<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CFP HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2013 95-4413619
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
1117 WEST OLYMPIC BLVD.
MONTEBELLO, CA 90640
213-727-0900
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
ERIC W. EK
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
CFP HOLDINGS, INC.
1117 WEST OLYMPIC BLVD.
MONTEBELLO, CA 90640
213-727-0900
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
COPY TO:
LAWRENCE G. GRAEV, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 408-2400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED NOTE PRICE(1) FEE
<S> <C> <C> <C> <C>
11 5/8% Series B Senior Guaranteed
Notes due 2004........................ $115,000,000 100% $115,000,000 $34,848
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
CFP HOLDINGS, INC.
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
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<C> <S> <C>
(1) Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page of Prospectus
(2) Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus; Available Information
(3) Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Prospectus Summary; Risk Factors; Selected Historical
Financial Data
(4) Terms of the Transaction............................. Prospectus Summary; The Exchange Offer; Description
of Notes; Certain Federal Income Tax Considerations
(5) Pro Forma Financial Information...................... Prospectus Summary; Unaudited Pro Forma Condensed
Combined Financial Information; Unaudited Pro Forma
Condensed Combined Balance Sheet; Unaudited Pro
Forma Condensed Statement of Operations
(6) Material Contacts with the Company Being Acquired.... *
(7) Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Plan of Distribution
(8) Interests of Named Experts and Counsel............... *
(9) Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................................ *
(10) Information With Respect to S-3 Registrants.......... *
(11) Incorporation of Certain Information by Reference.... *
(12) Information With Respect to S-2 or S-3 Registrants... *
(13) Incorporation of Certain Information by Reference.... *
(14) Information With Respect to Registrants Other Than
S-2 or S-3 Registrants............................. Prospectus Summary; Risk Factors; Unaudited Pro Forma
Condensed Combined Financial Information; Unaudited
Pro Forma Condensed Combined Balance Sheet;
Unaudited Pro Forma Condensed Statement of
Operations; Selected Historical Financial Data of
Quality Foods; Selected Historical Financial Data
of Custom Foods; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Description of the Bank
Credit Agreement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- - - ---------------------------------------------------------------- -----------------------------------------------------
(15) Information With Respect to S-3 Companies............ *
<C> <S> <C>
(16) Information With Respect to S-2 or S-3 Companies..... *
(17) Information With Respect to Companies Other Than S-2
or S-3 Companies................................... *
(18) Information if Proxies, Consents or Authorization Are
to be Solicited.................................... *
(19) Information if Proxies, Consents or Authorizations
Are Not to be Solicited, or in an Exchange Offer... Management; Principal Stockholders;
</TABLE>
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* Not applicable or answer is in the negative.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 21, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY THEM BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
CFP HOLDINGS, INC.
OFFER TO EXCHANGE UP TO $115,000,000 OF ITS
11 5/8% SERIES B SENIOR GUARANTEED NOTES DUE 2004
FOR ANY AND ALL OF ITS OUTSTANDING
11 5/8% SENIOR GUARANTEED NOTES DUE 2004
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
------------------------
CFP Holdings, Inc. (the "Company") hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange $1,000
principal amount of 11 5/8% Series B Senior Guaranteed Notes due 2004 (the "New
Notes") of the Company for each $1,000 principal amount of the issued and
outstanding 11 5/8% Senior Guaranteed Notes due 2004 (the "Old Notes" and the
Old Notes and the New Notes, collectively, the "Notes") of the Company from the
Holders (as defined herein) thereof. As of the date of this Prospectus, there is
$115,000,000 aggregate principal amount of the Old Notes outstanding. The terms
of the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for an increase
in the interest rate on the Old Notes under certain circumstances relating to
the Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
Interest on the New Notes will accrue from January 28, 1997 and will be
payable semi-annually on January 15 and July 15 of each year, commencing July
15, 1997. No interest will be payable on the Old Notes accepted for exchange.
The New Notes will be unconditionally guaranteed on a senior basis by the
Company's existing subsidiaries and each future subsidiary of the Company and
will be similarly guaranteed by the Company's parent. The New Notes, the
subsidiary guarantees and the parent guarantee will be senior unsecured
obligations and will rank PARI PASSU in right of payment with all other existing
and future senior obligations of the Company, the subsidiary guarantors and the
parent, respectively. Loans under the Company's Bank Credit Agreement (as
defined herein) will be secured by substantially all of the Company's assets,
will be guaranteed by the Company's subsidiaries, which guarantees will be
secured by substantially all of the assets of the Company's subsidiaries, and
will be guaranteed by the Company's parent, which guarantee is secured by a
pledge of all of the stock of the Company. Accordingly, the Old Notes are, and
the New Notes and the guarantees will be, effectively subordinated to the loans
outstanding under the Bank Credit Agreement and the guarantees of such loans to
the extent of the value of the assets securing such loans and guarantees. As of
December 28, 1996, on a pro forma basis after giving effect to the acquisition
of the business of Quality Foods, L.P., the Offering (as defined herein) and the
application of the estimated net proceeds therefrom and the other transactions
referred to herein, the Company would have had $25.6 million of indebtedness
outstanding other than the Notes, all of which would have been secured debt. The
terms of the Indenture (as defined herein) will permit the Company and its
subsidiaries to incur additional indebtedness, subject to certain limitations.
See "Description of Notes."
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by such broker-dealer in connection with any resale of New Notes received
in exchange for such Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale.
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. The Company does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined herein). The Exchange Offer is
subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
---------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. Such
materials can also be inspected on the Internet at http://www.sec.gov.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and other information with the Commission.
Such material filed by the Company with the Commission may be inspected, and
copies thereof obtained, at the places, and in the manner, set forth above.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so long
as the Old Notes or the New Notes remain outstanding, it will file with the
Commission and distribute to holders of the Old Notes or the New Notes, as
applicable, copies of (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to annual information only, a report thereon by
the Company's independent public accountants and (ii) all reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. The Company will also make such reports available
to prospective purchasers of the Old Notes or the New Notes, as applicable,
securities analysts and broker-dealers upon their request. In addition, the
Company has agreed that for so long as any of the Old Notes remain outstanding
it will make available to any prospective purchaser of the Old Notes or
beneficial owner of the Old Notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Issuer has either exchanged the Old Notes for securities identical
in all material respects which have been registered under the Securities Act or
until such time as the holders thereof have disposed of such Old Notes pursuant
to an effective registration statement filed by the Company.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO (I) "CFP
GROUP" ARE TO CFP GROUP, INC., A DELAWARE CORPORATION, (II) "CFP HOLDINGS" ARE
TO CFP HOLDINGS, INC., A DELAWARE CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF
CFP GROUP, (III) "CUSTOM FOODS" ARE TO CUSTOM FOOD PRODUCTS, INC., A CALIFORNIA
CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF CFP HOLDINGS, (IV) "QUALITY FOODS"
INCLUDES BOTH QUALITY FOODS, L.P., A DELAWARE LIMITED PARTNERSHIP, THE BUSINESS
OF WHICH WAS ACQUIRED BY CFP HOLDINGS, AND QF ACQUISITION CORP., WHICH WAS ONE
OF THE GENERAL PARTNERS OF QUALITY FOODS, L.P. AND FOLLOWING THE ACQUISITION (AS
DEFINED), BECAME A WHOLLY-OWNED SUBSIDIARY OF CFP HOLDINGS, (V) THE "COMPANY"
ARE TO CFP HOLDINGS AND ITS SUBSIDIARIES, QUALITY FOODS AND CUSTOM FOODS AND
(VI) THE "ACQUISITION" ARE TO THE ACQUISITION BY CFP HOLDINGS OF THE BUSINESS OF
QUALITY FOODS, L.P. COMPLETED ON DECEMBER 31, 1996. PRO FORMA INFORMATION GIVES
EFFECT TO THE ACQUISITION, THE OFFERING AND THE APPLICATION OF THE ESTIMATED NET
PROCEEDS THEREFROM, AND THE OTHER TRANSACTIONS REFERRED TO HEREIN, AS IF EACH OF
THE FOREGOING TRANSACTIONS HAD OCCURRED ON OCTOBER 1, 1995, WITH RESPECT TO THE
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS, AND AS OF DECEMBER 28,
1996, WITH RESPECT TO THE PRO FORMA CONDENSED COMBINED BALANCE SHEET, AND ALL
REFERENCES TO PRO FORMA INFORMATION REFER TO THE FISCAL YEAR ENDING SEPTEMBER 30
OF EACH YEAR. ALL REFERENCES TO THE COMPANY'S AND CUSTOM FOODS' FISCAL YEAR
REFER TO THE FISCAL YEAR ENDING ON SEPTEMBER 30 OF EACH YEAR, AND ALL REFERENCES
TO QUALITY FOODS' FISCAL YEAR REFER TO THE FISCAL YEAR ENDING ON DECEMBER 31 OF
EACH YEAR.
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE STATEMENTS UNDER "PROSPECTUS
SUMMARY," "RISK FACTORS," "SUMMARY UNAUDITED PRO FORMA CONDENSED FINANCIAL
DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC
PERFORMANCE AND FINANCIAL CONDITION, INCLUDING, AMONG OTHER THINGS, THE
COMPANY'S BUSINESS STRATEGY. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS
INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS PROSPECTUS, AND UNDER "RISK FACTORS." ALL SUBSEQUENT
WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR
PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS.
1
<PAGE>
THE COMPANY
The Company is a leading developer, manufacturer and marketer of value-added
meat and poultry products sold to the foodservice industry and manufacturers of
packaged foods. The Company provides a wide range of pre-cooked and uncooked
products, including beef and chicken sandwich steaks; beef, pork and poultry
meat rolls used in further processing; charbroiled products and crumble
toppings; barbecue-flavored meats; and meatballs. The Company principally
manufactures higher margin specialty products that provide superior quality and
performance for the end-user and that are typically custom-formulated to meet
specific customer requirements. In the foodservice industry, the Company
supplies some of the country's leading restaurant chains and outlets, including
Subway ("Subway"), Great Steak & Potato Co., International House of Pancakes,
Inc., Domino's Pizza, Inc., Wal-Mart Stores, Inc., Nathan's Famous Inc., Blimpie
International, Inc. and Arby's ("Arby's"). The Company also serves many of the
country's leading packaged foods manufacturers, including Chef America, Inc.
("Chef America"), H. J. Heinz Co., Inc., Foodbrands America, Inc., Schwan's
Sales Enterprises Inc., Kraft Foods Inc. and McLane Company, Inc. The Company
believes that its proprietary recipes and manufacturing processes, national
presence and long-standing customer relationships pose barriers to entry for
other manufacturers seeking to provide competitive products. The Company is
comprised of two operating subsidiaries, Quality Foods, which was acquired on
December 31, 1996, and Custom Foods. For the 12-month period ended September 30,
1996, after giving effect to the Acquisition, the Offering and the application
of the net proceeds therefrom and the other transactions referred to herein, the
Company would have had pro forma net sales of $156.6 million.
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in "Philadelphia-style" steak
sandwiches. It also supplies sliced chicken products and pre-cooked and uncooked
meatballs and hamburger patties. Quality Foods serves the foodservice industry,
with particular emphasis on quick service restaurants ("QSRs"), sandwich chains
and family dining establishments. For over ten years, Quality Foods has been the
primary supplier of pre-cooked beef to the Subway restaurant chain for its
popular steak and cheese sandwich. Quality Foods employs a proprietary forming
and freezing process that, the Company believes, produces a product with
excellent flavor and visual appearance, as well as superior yield when cooked.
Because of its product quality and performance, Quality Foods has historically
been able to charge a premium price for its uncooked sandwich steak products.
From fiscal 1991 to fiscal 1995, Quality Foods experienced compound annual
growth in net sales and operating profit of 14.5% and 26.1%, respectively, and
for the nine months ended September 30, 1996 net sales and operating profit
increased 9.4% and 39.2%, respectively, compared to the same period in 1995. The
Company believes this growth has been due to Quality Foods' superior product
quality, the expanding national presence of the Philadelphia-style steak
sandwich on restaurant menus, increased demand by its customers for high
value-added products and a continued focus on improving its proprietary low-cost
manufacturing processes. Quality Foods sells its products through an established
network of independent foodservice brokers and its direct sales force to over
400 foodservice distributors located in 42 states and six Canadian provinces.
Quality Foods has recently developed and introduced several complementary beef
and chicken products which, the Company believes, can be successfully marketed
through these established distribution channels.
2
<PAGE>
In November 1996, Quality Foods completed an $11.0 million purchase,
renovation and retrofit of a 150,000 square foot production facility in
Philadelphia, and the substantial consolidation of three manufacturing and
administrative facilities into this location (collectively, the "Philadelphia
Consolidation"). The Philadelphia Consolidation has more than doubled Quality
Foods' production capacity and will enable it to meet its anticipated
manufacturing needs for at least the next five years. The Company believes that
the Philadelphia Consolidation will result in annual cost savings of
approximately $4.5 million as a result of the improvements in Quality Foods'
production processes through the use of new cooking equipment, the elimination
of its historic dependence on outside co-packing arrangements, the reduction in
overtime through productivity improvements and the elimination of redundant
facility costs.
Custom Foods develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods, also referred to as "industrial" users. Custom Foods' pre-cooked products
include a variety of pork, beef, chicken and turkey items, such as meat rolls
used in further processing; barbecue products; Mexican specialties; charbroiled
patties and crumble toppings. Custom Foods focuses on sales to manufacturers of
frozen and refrigerated convenience foods, including items in the fast-growing
hand-held foods segment. In its pre-cooked operations, Custom Foods is the
largest supplier of custom-formulated meat and poultry fillings to Chef America
for use in substantially all of its microwaveable sandwich product lines. Chef
America has accounted for a majority of Custom Foods' sales of pre-cooked
products for each of the past three years and, according to Packaged Facts, a
consumer products research publication, Chef America is the country's leading
manufacturer of frozen hand-held entrees. From fiscal 1992 to fiscal 1996,
Custom Foods experienced compound annual growth in net sales and gross profit of
29.7% and 40.2%, respectively, in its pre-cooked operations, due to strong
growth in Chef America's business and growth in demand from other industrial
users for pre-cooked, cost-effective meat and poultry products. Due to capacity
constraints and the growing needs of its customers, Custom Foods has, over the
past two years, significantly broadened its operations with the opening and
subsequent expansion of a new facility in Kentucky. With capacity expansions
completed, Custom Foods recently created a direct sales and marketing
department. Custom Foods has developed over 400 proprietary product
formulations, many of which, the Company believes, can now be successfully
marketed through this sales group.
Custom Foods, through its Best Western division, supplies uncooked beef
products to Arby's. Prior to fiscal 1995, Custom Foods supplied Arby's on a
national basis. However, in the first quarter of fiscal 1995, Custom Foods
entered into an 18-month contract to supply Arby's on a regional basis only.
Under this contract, sales to Arby's declined from $61.0 million in fiscal 1994
to $26.2 million in fiscal 1995, resulting in an overall 28.9% decrease in
Custom Foods' net sales. Nevertheless, Custom Foods' income from operations
during this period increased 40.0%, reflecting significant growth in its more
profitable pre-cooked operations. In June 1996, following completion of the
expansion of its Kentucky facility, Custom Foods entered into a new three-year
contract to once again supply Arby's on a national basis. Despite the increased
sales and profitability associated with the new Arby's contract, Custom Foods
plans to continue to focus on its faster growing, higher margin pre-cooked
product operations.
INDUSTRY
The Company is considered a value-added processor within the meat and
poultry industry and is focused on serving the foodservice and industrial
markets. The foodservice industry is composed of establishments that serve food
away from the home and includes restaurants; the food operations of
3
<PAGE>
healthcare providers, schools and other institutions, hotels, resorts and
corporations; and other non-traditional foodservice outlets. The foodservice
industry generated $300 billion in revenues in 1995 and experienced compound
annual growth of 4.7% from 1990 to 1995, according to Restaurants and
Institutions, an industry publication. This growth has been driven by the
increase in away-from-home meal preparation, which has accompanied the expanding
number of both dual income and single-parent households. According to Technomic,
Inc., the foodservice industry in the United States captured 51% of all consumer
food expenditures in 1995, surpassing traditional retail supermarkets and
outlets. Another trend within the foodservice industry is the growth in the
number of non-traditional foodservice outlets such as, convenience stores,
retail stores, supermarkets and food kiosks. These non-traditional locations
often lack extensive cooking, storage or preparation facilities, resulting in a
need for pre-cooked and prepared foods similar to those provided by the Company.
The expansion in the foodservice industry has also been accompanied by the
continued consolidation and growth of broadline and specialty foodservice
distributors, many of which are long-standing customers of the Company.
The same demographic and lifestyle trends which contributed to the growth in
the foodservice industry have led to a growing demand for branded and private
label packaged foods, particularly for easy-to-prepare, microwaveable
convenience foods. Among the fastest growing segments is the approximately $1.2
billion refrigerated and frozen hand-held foods segment, which includes burritos
and other wrap sandwiches, pocket-style sandwiches, hand-held appetizers and
other similar products. This segment grew at a compound annual rate of 9.1% from
1993 to 1995, and is expected to grow at a compound annual rate of 8.0% from
1995 to 2000, according to Packaged Facts. As these markets have expanded,
manufacturers have sought to reduce their all-in costs while improving product
variety, safety and consistency. The Company believes that its value-added
products, which are typically manufactured to the specific requirements of its
customers, position it well to take advantage of these trends.
4
<PAGE>
THE QUALITY FOODS ACQUISITION
On December 31, 1996, pursuant to a securities purchase agreement (the
"Acquisition Agreement"), CFP Holdings, a company controlled by an affiliate of
First Atlantic Capital, Ltd. ("First Atlantic"), acquired all of the capital
stock of the general partners of, and substantially all of the partnership
interests in, Quality Foods (the "Acquisition") for a cash purchase price of
$64.0 million and refinanced and assumed $23.2 million of Quality Foods'
indebtedness. In addition, the remaining partnership interests in Quality Foods
(the "Rollover Interests"), with a value of $1.5 million, were exchanged for
approximately 7.4% of the fully-diluted common stock of CFP Group. Funds used
for the Acquisition and for working capital were provided by: (i) a new bank
credit agreement (the "Bank Credit Agreement") providing for $76.0 million of
7-year secured term loans (the "Term Loans") and a $20.0 million 5 1/2-year
revolving credit facility (the "Revolving Credit Facility"), under which $3.7
million was borrowed at the time of the closing, (ii) $25.0 million of
subordinated bridge notes (the "Bridge Notes") and (iii) a $2.0 million equity
investment (including the Rollover Interests) from certain members of Quality
Foods' management. See "The Quality Foods Acquisition -- Financing of the
Acquisition."
The Company expects the Acquisition to enhance its overall growth prospects
and strengthen its position in its target markets. The Company believes that the
Acquisition will: (i) create cross-marketing opportunities, (ii) expand
manufacturing, distribution and product development capabilities, (iii)
establish critical scale with vendors and major customers and (iv) broaden
management resources. The Company also believes that the Acquisition will allow
it to better serve the growing needs of its customer base and take advantage of
the growth trends in the foodservice and industrial markets. Specifically, the
Company believes the Acquisition will result in the following:
- EXPANDED SALES GROWTH OPPORTUNITIES. The Company intends to pursue new
sales opportunities created by the combination of Custom Foods' broad
product line and Quality Foods' established foodservice presence. Quality
Foods has a strong national foodservice broker network and extensive
distribution relationships. Custom Foods manufactures a broad line of
pre-cooked meat and poultry products that to date have been marketed
principally to packaged foods manufacturers but which, the Company
believes, can be marketed effectively to foodservice customers. The
Company believes that opportunities exist to cross-market its now
broadened product lines, as well as continue to increase sales in the
foodservice industry and to industrial accounts.
- EXPANDED MANUFACTURING AND PRODUCT DEVELOPMENT CAPABILITIES. The
Acquisition combines complementary manufacturing and distribution
capabilities, affording the Company the opportunity to further reduce
operating costs and provide greater economies of scale through improved
facility utilization and logistics. Specifically, Custom Foods operates
two plants in California with capacity sufficient to manufacture and
warehouse certain of Quality Foods' products for West Coast distribution.
This capability could potentially reduce cross-country freight costs and
enhance Quality Foods' national customer service capabilities. In
addition, the Company believes that Quality Foods' and Custom Foods'
combined manufacturing expertise in pre-cooked and uncooked products will
strengthen its overall product development efforts.
- DIVERSIFIED OPERATIONS. The Acquisition positions the Company as a
sizeable and diversified competitor in the value-added meat and poultry
industry, with national distribution and multiple manufacturing locations.
The Company believes that the combination of Custom Foods' broad product
line and Quality Foods' distribution capabilities provides an enhanced
ability to efficiently service a
5
<PAGE>
geographically diverse customer base. The Company believes that this
increased scale provides it with a competitive advantage over many
regional and local manufacturers with which it competes. Furthermore, the
Company believes the Acquisition positions it to continue to grow its
business through internal expansion and selected strategic acquisitions.
- BROADENED MANAGEMENT CAPABILITIES. The Acquisition combines two strong
management teams with diverse experience in the meat processing industry.
The Company's management team has complementary skills in manufacturing,
product development, marketing and sales. In particular, Custom Foods'
manufacturing experience, when combined with Quality Foods' marketing and
distribution expertise, should benefit the Company as it pursues its
growth strategy.
BUSINESS STRATEGY
The Company's objective is to be one of the premier multi-niche suppliers of
value-added meat and poultry products for the foodservice and industrial
markets. The Company intends to achieve this objective by continuing to
introduce new value-added products, further expanding its sales and marketing
capabilities and maintaining excellent customer service. The key components of
the Company's business strategy are to (i) maximize the benefits of the
Acquisition, (ii) expand product lines and sales in the foodservice industry,
(iii) increase sales penetration of pre-cooked products among packaged foods
manufacturers, (iv) increase productivity by maximizing the utilization of
existing facilities and (v) pursue strategic acquisitions that complement its
existing product offerings.
The Company is located at 1117 West Olympic Boulevard, P.O. Box 1027,
Montebello, California 90640. The Company's telephone number is (213) 727-0900.
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Registration Rights Agreement.......... The Old Notes were sold by the Company on January
28, 1997 (the "Offering") to NationsBanc Capital
Markets, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchasers"),
who placed the Old Notes with institutional
investors. In connection therewith, the Company and
the Initial Purchasers executed and delivered for
the benefit of the holders of the Old Notes a
registration rights agreement (the "Registration
Rights Agreement") providing, among other things,
for the Exchange Offer.
The Exchange Offer..................... New Notes are being offered in exchange for a like
principal amount of Old Notes. As of the date
hereof, $115,000,000 aggregate principal amount of
Old Notes are outstanding. The Company will issue
the New Notes to Holders promptly following the
Expiration Date. See "Risk Factors--Consequences of
Failure to Exchange."
Expiration Date........................ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended as
provided herein, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended.
Interest............................... Each New Note will bear interest from January 28,
1997, the date of the Offering of the Old Notes. No
interest will be paid on the Old Notes accepted for
exchange.
Conditions to the Exchange Offer....... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company reserves the right to amend, terminate or
extend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. See "The Exchange Offer--Conditions."
Procedures for Tendering Old Notes..... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message (as defined herein) together with
the Old Notes and any other required documentation
to the exchange agent (the "Exchange Agent") at the
address set forth herein. By executing the Letter
of Transmittal or delivering an Agent's Message,
each Holder will represent to the Company, among
other things, that (i) the New Notes acquired
pursuant to the Exchange Offer by the Holder and
any beneficial owners of Old Notes are being
obtained in the ordinary course of business of the
person receiving such New Notes, (ii) neither the
Holder nor such beneficial owner has an
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
arrangement with any person to participate in the
distribution of such New Notes, (iii) neither the
Holder nor such beneficial owner nor any such other
person is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither the
Holder nor such beneficial owner is an "affiliate,"
as defined under Rule 405 promulgated under the
Securities Act, of the Company. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities (other than Old Notes acquired directly
from the Company), may participate in the Exchange
Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in
the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such
New Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures
for Tendering" and "Plan of Distribution."
Special Procedures for Beneficial
Owners............................... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal or delivering an Agent's
Message and delivering his Old Notes, either make
appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the
registered Holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures......... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or an Agent's Message or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Withdrawal Rights...................... Tenders may be withdrawn as provided herein at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Acceptance of Old Notes and Delivery of
New Notes............................ The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Exchange Agent......................... United States Trust Company of New York is serving
as Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer --Exchange Agent."
Use of Proceeds........................ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
Federal Income Tax Consequences........ The exchange of Old Notes for New Notes will not be
a taxable exchange for Federal income tax purposes.
See "Certain Federal Income Tax Considerations."
Consequences of Failure to Exchange.... Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the
legend thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, Old Notes may
not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
</TABLE>
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $115,000,000 aggregate principal amount of Old
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except that the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer and will
not contain certain provisions providing for an increase in the interest rate on
the Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt as
the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old
Notes were, and the New Notes will be, issued. See "Description of Notes."
<TABLE>
<S> <C>
The New Notes................ $115.0 million aggregate principal amount of 11 5/8% Series
B Senior Guaranteed Notes Due 2004.
Maturity Date................ January 15, 2004.
Interest Rate and Payment
Dates...................... The New Notes will bear interest at a rate of 11 5/8% per
annum. Interest will be payable semi-annually on January 15
and July 15, commencing July 15, 1997.
Guarantees................... The New Notes will be unconditionally guaranteed (the
"Subsidiary Guarantees") on a senior basis by Quality Foods
and Custom Foods and each of the future subsidiaries of the
Company (the "Subsidiary Guarantors") and will be similarly
guaranteed by CFP Group (the "Parent Guarantee" and,
together with the Subsidiary Guarantees, the "Guarantees").
Each of the Guarantees will be a guarantee of payment and
not of collection. See "Description of Notes."
Ranking...................... The New Notes, the Subsidiary Guarantees and the Parent
Guarantee will be senior unsecured obligations and will rank
PARI PASSU in right of payment with all other existing and
future senior obligations of the Company, the Subsidiary
Guarantors and CFP Group, respectively. Loans under the Bank
Credit Agreement will be secured by substantially all of the
Company's assets, including a pledge of all the stock of
Quality Foods and Custom Foods, will be guaranteed by the
Company's subsidiaries, which guarantees will be secured by
substantially all of the assets of the Company's
subsidiaries, and will be guaranteed by CFP Group, which
guarantee will be secured by a pledge of all of the stock of
the Company. Accordingly, the New Notes and the Guarantees
will be effectively subordinated to the loans outstanding
under the Bank Credit Agreement and the guarantees by the
subsidiaries and CFP Group of such loans, to the extent of
the value of the assets securing such loans and guarantees.
As of December 28, 1996, on a pro forma basis after giving
effect to the Acquisition, the Offering and the application
of the estimated net proceeds therefrom and the other
transactions referred to herein, the
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Company would have had $25.6 million of indebtedness
outstanding other than the Notes, all of which would have
been secured debt. Subject to certain limitations, the
Company and its subsidiaries may incur additional
indebtedness in the future.
Optional Redemption.......... The New Notes will be redeemable at the Company's option, in
whole or in part, at any time on or after January 15, 2001
at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. See
"Description of Notes -- Redemption -- Optional Redemption."
In addition, at any time prior to January 15, 2000, the
Company may redeem up to $40.0 million aggregate principal
amount of the Notes with the net proceeds of one or more
equity offerings of CFP Group's common stock, at a
redemption price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the
date of redemption; provided that at least $75.0 million
aggregate principal amount of the Notes remains outstanding
after each such redemption.
Mandatory Redemption......... None, except at maturity on January 15, 2004.
Change of Control............ Upon a Change of Control (as defined), the Company will be
required to make an offer to repurchase all outstanding
Notes at 101% of the principal amount thereof plus accrued
and unpaid interest thereon to the date of repurchase. See
"Description of Notes -- Purchase of Notes upon a Change of
Control."
Covenants.................... The Indenture will restrict, among other things, the
Company's ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, apply
net proceeds from certain asset sales, enter into certain
transactions with affiliates, agree to certain payment
restrictions applicable to Restricted Subsidiaries, sell
stock of Restricted Subsidiaries, designate subsidiaries as
Restricted or Unrestricted Subsidiaries, incur liens or
enter into consolidations or mergers. See "Description of
Notes -- Certain Covenants."
</TABLE>
RISK FACTORS
For a discussion of certain matters that should be considered by Holders
prior to tendering Old Notes in the Exchange Offer, see "Risk Factors."
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth the Summary Unaudited Pro Forma Condensed
Combined Financial Data for the fiscal year ended September 30, 1996 and the
three months ended December 28, 1996, after giving effect to the Acquisition,
the Offering and the application of the estimated net proceeds therefrom and the
other transactions referred to herein, as if each of the foregoing transactions
had occurred on October 1, 1995 with respect to the statement of operations data
and as of December 28, 1996 with respect to the balance sheet data. The pro
forma data should be read in conjunction with the "Unaudited Pro Forma Condensed
Combined Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements of
CFP Holdings and Quality Foods and related notes thereto, included elsewhere in
this Prospectus. The supplemental financial data for the year ended September
30, 1995 and the three months ended December 30, 1995 sets forth the combined
financial data of CFP Holdings and Quality Foods for the fiscal year ended
September 30, 1995 and the three months ended December 30, 1995, after giving
effect to the Acquisition, the Offering and the application of the estimated net
proceeds therefrom and the other transactions referred to herein, as if each of
the foregoing transactions had occurred on October 1, 1994. The data set forth
below is not necessarily indicative of the results that actually would have been
achieved had such transactions been consummated as of the dates indicated or
that may be achieved in future periods.
<TABLE>
<CAPTION>
SUPPLEMENTAL PRO FORMA
SUPPLEMENTAL PRO FORMA THREE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 30, DECEMBER 28,
1995 1996 1995 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT RATIOS AND PER POUND DATA)
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 149,565 $ 156,645 $ 36,632 $ 41,673
Cost of sales................................... 122,886 123,072 28,452 36,216
------------- ------------- -------------- --------------
Gross profit.................................... 26,679 33,573 8,180 5,457
Operating expenses.............................. 16,422 15,310 4,077 3,660
Other charges(1)................................ -- 6,284 -- 339
------------- ------------- -------------- --------------
Income from operations........................ 10,257 11,979 4,103 1,458
Interest expense................................ 16,647 16,740 4,319 4,388
------------- ------------- -------------- --------------
Loss before income taxes...................... (6,390) (4,761) (216) (2,930)
(Benefit) for income taxes...................... (2,304) (1,689) (235) (1,033)
------------- ------------- -------------- --------------
Net income loss............................... $ (4,086) $ (3,072) $ 19 $ (1,897)
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
OTHER PRO FORMA DATA:
Pounds sold..................................... 81,340 90,734 20,795 25,839
Average net sales price per pound............... $ 1.84 $ 1.73 $ 1.76 $ 1.61
Average gross profit per pound.................. 0.33 0.37 .39 .21
Pro forma EBITDA(2)............................. 24,598 3,412
Depreciation and amortization................... 5,537 1,575
Cash interest expense(3)........................ 15,713 4,131
Expansion capital expenditures(4)............... 9,067 181
Maintenance capital expenditures................ 2,002 142
Ratio of earnings to fixed charges(5)........... -- --
PRO FORMA BALANCE SHEET DATA:
Working capital................................. $ 15,816
Total assets.................................... 137,177
Total long-term debt............................ 139,067
Total stockholders' deficiency.................. (13,838)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
12
<PAGE>
(1) At the time of the acquisition of Custom Foods by CFP Holdings in 1993,
Custom Foods entered into an agreement (the "Sales Brokerage Agreement")
with one of the sellers in that transaction, under which such seller agreed
to provide certain sales and marketing support in exchange for commissions
on most of the sales of pre-cooked products sold by Custom Foods. In January
1996, the parties agreed to terminate the Sales Brokerage Agreement in
exchange for a one-time $5.0 million cash payment by Custom Foods and the
execution of a one-year consulting agreement. Other charges also include
facility start-up and relocation costs of $1.3 million associated with the
Philadelphia Consolidation.
(2) For the year ended September 30, 1996, pro forma EBITDA consists of EBITDA,
adjusted to eliminate the following non-recurring charges: (i) costs of $5.7
million associated with the termination of the Sales Brokerage Agreement by
Custom Foods consisting of (a) the $5.0 million cash payment, (b)
commissions of $570,000 and other costs of $99,000 paid under the Sales
Brokerage Agreement during the fiscal year and prior to the termination, (c)
$75,000 associated with the consulting agreement, less (d) the incremental
costs associated with an additional in-house salesperson of $65,000, (ii)
the facility start-up and relocation costs related to the Philadelphia
Consolidation of $1.3 million and (iii) the start-up costs for a new
production line located in Custom Foods' Kentucky facility of $119,000.
EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity. For the quarter ended December 28, 1996, pro forma
EBITDA consists of EBITDA, adjusted to eliminate the following non-recurring
charges: (i) $40,000 associated with a consulting agreement entered into in
connection with the termination of the Sales Brokerage Agreement; and (ii)
the facility start-up and relocation costs related to the Philadelphia
Consolidation of $339,000.
(3) Cash interest expense for the year ended September 30, 1996 consists of
interest expense of $16.7 million less amortization of deferred financing
costs of $1.0 million and is exclusive of capitalized interest paid of
$593,000. Cash interest expense for the quarter ended December 28, 1996
consists of interest expense of $4.4 million less amortization of deferred
financing costs of $257,000.
(4) Reflects increased capital expenditures of $7.5 million related to the
Philadelphia Consolidation and $1.5 million related to the expansion of the
Custom Foods' Kentucky facility for the year ended September 30, 1996. For
the quarter ended December 28, 1996, increased capital expenditures include
$104,000 related to the Philadelphia Consolidation and $34,000 related to
the expansion of Custom Foods' Kentucky facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Financial Resources."
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest (which includes amortization of
deferred financing costs) whether expensed or capitalized and one-third of
rental expense, deemed representative of that portion of rental expense
estimated to be attributable to interest. Pro forma earnings were inadequate
to cover fixed charges by $5.4 million for the year ended September 30, 1996
and $2.9 million for the quarter-ended December 28, 1996.
13
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF QUALITY FOODS
The following Summary Historical Financial Data should be read in
conjunction with the financial statements and related notes of Quality Foods and
other financial data included elsewhere in this Prospectus. The balance sheet
data presented below as of December 31, 1992, 1993, 1994, 1995 and 1996 and
statement of operations data presented below for the period July 20, 1992 to
December 31, 1992 and the years ended December 31, 1993, 1994, 1995 and 1996 are
derived from the audited financial statements of Quality Foods. The balance
sheet data as of July 19, 1992 and the statement of operations data for the
period from January 1, 1992 to July 19, 1992 are derived from the audited
financial statements of William Cohen and Son Co., Inc., Quality Foods'
predecessor.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY(1) QUALITY FOODS
------------------- ---------------------------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, JULY 20, 1992
1992 TO YEAR ENDED DECEMBER 31,
TO JULY 19, DECEMBER 31, ------------------------------------------
1992 1992 1993 1994 1995 1996
------------------- ------------- --------- --------- --------- ---------
(DOLLARS IN (DOLLARS IN THOUSANDS)
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 29,376 $ 26,225 $ 71,195 $ 84,817 $ 84,694 $ 90,582
Cost of sales................................... 25,232 22,314 61,040 72,162 67,930 71,448
------- ------------- --------- --------- --------- ---------
Gross profit.................................... 4,144 3,911 10,155 12,655 16,764 19,134
Operating expenses.............................. 1,861 2,085 5,266 6,887 6,926 7,519
Other charges................................... -- -- -- -- -- 4,716(2)
------- ------------- --------- --------- --------- ---------
Income from operations........................ 2,283 1,826 4,889 5,768 9,838 6,899
Interest expense................................ 177 1,001 2,450 2,616 2,129 1,871
------- ------------- --------- --------- --------- ---------
Income before income taxes and extraordinary
items....................................... 2,106 825 2,439 3,152 7,709 5,028
Provision for income taxes...................... 1,023 -- -- -- -- --
------- ------------- --------- --------- --------- ---------
Income before extraordinary items............. 1,083 825 2,439 3,152 7,709 5,028
Extraordinary loss on early extinguishment of
debt.......................................... -- -- -- 1,771 130 546
------- ------------- --------- --------- --------- ---------
Net income.................................... 1,083 825 2,439 1,381 7,579 4,482
Pro forma income taxes(3)....................... -- 330 976 553 3,032 1,793
------- ------------- --------- --------- --------- ---------
Pro forma net income.......................... $ 1,083 $ 495 $ 1,463 $ 828 $ 4,547 $ 2,689
------- ------------- --------- --------- --------- ---------
------- ------------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(4)....................................... $ 2,471 $ 2,172 $ 5,640 $ 6,523 $ 10,703 $ 8,206
EBITDA as a percentage of net sales............. 8.4% 8.3% 7.9% 7.7% 12.6% 9.1%
Depreciation and amortization................... $ 188 $ 346 $ 751 $ 755 $ 865 1,307
Capital expenditures(5)......................... 278 89 524 858 4,102 7,190
Ratio of earnings to fixed charges(6)........... 9.53x 1.78x 1.94x 2.12x 3.76x 3.64x
BALANCE SHEET DATA:
Working capital................................. $ 3,367 $ 802 $ 1,189 $ 886 $ 4,032 $ 8,440
Total assets.................................... 11,781 19,828 25,097 28,684 33,814 35,592
Total debt...................................... 947 15,636 17,694 22,137 20,225 5,728
Total stockholders' equity/partners' capital.... 6,798 1,841 2,917 2,521 8,888 7,260
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
(1) Predecessor Company reflects the operations of William Cohen and Son Co.,
Inc.
(2) Other charges of $4.7 million consist of $1.6 million facility start-up and
relocation costs associated with the Philadelphia Consolidation and $3.1
million of acquisition related costs.
(3) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation for all periods presented. Included in pro
forma income tax expense for the years ended December 31, 1994, 1995 and
1996 is an income tax benefit of $708,000, $52,000 and $218,000,
respectively, relating to the extraordinary item--early extinguishment of
debt.
(4) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(5) Capital expenditures for the year ended December 31, 1995 included $3.6
million related to the Philadelphia Consolidation and $506,000 of
maintenance capital expenditures. Capital expenditures for the year ended
December 31, 1996 included $6.8 million related to the Philadelphia
Consolidation and $413,000 of maintenance capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources."
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
15
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF CFP HOLDINGS
The following Summary Historical Consolidated Financial Data of CFP Holdings
should be read in conjunction with the consolidated financial statements and
related notes of CFP Holdings and other financial data included elsewhere in
this Prospectus. The balance sheet data presented below as of September 30,
1993, 1994, 1995 and 1996 and the statement of operations data presented below
for the six months ended September 30, 1993 and for the years ended September
30, 1994, 1995 and 1996 are derived from the audited consolidated financial
statements of CFP Holdings. The balance sheet data presented below as of
September 30, 1992 and March 31, 1993 and the statement of operations data
presented below for the year ended September 30, 1992 and the six months ended
March 31, 1993 have been derived from the combination of the unaudited financial
statements of CFP Holdings' predecessors, Center of the Plate Foods, Inc. and
Best Western Foods, Inc. The balance sheet data as of December 30, 1995 and
December 28, 1996 and the statement of operations data for the three months
ended December 30, 1995 and December 28, 1996 have been derived from CFP
Holdings' unaudited financial statements. Operating results for the three months
ended December 28, 1996 may not be indicative of the results that may be
expected for the year ended September 30, 1997 or any future period.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1) CFP HOLDINGS(2)
-------------------------- ----------------------------------------------------------------------------
SIX MONTHS SIX MONTHS YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED
YEAR ENDED ENDED ENDED ----------------------------
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, ------------------------------- DECEMBER 30, DECEMBER 28,
1992 1993 1993 1994 1995 1996 1995 1996
------------- ----------- ------------- --------- --------- --------- ------------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $ 71,591 $ 38,332 $ 44,285 $ 86,598 $ 61,543(3) $ 65,996 $ 15,515 $ 20,624
Cost of sales......... 63,373 34,169 40,352 76,485 49,868 53,818 12,507 18,063
------------- ----------- ------------- --------- --------- --------- ------------- -------------
Gross profit.......... 8,218 4,163 3,933 10,113 11,675 12,178 3,008 2,561
Operating expenses.... 4,580 1,892 2,389 6,506 6,627 5,187 1,393 1,455
Other charges......... 28,755(4) -- -- -- -- 4,996(5)
------------- ----------- ------------- --------- --------- --------- ------------- -------------
Income (loss) from
operations........ (25,117) 2,271 1,544 3,607 5,048 1,995 1,615 1,106
Interest expense...... 3,717 1,906 1,457 2,592 2,383 3,182 795 823
------------- ----------- ------------- --------- --------- --------- ------------- -------------
Income (loss) before
income taxes...... (28,834) 365 87 1,015 2,665 (1,187) 820 283
Provision (benefit)
for income taxes... 650 463 70 572 1,318 (259) 179 252
------------- ----------- ------------- --------- --------- --------- ------------- -------------
Net income (loss)... $ (29,484) $ (98) $ 17 $ 443 $ 1,347 $ (928) $ 641 $ 31
------------- ----------- ------------- --------- --------- --------- ------------- -------------
------------- ----------- ------------- --------- --------- --------- ------------- -------------
OTHER DATA:
EBITDA(6)............. $ 6,220 $ 3,070 $ 2,582 $ 6,003 $ 6,685 $ 3,758 $ 2,051 $ 1,578
EBITDA as a percentage
of net sales....... 8.7% 8.0% 5.8% 6.9% 10.9% 5.7% 13.2% 7.7%
Depreciation and
amortization....... $ 2,582 $ 799 $ 1,038 $ 2,396 $ 1,637 $ 1,763 $ 436 $ 472
Interest expense...... 3,717 1,906 1,457 2,592 2,383 3,182 795 823
Capital
expenditures....... 19 1,214 445 1,515 5,054 3,009 143 182
Ratio of earnings to
fixed charges(7)... -- 1.18x 1.06x 1.36x 2.03x -- 1.97x 1.32x
BALANCE SHEET DATA:
Working capital....... $ 6,057 $ 9,225 $ 4,758 $ 4,010 $ 2,684 $ 3,153 $ 3,106 $ 7,136
Total assets.......... 23,979 25,811 30,823 28,857 30,453 31,716 30,216 36,343
Total debt and
redeemable
preferred stock.... 46,187 46,755 23,869 21,180 20,693 23,223 20,632 27,438
Total stockholders'
equity
(deficiency)....... (23,999)(4) (24,240)(4) 3,734 4,117 5,366 3,727 5,863 3,527
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
16
<PAGE>
(1) Predecessor Company reflects the combined operations of Center of the Plate
Foods, Inc. and Best Western Foods, Inc.
(2) CFP Holdings commenced operations on April 1, 1993 after acquiring all of
the outstanding stock of Center of the Plate Foods, Inc. and all significant
operating assets of Best Western Foods, Inc.
(3) Sales declined during the year ended September 30, 1995 as a result of the
decline in sales to the Arby's restaurant chain. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) During the year ended September 30, 1992, Best Western Foods, Inc., one of
CFP Holdings' predecessors, wrote off goodwill of $28.8 million, which also
resulted in the stockholders' deficiency as of September 30, 1992 and March
31, 1993.
(5) Represents one-time costs associated with the termination of the Sales
Brokerage Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest (which includes amortization of deferred financing costs) and
one-third of rental expense, deemed representative of that portion of rental
expense estimated to be attributable to interest. Earnings were inadequate
to cover fixed charges by $28.8 million for the year ended September 30,
1992 and by $1.2 million for the year ended September 30, 1996.
17
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below, as well as the other information included in this Prospectus, prior
to making a decision to tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 120 days from
the date of this Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any Holder to resell the New Notes is
subject to applicable state securities laws as described in "Risk Factors--Blue
Sky Restrictions on Resale of New Notes."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal or an Agent's Message, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on
or prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedure for book-entry transfer
described herein, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the Holder must comply with the guaranteed delivery procedures
described herein. See "The Exchange Offer."
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have
18
<PAGE>
been satisfied. The Company does not currently intend to register or qualify the
resale of the New Notes in any such jurisdictions. However, an exemption is
generally available for sales to registered broker-dealers and certain
institutional buyers. Other exemptions under applicable state securities laws
may also be available.
SIGNIFICANT LEVERAGE AND INDEBTEDNESS SERVICE
The Company incurred substantial indebtedness in connection with the
financing of the Acquisition and is highly leveraged following the Offering. As
of December 28, 1996, on a pro forma basis, the Company would have had total
consolidated indebtedness (including capitalized lease obligations) of
approximately $140.6 million and a stockholders' deficiency of $13.8 million. In
addition, subject to the restrictions in the Bank Credit Agreement and the
Indenture, the Company and its subsidiaries may incur additional indebtedness
from time to time to finance capital expenditures and acquisitions and for other
general corporate purposes. Further, the Company's earnings on a pro forma
basis, for the 12 months ended September 30, 1996, were inadequate to cover
fixed charges by $5.4 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Financial
Resources."
The degree to which the Company is leveraged could have important
consequences to the holders of the New Notes, including: (i) the possible
limitation in the future on the Company's ability to obtain additional financing
for working capital or other purposes; (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of the
principal of and interest on its indebtedness, thereby reducing funds available
for operations; (iii) certain of the Company's borrowings, including the
borrowings under the Bank Credit Agreement, will be at variable rates of
interest which could cause the Company to be vulnerable to increases in interest
rates; (iv) the Company may be more vulnerable to economic downturns and be
limited in its ability to withstand competitive pressures; and (v) the New Notes
will mature after substantially all of the Company's other indebtedness. See
"Description of Bank Credit Agreement."
The Company's ability to make scheduled payments on the principal of, or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control, as well as the
availability of borrowings under the Bank Credit Agreement or successor
facilities. However, based upon the current and anticipated level of operations,
the Company believes that its cash flow from operations, together with amounts
available under the Bank Credit Agreement and its other sources of liquidity,
will be adequate to meet its anticipated cash requirements for at least the next
several years for working capital, capital expenditures, interest payments and
scheduled principal payments. There can be no assurance, however, that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its indebtedness, it may be required to
refinance all or a portion of its existing indebtedness, including the Notes, or
to obtain additional financing. There can be no assurance that any such
refinancing would be possible or that any additional financing could be
obtained. The inability to obtain additional financing could have a material
adverse effect on the Company. Finally, it is anticipated that in order to pay
the principal balance of the Notes due at maturity, the Company will have to
obtain alternative financing.
IMPORTANCE OF KEY CUSTOMERS
Certain customers are material to the business and operations of the
Company. On a pro forma basis, Subway, Arby's and Chef America accounted for
26.4%, 20.2% and 16.7% of the Company's net sales, respectively, in fiscal 1996
and 25.7%, 18.8% and 18.1%, respectively, in fiscal 1995. No other customer
accounted for as much as 4.5% of the Company's net sales during either year.
The Company's prospects will continue to depend upon the success of the
Subway and Chef America products that incorporate meats provided by the Company,
as well as Subway's and Chef America's
19
<PAGE>
retention of the Company as a major supplier. Although the Company believes that
it has excellent relationships with these customers and that such relationships
are mutually beneficial, the Company does not have long-term contracts with
either Subway or Chef America, and the loss of either as a customer, or a
significant reduction in the Company's business with either of them, would have
a material adverse effect on the Company. During 1996, certain major Subway
franchisees, operating with the support of Subway, assisted in the formation of
a purchasing co-operative with the goal of improving the consistency of the
products served in Subway stores on a national basis, reducing total product
costs to the Subway chain through more efficient chain purchasing, and, to a
lesser extent, improving distribution of products within the Subway system.
While the Company believes that its product quality and relationships with
Subway position it well to respond to potential new requirements, if any, that
may be introduced by the new co-operative, there can be no assurance that
Subway's purchasing philosophy and system will not change in the future.
While Arby's is one of the Company's three largest customers, sales to
Arby's produce relatively low profit margins, compared to other higher margin
value-added products of the Company, and require a high level of the Company's
working capital relative to the profit margins produced. Accordingly, the
Company believes that while it maintains an excellent relationship with Arby's,
the loss of this customer would not have a material adverse effect.
COMPETITION
The Company operates in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. The Company's sales to Arby's and its sales of hamburger patties and
meatball items to other customers, because of their low value-added nature are
the most price sensitive and competitive areas in which the Company competes. A
number of the Company's competitors have multiple product lines, substantially
greater financial and other resources available to them and are, to varying
degrees, vertically integrated. There can be no assurance that the Company can
continue to compete successfully with such other companies. Competitive
pressures or other factors could cause the Company's products to lose market
share or could result in significant price erosion, which would have a material
adverse effect on the Company.
GENERAL RISKS OF FOOD INDUSTRY
The food industry, and the markets within the food industry in which the
Company competes, are subject to various risks, including: adverse changes in
general economic conditions; evolving consumer preferences; nutritional and
health-related concerns; federal, state and local food inspection and processing
controls; consumer product liability claims; risks of product tampering; and the
availability and expense of liability insurance. The meat and poultry industries
have recently been subject to increasing scrutiny due to the association of meat
and poultry products with recent outbreaks of illness, and on rare occasions
even death, caused by foodborne pathogens such as E. COLI, Salmonella and others
which are found in raw and improperly cooked meat. Consumer demand for meat and
poultry may fluctuate as the result of such outbreaks of illness. Product
recalls are sometimes required in the meat and poultry industries to withdraw
contaminated or mislabeled products from the market.
SUPPLIERS AND RAW MATERIALS
The Company purchases large quantities of commodity beef, pork and poultry.
Historically, market prices for products processed by the Company have
fluctuated in response to a number of factors, including changes in the United
States government farm support programs, changes in international agricultural
and trading policies, weather and other conditions during the growing and
harvesting seasons. The Company historically has been able to pass through some
increases in the prices of beef, pork and poultry to end users. Failure to pass
on significant price increases to its customers for a prolonged period of time
would have a material adverse effect on the Company. Further, certain of the
Company's customers, including Subway and Chef America, have fixed price
arrangements for certain products in
20
<PAGE>
which the sale price is fixed for periods of up to one year. Although the fixed
price arrangements are for a targeted quantity of products, there is no
requirement to deliver the products until a purchase order is issued
establishing quantity and delivery time. Should the prices of raw materials
increase substantially for a prolonged period of time, the Company could be
required to deliver products to these customers at lower gross margins than
historically achieved.
The Company has longstanding relationships with numerous major beef, pork
and other suppliers. The Company purchases most if its beef, pork and poultry
products directly from suppliers. In fiscal 1996, on a pro forma basis, the
Company purchased approximately 40.9% of the dollar value of its meat and
poultry requirements from divisions of ConAgra, Inc. Although the supply of meat
products is concentrated, it is a commodity market and the Company believes that
supplies at required standards are readily available on a competitive basis from
a variety of sources.
GOVERNMENT REGULATION
The operations of the Company are subject to extensive inspection and
regulation by the United States Department of Agriculture ("USDA") and by other
federal, state and local authorities, regarding the processing, packaging,
storage, transportation, distribution and labeling of products that are
manufactured, produced and processed by the Company. The Company's processing
facilities and products are subject to frequent inspection by USDA and/or other
federal, state and local authorities. On July 25, 1996, the USDA issued strict
new policies against contamination by foodborne pathogens such as E. COLI and
Salmonella, and established a new system of regulation known as the Hazard
Analysis Critical Control Points ("HACCP") program. The HACCP program requires
all meat and poultry processing plants to develop and implement sanitary
operating procedures by January 27, 1997. Other HACCP program requirements begin
going into effect on January 26, 1998. As the USDA's HACCP requirements are
relatively new, and not fully implemented, their impact on the meat and poultry
industries is not yet fully known. However, the Company believes that it is
currently in substantial compliance with all material governmental laws and
regulations (including the January 1997 HACCP requirements), and that it
maintains all material permits and licenses relating to its operations.
Nevertheless, there can be no assurance that the Company will be able to
maintain compliance with existing laws or regulations or that it will be able to
comply with any future laws and regulations. Failure by the Company to comply
with applicable laws and regulations could subject it to civil remedies,
including withdrawal of necessary USDA inspection, fines, injunctions, recalls
or seizures, as well as potential criminal sanctions, any of which could have a
material adverse effect on the Company. See "Business -- Government Regulatory
Matters."
The business operations of the Company and the past and present ownership
and operation of real property by Custom Foods and Quality Foods are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to protection of the environment. Compliance with federal,
state and local environmental laws and regulations is not expected to have a
material impact on the Company's capital expenditures, earnings or competitive
position. No assurance can be given, however, that additional environmental
issues relating to presently known matters or identified sites or to other
matters or sites will not require additional, currently unanticipated
investigation, assessment or expenditures.
DEPENDENCE ON KEY MANAGEMENT
The Company's executive officers and certain other key employees have been
primarily responsible for the development and expansion of the Company's
business, and the loss of the services of one or more of these individuals could
have an adverse effect on the Company. Furthermore, the Acquisition combined two
separate management teams under the ownership of one Company. The Company's
future success will be dependent in part upon its continued ability to recruit,
motivate and retain qualified personnel, as well as the successful integration
of the two management teams. There can be no assurance that the Company
21
<PAGE>
will be successful in this regard. The Company has employment and
non-competition agreements with certain key personnel. See "Management."
INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control as defined in the Indenture, the Company will be
required to offer to repurchase all outstanding Notes at 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered, or that restrictions in the Bank Credit Agreement will allow the
Company to make such required repurchases. Notwithstanding these provisions, the
Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of debt outstanding at such time. See "Description of Notes
- - - -- Certain Covenants -- Purchase of Notes Upon a Change of Control."
RANKING OF NEW NOTES
The New Notes, the Subsidiary Guarantees and the Parent Guarantee will be
senior unsecured obligations and will rank PARI PASSU in right of payment with
all other existing and future senior obligations of the Company, the Subsidiary
Guarantors and CFP Group, respectively. Loans under the Bank Credit Agreement
will be secured by substantially all of the Company's assets, including a pledge
of all the stock of Quality Foods and Custom Foods, will be guaranteed by the
Company's subsidiaries, which guarantees will be secured by substantially all of
the assets of the Company's subsidiaries, and will be guaranteed by CFP Group,
which guarantee will be secured by a pledge of all of the stock of the Company.
Accordingly, the New Notes and the Guarantees will be effectively subordinated
to the loans outstanding under the Bank Credit Agreement and the guarantees by
the subsidiaries and CFP Group of such loans, to the extent of the value of the
assets securing such loans and guarantees.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Subsidiary Guarantor's guarantee of the obligations of the Company
under the Notes may be subject to review under relevant federal and state
fraudulent conveyance statutes (the "Fraudulent Conveyance Statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of such Subsidiary Guarantors. If a
court were to find under relevant Fraudulent Conveyance Statutes that, at the
time the Old Notes were issued, (a) a Subsidiary Guarantor guaranteed the Old
Notes with the intent of hindering, delaying or defrauding current or future
creditors or (b)(i) a Subsidiary Guarantor received less than reasonably
equivalent value or fair consideration for guaranteeing the Old Notes and
(ii)(A) was insolvent or was rendered insolvent by reason of such Note
Guarantee, (B) was engaged, or about to engage, in a business or transaction for
which its assets constituted unreasonably small capital, (C) intended to incur,
or believed that it would incur, obligations beyond its ability to pay as such
obligations matured (as all of the foregoing terms are defined in or interpreted
under such Fraudulent Conveyance Statutes) or (D) was a defendant in an action
for money damages, or had a judgment for money damages docketed against it (if,
in either case, after final judgment, the judgment is unsatisfied), such court
could avoid or subordinate such guarantee of the Notes to presently existing and
future indebtedness of such Subsidiary Guarantor and take other action
detrimental to the holders of the Notes, including, under certain circumstances,
invalidating such guarantee of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Subsidiary Guarantor would be considered
insolvent if, at the time it incurred its Subsidiary Guarantee, either (i) the
fair market value (or fair saleable value) of its assets is less than the amount
required to pay the probable liability on its total existing indebtedness and
liabilities (including contingent liabilities) as they become absolute and
mature or (ii) it is incurring obligations beyond its ability to pay as such
obligations mature or become due.
22
<PAGE>
The Boards of Directors and management of each of the Company, Custom Foods
and Quality Foods believed, at the time of issuance of the Notes and the
guarantees of the Notes, that each Subsidiary Guarantor (i) was (a) neither
insolvent nor rendered insolvent thereby, (b) in possession of sufficient
capital to meet its obligations as the same mature or become due and to operate
its business effectively and (c) incurring obligations within its ability to pay
as the same mature or become due and (ii) had sufficient assets to satisfy any
probable judgment against it in any pending action. There can be no assurance,
however, that such beliefs will prove to be correct or that a court passing on
such questions would reach the same conclusions.
CONTROLLING STOCKHOLDER
Atlantic Equity Partners, L.P., a Delaware limited partnership ("AEP"), of
which First Atlantic is the investment manager, owns 48.8% and 97.2% of CFP
Group's fully-diluted common stock and voting common stock, respectively. As
controlling stockholder, AEP is able, subject to certain contractual
limitations, to determine the outcome of any corporate transaction or other
matter submitted to the stockholders of CFP Group for approval, including
mergers, consolidations or the sale of all or substantially all of the assets of
CFP Group, or any of its subsidiaries (including the Company). In addition, AEP
has the ability to elect a majority of CFP Group's Board of Directors and the
Boards of Directors of its subsidiaries (including the Company). See "Principal
Stockholders" and "Certain Transactions -- Stockholders' Agreement."
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Bank Credit Agreement and the Indenture contain numerous restrictive
covenants, which limit the discretion of the management of CFP Group and the
Company with respect to certain business matters. These covenants place
significant restrictions on, among other things, the ability of CFP Group and
the Company to incur additional indebtedness, to create liens or other
encumbrances, to pay dividends or make other restricted payments, to make
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of assets to, or merge or consolidate with, another entity.
The Bank Credit Agreement also contains a number of financial covenants that
require CFP Group and the Company to meet certain financial ratios and tests and
provide that a "change of control" will constitute an event of default. See "The
Quality Foods Acquisition" and "Description of Notes -- Certain Covenants." A
failure to comply with the obligations contained in the Bank Credit Agreement or
the Indenture, if not cured or waived, could permit acceleration of the related
indebtedness and acceleration of indebtedness under other instruments that
contain cross-acceleration or cross-default provisions. In addition, the
obligations of CFP Group and the Company under the Bank Credit Agreement are
secured by substantially all of their respective assets. In the case of an event
of default under the Bank Credit Agreement, the lenders under the Bank Credit
Agreement would be entitled to exercise the remedies available to a secured
lender under applicable law. If CFP Group or the Company were obligated to repay
all or a significant portion of its indebtedness, there can be no assurance that
CFP Group or the Company would have sufficient cash to do so or that CFP Group
or the Company could successfully refinance such indebtedness. Other
indebtedness of CFP Group and the Company that may be incurred in the future may
contain financial or other covenants more restrictive than those applicable to
the Bank Credit Agreement or the Notes.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
The Old Notes are designated for trading in the PORTAL market. There is no
established trading market for the New Notes. Although the Initial Purchasers
have advised the Company that they currently intend to make a market in the New
Notes, they are not obligated to do so and it may discontinue such market-making
at any time without notice. The Company does not currently intend to list the
New Notes on any securities exchange or to seek approval for quotation through
any automated quotation system. Accordingly, there can be no assurance as to the
development of any market or the liquidity of any market that may develop for
the New Notes. If such a market were to exist, no assurance can be given as to
the trading prices of the New Notes. Future trading prices of the New Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on January 28, 1997 (the "Issue
Date") to the Initial Purchasers, who placed the Old Notes with institutional
investors. In connection therewith, the Company and the Initial Purchasers
entered into the Registration Rights Agreement, pursuant to which the Company
agreed, for the benefit of the Holders of the Old Notes, that the Company would,
at its sole cost, (i) within 90 days following the original issuance of the Old
Notes, file with the Commission a Registration Statement (of which this
Prospectus is a part) under the Securities Act with respect to an issue of a
series of new notes of the Company identical in all material respects to the
series of Old Notes (except that such New Notes would not contain terms with
respect to transfer restrictions) and (ii) cause such Registration Statement to
be declared effective under the Securities Act within 150 days following the
original issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, to be issued without a restrictive legend and
which may, generally, be reoffered and resold by the holder without restrictions
or limitations under the Securities Act. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such New Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 promulgated under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, PROVIDED that such New Notes are acquired in the ordinary course
of such Holder's business, such Holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes and neither such
Holder nor any other such person is engaging in or intends to engage in a
distribution of such New Notes. Since the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Company or who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 120 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) the Exchange Offer is not
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consummated within 180 days of the Issue Date unless the Exchange Offer has
commenced, in which case, the Exchange Offer is not consummated within 30 days
after the date on which the Exchange Offer commenced, (iii) in certain
circumstances, the Initial Purchasers so request after the consummation of the
Exchange Offer or (iv) in certain circumstances, any Holder that is not eligible
to participate in the Exchange Offer or any Holder that participates in the
Exchange Offer and such Holder does not receive New Notes on the date of the
exchange that may be sold without restriction under state and Federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act) and so notifies the Company
within 60 days after such Holder first becomes aware of such restriction and
provides the Company with a reasonable basis for its conclusion, in the case of
each of clauses (i)-(iv) of this sentence, then the Company will promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice") and, at its cost, (a) as promptly as practicable, file a shelf
registration statement covering resales of the Notes (the "Shelf Registration
Statement"), (b) use all reasonable efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act by the 60th day
after the delivery of the Shelf Notice (or promptly in the event of a request by
the Initial Purchaser) and (c) use all reasonable efforts to keep the Shelf
Registration Statement effective until three years after its effective date, or
such shorter period ending when (i) all Notes covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated therein or
(ii) a subsequent Shelf Registration Statement covering all unregistered Old
Notes has been declared effective under the Securities Act. The Company will, in
the event of the filing of a Shelf Registration Statement, provide to each
Holder of the Old Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit unrestricted resales of the Old Notes. A Holder of Old
Notes that sells such Old Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a Holder (including certain
indemnification obligations). In addition, each Holder of the Old Notes will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have its Old Notes included in the Shelf Registration Statement and
to benefit from the provisions regarding liquidated damages set forth in the
following paragraph.
In the event that either (i) the Registration Statement is not filed with
the Commission on or prior to the 90th calendar day following the Issue Date or
(ii) the Exchange Offer is not consummated, or the Shelf Registration Statement
is not declared effective on or prior to the 180th calendar day following the
Issue Date, the Company will pay increased cash interest to each Holder of the
Old Notes during the first 30 days following the 90-day period referred to in
(i) above or the first 90 days following the 180-day period referred to in (ii)
in an amount equal to 0.25% per annum on the Old Notes. The amount of the cash
interest will increased by an additional 0.25% per annum for each subsequent
30-day period in the case of (i) above or 90-day period in the case of (ii)
above, up to a maximum amount of additional cash interest of 1.50% per annum.
All accrued cash interest shall be paid to record holders of the Old Notes by
wire transfer of immediately available funds or by federal funds check by the
Company on each Interest Payment Date. Upon (x) the filing of the Registration
Statement in the case of clause (i) above, (y) the effectiveness of the
Registration Statement in the case of clause (ii) above or (z) the consummation
of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as
the case may be, in the case of clause (iii) above, and provided that none of
the conditions set forth in clauses (i), (ii) and (iii) above continues to
exist, such additional interest shall cease to accrue on the Old Notes from the
date of such filing, effectiveness or consummation.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the
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Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement, which provisions will terminate
upon the consummation of the Exchange Offer. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $115,000,000 aggregate principal amount
of the Old Notes are outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of such date, there were registered
Holders of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer--Fees and Expenses."
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<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "The Exchange Offer--Conditions" shall not have
been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) or written notice of such delay, extension or termination
to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any
manner. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to 10-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from January 28, 1997. No interest will be
paid on the Old Notes accepted for exchange.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about , 1997, to all Holders of Old Notes known
to the Company and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, or an Agent's Message, including any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) the certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Old Notes, Letter of
Transmittal or Agent's Message and other required documents must be received by
the Exchange Agent at the address set forth below under "Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date.
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<PAGE>
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such beneficial owner's own behalf, such beneficial owner
must, prior to completing and executing the Letter of Transmittal or delivering
an Agent's Message and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
promulgated under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, adminstrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent
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<PAGE>
nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that the Company determines are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that (i) the New Notes acquired by the Holder and any beneficial owners of Old
Notes pursuant to the Exchange Offer are being obtained in the ordinary course
of business of the persons receiving such New Notes, (ii) neither the Holder nor
such beneficial owner has an arrangement with any person to participate in the
distribution of such New Notes, (iii) neither the Holder nor such beneficial
owner nor any such other person is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither the Holder nor any such other
person is an "affiliate," as defined under Rule 405 promulgated under the
Securities Act, of the Company. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, or
an Agent's Message, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of the addresses set forth below under "The Exchange
Offer--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) or an Agent's Message, together with
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the certificate(s) representing the Old Notes, or a Book-Entry Confirmation,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other document required by
the Letter of Transmittal are received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the persons withdrawing the tender and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, which determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered
by following one of the procedures described above under "The Exchange Offer--
Procedures for Tendering" at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
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(b) any action or proceeding is instituted or threatened in any court or
by any governmental agency that might materially impair the ability of the
Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility), (ii) extend the Exchange Offer and retain all Old
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of Holders to withdraw such Old Notes (see "The Exchange Offer--
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND TO 4:30 P.M.: BY OVERNIGHT COURIER AND BY
United States Trust Company United States Trust Company HAND AFTER 4:30 P.M.:
of New York of New York United States Trust Company
P.O. Box 843 111 Broadway of New York
Cooper Station New York, New York 10006 770 Broadway, 13th Floor
New York, New York 10276 Attention: Lower Level New York, New York 10003
Attention: Corporate Trust Corporate Trust Window Attention: Corporate Trust
Services Redemption Unit
FOR INFORMATION CALL:
(212) 852-1000
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
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The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less accrued original issue discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the Exchange
Offer and the unamortized expenses related to the issuance of the Old Notes will
be amortized over the term of the New Notes.
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THE QUALITY FOODS ACQUISITION
THE ACQUISITION
On December 31, 1996, CFP Holdings completed the acquisition of Quality
Foods pursuant to the Acquisition Agreement among Quality Foods, the limited
partners of Quality Foods, the stockholders of the two general partners of
Quality Foods (the "General Partners"), CFP Holdings and the other signatories
thereto. Pursuant to the Acquisition Agreement, CFP Holdings acquired all of the
issued and outstanding capital stock of the General Partners and substantially
all of the limited partnership interests of Quality Foods owned by its limited
partners. The remaining limited partnership interests were exchanged by certain
members of management of Quality Foods for common stock of CFP Group, which
represents, in the aggregate, approximately 7.4% of the fully-diluted common
stock of CFP Group. Immediately following the acquisition of all such interests,
CFP Group contributed the Rollover Interests to CFP Holdings and CFP Holdings
then contributed the limited partnership interests acquired pursuant to the
Acquisition Agreement and the Rollover Interests to QF Acquisition Corp. The
Quality Foods partnership thereby terminated and QF Acquisition Corp. became a
wholly-owned subsidiary of CFP Holdings. Simultaneously with the consummation of
the foregoing, each person owning capital stock of CFP Holdings exchanged each
share of capital stock held by such person for an equivalent share of capital
stock of CFP Group. See "Principal Stockholders." In addition, in connection
with the consummation of the Acquisition, CFP Group assumed all obligations of
CFP Holdings pursuant to the CFP Holdings 1995 Stock Option Plan, whereupon each
issued and outstanding option to acquire nonvoting capital stock of CFP Holdings
was converted into an option to acquire equivalent shares of nonvoting common
stock of CFP Group.
The Company paid $64.0 million for the issued and outstanding shares of the
General Partners and all the limited partnership interests (excluding the
Rollover Interests) of Quality Foods, and refinanced and assumed $23.2 million
of indebtedness of Quality Foods.
The Acquisition Agreement provides for a dollar-for-dollar post-closing
adjustment of the purchase price in the event that closing working capital of
Quality Foods is less than or greater than $10.1 million. "Closing working
capital" is defined as total current assets less total current liabilities of
Quality Foods and the General Partners (on a combined basis), subject to certain
specified exceptions.
The Acquisition Agreement contains certain customary representations,
warranties and covenants. With certain exceptions, the representations and
warranties expire 30 days following the receipt by CFP Holdings of Quality
Foods' audited consolidated financial statements for the fiscal year ending
December 31, 1997 (the "Initial Survival Date"). The Acquisition Agreement
requires the stockholders of the General Partners and the limited partners of
Quality Foods (collectively, the "Sellers") to indemnify CFP Holdings and its
affiliates for inaccuracies in the representations and warranties in the
Acquisition Agreement, and for the failure of any such party to comply with
covenants made in the Acquisition Agreement. In order to secure the indemnity
obligations of the Sellers, $5.0 million of the purchase price otherwise payable
to the Sellers was placed in escrow until (i) the seventh anniversary of the
closing of the Acquisition, subject to the release of $2.9 million (less any
claims previously made against the escrow, plus interest accrued thereon) after
the Initial Survival Date and (ii) the release on the fifth anniversary of the
closing of the Acquisition of all but $1.0 million (plus the sum of (x) any
claims previously made against the escrow and (y) $100,000, to the extent
certain environmental matters relating to the Philadelphia facility have not
been resolved by such time, plus interest accrued thereon) of the remaining
escrowed amount. Subject to certain exceptions, the indemnification obligations
of the Sellers with respect to inaccuracies in representations and warranties
and breaches of covenants is subject to a deductible of $500,000 and an
aggregate maximum liability of $7.0 million.
33
<PAGE>
FINANCING OF THE ACQUISITION
In connection with the Acquisition and certain other transactions referred
to herein, $113.7 million was required, the sources and uses of which were as
follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sources of Funds(1):
Cash on hand(2).............................................................. $ 6,983
Bank Credit Agreement
Revolving Credit Facility.................................................. 3,686
Term Loans................................................................. 76,000
Bridge Notes................................................................. 25,000
Rollover Interests........................................................... 1,500
Equity investment in CFP Group by Quality Foods' management.................. 500
-------------
Total sources............................................................ $ 113,669
-------------
-------------
Uses of Funds:
Cash purchase price paid to Sellers.......................................... $ 64,034
Rollover Interests........................................................... 1,500
Refinance Quality Foods' and CFP Holdings' indebtedness...................... 37,585
Repurchase of CFP Holdings' outstanding common stock and cancellation of
option agreements(2)....................................................... 2,044
Loans to Quality Foods' management for equity investment..................... 343
Payment of estimated transaction fees and expenses(3)........................ 8,163
-------------
Total uses............................................................... $ 113,669
-------------
-------------
</TABLE>
- - - ------------------------
(1) For a description of the Revolving Credit Facility and the Term Loans, see
"Description of Bank Credit Agreement."
(2) Represents purchase of equity interests of certain former employees and
stockholders of CFP Holdings.
(3) Includes fees and expenses paid by the Company in connection with the
Acquisition, the Bridge Notes and the Bank Credit Agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds received by the Company from the sale of the Old Notes were
approximately $109.8 million after deducting underwriting discounts and offering
expenses. The net proceeds from the issuance of the Old Notes were used (i) to
repay $66.0 million principal amount of the Term Loans, (ii) to repay $25.0
million of Bridge Notes, (iii) to fund the payment of a $16.0 million cash
distribution to the holders of CFP Group's Class A Voting and Nonvoting Common
Stock (the "Distribution") and (iv) to repay $2.8 million of borrowings under
the Revolving Credit Facility.
The following is a description of the sources and uses of proceeds of the
Offering.
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sources:
Old Notes Offering........................................................... $ 109,844
-------------
-------------
Uses:
Repay Term Loans............................................................. $ 66,000
Repay Bridge Notes........................................................... 25,000
Fund the Distribution........................................................ 16,000
Repay borrowings under the Revolving Credit Facility......................... 2,844
-------------
Total uses............................................................. $ 109,844
-------------
-------------
</TABLE>
Borrowings under the Revolving Credit Facility and the Term Loan A mature in
June 2002. On the date hereof, the Term Loan A bears interest at the rate of
10 1/4% per annum and borrowings under the Revolving Credit Facility bear
interest at the rate of 7 31/32% per annum.
34
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of CFP
Holdings at December 28, 1996, (ii) such consolidated capitalization as adjusted
to give effect to the Acquisition and the financing thereof and (iii) such
consolidated capitalization as further adjusted to give effect to the Offering
and the application of the net proceeds therefrom and the other transactions
referred to herein. This table should be read in conjunction with the "Unaudited
Pro Forma Condensed Combined Financial Statements" and the financial statements
of CFP Holdings and Quality Foods, including the notes thereto, and the other
information contained in this Offering Memorandum.
<TABLE>
<CAPTION>
DECEMBER 28, 1996
-------------------------------------
<S> <C> <C> <C>
PRO FORMA
FOR
PRO FORMA ACQUISITION
FOR AND
HISTORICAL ACQUISITION OFFERING
----------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt, including current maturities of long-term debt(1)............ $ 3,656 $ 4,995 $ 1,495
----------- ----------- -----------
----------- ----------- -----------
Long-term debt:
Revolving loan.............................................................. $ 5,785 $ -- $ --
Bank term loans............................................................. 5,848 -- --
Senior subordinated notes................................................... 5,016 -- --
Capital lease obligations................................................... 5,929 5,929 5,929
Industrial revenue bonds and other debt..................................... -- 5,539 5,539
Bank Credit Agreement(1)
Term Loans................................................................ -- 71,500 9,000
Revolving Credit Facility................................................. -- 4,873 3,599
11 5/8% Senior Guaranteed Notes Due 2004.................................... -- -- 115,000
Bridge Notes................................................................ -- 25,000 --
----------- ----------- -----------
Total long-term debt(2)................................................... 22,578 112,841 139,067
----------- ----------- -----------
Redeemable preferred stock(3)................................................. 1,204 1,204 --
----------- ----------- -----------
Common stockholders' equity (deficiency)(4)................................... 3,527 4,651 (13,838)
----------- ----------- -----------
Total capitalization...................................................... $ 27,309 $ 118,696 $ 125,229
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- - - ------------------------
(1) Upon consummation of the Acquisition, the Company borrowed $76.0 million of
Term Loans, $4.5 million of which were due within one year. Upon consummation
of the Offering and application of the net proceeds therefrom, $10.0 million
of the Term Loans will remain outstanding, $1.0 million of which will be due
within one year. The Bank Credit Agreement also includes a Revolving Credit
Facility of $20.0 million. See "Description of Bank Credit Agreement."
(2) For a description of the Company's long-term debt, see Note 6 to CFP
Holdings' Consolidated Financial Statements and Note 6 to Quality Foods'
Financial Statements.
(3) Contemporaneous with the closing of the Offering, CFP Group redeemed all of
its redeemable preferred stock for $1.2 million.
(4) For a description of the transactions resulting in adjustments to common
stockholders' equity (deficiency), see Notes to the Unaudited Pro Forma
Condensed Combined Financial Statements.
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet gives
effect to the Acquisition, the Offering and the application of the net proceeds
therefrom and the other transactions referred to herein as if each of the
foregoing had occurred on December 28, 1996. The Unaudited Pro Forma Condensed
Combined Statement of Operations for the year ended September 30, 1996 and for
the three months ended December 28, 1996 give effect to the Acquisition, the
Offering and the application of the estimated net proceeds therefrom and the
other transactions referred to herein, as if each of the foregoing had occurred
on October 1, 1995.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the "Use of Proceeds," "Capitalization," "Selected
Historical Financial Statements of CFP Holdings," "Selected Historical Financial
Statements of Quality Foods" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus. The pro forma data do not purport to represent what the Company's
actual results of operations or financial position would have been had such
transactions in fact occurred on such dates. The pro forma statement of
operations also does not purport to project the results of operations of the
Company for the current year or for any other period.
36
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
CFP QUALITY
HOLDINGS FOODS
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
DECEMBER 28, DECEMBER 31, ACQUISITION OFFERING
1996 1996 ADJUSTMENTS(1) ADJUSTMENTS TOTAL
------------- ------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash................................ $ 3,608 $ 390 $ (3,998)(2) $ --(3) $ --
Accounts receivable................. 5,189 5,892 11,081
Inventories......................... 4,593 7,727 12,320
Deferred income taxes............... 136 -- 136
Income taxes receivable............. -- -- 374(4) 1,665(4) 1,796
(114)(4)
(129)(4)
Prepaid expenses and other.......... 415 1,547 (38)(2) 1,924
------------- ------------- -------------- ----------- ---------
Total current assets.............. 13,941 15,556 (3,905) 1,665 27,257
Property, plant & equipment........... 9,898 15,395 25,293
Intangible and other assets........... 2,200 4,641 5,822(5) 5,156(6) 8,629
(740)(4) (3,788)(4)
(4,412)(1)
(250)(2)
Excess of purchase cost over book
value of net assets acquired........ 10,304 -- 63,353(1) 75,998
2,341(1)
------------- ------------- -------------- ----------- ---------
Total assets.......................... $ 36,343 $ 35,592 $ 62,209 $ 3,033 $ 137,177
------------- ------------- -------------- ----------- ---------
------------- ------------- -------------- ----------- ---------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt... $ 3,656 $ 189 $ (3,350)(7) $ 495
Current portion of Term Loans....... 4,500(5) $ (3,500)(8) 1,000
Accounts payable.................... 2,322 6,392 8,714
Accrued liabilities................. 698 535 1,233
Income taxes payable.................. 129 (129)(4) --
------------- ------------- -------------- ----------- ---------
Total current liabilities......... 6,805 7,116 1,021 (3,500) 11,442
Long-term debt........................ 22,578 5,539 (16,649)(7) 11,468
Revolving Credit Facility............. 4,873(5) (2,844)(8) 3,599
1,570(9)
Advances from CFP Holding............. -- 15,677 (15,677)(2) --
Term Loans............................ 71,500(5) (62,500)(8) 9,000
11 5/8% Senior Guaranteed Notes Due
2004................................ 115,000(6) 115,000
Bridge Notes.......................... 25,000(5) (25,000)(8) --
Deferred income taxes................. 506 -- 506
------------- ------------- -------------- ----------- ---------
Total liabilities................. 29,889 28,332 70,068 22,726 151,015
------------- ------------- -------------- ----------- ---------
Warrants.............................. 1,723 -- (1,723)(10) --
------------- ------------- -------------- ---------
Redeemable preferred stock............ 1,204 -- (1,204)(9) --
------------- ------------- ----------- ---------
Stockholders' equity
Partners' capital................... 7,260 (7,260)(1) --
Common stock and additional paid-in
capital........................... 3,788 -- 2,000 (11 7,323
(188)(12)
1,723 (10
Stockholder notes................... -- (343)(11) (343)
Accumulated deficit................. (261) -- (1,677)(12) (16,000)(8) (20,818)
(391)(4) 9(9)
(2,498)(4)
------------- ------------- -------------- ----------- ---------
Total stockholders' equity
(deficiency)...................... 3,527 7,260 (6,136) (18,489) (13,838)
------------- ------------- -------------- ----------- ---------
Total liabilities and stockholders'
equity (deficiency)................. $ 36,343 $ 35,592 $ 62,209 $ 3,033 $ 137,177
------------- ------------- -------------- ----------- ---------
------------- ------------- -------------- ----------- ---------
</TABLE>
37
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
----------------------------------------------------------
<S> <C> <C> <C> <C>
CFP HOLDINGS QUALITY FOODS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS (1) PRO FORMA
------------- ------------- --------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................................... $ 65,996 $ 90,649 $ 156,645
Cost of sales............................................... 53,818 69,254 123,072
------------- ------------- -----------
Gross profit................................................ 12,178 21,395 33,573
Operating expenses.......................................... 5,187 7,720 $ 2,696 (13 15,310
(293)(14)
Other charges............................................... 4,996 (15 1,288 (16 6,284
------------- ------------- ------- -----------
Income from operations.................................... 1,995 12,387 (2,403) 11,979
Interest expense............................................ 3,182 1,851 11,707 (17 16,740
------------- ------------- ------- -----------
Income (loss) before income taxes......................... (1,187) 10,536 (14,110) (4,761)
Provision (benefit) for income taxes........................ (259) 4,214 (18 (5,644)(19) (1,689)
------------- ------------- ------- -----------
Net income (loss)......................................... $ (928) $ 6,322 $ (8,466) $ (3,072)
------------- ------------- ------- -----------
------------- ------------- ------- -----------
OTHER DATA:
Pro forma EBITDA (20)..................................... $ 24,598
Depreciation and amortization............................. 5,537
Cash interest expense (21)................................ 15,713
Ratio of earnings to fixed charges (22)................... --
</TABLE>
<TABLE>
<CAPTION>
CFP HOLDINGS QUALITY FOODS
HISTORICAL HISTORICAL
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 28, DECEMBER 31, PRO FORMA
1996 1996 ADJUSTMENTS (1) PRO FORMA
------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 20,624 $ 21,049 $ 41,673
Cost of sales............................................... 18,063 18,153 36,216
------------- ------------- -----------
Gross profit................................................ 2,561 2,896 5,457
Operating expenses.......................................... 1,455 1,729 707 (13 3,660
(231)(14)
Other charges............................................... 3,325 (2,986)(14) 339
------------- ------------- ------- -----------
Income from operations.................................... 1,106 (2,158) 2,510 1,458
Interest expense............................................ 823 503 3,062 (17 4,388
------------- ------------- ------- -----------
Income (loss) before income taxes......................... 283 (2,661) (552) (2,930)
Provision (benefit) for income taxes........................ 252 (1,064) (221)(19) (1,033)
------------- ------------- ------- -----------
Net income (loss)......................................... $ 31 $ (1,597) $ (331) $ (1,897)
------------- ------------- ------- -----------
------------- ------------- ------- -----------
OTHER DATA:
Pro forma EBITDA(20)...................................... $ 3,412
Depreciation and amortization............................. 1,575
Cash interest expense(21)................................. 4,131
Ratio of earnings to fixed charges(22).................... --
</TABLE>
38
<PAGE>
CFP HOLDINGS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The Acquisition occurred on December 31, 1996. Simultaneously with the
Acquisition, each person owning capital stock (or options to acquire capital
stock) of CFP Holdings exchanged their equity interests for equivalent
interests of capital stock (or options to acquire capital stock) of CFP
Group. As CFP Group has no operations and its sole asset is its 100%
ownership of CFP Holdings, all transactions discussed herein applicable to
CFP Group have been reflected in the following pro forma adjustments of CFP
Holdings.
The Acquisition was accounted for as a purchase. The total purchase cost
will be allocated to Quality Foods' assets and liabilities based on their
relative fair values as of the closing date of the Acquisition, based on
valuations and other studies which are not yet complete. Accordingly, the
excess of the purchase cost over the historical book value of the net assets
acquired has not yet been allocated to individual assets and liabilities.
However, the Company believes that a portion of the purchase price will be
allocated to property and equipment.
The purchase cost and the preliminary pro forma calculation of the excess of
the cost over the book value of net assets acquired is as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Cash purchase price of Quality Foods' equity (inclusive of the Rollover
Interests)................................................................... $ 66,201
-------------
Book value of Quality Foods' equity............................................ 7,260
Elimination of existing goodwill and organization costs........................ 4,412
-------------
Book value of net assets acquired.............................................. 2,848
-------------
Excess of purchase cost over book value of net assets acquired................. $ 63,353
-------------
-------------
</TABLE>
Certain transaction fees and expenses totaling $2.3 million that were
incurred in connection with the Acquisition are included in the excess of
purchase cost over book value of net assets acquired.
(2) Reflects the cash flows from the Acquisition and certain other transactions
as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Proceeds from Term Loans....................................................... $ 76,000
Revolving Credit Facility borowings............................................ 4,873
Proceeds from Bridge Notes..................................................... 25,000
Equity investment by Quality Foods' management................................. 500
Rollover Interests............................................................. 1,500
Cash purchase price paid to Sellers............................................ (64,701)
Rollover Interests............................................................. (1,500)
Repurchase of CFP Holdings' outstanding common stock and cancellation of option
agreements................................................................... (1,865)
Refinance CFP Holdings' indebtedness........................................... (19,910)
Payment of estimated transaction fees and expenses............................. (7,157)
Loans to Quality Foods' management for equity investment....................... (343)
Cash advanced to Quality Foods................................................. (16,395)
-------------
Change in cash........................................................... $ (3,998)
-------------
-------------
</TABLE>
The pro forma cash purchase price paid to the Sellers of $64.7 million is
different from the $64.0 million actually paid at closing. The cash purchase
price paid at closing was adjusted for changes in working capital and
outstanding debt balances which were different at the time of the actual
closing.
39
<PAGE>
Advances from CFP Holdings of $15,677,000 reflects cash advanced from Custom
Foods of $16,395,000, application of the purchase deposit of $250,000, and
amounts receivable of $38,000 less expenses paid by Quality Foods on the
behalf of Custom Foods of $1,006,000.
The cash used to repay the existing indebtedness of Quality Foods and CFP
Holdings of $34.6 million differs from the carrying value of the existing
indebtedness by $3,000 due to a discount of $284,000 agreed to by the
holders of CFP Holdings' subordinated debt, unamortized discount of $195,000
related to CFP Holdings' senior debt and $92,000 of prepayment penalties
related to Quality Foods' subordinated debt.
(3) Reflects the cash flows from the Offering and other transactions as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Net proceeds from Notes Offering............................................... $ 109,844
Repayment of Term Loans........................................................ (66,000)
Repayment of Bridge Notes...................................................... (25,000)
Distribution to stockholders................................................... (16,000)
Repayment of borrowings under the Revolving Credit Facility.................... (2,844)
-------------
Change in cash......................................................... $ --
-------------
-------------
</TABLE>
In addition, Revolving Credit Facility borrowings of $1.2 million were used
to redeem the redeemable preferred stock of CFP Group.
(4) The unamortized discount of $195,000, and deferred financing costs of
$740,000 for CFP Holdings' existing indebtedness will be expensed and
reflected as an extraordinary item in December 1996 less income tax effect
of $374,000.
In addition, the Company will record an extraordinary gain of $284,000 less
income tax effect of $114,000 from the prepayment discount.
Income taxes payable of $129,000 have been offset against income taxes
receivable.
The net reduction of stockholders' equity from these items is $391,000.
With consummation of the Offering, (i) deferred financing costs of $3.8
million related to the issuance of the Bridge Notes and $66.0 million of the
Term Loans are expected to be charged to expense and reflected as an
extraordinary item, less income tax effect of $1.5 million and (ii) one-time
payments of $375,000 to certain executive officers of the Company will be
expensed, less income tax effect of $150,000. The net reduction of
stockholders' equity from these items is $2.5 million.
(5) Reflects the following: (i) issuance of $76.0 million of Term Loans ($4.5
million of which is classified as current), $25.0 million of Bridge Notes
and $4.9 million of Revolving Credit Facility borrowings; and (ii) certain
transaction fees and expenses totalling $5.8 million, $5.4 million of which
were incurred in connection with the Bank Credit Agreement and Bridge Notes
borrowings and $375,000 of which relate to the one-time payments to certain
executive officers of the Company.
(6) Reflects the issuance of the Notes for $115.0 million, less debt issuance
fees and estimated expenses of $5.2 million.
40
<PAGE>
(7) Reflects the principal amounts of existing indebtedness, assumed to have
been repaid on December 31, 1996, as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
CFP Holdings' revolving line of credit......................................... $ 5,785
CFP Holdings' senior debt...................................................... 8,973
CFP Holdings' subordinated debt................................................ 5,241
-------------
Total.................................................................... $ 19,999
-------------
-------------
</TABLE>
(8) Reflects the repayment of $66.0 million of Term Loans, the $25.0 million of
Bridge Notes, $2.8 million of borrowings under the Revolving Credit
Facility, and a cash distribution of $16.0 million to the Company's
stockholders out of the estimated net proceeds of the Offering.
(9) Reflects $1.6 million of additional Revolving Credit Facility borrowings
used to redeem the redeemable preferred stock of CFP Group with a carrying
value of $1.2 million and the related adjustment of $9,000, which represents
the difference between the carrying value and the pro forma redemption
amount.
(10) Reflects the exercise of the common stock warrants which were recorded at
$1.7 million as of December 31, 1996.
(11) Reflects the issuance of CFP Group's common stock to certain of Quality
Foods' management for $2.0 million, represented by a $1.5 million rollover
of partnership interests in Quality Foods, a $343,000 promissory note and
$157,000 of cash.
(12) Reflects the repurchase of the CFP Holdings' outstanding common stock and
cancellation of option agreements which is allocated $188,000 to common
stock and additional paid-in capital and $1.7 million to accumulated
deficit.
(13) Reflects the amortization expense of $3.2 million per year for the
amortization over 20 years of the excess of the purchase cost of Quality
Foods over net assets acquired less the historical amortization of Quality
Foods' goodwill and organization costs of $468,000 per year.
(14) For the year ended September 30, 1996, reflects the net elimination of
$293,000 of expenses as follows: (i) legal and accounting fees and other
expenses of Quality Foods and CFP Holdings relating to the Acquisition of
$235,000 and (ii) the contractual decrease in management and consultant fees
of $128,000, offset by contractually increased executive salaries of
management of Quality Foods of $70,000. For the quarter ended December 31,
1996, reflects the net elimination of $3,039,000 of expenses as follows:
from operating expenses. (i) legal and accounting fees and other expenses of
CFP Holdings relating to the Acquisition of $23,000, (ii) the contractual
decrease in management and consultant fees of $20,000, and (iii)
contractually increased executive salaries of management of Quality Foods
and other compensation charges of $188,000, from other charges-$2,986,000 of
Quality Foods acquisition costs.
(15) Represents the termination payment associated with the Sales Brokerage
Agreement.
(16) Represents facility start-up and relocation costs associated with the
Philadelphia Consolidation.
(17) Reflects the estimated increase in interest expense as if the Acquisition,
the Offering and the application of the estimated net proceeds therefrom and
the other transactions referred to herein had occurred on October 1, 1995.
In as much as the Bridge Notes and $66.0 million of the Term Loans, which
are being repaid from the net proceeds of the Offering, were not in
existence during the year
41
<PAGE>
ended September 30, 1996, and the quarter ended December 28, 1996, no effect
is given to such borrowings. Pro forma interest expense is comprised of the
following:
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
SEPTEMBER 30, 1996 DECEMBER 28, 1996
------------------ ------------------
<S> <C> <C>
(IN THOUSANDS)
Interest expense on the Notes in the principal amount
of $115.0 million and Term Loans in the principal
amount of $10.0 million with an estimated weighted
average interest rate of 11.40%..................... $ 14,219 $ 3,554
Assumed average utilization of Revolving Credit
Facility............................................ (76) 18
Amortization of deferred financing costs related to
the Offering and a portion of the Bank Credit
Agreement........................................... 1,026 257
Less interest expense and amortization related to
retired debt........................................ (3,462) (767)
------- -------
Net adjustment........................................ $ 11,707 $ 3,062
------- -------
------- -------
</TABLE>
A 1/8% increase in the assumed interest rates applicable to the Bank Credit
Agreement would increase pro forma interest expense by $14,000 per year.
(18) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation.
(19) The provision (benefit) for income taxes is computed by applying the
estimated combined statutory rate of 40%.
(20) For the year ended September 30, 1996, pro forma EBITDA consists of EBITDA,
adjusted to eliminate the following non-recurring charges: (i) costs of $5.7
million associated with the termination of the Sales Brokerage Agreement by
Custom Foods consisting of (a) the $5.0 million cash payment, (b)
commissions of $570,000 and other costs of $99,000 paid under the Sales
Brokerage Agreement during the fiscal year and prior to the termination, (c)
$75,000 associated with a consulting agreement entered into in connection
with the termination, less (d) the incremental costs associated with an
additional in-house salesperson of $65,000; (ii) the facility start-up and
relocation costs related to the Philadelphia Consolidation of $1.3 million;
and (iii) the start-up costs for a new production line located in Custom
Foods' Kentucky facility of $119,000. For the quarter ended December 28,
1996, pro forma EBITDA consists of EBITDA, adjusted to eliminate the
following non-recurring charges: (i) $40,000 associated with a consulting
agreement entered into in connection with the termination of the Sales
Brokerage Agreement; and (ii) the facility start-up and relocation costs
related to the Philadelphia Consolidation of $339,000. EBITDA is the sum of
income before income taxes and interest, depreciation and amortization
expense. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service indebtedness. However, EBITDA
should not be considered as an alternative to income from operations or to
cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be construed
42
<PAGE>
as an indication of a company's operating performance or as a measure of
liquidity. The Company's pro forma EBITDA is derived as follows:
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
SEPTEMBER 30, 1996 DECEMBER 28, 1996
------------------ -----------------
<S> <C> <C>
(IN THOUSANDS)
Loss before income taxes............................... $ (4,761) $ (2,930)
Non-recurring charges and expenses:
Custom Foods:
Net impact of the termination of the Sales
Brokerage Agreement by Custom Foods.............. 5,675 40
Start-up costs for new production line............. 119 --
Quality Foods:
Philadelphia Consolidation start-up and
relocation....................................... 1,288 339
Depreciation and amortization.......................... 5,537 1,575
Interest expense....................................... 16,740 4,388
------- -------
Pro forma EBITDA....................................... $ 24,598 $ 3,412
------- -------
------- -------
</TABLE>
(21) Cash interest expense for the year ended September 30, 1996, consists of
interest expense of $16.7 million less amortization of deferred financing
costs of $1.0 million and is exclusive of capitalized interest paid of
$593,000. Cash interest expense for the quarter ended December 28, 1996,
consists of interest expense of $4.4 million less amortization of deferred
financing costs of $257,000.
(22) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges (excluding capitalized interest).
Fixed charges consist of interest expense (which includes amortization of
deferred financing costs) whether expensed or capitalized and one-third of
rental expense, deemed representative of that portion of rental expense
attributable to interest. Pro forma earnings were inadequate to cover fixed
charges by $5.4 million for the year ended September 30, 1996, and $2.9
million for the quarter ended December 28, 1996.
43
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF QUALITY FOODS
The following Selected Historical Financial Data should be read in
conjunction with the financial statements and related notes of Quality Foods and
other financial data included elsewhere in this Prospectus. The balance sheet
data presented below as of December 31, 1992, 1993, 1994, 1995 and 1996 and the
statement of operations data presented below for the period July 20, 1992 to
December 31, 1992 and the years ended December 31, 1993, 1994, 1995 and 1996 are
derived from the audited financial statements of Quality Foods. The balance
sheet data as of July 19, 1992 and the statement of operations data for the year
ended December 31, 1991 and the period from January 1, 1992 to July 19, 1992 are
derived from the audited financial statements of William Cohen and Son Co.,
Inc., Quality Foods' predecessor.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY(1) QUALITY FOODS
------------- ---------------------------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, JULY 20, 1992
1992 TO YEAR ENDED DECEMBER 31,
TO JULY 19, DECEMBER 31, -------------------------------
1992 1992 1993 1994 1995 1996
------------- ------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $ 29,376 $ 26,225 $ 71,195 $ 84,817 $ 84,694 $ 90,582
Cost of sales..................................... 25,232 22,314 61,040 72,162 67,930 71,448
------------- ------------- --------- --------- --------- ---------
Gross profit...................................... 4,144 3,911 10,155 12,655 16,764 19,134
Operating expenses................................ 1,861 2,085 5,266 6,887 6,926 7,519
Other charges..................................... -- -- -- -- -- 4,716(2)
------------- ------------- --------- --------- --------- ---------
Income from operations.......................... 2,283 1,826 4,889 5,768 9,838 6,899
Interest expense.................................. 177 1,001 2,450 2,616 2,129 1,871
------------- ------------- --------- --------- --------- ---------
Income before income taxes and extraordinary
items......................................... 2,106 825 2,439 3,152 7,709 5,028
Provision for income taxes........................ 1,023 -- -- -- -- --
------------- ------------- --------- --------- --------- ---------
Income before extraordinary items............... 1,083 825 2,439 3,152 7,709 5,028
Extraordinary loss on early extinguishment of
debt............................................ -- -- -- 1,771 130 546
------------- ------------- --------- --------- --------- ---------
Net income...................................... 1,083 825 2,439 1,381 7,579 4,482
Pro forma income taxes(3)......................... -- 330 976 553 3,032 1,793
------------- ------------- --------- --------- --------- ---------
Pro forma net income............................ $ 1,083 $ 495 $ 1,463 $ 828 $ 4,547 $ 2,689
------------- ------------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(4)......................................... $ 2,471 $ 2,172 $ 5,640 $ 6,523 $ 10,703 $ 8,206
EBITDA as a percentage of net sales............... 8.4% 8.3% 7.9% 7.7% 12.6% 9.1%
Depreciation and amortization..................... $ 188 $ 346 $ 751 $ 755 $ 865 $ 1,307
Capital expenditures(5)........................... 278 89 524 858 4,102 7,190
Ratio of earnings to fixed charges(6)............. 9.53x 1.78x 1.94x 2.12x 3.76x 3.64x
BALANCE SHEET DATA:
Working capital................................... $ 3,367 $ 802 $ 1,189 $ 886 $ 4,032 $ 8,440
Total assets...................................... 11,781 19,828 25,097 28,684 33,814 35,592
Total debt........................................ 947 15,636 17,694 22,137 20,225 5,728
Total stockholders' equity/partners' capital...... 6,798 1,841 2,917 2,521 8,888 7,260
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
44
<PAGE>
(1) Predecessor Company reflects the operations of William Cohen and Son Co.,
Inc.
(2) Other charges of $4.7 million consist of $1.6 million facility start-up and
relocation costs associated with the Philadelphia Consolidation and $3.1
million of acquisition related costs.
(3) Quality Foods was taxed as a partnership for federal and state income tax
purposes prior to the Acquisition. Pro forma provision for income taxes and
pro forma net income reflect the pro forma effect of income taxes as if it
had been taxed as a C corporation for all periods presented. Included in pro
forma income tax expense for the years ended December 31, 1994, 1995 and
1996 is an income tax benefit of $708,000, $52,000 and $218,000,
respectively, relating to the extraordinary item -- early extinguishment of
debt.
(4) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(5) Capital expenditures for the year ended December 31, 1995 included $3.6
million related to the Philadelphia Consolidation and $506,000 of
maintenance capital expenditures. Capital expenditures for the year ended
December 31, 1996 included $6.8 million related to the Philadelphia
Consolidation and $413,000 of maintenance capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources."
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
45
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CFP HOLDINGS
The following Selected Historical Consolidated Financial Data of CFP
Holdings should be read in conjunction with the consolidated financial
statements and related notes of CFP Holdings and other financial data included
elsewhere in this Prospectus. The balance sheet data presented below as of
September 30, 1993, 1994, 1995 and 1996 and the statement of operations data
presented below for the six months ended September 30, 1993 and for the years
ended September 30, 1994, 1995 and 1996 are derived from the audited
consolidated financial statements of CFP Holdings. The balance sheet data
presented below as of September 30, 1992 and March 31, 1993 and the statement of
operations data presented below for the year ended September 30, 1992 and the
six months ended March 31, 1993 have been derived from the combination of the
unaudited financial statements of CFP Holdings' predecessors, Center of the
Plate Foods, Inc. and Best Western Foods, Inc. The balance sheet data as of
December 30, 1995 and December 28, 1996 and the statement of operations data for
the three months ended December 30, 1995 and December 28, 1996 have been derived
from CFP Holdings' unaudited financial statements. Operating results for the
three months ended December 28, 1996 may not be indicative of the results that
may be expected for the year ended September 30, 1997 or any future period.
<TABLE>
<CAPTION>
CFP HOLDINGS(2)
PREDECESSOR COMPANY(1) -------------------------------------------------------------
-------------------------- THREE MONTHS
YEAR SIX MONTHS SIX MONTHS ENDED
ENDED ENDED ENDED YEAR ENDED SEPTEMBER 30, -------------
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, ------------------------------- DECEMBER 30,
1992 1993 1993 1994 1995 1996 1995
------------- ----------- ------------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $ 71,591 $ 38,332 $ 44,285 $ 86,598 $ 61,543(3) $ 65,996 $ 15,515
Cost of sales................. 63,373 34,169 40,352 76,485 49,868 53,818 12,507
------------- ----------- ------------- --------- --------- --------- -------------
Gross profit.................. 8,218 4,163 3,933 10,113 11,675 12,178 3,008
Operating expenses............ 4,580 1,892 2,389 6,506 6,627 5,187 1,393
Other charges................. 28,755(4) -- -- -- -- 4,996(5)
------------- ----------- ------------- --------- --------- --------- -------------
Income (loss) from
operations................ (25,117) 2,271 1,544 3,607 5,048 1,995 1,615
Interest expense.............. 3,717 1,906 1,457 2,592 2,383 3,182 795
------------- ----------- ------------- --------- --------- --------- -------------
Income (loss) before income
taxes..................... (28,834) 365 87 1,015 2,665 (1,187) 820
Provision (benefit) for income
taxes....................... 650 463 70 572 1,318 (259) 179
------------- ----------- ------------- --------- --------- --------- -------------
Net income (loss)........... $ (29,484) $ (98) $ 17 $ 443 $ 1,347 $ (928) $ 641
------------- ----------- ------------- --------- --------- --------- -------------
------------- ----------- ------------- --------- --------- --------- -------------
OTHER DATA:
EBITDA(6)..................... $ 6,220 $ 3,070 $ 2,582 $ 6,003 $ 6,685 $ 3,758 $ 2,051
EBITDA as a percentage of net
sales....................... 8.7% 8.0% 5.8% 6.9% 10.9% 5.7% 13.2%
Depreciation and
amortization................ $ 2,582 $ 799 $ 1,038 $ 2,396 $ 1,637 $ 1,763 $ 436
Interest expense.............. 3,717 1,906 1,457 2,592 2,383 3,182 795
Capital expenditures.......... 19 1,214 445 1,515 5,054 3,009 143
Ratio of earnings to fixed
charges(7).................. -- 1.18x 1.06x 1.36x 2.03x -- 1.97x
BALANCE SHEET DATA:
Working capital............... $ 6,057 $ 9,225 $ 4,758 $ 4,010 $ 2,684 $ 3,153 $ 3,106
Total assets.................. 23,979 25,811 30,823 28,857 30,453 31,716 30,216
Total debt and redeemable
preferred stock............. 46,187 46,755 23,869 21,180 20,693 23,223 20,632
Total stockholders' equity
(deficiency)................ (23,999)(4) (24,240)(4) 3,734 4,117 5,366 3,727 5,863
<CAPTION>
DECEMBER 28,
1996
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $ 20,624
Cost of sales................. 18,063
-------------
Gross profit.................. 2,561
Operating expenses............ 1,455
Other charges.................
-------------
Income (loss) from
operations................ 1,106
Interest expense.............. 823
-------------
Income (loss) before income
taxes..................... 283
Provision (benefit) for income
taxes....................... 252
-------------
Net income (loss)........... $ 31
-------------
-------------
OTHER DATA:
EBITDA(6)..................... $ 1,578
EBITDA as a percentage of net
sales....................... 7.7%
Depreciation and
amortization................ $ 472
Interest expense.............. 823
Capital expenditures.......... 182
Ratio of earnings to fixed
charges(7).................. 1.32x
BALANCE SHEET DATA:
Working capital............... $ 7,136
Total assets.................. 36,343
Total debt and redeemable
preferred stock............. 27,438
Total stockholders' equity
(deficiency)................ 3,527
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
46
<PAGE>
(1) Predecessor Company reflects the combined operations of Center of the Plate
Foods, Inc. and Best Western Foods, Inc.
(2) CFP Holdings commenced operations on April 1, 1993 after acquiring all of
the outstanding stock of Center of the Plate Foods, Inc., and all
significant operating assets of Best Western Foods, Inc.
(3) Sales declined during the year ended September 30, 1995 as a result of the
decline in sales to the Arby's restaurant chain. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) During the year ended September 30, 1992, Best Western Foods, Inc., one of
CFP Holdings' predecessors, wrote off goodwill of $28.8 million which
resulted in the stockholders' deficiency as of September 30, 1992 and March
31, 1993.
(5) Represents one-time costs associated with the termination of a Sales
Brokerage Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) EBITDA is the sum of income before income taxes and interest, depreciation
and amortization expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of a company's operating performance or as a
measure of liquidity.
(7) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest (which includes amortization of deferred financing costs) and
one-third of rental expense, deemed representative of that portion of rental
expense estimated to be attributable to interest. Earnings were inadequate
to cover fixed charges by $28.8 million for the year ended September 30,
1992 and by $1.2 million for the year ended September 30, 1996.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following should be read in conjunction with the Financial Statements of
CFP Holdings and Quality Foods and the notes thereto and the Unaudited Pro Forma
Condensed Combined Financial Statements and notes thereto.
Prior to the Acquisition, Quality Foods maintained a December 31 fiscal year
end and reported interim results of thirteen equal four-week accounting periods.
Custom Foods' fiscal year end is the 52- or 53-week period ending on the
Saturday nearest to September 30 and its interim fiscal quarters are the 13-week
periods ending on the Saturday nearest to December 31, March 31 and June 30. For
ease of presentation, the Company has indicated the historical and pro forma
results for the periods ending near September 30 included herein as ending on
September 30. The Company is proposing during this fiscal year, to change its
fiscal year end to the Saturday nearest to March 31.
The Company is a leading developer, manufacturer and marketer of value-added
meat and poultry products sold to the foodservice industry and manufacturers of
packaged foods. The Company is comprised of two operating subsidiaries, Quality
Foods, which was acquired on December 31, 1996, and Custom Foods.
Quality Foods
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in Philadelphia-style steak
sandwiches. It also supplies sliced chicken products and lines of pre-cooked and
uncooked meatballs and hamburger patties. Quality Foods has experienced
significant growth in sales and operating profit since 1991, primarily due to
the growth of its pre-cooked beef product, which is principally sold to the
Subway restaurant chain, and to increases in sales of uncooked steak sandwich
products. From fiscal 1993 to fiscal 1994, total pounds sold increased 22.0%.
However, volume growth in 1995 was relatively flat due to a change in the timing
and content of Subway's Fall steak and cheese sandwich promotion and capacity
constraints at Quality Foods' Camden facility. Recently, Subway has run Spring
and Fall steak and cheese sandwich promotions, the timing and success of which
can significantly impact Quality Foods' net sales. For the first nine months of
1996, total pounds sold increased 13.2% over the prior year's comparable period.
Quality Foods' average net sales price per pound has declined each year since
fiscal 1993, while the average gross profit per pound has increased each year
during this period. Quality Foods' average net sales price per pound has
declined because of a significant decline in its raw material cost, some of
which was passed on to customers, and, to a lesser extent, a change in product
mix. Average gross profit per pound has continued to increase because of the
decline in raw material cost.
In the past two years, Quality Foods has been capacity constrained in its
Camden facility for its pre-cooked product, relying on third-party co-packing
arrangements for between 45% and 55% of its cooking requirements. To alleviate
this problem, in November 1996, Quality Foods substantially completed its $11.0
million Philadelphia Consolidation, comprised of the purchase, retrofit and
renovation of a 150,000 square foot manufacturing facility in Philadelphia, and
the consolidation of the manufacturing operations at the Penns Grove, New Jersey
facility and the Collingswood, New Jersey administrative offices into the
Philadelphia facility. In addition, the majority of the manufacturing
capabilities and resources from Quality Foods' Camden, New Jersey facility were
relocated to Philadelphia, with only certain limited slicing and cold storage
functions remaining in Camden. The Company anticipates that by September 1997
all manufacturing and cold storage will have been relocated, after which the
Camden facility will be closed and divested. During fiscal 1996, Quality Foods
experienced facility start-up and relocation costs of $1.3 million. The Company
believes the Philadelphia Consolidation may generate approximately $4.5 million
in annual permanent cost reductions for Quality Foods beginning January 1, 1997.
48
<PAGE>
Custom Foods
Custom Foods develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods and is a major supplier of frozen uncooked beef products to the Arby's
restaurant chain. Custom Foods' pre-cooked operations have experienced
significant growth since 1992, due to strong growth in sales to Chef America and
other customers.
Custom Foods' sales to Arby's declined significantly in fiscal 1995. Prior
to fiscal 1995, Custom Foods supplied Arby's on a national basis. However, in
the first quarter of fiscal 1995, Custom Foods entered into an 18-month contract
to supply Arby's on a regional basis, reducing the scope of its arrangement due
to a new competitive bidding process and a freight advantage enjoyed by certain
other suppliers. Under this contract, sales to Arby's declined from $61.0
million in fiscal 1994 to $26.2 million in fiscal 1995, resulting in an overall
28.9% decrease in Custom Foods' net sales. Nevertheless, Custom Foods' income
from operations during this period increased 40.0%, reflecting significant
growth in its higher margin, pre-cooked operations. In June 1996, following
completion of the expansion of its Kentucky facility, Custom Foods entered into
a new three-year contract to once again supply Arby's on a national basis.
Custom Foods' average net sales price per pound has declined each year since
1994, principally due to the reduction in beef costs, which were passed through
to Arby's pursuant to a cost-plus contract. Average gross profit per pound
increased in fiscal 1995 due to a change in product mix, lower pounds sold to
Arby's and increased pounds sold of higher margin value-added products. The
decline in average gross profit per pound in fiscal 1996 resulted principally
from increased pounds sold to Arby's, which carry a lower margin.
Due to capacity constraints and the growing needs of its customers, Custom
Foods significantly broadened its manufacturing operations and created a direct
sales and marketing organization. As a result of this strategy, on January 8,
1996, Custom Foods terminated the Sales Brokerage Agreement and made a
termination payment of $5.0 million in lieu of annual commission payments. In
connection with the termination of the Sales Brokerage Agreement, Custom Foods
hired a salesperson who was previously employed by the broker.
THE COMPANY'S PRO FORMA RESULTS OF OPERATIONS
The following table sets forth certain pro forma information for the year
ended September 30, 1995 and 1996 and for the three months ended December 30,
1995 and December 28, 1996. The data for the year ended September 30, 1996 and
the three months ended December 28, 1996 have been derived from the Unaudited
Pro Forma Condensed Combined Statements of Operations of CFP Holdings appearing
elsewhere in this Prospectus. The data for the year ended September 30, 1995 and
the three months ended December 30, 1995 have been prepared in a manner
consistent with the September 30, 1996 and December 28, 1996 Unaudited Pro Forma
Condensed Combined Statements of Operations, except for the assumption that the
Acquisition, the Offering and the application of the net proceeds therefrom and
the other transactions referred to herein occurred on October 1, 1994. The pro
forma information for the three months ended December 28, 1996 and December 30,
1995 represents the combination of the results for Custom Foods for the three
months ended December 28, 1996 and December 30, 1995 with the results for
Quality Foods for the three months ended December 31, 1996 and 1995,
respectively.
49
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL YEAR SUPPLEMENTAL PRO FORMA
PRO FORMA YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 DECEMBER 30, 1995 DECEMBER 28, 1996
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER POUND DATA)
PRO FORMA STATEMENT OF OPERATIONS:
Net sales....................... $ 149,565 100.0% $ 156,645 100.0% $ 36,632 100.0% $ 41,673 100.0%
Cost of sales................... 122,886 82.2 123,072 78.6 28,452 77.7 36,216 86.9
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit.................... 26,679 17.8 33,573 21.4 8,180 22.3 5,457 13.1
Operating expenses.............. 16,422 10.9 15,310 9.8 4,077 11.1 3,660 8.8
Other charges................... -- -- 6,284 4.0 -- -- 339 .8
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations........ 10,257 6.9 11,979 7.6 4,103 11.2 1,458 3.5
Interest expense................ 16,647 11.1 16,740 10.7 4,319 11.8 4,388 10.5
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes....................... (6,390) (4.2) (4,761) (3.1) (216) (0.6) (2,930) (7.0)
Provision (benefit) for income
taxes......................... (2,304) (1.5) (1,689) (1.1) (235) (0.7) (1,033) (2.5)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)............. $ (4,086) (2.7)% $ (3,072) (2.0)% $ 19 0.1% $ (1,897) (4.5)%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
OTHER PRO FORMA DATA:
Pounds sold..................... 81,340 90,734 20,795 25,839
Average net sales price per
pound......................... $ 1.84 $ 1.73 $ 1.76 $ 1.61
Average gross profit per
pound......................... 0.33 0.37 0.39 0.21
</TABLE>
50
<PAGE>
PRO FORMA THREE-MONTHS ENDED DECEMBER 28, 1996 COMPARED TO SUPPLEMENTAL
THREE MONTHS ENDED
DECEMBER 30, 1995
NET SALES. The Company's pro forma net sales increased to $41.7 million for
the three months ended December 28, 1996 compared to the three months ended
December 30, 1995, a 13.8% increase, as a result of a 0.3% decrease in sales at
Quality Foods and a 32.9% increase in sales at Custom Foods.
Quality Foods' net sales remained stable at $21.0 million in the three-month
period ended December 31, 1996 compared to $21.1 in the three-month period ended
December 31, 1995.
Custom Foods' net sales increased to $20.6 million in the three-month period
ended December 28, 1996 from $15.5 in the three-month period ended December 30,
1995, as a result of increases in sales to Arby's and other customers. Sales to
Arby's increased during this period as a result of increases in sales to several
Eastern U.S. markets pursuant to the new three-year contract. Sales of
value-added products increased moderately over the prior period, principally as
a result of sales to new and existing customers. Total pounds sold by Custom
Foods increased by 41.7% while the average selling price declined 6.0%. The
average selling price declined both as a result of a reduction in beef prices
from 1995 to 1996, which were passed through to Arby's under the cost-plus
pricing structure of the contract, and as a result of a change in the mix of
products sold which was more heavily weighted towards lower priced products sold
to Arby's.
GROSS PROFIT. The Company's pro forma gross profit decreased to $5.5
million for the three months ended December 28, 1996 compared to the three
months ended December 30, 1995, a 33.3% decrease, as a result of a 10.7%
decrease in gross profit at Quality Foods and a 7.0% decrease in gross profit at
Custom Foods. The gross margin declined to 13.1% in the three months ended
December 28, 1996 from 22.3% in the three months ended December 30, 1995.
Quality Foods' gross profit decreased to $2.3 million in the three-month
period ended December 31, 1996 from $5.2 million in the three-month period ended
December 31, 1995. The decrease in gross profit was a result of increasing raw
material costs due principally to the Company's inability to process raw
materials during their seasonally low price periods during the summer and fall
due to its relocation of manufacturing operations into its new Philadelphia
facility. Typically, the Company builds inventory during this period for sale
later in the year to avoid higher meat prices in the fall and winter.
Additionally, depreciation of the newly opened facility added $200,000 of
depreciation to the 1996 quarter. The gross margin decreased to 13.8% in the
three months ended December 28, 1996 from 24.5% in the three months ended
December 30, 1995.
Custom Food's gross profit declined to $2.6 million in the three-month
period ended December 28, 1996 from $3.0 million in the three-month period ended
December 28, 1995, notwithstanding an increase in sales. The decrease in gross
profit was a net result of increasing raw material costs which were not passed
on to the company's value added customers. The gross margin decreased to 12.4%
in the three months ended December 28, 1996 from 19.4% in the three months ended
December 30, 1995. The decline in the gross margin as a percentage of sales was
a net result of increased costs for raw materials of the value added products
and a change in mix towards the lower gross profit margin Arby's business.
OPERATING EXPENSES. The Company's pro forma operating expenses decreased to
$3.5 million in the three months ended December 31, 1996 from $4.1 million in
the three months ended December 30, 1995. The 13.6% combined decrease, was the
net result of 6.2% decrease in operating expenses at Quality Foods and a 8.3%
decrease in operating expenses at Custom Foods combined with additional pro
forma adjustments relating to amortization expense in both periods. The
operating expenses as a percentage of sales declined to 8.5% in the three months
ended December 28, 1996 from 11.1% in the three months ended December 30, 1995.
Quality Foods' operating expenses were substantially unchanged at $1.7
million in the three-month period ended December 31, 1996 and $1.8 million in
the three-month period ended December 31, 1995.
51
<PAGE>
Custom Food's operating expenses decreased to $1.3 million in the
three-month period ended December 28, 1996 from $1.4 million in the three-month
period ended December 28, 1995 principally attributable to the net effect of the
elimination of sales commissions as a result of the termination of the Sales
Brokerage Agreement.
OTHER CHARGES. The Company's pro forma other charges of $476,000 for the
three months ended December 28, 1996 resulted from the start-up and relocation
costs related to the Philadelphia Consolidation.
INCOME FROM OPERATIONS. The Company's pro forma income from operations
decreased to $1.5 million for the three months ended December 28, 1996 from $4.1
million, a 64.5% decrease, as a result of lower gross margins and additional
start-up costs related to the Philadelphia Consolidation.
INTEREST EXPENSE. The Company's pro forma interest expense increased $4.4
million for the three months ended December 28, 1996 from $4.3 million for the
three months ended December 30, 1995.
BENEFIT FOR INCOME TAXES. The Company's pro forma income tax benefit
increased to $1.0 million for the three months ended December 28, 1996 from $0.2
million for three months ended December 30, 1995, principally due to a loss
incurred in the three-month period ended December 28, 1996.
NET INCOME (LOSS). The Company's pro forma net income (loss) decreased to
$1.9 million for the three months ended December 28, 1996 from net income of
$19,000 for the three months ended December 30, 1995 due to the net impact of
the foregoing items.
PRO FORMA FISCAL YEAR ENDED SEPTEMBER 30, 1996 ("FISCAL 1996") COMPARED TO
PRO FORMA FISCAL YEAR ENDED SEPTEMBER 30, 1995 ("FISCAL 1995")
NET SALES. The Company's pro forma net sales increased to $156.6 million in
fiscal 1996 from $149.6 million in fiscal year 1995, a 4.7% increase, as a
result of a 3.0% increase in sales at Quality Foods and a 7.2% increase in sales
at Custom Foods.
Quality Foods' net sales increased to $90.6 million in fiscal 1996 from
$88.0 million in fiscal 1995, due to increases in sales of uncooked sandwich
steak products. Sales of pre-cooked sandwich steak products, most of which were
to Subway, were relatively constant. Total pounds sold increased 6.2% while the
average selling price decreased 3.0%. The average selling price decreased as a
result of the relative growth in lower priced uncooked products and a slight
decrease in overall selling prices.
Custom Foods' net sales increased to $66.0 million in fiscal 1996 from $61.5
million in fiscal 1995, as a result of increases in sales to Arby's and other
customers. Sales to Arby's increased in fiscal 1996 as a result of additional
sales to several Eastern U.S. markets pursuant to the new three-year contract.
Sales of value-added products increased slightly over the prior year,
principally as a result of sales to new and existing customers. Total pounds
sold by Custom Foods increased 16.2% while the average selling price declined
7.7%. The average selling price declined primarily as a result of a reduction in
beef prices from 1995 to 1996, which were passed through to Arby's under the
cost-plus pricing structure of the contract.
GROSS PROFIT. The Company's pro forma gross profit increased to $33.6
million in fiscal 1996 from $26.7 million in fiscal 1995, a 25.8% increase, as a
result of a 42.6% increase in gross profit at Quality Foods and a 4.3% increase
in gross profit at Custom Foods. The gross margin increased to 21.4% in fiscal
1996 from 17.8% in fiscal 1995.
Quality Foods' gross profit increased to $21.4 million in fiscal 1996 from
$15.0 million in fiscal 1995 due to a decline in average raw material costs
which substantially exceeded the decline in average selling prices on higher
volumes as well as a 6.2% increase in pounds sold. Quality Foods was able to
maintain its selling prices, despite a decline in raw material costs because of
the continued strong demand for its value-added products. The gross margin
increased to 23.6% in fiscal 1996 from 17.0% in fiscal 1995.
52
<PAGE>
Custom Foods' gross profit increased to $12.2 million in fiscal 1996 from
$11.7 million in fiscal 1995. The gross margin declined slightly to 18.5% in
fiscal 1996 from 19.0% in fiscal 1995 principally as a result of increased sales
to Arby's which are lower margin sales of Custom Foods.
OPERATING EXPENSES. The Company's pro forma operating expenses decreased to
$15.3 million in fiscal 1996 from $16.4 million in fiscal 1995, a decrease of
6.8%, as a result of the net effect of a 9.0% increase for Quality Foods and a
21.7% decrease for Custom Foods. Operating expenses as a percentage of sales
decreased to 9.8% in fiscal 1996 from 10.9% in fiscal 1995.
Quality Foods' operating expenses increased to $7.7 million in fiscal 1996
from $7.1 million in fiscal 1995 due to increased sales and administrative
expenses resulting from additional sales and management personnel employed to
support continued growth.
Custom Foods' operating expenses decreased to $5.2 million in fiscal 1996
from $6.6 million in fiscal 1995, a 21.7% decrease, principally attributable to
the net effect of the elimination of sales commissions as a result of the
termination of the Sales Brokerage Agreement.
OTHER CHARGES. The Company's pro forma other charges of $6.3 million in
fiscal 1996 consisted of $5.0 million for termination of the Sales Brokerage
Agreement in January 1996 and $1.3 million of start-up and relocation costs
related to the Philadelphia Consolidation.
INCOME FROM OPERATIONS. The Company's pro forma income from operations
increased to $12.0 million in fiscal 1996 from $10.3 million in fiscal 1995, a
17.0% increase, as a result of higher sales and improved gross margins.
INTEREST EXPENSE. The Company's pro forma interest expense remained
essentially unchanged at $16.7 million in fiscal 1996 compared to $16.6 million
in fiscal 1995.
BENEFIT FOR INCOME TAXES. The Company's pro forma income tax benefit
decreased to $1.7 million in fiscal 1996 from $2.3 million in fiscal 1995,
principally due to the lower loss before income taxes.
NET LOSS. The Company's pro forma net loss declined to $3.0 million in
fiscal 1996 from $4.0 million in fiscal 1995, a 24.8% decrease, due to the net
impact of the foregoing items.
53
<PAGE>
QUALITY FOODS--RESULTS OF OPERATIONS
The following tables sets forth certain historical information for Quality
Foods for the years ended December 31, 1993, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1993 1994
----------- -----------
<S> <C> <C>
(IN THOUSANDS EXCEPT PER
POUND DATA)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ $ 71,195 $ 84,817
Cost of sales.................................................................................... 61,040 72,162
----------- -----------
Gross profit..................................................................................... 10,155 12,655
Operating expenses............................................................................... 5,266 6,887
Other charges.................................................................................... -- --
----------- -----------
Income from operations......................................................................... 4,889 5,768
Interest expense................................................................................. 2,450 2,616
----------- -----------
Income before extraordinary item............................................................... 2,439 3,152
Extraordinary loss on early extinguishment of debt............................................... -- 1,771
----------- -----------
Net income..................................................................................... 2,439 1,381
Pro forma income taxes........................................................................... 976 553
----------- -----------
Pro forma net income........................................................................... $ 1,463 $ 828
----------- -----------
----------- -----------
OTHER DATA:
Pounds sold...................................................................................... 29,712 36,258
Average net sales price per pound................................................................ $ 2.40 $ 2.34
Average gross profit per pound................................................................... 0.34 0.35
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ $ 84,694 $ 90,582
Cost of sales.................................................................................... 67,930 71,448
----------- -----------
Gross profit..................................................................................... 16,764 19,134
Operating expenses............................................................................... 6,926 7,519
Other charges.................................................................................... -- 4,716
----------- -----------
Income from operations......................................................................... 9,838 6,899
Interest expense................................................................................. 2,129 1,871
----------- -----------
Income before extraordinary item............................................................... 7,709 5,028
Extraordinary loss on early extinguishment of debt............................................... 130 546
----------- -----------
Net income..................................................................................... 7,579 4,482
Pro forma income taxes........................................................................... 3,032 1,793
----------- -----------
Pro forma net income........................................................................... $ 4,547 $ 2,689
----------- -----------
----------- -----------
OTHER DATA:
Pounds sold...................................................................................... 36,905 40,542
Average net sales price per pound................................................................ $ 2.29 $ 2.23
Average gross profit per pound................................................................... 0.45 0.47
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1993 1994
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ 100.0% 100.0%
Cost of sales.................................................................................... 85.7 85.1
----------- -----------
Gross profit..................................................................................... 14.3 14.9
Operating expenses............................................................................... 7.4 8.1
Other charges.................................................................................... -- --
----------- -----------
Income from operations......................................................................... 6.9 6.8
Interest expense................................................................................. 3.4 3.1
----------- -----------
Income before extraordinary item............................................................... 3.5 3.7
Extraordinary loss on early extinguishment of debt............................................... -- 2.1
----------- -----------
Net income..................................................................................... 3.5 1.6
Pro forma income taxes........................................................................... 1.4 0.6
----------- -----------
Pro forma net income........................................................................... 2.1% 1.0%
----------- -----------
----------- -----------
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................................ 100.0% 100.0%
Cost of sales.................................................................................... 80.2 78.9
----------- -----------
Gross profit..................................................................................... 19.8 21.1
Operating expenses............................................................................... 8.2 8.3
Other charges.................................................................................... -- 5.2
----------- -----------
Income from operations......................................................................... 11.6 7.6
Interest expense................................................................................. 2.5 2.0
----------- -----------
Income before extraordinary item............................................................... 9.1 5.6
Extraordinary loss on early extinguishment of debt............................................... 0.1 .6
----------- -----------
Net income..................................................................................... 9.0 5.0
Pro forma income taxes........................................................................... 3.6 2.0
----------- -----------
Pro forma net income........................................................................... 5.4% 3.0%
----------- -----------
----------- -----------
</TABLE>
54
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995
NET SALES. Net sales increased $5.9 million to $90.6 million in fiscal 1996
as compared to $84.7 in fiscal 1995. Volumes increased 10% across all product
lines offset by a 3% decrease in average selling price. Pre-cooked product
volumes were impacted favorably by additional promotional activity of Quality
Foods' product at Subway as compared to the prior year.
GROSS PROFIT. Gross profit increased to $19.1 million in fiscal 1996 from
$16.8 million in fiscal 1995, an increase of $2.3 million, due principally to
declines in average raw material prices exceeding the declines in average
selling prices.
OPERATING EXPENSES. Operating expenses increased $0.6 million to $7.5
million in fiscal 1996 from $6.9 million in fiscal 1995. Operating expenses as a
percentage of net sales increased slightly to 8.3% in fiscal 1996 as compared to
8.2% for fiscal 1995.
OTHER CHARGES. Other charges of $4.7 million consist of $1.6 million
facility start-up and relocation costs associated with the Philadelphia
Consolidation and $3.1 million of acquisition related costs.
INCOME FROM OPERATIONS. Income from operations decreased $2.9 million to
$6.9 million in fiscal 1996 from $9.8 million in 1995 as described above.
INTEREST EXPENSES. Interest expense declined to $1.9 million in fiscal 1996
from $2.1 million in fiscal 1995 due to lower outstanding debt balances.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In fiscal 1996, Quality
Foods prepaid certain debt in connection with its acquisition by the Company
including prepayment premiums of $99,000 and wrote off related unauthorized
financing fees of $447,000. In fiscal 1995, Quality Foods incurred a loss of
$130,000 on the redemption of a tax exempt industrial revenue bond prior to
maturity.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Net sales remained essentially unchanged at $84.7 million in
fiscal 1995 compared to $84.8 million in fiscal 1994, principally due to
operations being adversely affected by capacity constraints in the Camden
facility, a decline in pre-cooked products sold due to changes in the timing and
content of Subway's promotions of Quality Foods' products, the elimination of
sandwich programs within certain Domino's regions and a 2.1% decrease in average
selling prices, largely offset by growth in volume of uncooked sandwich steak
products and chicken products sold to other customers.
GROSS PROFIT. Gross profit increased to $16.8 million in fiscal 1995 from
$12.7 million in fiscal 1994, a 32.5% increase, principally due to the decline
in average raw material prices which exceeded the decline in average selling
prices, partially offset by the increased use of overtime and outside processing
and storage fees used due to capacity limitations. The gross margin increased to
19.8% in fiscal 1995 from 14.9% in fiscal 1994.
OPERATING EXPENSES. Operating expenses remained substantially unchanged at
$6.9 million in fiscal 1995 and fiscal 1994.
INCOME FROM OPERATIONS. Income from operations increased to $9.8 million in
fiscal 1995 from $5.8 million in fiscal 1994, a 70.6% increase, principally due
to the increase in gross margin and stable operating expenses.
INTEREST EXPENSE. Interest expense decreased to $2.1 million in fiscal 1995
from $2.6 million in fiscal 1994, a 18.6% decrease, due to lower outstanding
debt balances and lower interest rates under a new senior debt agreement.
55
<PAGE>
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In fiscal 1995, Quality
Foods incurred a $130,000 loss on the redemption of a tax exempt industrial
revenue bond prior to maturity. In fiscal 1994, Quality Foods incurred a loss of
$1.8 million on the redemption prior to maturity of the debt outstanding under a
senior debt agreement.
CUSTOM FOODS--RESULTS OF OPERATIONS
The following table set forth certain historical information for the years
ended September 30, 1994, 1995 and 1996, and the three-month periods ended
December 30, 1995 and December 28, 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)EXCEPT PER POUND DATA
STATEMENT OF OPERATIONS DATA:
Net sales......................................................................... $ 86,598 $ 61,543 $ 65,996
Cost of sales..................................................................... 76,485 49,868 53,818
----------- ----------- -----------
Gross profit...................................................................... 10,113 11,675 12,178
Operating expenses................................................................ 6,506 6,627 5,187
Other charges..................................................................... -- -- 4,996
----------- ----------- -----------
Income from operations.......................................................... 3,607 5,048 1,995
Interest expense.................................................................. 2,592 2,383 3,182
----------- ----------- -----------
Income (loss) before income taxes............................................... 1,015 2,665 (1,187)
Provision (benefit) for income taxes.............................................. 572 1,318 (259)
----------- ----------- -----------
Net income (loss)............................................................... $ 443 $ 1,347 $ (928)
----------- ----------- -----------
----------- ----------- -----------
OTHER DATA:
Net sales:
Value-added..................................................................... $ 25,628 $ 35,294 $ 36,391
Arby's.......................................................................... 60,970 26,249 29,605
----------- ----------- -----------
Total......................................................................... $ 86,598 $ 61,543 $ 65,996
----------- ----------- -----------
----------- ----------- -----------
Pounds sold....................................................................... 56,823 43,371 50,417
Average net sales price per pound................................................. $ 1.52 $ 1.42 $ 1.31
Average gross profit per pound.................................................... $ 0.18 $ 0.27 $ 0.24
<CAPTION>
THREE MONTHS ENDED
DECEMBER 30, DECEMBER 28,
------------- -------------
1995 1996
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................................................... $ 15,515 $ 20,624
Cost of sales..................................................................... 12,507 18,063
------------- -------------
Gross profit...................................................................... 3,008 2,561
Operating expenses................................................................ 1,393 1,455
Other charges..................................................................... -- --
------------- -------------
Income from operations.......................................................... 1,615 1,106
Interest expense.................................................................. 795 823
------------- -------------
Income (loss) before income taxes............................................... 820 283
Provision (benefit) for income taxes.............................................. 179 252
------------- -------------
Net income (loss)............................................................... $ 641 $ 31
------------- -------------
------------- -------------
OTHER DATA:
Net sales:
Value-added..................................................................... $ 8,759 $ 9,370
Arby's.......................................................................... 6,756 11,254
------------- -------------
Total......................................................................... $ 15,515 $ 20,624
------------- -------------
------------- -------------
Pounds sold....................................................................... 11,540 16,350
Average net sales price per pound................................................. $ 1.34 $ 1.26
Average gross profit per pound.................................................... $ .26 $ .16
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................................................. 100.0% 100.0% 100.0%
Cost of sales.......................................................................... 88.3 81.0 81.5
----- ----- -----
Gross profit........................................................................... 11.7 19.0 18.5
Operating expenses..................................................................... 7.5 10.8 7.9
Other charges.......................................................................... -- -- 7.6
----- ----- -----
Income from operations............................................................... 4.2 8.2 3.0
Interest expense....................................................................... 3.0 3.9 4.8
----- ----- -----
Income (loss) before income taxes.................................................... 1.2 4.3 (1.8)
Provision (benefit) for income taxes................................................... 0.7 2.1 (0.4)
----- ----- -----
Net income (loss).................................................................... 0.5% 2.2% (1.4)%
----- ----- -----
----- ----- -----
<CAPTION>
THREE MONTHS ENDED
DECEMBER 30, DECEMBER 28,
------------- -------------
1995 1996
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................................................. 100.0% 100.0%
Cost of sales.......................................................................... 80.6 87.6
----- -----
Gross profit........................................................................... 19.4 12.4
Operating expenses..................................................................... 9.0 7.0
Other charges.......................................................................... -- --
----- -----
Income from operations............................................................... 10.4 5.4
Interest expense....................................................................... 5.1 4.0
----- -----
Income (loss) before income taxes.................................................... 5.3 1.4
Provision (benefit) for income taxes................................................... 1.2 1.2
----- -----
Net income (loss).................................................................... 4.1% 0.2%
----- -----
----- -----
</TABLE>
56
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO THE FISCAL YEAR ENDED
SEPTEMBER 30, 1994
NET SALES. Net sales declined to $61.5 million in fiscal year 1995 from
$86.6 million in fiscal 1994, a 28.9% decrease, attributable to a decline in
sales to Arby's, partially offset by increases in sales of value-added products
to other customers. Net sales of value-added products increased to $35.3 million
in fiscal 1995 from $25.6 million in fiscal 1994, a 37.7% increase, primarily
attributable to increased sales to Chef America, as well as increased sales of
new products to new and existing customers. Net sales to Arby's decreased to
$26.2 million in fiscal 1995 from $61.0 million in fiscal 1994, a 56.9%
decrease, as a result of Custom Foods' change from a national to a regional
supplier to the Arby's restaurant chain.
GROSS PROFIT. Gross profit increased to $11.7 million in fiscal 1995 from
$10.1 million in fiscal 1994. Gross profit from value-added products increased
substantially in fiscal 1995, attributable to the increase in net sales, a
reduction in the overall cost of raw materials, and an improvement in
manufacturing operations and packaging costs as Custom Foods commenced
operations at its Kentucky facility in April 1995. On the other hand, gross
profit from Arby's decreased substantially in fiscal 1995 due to the decreased
volume associated with the 18-month contract entered into in the beginning of
fiscal 1995. The gross margin increased to 19.0% in fiscal 1995 from 11.7% in
fiscal 1994.
OPERATING EXPENSES. Operating expenses increased to $6.6 million in fiscal
1995 from $6.5 million in fiscal 1994, principally attributable to increases in
general and administrative expenses due to a newly created bonus plan and the
hiring of additional management personnel. These increases were partially offset
by a decrease in amortization expense related to the covenant not to compete
discussed in Notes 2 and 6 to CFP Holdings' Consolidated Financial Statements.
Operating expenses as a percentage of net sales increased to 10.8% in fiscal
1995 from 7.5% in fiscal 1994.
INCOME FROM OPERATIONS. Income from operations increased to $5.0 million in
fiscal 1995 from $3.6 million in fiscal 1994, a 40.0% increase, as a result of
the factors discussed above.
INTEREST EXPENSE. Interest expense decreased to $2.4 million in fiscal 1995
from $2.6 million in fiscal 1994, an 8.1% decrease, due to lower outstanding
debt balances.
LIQUIDITY AND FINANCIAL RESOURCES
The Acquisition has had a major impact on the Company's financial condition.
At September 30, 1996, Quality Foods had total indebtedness of $20.0 million and
at December 28, 1996 CFP Holdings had total indebtedness of $26.0 million. On a
pro forma basis, after giving effect to the Acquisition, the Offering and the
application of the estimated net proceeds therefrom, the Company's total
consolidated indebtedness would have been $140.6 million at December 28, 1996.
Interest payments on the Notes and anticipated interest and principal
payments under the Bank Credit Agreement will represent significantly increased
obligations of the Company. The New Notes will require semi-annual interest
payments commencing in July 1997. Borrowings under the Bank Credit Agreement
bear interest at floating rates and require quarterly interest payments. The
Bank Credit Agreement provides the Company with (i) a $10.0 million Term Loan,
which requires a $1.0 million principal repayment in 1997 and increasing
principal repayments in later years, and matures in 2002, and (ii) a Revolving
Credit Facility of $20.0 million with $3.2 million outstanding at December 28,
1996. Approximately $5.0 million of the Revolving Credit Facility is reserved to
provide letters of credit supporting the industrial revenue bond issue with
respect to Quality Foods' Philadelphia facility and other obligations. All
amounts under the Revolving Credit Facility outstanding will mature in 2002. See
"The Quality Foods Acquisition" and "Description of Bank Credit Agreement."
In addition to its debt service obligations, the Company requires liquidity
for working capital and capital expenditures. The Company experiences seasonal
increases in its working capital as a result of large product promotions and
planned inventory increases based upon seasonally low raw material prices. In
57
<PAGE>
1997, the Company expects its working capital to be at its lowest level in the
Winter and to peak between May and September. Historically, the Company has
experienced minimal bad debts with respect to accounts receivable and has
experienced no material inventory obsolescence or shrinkage losses.
For the fiscal year ended September 30, 1996, the Company spent $11.1
million on capital expenditures. Of this amount, approximately $7.5 million was
spent by Quality Foods on the Philadelphia Consolidation and $1.5 million was
spent by Custom Foods on an expansion of its Kentucky facility, which was
financed principally through an increase in its capital lease facility. These
projects were of a non-recurring nature that resulted in a substantial increase
in the Company's capacities sufficient to sustain anticipated growth over the
next several years. Excluding these items, the Company would have spent
approximately $2.0 million during fiscal 1996, an amount which the Company
believes is more reflective of historic levels of recurring annual capital
spending of maintenance capital expenditures. For fiscal 1997, the Company
anticipates that capital spending will be approximately $3.5 million, including
an estimated $1.5 million to complete the final phase of the Philadelphia
Consolidation.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Credit Facility. Immediately after
consummation of the Offering, approximately $11.8 million was available to the
Company for borrowings under the Revolving Credit Facility, subject to inventory
and accounts receivable levels. The Company anticipates that its working capital
requirements, capital expenditures and debt service requirements for fiscal 1997
will be satisfied through a combination of cash flow from operations and funds
available under the Revolving Credit Facility.
EFFECTS OF INFLATION
Inflation has not had a significant effect on the operations of the Company.
See "Risk Factors-- Suppliers and Raw Materials" and "Business--Raw Materials
and Suppliers."
58
<PAGE>
BUSINESS
GENERAL
The Company is a leading developer, manufacturer and marketer of value-added
meat and poultry products sold to the foodservice industry and manufacturers of
packaged foods. The Company provides a wide range of pre-cooked and uncooked
products, including beef and chicken sandwich steaks; beef, pork and poultry
meat rolls used in further processing; charbroiled products and crumble
toppings; barbecue-flavored meats; and meatballs. The Company principally
manufactures higher margin specialty products that provide superior quality and
performance for the end-user and that are typically custom-formulated to meet
specific customer requirements. In the foodservice industry, the Company
supplies some of the country's leading restaurant chains and outlets, including
Subway, Great Steak & Potato Co., International House of Pancakes, Inc.,
Domino's Pizza, Inc., Wal-Mart Stores, Inc., Nathan's Famous Inc., Blimpie
International, Inc. and Arby's. The Company also serves many of the country's
leading packaged foods manufacturers, including Chef America, H. J. Heinz Co.,
Inc. Foodbrands America, Inc., Schwan's Sales Enterprises Inc., Kraft Foods Inc.
and McLane Company, Inc. The Company believes that its proprietary recipes and
manufacturing processes, national presence and long-standing customer
relationships pose barriers to entry for other manufacturers seeking to provide
competitive products. The Company is comprised of two operating subsidiaries,
Quality Foods, which was acquired on December 31, 1996, and Custom Foods. For
the 12-month period ended September 30, 1996, after giving effect to the
Acquisition, the Offering and the application of the estimated net proceeds
therefrom and the other transactions referred to herein, the Company would have
had pro forma net sales of $156.6 million.
Quality Foods is one of the country's leading manufacturers of pre-cooked
and uncooked, thinly-sliced beef used primarily in Philadelphia-style steak
sandwiches. It also supplies sliced chicken products and pre-cooked and uncooked
meatballs and hamburger patties. Quality Foods serves the foodservice industry,
with particular emphasis on QSRs, sandwich chains and family dining
establishments. For over ten years, Quality Foods has been the primary supplier
of pre-cooked beef to the Subway restaurant chain for its popular steak and
cheese sandwich. Quality Foods employs a proprietary forming and freezing
process that, the Company believes, produces a product with excellent flavor and
visual appearance, as well as superior yield when cooked. Because of its product
quality and performance, Quality Foods has historically been able to charge a
premium price for its uncooked sandwich steak products.
From fiscal 1991 to fiscal 1995, Quality Foods experienced compound annual
growth in net sales and operating profit of 14.5% and 26.1%, respectively, and
for the nine months ended September 30, 1996 net sales and operating profit
increased 9.4% and 39.2%, respectively, compared to the same period in 1995. The
Company believes this growth has been due to Quality Foods' superior product
quality, the expanding national presence of the Philadelphia-style steak
sandwich on restaurant menus, increased demand by its customers for high
value-added products and a continued focus on improving its proprietary low-cost
manufacturing processes. Quality Foods sells its products through an established
network of independent foodservice brokers and its direct sales force to over
400 foodservice distributors located in 42 states and six Canadian provinces.
Quality Foods has recently developed and introduced several complementary beef
and chicken products which, the Company believes, can be successfully marketed
through these established distribution channels.
In November 1996, Quality Foods completed the $11.0 million Philadelphia
Consolidation which has more than doubled Quality Foods' production capacity and
will enable it to meet its anticipated manufacturing needs for at least the next
five years. The Company believes that the Philadelphia Consolidation will result
in annual cost savings of approximately $4.5 million as a result of the
improvements in Quality Foods' production processes through the use of new
cooking equipment, the elimination of its historic dependence on outside
co-packing arrangements, the reduction in overtime through productivity
improvements and the elimination of redundant facility costs.
59
<PAGE>
Custom Foods develops, manufactures and markets pre-cooked meat and poultry
products sold primarily to manufacturers of branded and private label packaged
foods, also referred to as "industrial" users, and is also a major supplier of
frozen, uncooked beef product to the Arby's restaurant chain. Custom Foods'
pre-cooked products include a variety of pork, beef, chicken and turkey items,
such as meat rolls used in further processing; barbecue products; Mexican
specialties; charbroiled patties and crumble toppings. Custom Foods focuses on
sales to manufacturers of frozen and refrigerated convenience foods, including
items in the fast-growing hand-held foods segment. In its more profitable
pre-cooked operations, Custom Foods is the largest supplier of custom-formulated
meat and poultry fillings to Chef America for use in substantially all of its
microwaveable sandwich product lines. Chef America has accounted for a majority
of Custom Foods' sales of pre-cooked products for each of the past three years
and, according to Packaged Facts, Chef America is the country's leading
manufacturer of frozen hand-held entrees. From fiscal 1992 to fiscal 1996,
Custom Foods experienced compound annual growth in net sales and gross profit of
29.7% and 40.2%, respectively, in its pre-cooked operations, due to strong
growth in Chef America's business and growth in demand from other industrial
users for pre-cooked, cost-effective meat and poultry products. Due to capacity
constraints and the growing needs of its customers, Custom Foods has, over the
past two years, significantly broadened its operations with the opening and
subsequent expansion of a new facility in Kentucky. With capacity expansions
completed, Custom Foods recently created a direct sales and marketing
department. Custom Foods has developed over 400 proprietary product
formulations, many of which, the Company believes, can now be successfully
marketed through this sales group.
Custom Foods and its predecessors have supplied beef products to Arby's for
over 20 years. Prior to fiscal 1995, Custom Foods supplied Arby's on a national
basis. However, in the first quarter of fiscal 1995, Custom Foods entered into
an 18-month contract to supply Arby's on a regional basis, reducing the scope of
its arrangement due to a new competitive bidding process and a freight advantage
enjoyed by certain other suppliers. Under this contract, sales to Arby's
declined from $61.0 million in fiscal 1994 to $26.2 million in fiscal 1995,
resulting in an overall 28.9% decrease in Custom Foods' net sales. Nevertheless,
Custom Foods' income from operations during this period increased 40.0%,
reflecting significant growth in its more profitable pre-cooked operations. In
June 1996, following completion of the expansion of its Kentucky facility,
Custom Foods entered into a new three-year contract to once again supply Arby's
on a national basis. Despite increased sales and profitability associated with
the new Arby's contract, Custom Foods plans to continue to focus on its faster
growing, higher margin pre-cooked product operations.
HISTORY
CFP Holdings was formed in 1993 by First Atlantic, a private investment firm
specializing in acquiring and building middle market companies, to acquire the
business of Best Western Foods, Inc. ("Best Western") and Center of the Plate
Foods, Inc. ("Center of the Plate"). Best Western was a leading supplier of
uncooked beef to the Arby's restaurant chain while Center of the Plate
constituted what is today Custom Foods' value-added operations. Under First
Atlantic's sponsorship, Custom Foods focused on building its core value-added
product line by expanding its manufacturing facilities, enhancing its product
development capabilities and developing a growth strategy aimed at diversifying
its customer base. On December 31, 1996 CFP Holdings acquired Quality Foods.
Founded in the 1940s as William Cohen and Son Co., Inc., Quality Foods has a
50-year history of supplying the foodservice industry. In 1992, Quality Foods
was acquired by the Sellers, including David Cohen, an executive officer and
director of the Company and grandson of Quality Foods' original founders. Under
that ownership, Quality Foods focused on increasing sales of its sandwich steak
products, and expanding and improving its proprietary manufacturing
capabilities. Quality Foods is one of the leading manufacturers of sandwich
steak products in the United States.
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INDUSTRY
Value-Added Meat and Poultry Processors
Value-added meat and poultry processors such as the Company purchase raw
cuts of beef, pork, chicken and turkey and process them into packaged form for
further processing or for distribution into the foodservice and retail markets.
Various steps including blending, forming, cooking, slicing and mixing with
vegetables and flavorings are employed to create consistent products that
fulfill specific preparation or processing needs of customers. Industry trends
have increased the demand for value-added meat and poultry products like those
provided by the Company, including the desire for more uniform and consistent
end-products, continuous focus on reduced preparation and/or reduced
manufacturing costs and increased food safety concerns. The Company believes
that it is well positioned among value-added meat and poultry processors to
capitalize on these trends as a result of its national distribution, broad
pre-cooked product capabilities, multiple modern manufacturing facilities and a
diversified focus on both foodservice and industrial markets.
Foodservice
The foodservice industry is composed of establishments that serve food
outside the home and includes restaurants; the food operations of healthcare
providers, schools and other institutions, hotels, resorts and corporations; and
other non-traditional foodservice outlets. The foodservice industry generated
$300 billion in revenues in 1995 and experienced compound annual growth of 4.7%
from 1990 to 1995, according to Restaurants and Institutions, an industry
publication. This growth has been driven by the increase in away-from-home meal
preparation, which has accompanied the expanding number of both dual income and
single-parent households. According to Technomic, Inc., the foodservice industry
in the United States captured 51% of all consumer food expenditures in 1995,
surpassing traditional retail supermarkets and outlets. Another trend within the
foodservice industry is the growth in the number of non-traditional foodservice
outlets such as, convenience stores, retail stores, supermarkets and food
kiosks. These non-traditional locations often lack extensive cooking, storage or
preparation facilities, resulting in a need for pre-cooked and prepared foods
similar to those provided by the Company. The expansion in the foodservice
industry has also been accompanied by the continued consolidation and growth of
broadline and specialty foodservice distributors, many of which are
long-standing customers of the Company.
Industrial
The majority of the Company's existing and targeted industrial customers are
involved in the manufacture of branded and private label packaged foods. The
same trends which have contributed to the increase in away-from-home meal
preparation have also fueled the growth in easy to prepare, microwaveable frozen
and refrigerated convenience foods. Among the fastest growing segments is the
approximately $1.2 billion frozen and refrigerated hand-held foods market.
According to Packaged Facts, a consumer product research publications firm, this
market, which consists of burritos and other wrap sandwiches, pocket-style
sandwiches, hand-held appetizers and other similar hand-held entree items, grew
at a compound annual rate of 9.1% from 1993 to 1995, and is projected to grow at
a compound annual rate of 8.0% from 1995 to 2000. This growth has been driven by
improved product quality and variety and the increasing need for inexpensive,
yet hearty, food items which require minimal preparation. Despite its rapid
growth, many categories of frozen and refrigerated hand-held foods have achieved
less than 20% household penetration. The Company believes it has been successful
in establishing and maintaining supply relationships with many of the leading
manufacturers in this market, including Chef America, and that it is well-suited
to service this customer base with a broad line of value-added products which
meet its customers needs.
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PRODUCTS
The Company manufactures and markets a wide variety of value-added beef,
pork and poultry products for both foodservice and industrial customers.
Products are provided in either "solid-muscle," or natural cut form, and
"restructured" form, whereby natural cuts are ground, blended or emulsified to
provide a generally more consistent and lower cost end product. The Company
manufactures both pre-cooked and uncooked products in both portion-controlled
and bulk form, depending upon the specific preparation, storage or manufacturing
needs of the end customer. Various sauces, spices, marinades and vegetable
mixtures are also used in certain of the Company's products.
The following charts depict the Company's net sales by product category and
meat variety, respectively, on a pro forma basis for the fiscal year ended
September 30, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRO FORMA NET SALES
<S> <C>
Fiscal Year Ended
September 30, 1996
Pork 10%
Beef (Uncooked Arby's) 19%
Beef (Other) 61%
Poultry 10%
Arby's Uncooked Beef 19%
Uncooked Hamburger Patties and Meatballs 1%
Charbroiled Products and Crumble Toppings 3%
Meat Rolls and Other Value-added 20%
Sandwich Steaks 57%
</TABLE>
Foodservice
The Company's primary foodservice products are thinly-sliced beef and
chicken used in Philadelphia-style sandwiches. Sandwich steaks are marketed
principally under the Quality Foods' Philly-Quik and Blue Diamond brand names
and are sold in both uncooked, portion-controlled form and in pre-cooked, bulk
packaged form. The Company employs a proprietary forming and freezing process
for its sandwich steak products that, the Company believes, produces a product
with excellent flavor and visual appearance, as well as superior product yield
when cooked. Because of its product quality and performance, the Company has
historically been able to charge a premium price for its uncooked sandwich steak
products. The Company's pre-cooked sandwich steak meat has historically been
sold principally to Subway. With the substantial completion of the Philadelphia
Consolidation, the Company will have sufficient capacity to begin marketing this
product to other large QSRs and foodservice operators. In addition, new products
under development include portion-controlled, pre-cooked versions of its current
products for QSRs and non-traditional foodservice operators, as well as a
pre-cooked chicken product.
The Company's foodservice products also include a variety of pre-cooked
items including charbroiled hamburger patties, chicken breasts, pork-rib patties
and other sandwich meats; meat crumble toppings and meatballs; stripped, sliced
and diced meats used in salad bars and entree dishes; barbecue meats in a
variety of regional sauces; and Mexican specialties including fajita meats and
taco fillings. These products
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are provided principally pre-cooked and are packaged in either
portion-controlled or bulk form. In addition, the Company is currently
installing a new, multi-purpose cooking oven in its Montebello, California
facility, capable of producing a broad array of pre-cooked crumble toppings and
meatballs.
The Company also manufactures certain other uncooked meat products for the
foodservice industry including an uncooked restructured beef product for the
Arby's restaurant chain, as well as meatballs and hamburger patties.
Industrial
The Company provides pre-cooked meat and poultry products to manufacturers
of packaged foods. Industrial products are typically manufactured using
"least-cost" formulations and are generally sold in restructured, as opposed to
natural cut form. This involves blending various cuts of meat or poultry with
seasonings, vegetable-based binders and other ingredients to produce a product
that will retain a high degree of consistency through the customer's
manufacturing process. These products are often subjected to multiple further
processing steps, including blending, re-heating and re-freezing by the
Company's customers and thus are typically formulated with taste, performance,
nutritional and cost characteristics specific to each customer's requirements.
The majority of the Company's industrial products are sold in roll-form, which
the customer then slices, dices or otherwise processes to produce an end
product. Increasingly, the Company has provided its products in sliced, diced or
stripped form, some of which are blended with seasonings and sauces, in
accordance with the manufacturing requirements of its customers. With the added
production capacity afforded by recent capital improvements to its facilities,
the Company will be able to expand its processing capabilities to take advantage
of what it believes is a growing demand among packaged food manufacturers for
more highly processed products.
CUSTOMERS AND END PURCHASERS
The Company serves over 600 active customers including broad line and
specialty foodservice distributors, packaged foods manufacturers and major
national and regional restaurant chains. On a pro forma basis, Subway, Arby's
and Chef America accounted for 26.4%, 20.2% and 16.7% of the Company's net
sales, respectively, in fiscal 1996. No other customer accounted for as much as
4.5% of the Company's net sales during that year. See "Risk Factors--Importance
of Key Customers."
The Company supplies its foodservice customers generally through
distributors which take title to the product and resell it. Among the Company's
customers are many of the country's largest broad line and specialty food
service distributors including Sysco Corporation, Alliant Food Service, Inc.,
PYA/Monarch, Inc., Rykoff/Sexton, Pro Source Distribution, Inc. and J.P.
Foodservice. While the sale is made to the distributor, the Company maintains
active customer relationships with many large end purchasers including Subway,
Great Steak & Potato Co., International House of Pancakes, Inc., Domino's Pizza,
Inc., Nathan's Famous Inc., Blimpie International, Inc. and Arby's. For these
and other large end purchasers, the Company's products generally go through
extensive qualification procedures and its manufacturing capabilities are
subjected to thorough review by the end purchasers prior to the Company's
approval as a vendor. Large end purchasers typically select suppliers that can
consistently meet increased volume requirements on a national basis during peak
promotional periods. In its value-added operations, the Company believes that
its manufacturing flexibility, national presence and long-standing customer
relationships pose barriers to entry for other manufacturers seeking to provide
similar products to the Company's current large foodservice end purchasers.
The Company's industrial customers comprise some of the leading packaged
foods manufacturers in the country, including Chef America, H.J. Heinz Co.,
Inc., Foodbrands America, Inc., Schwan's Sales Enterprises, Inc., Kraft Foods,
Inc. and McLane Company. Given the highly customized nature of the Company's
products, relationships are generally maintained at various levels within the
Company. The Company believes that it has been able to maintain and expand these
relationships through its attention to
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customer service, by providing products that consistently meet the changing
needs of its customers and by remaining cost competitive. The Company believes
that once its value-added products are approved as principal ingredients in its
customers' end products, there exist high barriers to entry for other
manufacturers as long as the Company's overall quality, costs and product
support remain competitive.
SALES AND MARKETING
Prior to the Acquisition, Quality Foods and Custom Foods maintained separate
sales and marketing efforts. The Company plans to divide its sales and marketing
efforts between the foodservice and industrial markets in order to better serve
its target markets.
Direct Sales Force
The Company has a 16-person direct sales force consisting of ten
professionals with extensive experience in the value-added meat industry, and
six sales support personnel. Direct sales and marketing efforts differ
substantially between foodservice and industrial accounts.
In its foodservice sales operations, the Company employs ten sales and sales
support personnel, located in Colorado, Florida, Maryland and Pennsylvania.
These individuals develop and maintain the Company's relationships with large
end purchasers, including Subway and its various franchisee groups, QSRs,
sandwich chains and major distributors. Sales personnel also interface with the
Company's independent foodservice distributor network, principally for the
purposes of developing new accounts for existing products as well as developing
new products to market through the existing channels.
Industrial sales are conducted by six in-house sales and sales support
personnel, located in Arizona, California, Maryland and Texas. In this segment,
sales are generally made without the use of foodservice brokers, and involve a
high degree of customer service and interaction with the product development,
manufacturing and purchasing personnel of the end purchaser. Due to historical
capacity constraints in the Company's pre-cooked product lines, a formal
industrial sales and marketing effort was not established until early in
calendar year 1996. The Company intends to continue to add experienced direct
salespeople in this area to increase its sales penetration among packaged foods
manufacturers on a national basis.
Independent Broker Network
The Company maintains a network of 44 independent foodservice brokers
covering 42 states and six Canadian provinces all of which are compensated on a
commission basis. The Company estimates that these brokers employ over 200
individual sales personnel. The Company believes that its broker relationships
are a valuable asset providing significant new product and customer
opportunities. The brokers perform several significant functions for the Company
including identifying and developing new business opportunities and providing
customers service and support to the Company's distributors and end purchasers.
MANUFACTURING AND PROCESSING
The Company purchases whole cuts of raw meat and poultry in either fresh or
frozen form and subjects them to various processing steps including blending,
forming, cooking and, in some cases, further processing including shredding,
cubing, slicing and the addition of sauces and vegetables. The Company has
developed highly specialized products for customers which include proprietary
recipes and manufacturing processes that the Company believes would be difficult
for a competitor to duplicate. Custom Foods usually develops the recipes and
manufacturing processes for its customers, or receives general requirements and
then develops a product formulation and manufacturing process to produce a
product that meets the needs of its customers. These requirements can include
specific fat and nutritional content, taste, texture, and various performance
characteristics specific to the customer's manufacturing process.
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The Company generally retains ownership of its proprietary manufacturing
processes and generally retains ownership of its product recipes. Although the
customer often specifies the ultimate "label" requirements and product
specifications, the actual manufacturing steps and processes typically remain
confidential and proprietary to the Company.
RAW MATERIALS AND SUPPLIERS
The Company's principal raw materials consist of fresh and frozen cuts of
beef, pork and poultry, purchased from a variety of local, national and foreign
suppliers. The Company often makes forward volume commitments on raw materials
to lock in availability and pricing consistent with its production expectations.
The Company also purchases a variety of spices, binders, sauces and other
product additives used in the manufacturing process.
The Company typically utilizes a variety of meat and poultry cuts in the
manufacture of its restructured products. In its sandwich steak product lines,
however, the Company generally purchases beef lifter and loin tail cuts to
ensure product quality and consistency throughout the manufacturing process.
Lifter meat, and to a lesser extent loin tail, have historically experienced
significant price fluctuations during the course of the year based on seasonal
buying patterns of large users and product availability relative to other cuts
of beef, with prices typically lowest from May to August and highest in the
Spring and Fall. Historically, the Company has purchased larger quantities
during the low points in the seasonal cycle, formed the product into an
intermediate stage and frozen it for further processing as production
requirements dictate.
The Company believes that its beef, pork and poultry raw materials are
available from a number of sources at market prices and quantities sufficient to
meet its anticipated production needs. The Company does, however, concentrate
certain beef and pork purchases to ensure the highest quality and consistency of
product and to improve its overall costs. For fiscal 1996 on a pro forma basis,
the Company purchased 40.9% of the dollar value of its meat and poultry
requirements from divisions of ConAgra, Inc.
PATENTS AND TRADEMARKS
The Company has no material patents or trademarks on which its business
depends.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of various sizes, including divisions or subsidiaries of larger
companies. The principle competitive factors in its markets are product quality
and consistency, price, customer service, ability to produce highly specialized
products to meet specific customer requirements. Many of the Company's
competitors are larger and have greater financial resources.
The Company competes with various local and regional manufacturers,
including Liberty Bell Meat Co. and Devault Meat Co. in sales of the uncooked
Phildelphia-style steak sandwich products. In its pre-cooked sandwich steak
line, the Company competes with Waltham Beef and Provision and Allied Meat Co.
The markets for the Company's industrial products are very fragmented and the
Company generally competes with a number of national and regional competitors in
those markets, a number of which are significantly larger than the Company. In
sales to Arby's, the Company competes with Cargill, IBP, Inc. and Emmbers.
GOVERNMENT REGULATORY MATTERS
The Company is subject to federal, state and local health laws and
regulations that establish standards for the manufacture, storage, labeling and
transport of foodstuffs. The USDA is the regulatory body that is primarily
responsible for monitoring the Company's operations. Beef, pork and poultry
inspection is mandatory, under the jurisdiction of the Food Safety and
Inspection Service (a division of the USDA), for meat that is transported across
state lines or is otherwise placed in interstate commerce.
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The Company operates USDA-approved facilities. The Company's programs are
designed to assure that its Company's products are manufactured under conditions
that meet or exceed all applicable government standards. Such programs are
monitored by federal inspectors and include: (i) inspection of meat at various
stages of processing, (ii) temperature monitoring for both fresh and cooked
meat, (iii) review and approval of labelling and (iv) controlling and monitoring
the use of additives.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement of
health standards and inspection of the facilities. Enforcement actions for
violations of federal, state and local regulations may include seizure and
condemnation of violative products, cease and desist orders, injunctions,
monetary penalties and/or impoundment. The Company believes that its facilities
and practices are sufficient to maintain compliance with applicable government
regulations, although there can be no assurances in this regard.
EMPLOYEES
As of September 30, 1996, on a pro forma basis, the Company had 535
employees, 461 of whom were engaged in manufacturing and warehousing, 16 were
engaged in sales and marketing and 58 were engaged in administration.
The Company's unionized employees include 153 employees at Quality Foods'
Philadelphia facility who are represented by the Teamsters Union. In addition,
the Company has 47 employees at Custom Foods' Montebello facility who are
represented by the Teamsters Union under a contract that expires on March 31,
2000. Neither Quality Foods nor Custom Foods has had a strike during the past
ten years.
PROPERTIES
The following table sets forth the Company's principal facilities:
<TABLE>
<CAPTION>
SQUARE
LOCATION PURPOSE OWNED/LEASED FOOTAGE
- - - ------------------------------------------------------------ ------------------------- ------------- ---------
<S> <C> <C> <C>
Philadelphia, PA............................................ Manufacturing and Owned 150,000
Administrative Offices
Camden, NJ.................................................. Manufacturing Owned 45,000
Montebello, CA.............................................. Manufacturing and Leased 32,000
Administrative Offices
Owingsville, KY............................................. Manufacturing Leased 38,000
Vernon, CA.................................................. Manufacturing Leased 20,000
</TABLE>
ENVIRONMENTAL MATTERS
The business operations of the Company and the operation of real property by
Custom Foods and Quality Foods are subject to extensive and changing federal,
state and local environmental laws and regulations pertaining to the discharge
of materials into the environment, the handling and disposition of wastes
(including solid and hazardous wastes) or otherwise relating to protection of
the environment. Compliance with federal, state and local environmental laws and
regulations is not expected to have a material impact on the Company's capital
expenditures, earnings or competitive position. No assurance can be given,
however, that additional environmental issues relating to presently known
matters or identified sites or to other matters or sites will not require
additional, currently unanticipated investigation, assessment or expenditures.
Environmental assessment audits conducted prior to Quality Foods'
acquisition of the Philadelphia facility revealed the presence there of
petroleum hydrocarbon contamination from former underground storage tank
operations. The facility's former owner has conducted assessment and remedial
work at the
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site under the oversight of the Pennsylvania Department of Enviromental
Protection. Soil and groundwater remediation is substantially complete. Pursuant
to an agreement among the facility's former owner, Quality Foods, and the
Commonwealth of Pennsylvania, subject to certain exceptions, Quality Foods is
not responsible to the Commonwealth of Pennsylvania for identified environmental
contamination that occurred on the site prior to Quality Foods' acquisition of
the facility.
LEGAL PROCEEDINGS
The Company is not involved in any legal matters within or outside of the
normal course of business which would have a material impact on the operations
or financial position of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages and positions of the directors,
executive officers and significant employees of the Company. All directors hold
office until the next annual meeting of stockholders of the Company and until
their successors are duly elected and qualified, and all executive officers hold
office at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- - - ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Roberto Buaron....................................... 50 Director, Chairman
Robert Gioia......................................... 48 Director, President and Chief Executive Officer
Richard Griffith..................................... 64 Director, Vice Chairman
David Cohen.......................................... 33 Director, Executive Vice President
Eric Ek.............................................. 41 Director, Vice President, Chief Financial Officer and
Secretary
James Long........................................... 54 Director, Vice Chairman and Treasurer
Andrew Kohn.......................................... 29 Director
Keith Pennell........................................ 29 Director
James Schubauer II................................... 33 Director
SIGNIFICANT EMPLOYEES
Robert Capobianco.................................... 42 Director of Operations--Quality Foods
Larry Davis.......................................... 41 Chief Financial Officer--Quality Foods
Steven Diener........................................ 52 Vice President--Sales and Marketing--Custom Foods
Gerald Harger........................................ 48 Vice President of National Accounts--Quality Foods
Jeffry Kohlhoff...................................... 48 Vice President--Manufacturing--Custom Foods
</TABLE>
ROBERTO BUARON has been the Chairman and a director of CFP Holdings since
December 1996. He is the Chairman and Chief Executive Officer of First Atlantic,
which he founded in 1989. From 1987 to 1989, he was an Executive Vice President
with Overseas Partners, Inc., an investment management firm. Mr. Buaron is
currently a director of BPC Holding Corporation.
ROBERT GIOIA has been the President, Chief Executive Officer and a director
of CFP Holdings since December 1996. He has been the Chairman and Chief
Executive Officer of Quality Foods and of a corporation (of which he is the sole
stockholder) which was a partner of Quality Foods since July 1992. He has held
management positions in the food processing industry for over 22 years. Prior to
joining Quality Foods, Mr. Gioia was responsible for sales and marketing of the
foodservice division, both restaurant and institutional, of the Red Wing
Company, a national food manufacturer and processor. In addition, Mr. Gioia held
several positions, including Vice President, with the Gioia Macaroni Company, a
national pasta manufacturer founded by the Gioia family in 1910.
RICHARD GRIFFITH has been the Vice Chairman of CFP Holdings since December
1996 and a director of CFP Holdings since March 1993. He has been the President
and Chief Executive Officer of Custom Foods since March 1993. Prior to the
formation of the Company, Mr. Griffith served as President and Chief Executive
Officer of the Company's predecessors, Best Western and Center of the Plate
since November 1991. Mr. Griffith was the founding Chairman of Arcop, Inc., the
purchasing cooperative of the Arby's restaurant chain.
DAVID COHEN has been the Executive Vice President and a director of CFP
Holdings since December 1996. He has been President and Chief Operating Officer
of Quality Foods since July 1992 and president of a corporation (of which he is
the sole stockholder) which was a partner of Quality Foods. Mr. Cohen joined
Quality Foods in 1983 and has served in numerous positions, including National
Sales Manager, before becoming Chief Operating Officer.
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ERIC EK has been the Vice President and Chief Financial Officer of the
Company since July 1993 and a director of CFP Holdings since December 1996.
Previously, Mr. Ek was a Managing Director at Takenaka & Company, a Pacific Rim
focused investment banking firm from 1990 to 1993. At Takenaka, Mr. Ek was the
Chief Financial Officer of a residential home builder and a Chief Administrative
Officer for a manufacturing firm. Prior to joining Takenaka, Mr. Ek was employed
by KPMG Peat Marwick and Ernst & Young. Mr. Ek is a Certified Public Accountant.
JAMES LONG has been the Vice Chairman and Treasurer of CFP Holdings since
December 1996 and a director of the Company since March 1993. He has been an
Executive Vice President of First Atlantic since March 1991. From January 1990
to February 1991, Mr. Long was an Executive Vice President at Kleinwort Benson
Equity Fund, a leveraged buyout fund. Mr. Long is currently a director of BPC
Holding Corporation.
ANDREW KOHN has been a director of CFP Holdings since December 1996. Mr.
Kohn is a Vice President of First Atlantic, with which he has been employed
since 1994. Previously, Mr. Kohn was employed by Berkshire Partners, a private
equity investment firm, and Bear Stearns & Co.
KEITH PENNELL has been a director of CFP Holdings and Assistant Secretary
since January 1994. Mr. Pennell is a Vice President of First Atlantic with which
he has been associated since 1992. From 1989 to 1992, Mr. Pennell worked in the
investment banking department of Dean Witter Reynolds, Inc.
JAMES SCHUBAUER II has been a director of CFP Holdings and Assistant
Secretary since December 1996. He joined First Atlantic as a Senior Vice
President in September 1996. Prior to that, Mr. Schubauer was a Senior Vice
President with the private equity investment firm Rosecliff, Inc., prior to
which he worked in various positions at SG Warburg & Co., CS First Boston and
Morgan Stanley & Co., Inc.
ROBERT CAPOBIANCO has worked for Quality Foods since December 1989 and been
the Director of Operations of Quality Foods since October 1992. Prior to joining
Quality Foods, Mr. Capobianco worked as Operations Manager at Southern Best
Foods. Mr. Capobianco has over 17 years of experience in the meat industry.
STEVEN DIENER has been the Vice President--Sales and Marketing of Custom
Foods since December 1996. Prior to joining Custom Foods in 1995, Mr. Diener was
the Vice President--Sales and Marketing for Wilshire Meat Sales. Previously, Mr.
Diener was the President of McLane Foods, Inc.
LARRY DAVIS has been the Chief Financial Officer of Quality Foods since
March 1995, having joined Quality Foods in July 1994. He was most recently a
Senior Manager with Ernst & Young LLP, an international accounting and
consulting firm, where he was employed for 15 years. Mr. Davis is a Certified
Public Accountant.
GERALD HARGER has been the Vice President of National Accounts of Quality
Foods since October 1993. He most recently worked as President and Chief
Operating Officer of Tavilla Marketing, the North American Import Division of
Albert Fisher, Inc., an international produce holding corporation. Mr. Harger
has over ten years of experience with foodservice national accounts, and was
National Accounts Manager for Leprino Foods.
JEFFRY KOHLHOFF has been the Vice President--Manufacturing of Custom Foods
since December 1994. Prior to joining Custom Foods, Mr. Kohlhoff was the
Director of Quality Assurance for Chef America from 1993 to 1994. Prior to that,
Mr. Kohlhoff was the Vice President of Quality Management for Stokely USA, Inc.
from 1986 to 1993.
COMPENSATION OF DIRECTORS
All directors are reimbursed for their usual and customary expenses incurred
in attending all Board of Directors and committee meetings. Directors of the
Company receive no remuneration for serving as directors.
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EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and its four other most highly
compensated executive officers (collectively the "Named Executive Officers") for
services rendered in all capacities during the last fiscal years of CFP Holdings
and Quality Foods, respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
ALL
OPTIONS LTIP OTHER
FISCAL SALARY BONUS GRANTED PAYOUTS COMPENSATION
NAME OF EXECUTIVE OFFICER YEAR ($) ($) (#) ($) ($)
- - - ------------------------------------------------- ----------- --------- --------- ----------- ----------- -------------
Robert Gioia..................................... 1995 191,000 191,000 0 0 1,566(1)
--------------------------------------------------------------------------
Richard Griffith................................. 1996 300,000 46,200 0 0 6,078(2)
--------------------------------------------------------------------------
David Cohen...................................... 1995 137,000 137,000 0 0 12,403(3)
--------------------------------------------------------------------------
Eric Ek.......................................... 1996 134,559 20,100 0 0 4,915(4)
--------------------------------------------------------------------------
Jeffry Kohlhoff.................................. 1996 125,000 19,250 0 0 0
</TABLE>
- - - ------------------------
(1) Consists of excess term life insurance.
(2) Consists of $6,078 of value of personal use of the Company's automobile.
(3) Consists of $12,000 car allowance and $403 excess term life insurance.
(4) Consists of $4,545 of disability insurance and $370 of a term life insurance
policy.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to any of the Named Executive Officers in the
last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
The following table sets forth information with respect to each exercise of
stock options during fiscal year 1996, by each of the Named Executive Officers
and the number of options held at fiscal year end and the aggregate value of
in-the-money options held at fiscal year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
OPTIONS AT FY-END
FY-END (#) ($)(1)
SHARES VALUE ------------- -------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- - - ------------------------------------------------- ------------ ----------- ------------- -------------------
<S> <C> <C> <C> <C>
Robert Gioia..................................... -- -- 0/0 0/0
Richard Griffith................................. -- -- 2,296/1,149 1,173,210/587,116
David Cohen...................................... -- -- 0/0 0/0
Eric Ek.......................................... -- -- 935/444 477,766/226,875
Jeffry Kohlhoff.................................. -- -- 459/230 234,540/117,525
</TABLE>
- - - ------------------------
(1) Based on the fair market value of the Common Stock at September 30, 1996
($800.00 per share), as determined by the Company's Board of Directors.
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Gioia (the
"Gioia Employment Agreement") that expires on December 31, 2001 or on an earlier
date in accordance with the terms of the Gioia Employment Agreement. Base
compensation under the Gioia Employment Agreement is $325,000 per year plus an
annual adjustment beginning in January 1998 based on the Consumer Price Index.
Mr. Gioia is also eligible to participate in the Company's annual cash bonus
plan which is based upon the Company's achievement of certain annual performance
targets, subject to the right to receive a minimum annual cash bonus of $50,000.
The Company may terminate Mr. Gioia at any time for "cause" or after a specified
period upon a "disability" (as such terms are defined in the Gioia Employment
Agreement). If the Company terminates Mr. Gioia "without cause" (as such term is
defined in the Gioia Employment Agreement), Mr. Gioia is entitled to receive,
among other things, the aggregate of his base salary and the pro rata portion of
his minimum annual bonus payable through the later of December 31, 2001 or 18
months from the date of termination by the Company "without cause." In
connection with the Gioia Employment Agreement, upon the adoption of the 1997
Stock Option Plan Mr. Gioia will be granted options to purchase up to that
number of shares of Class B Nonvoting Common Stock, $.01 par value, of CFP Group
(the "Class B Nonvoting Common Stock") equal to 1.25% of the total number of
issued and outstanding shares of common stock of CFP Group (determined on a
fully-diluted basis).
The Company has entered into an employment agreement with Mr. Griffith (the
"Griffith Employment Agreement") that expires on December 31, 1999 or on an
earlier date in accordance with the terms of the Griffith Employment Agreement.
Base compensation under the Griffith Employment Agreement is $300,000 per year
plus an annual adjustment beginning in July 1997 based on the Consumer Price
Index. Mr. Griffith is also eligible to participate in the Company's annual cash
bonus plan which is based upon Custom Foods' achievement of certain annual
performance targets. The Company may terminate Mr. Griffith at any time for
"cause" or after a specified period upon a "disability" (as such terms are
defined in the Griffith Employment Agreement). If the Company terminates Mr.
Griffith "without cause" (as such term is defined in the Griffith Employment
Agreement), Mr. Griffith is entitled to receive, among other things, the
aggregate of his base salary payable through the earlier of December 31, 1999 or
18 months from the date of termination by the Company "without cause" and the
pro rata portion of his annual bonus for the fiscal year in which such
termination occurred.
The Company has entered into an employment agreement with Mr. Cohen (the
"Cohen Employment Agreement") that expires on December 31, 1999 or on an earlier
date in accordance with the terms of the Cohen Employment Agreement. Base
compensation under the Cohen Employment Agreement is $240,000 per year plus an
annual adjustment beginning in January 1998 based on the Consumer Price Index.
Mr. Cohen is also eligible to participate in the Company's annual cash bonus
plan which is based upon Quality Food's achievement of certain annual
performance targets, subject to the right to receive a minimum annual cash bonus
of $50,000. The Company may terminate Mr. Cohen at any time for "cause" or after
a specified period upon a "disability" (as such terms are defined in the Cohen
Employment Agreement). If the Company terminates Mr. Cohen "without cause" (as
such term is defined in the Cohen Employment Agreement), Mr. Cohen is entitled
to receive, among other things, the aggregate of his base salary and the pro
rata portion of his minimum annual bonus through the later of December 31, 1999
or 18 months from the date of termination by the Company "without cause." In
connection with the Cohen Employment Agreement, upon the adoption of the 1997
Stock Option Plan Mr. Cohen will be granted options to purchase up to that
number of shares of Class B Nonvoting Common Stock of CFP Group equal to 1.25%
of the total number of issued and outstanding shares of common stock of CFP
Group (determined on a fully-diluted basis).
The Company has entered into an employment agreement with Mr. Ek (the "Ek
Employment Agreement") that expires on December 31, 1999 or on an earlier date
in accordance with the terms of the Ek Employment Agreement. Base compensation
under the Ek Employment Agreement is $165,200 per
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<PAGE>
year plus an annual adjustment beginning in July 1997 based on the Consumer
Price Index. Mr. Ek is also eligible to participate in the Company's annual cash
bonus plan which is based upon Custom Foods' achievement of certain annual
performance targets. The Company may terminate Mr. Ek at any time for "cause" or
after a specified period upon a "disability" (as such terms are defined in the
Ek Employment Agreement). If the Company terminates Mr. Ek "without cause" (as
such term is defined in the Ek Employment Agreement), Mr. Ek is entitled to
receive, among other things, the aggregate of his base salary payable for 12
months from the date of termination by the Company "without cause" and the pro
rata portion of his annual bonus for the fiscal year in which such termination
occurred.
PUT RIGHTS OF MESSRS. GIOIA, COHEN AND GRIFFITH
Under the terms of their respective employment agreements, each of Messrs.
Gioia, Cohen and Griffith have the right, in connection with the termination of
their employment under certain circumstances, to sell to CFP Group, and CFP
Group is obligated to purchase, the shares of Class A Nonvoting Common Stock (in
the case of Mr. Griffith) and Class B Nonvoting Common Stock (in the case of
Messrs. Gioia and Cohen) owned by them. The price at which such shares may be
purchased and sold is intended to be the fair market value thereof as determined
pursuant to a formula (in the case of Mr. Griffith) and an appraisal (in the
case of Messrs. Gioia and Cohen). The right of such individuals to sell their
shares to CFP Group is subject to the terms and conditions of the then
outstanding credit facilities of CFP Group and its subsidiaries.
In addition, under the terms of the Griffith Employment Agreement, CFP Group
has the right, under certain circumstances, to require Mr. Griffith to sell the
shares of Class A Nonvoting Common Stock owned by him to CFP Group. The price at
which such shares may be purchased and sold is intended to be the fair market
value thereof as determined pursuant to a formula. The right of CFP Group to
purchase Mr. Griffith's shares is also subject to the terms and conditions of
the then outstanding credit facilities of CFP Group and its subsidiaries.
EMPLOYEE STOCK OPTION PLAN
1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "Option Plan"), which was assumed
by CFP Group in December, 1996, provides for the grant of both incentive stock
options ("ISOs") and non-qualifying stock options ("NSOs") to directors and
employees of, and independent consultants and contractors to, the Company and
its subsidiaries. A total of 11,586 shares of nonvoting common stock has been
authorized and reserved for issuance under the Option Plan, subject to
adjustment to reflect changes in capitalization resulting from stock splits,
stock dividends and similar events.
The Option Plan is administered by the Board of Directors or a Stock Option
Committee (the "Committee") appointed by the Board of Directors. The Committee
has the authority to interpret the Option Plan, to determine the persons to whom
options will be granted, to determine the basis upon which the options will be
granted, and to determine the exercise price, duration and other terms of the
options to be granted under the Option Plan, provided, among other things, that
(a) the exercise price of ISOs granted under the Option Plan may not be less
than the fair market value of the stock subject to the option on the date of
grant (110% of fair market value if the employee is the beneficial owner of 10%
or more of CFP Group's voting securities), (b) the exercise price must be paid
in cash, by personal or certified check or by surrendering previously owned
shares of nonvoting common stock upon the exercise of the option, (c) the term
of the option may not exceed ten years (or five years in the case of an ISO
granted to an employee who is the beneficial owner of 10% or more of CFP Group's
voting securities), (d) no option is transferrable other than by will or the
laws of descent and distribution and (e) no option may be granted to a member of
the Committee.
72
<PAGE>
Upon the termination of an optionee's employment (other than by death or
disability), such person's options may be exercised during the three-month
period following the date of such termination. In the event of the death or
disability of an optionee, the option may be exercised by such person or his
personal representative during the six-month period following the date the
optionee ceases to be an employee of the Company by reason of such death or
disability. In the event of a Corporate Transaction (as such term is defined in
the Option Plan), each outstanding option under the Option Plan which is not
assumed or replaced with a comparable option from the successor corporation will
automatically terminate.
ISOs may not be granted under the plan to any individual if the effect of
such grant would be to permit that person to have the first opportunity to
exercise such options, in any calendar year, for the purchase of shares having a
fair market value (at the time of the grant of such options) in excess of
$100,000. ISOs granted under the Option Plan are intended to have the federal
income tax consequences of a qualified stock option. An employee to whom an
incentive stock option ("ISO") which qualifies under Section 422 of the Code is
granted will not recognize income at the time of grant or exercise of such
Option. However, upon the exercise of an ISO, any excess in the fair market
price of the Common Stock over the Option Price constitutes a tax preference
item which may have alternative minimum tax consequences for the employee. If
the employee sells such shares more than one year after the date of transfer of
such shares and more than two years after the date of grant of such ISO, the
employee will generally recognize a long-term capital gain or loss equal to the
difference, if any, between the sale prices of such shares and the Option Price.
In such case, CFP Group will not be entitled to a federal income tax deduction
in connection with the grant or exercise of the ISO. If the employee does not
hold such shares for the required period, when the employee sells such shares,
the employee will recognize ordinary compensation income and possibly capital
gain or loss (long-term or short-term, depending on the holding period of the
stock sold) in such amounts as are prescribed by the Code and the regulations
thereunder, and CFP Group will generally be entitled to a Federal income tax
deduction in the amount of such ordinary compensation income recognized by the
employee.
An employee to whom a nonqualified stock option ("NSO") is granted will not
recognize income at the time of grant of such Option. When such employee
exercises such NSO, the employee will recognize ordinary compensation income
equal to the excess, if any, of the fair market value, as of the date of Option
exercise, of the shares the employee receives upon such exercise over the Option
Price paid. The tax basis of such shares to such employee will be equal to the
Option Price paid plus the amount, if any, includible in the employee's gross
income, and the employee's holding period for such shares will commence on the
date on which the employee recognizes taxable income in respect of such shares.
Gain or loss upon a subsequent sale of any Common Stock received upon the
exercise of a NSO generally would be taxed as capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold). Certain
additional rules apply if the Option Price is paid in shares previously owned by
the participant. Subject to the applicable provisions of the Code and
regulations thereunder, CFP Group will generally be entitled to a Federal income
tax deduction in respect of a NSO in an amount equal to the ordinary
compensation income recognized by the employee. This deduction will, in general,
be allowed for the taxable year of CFP Group in which the participant recognizes
such ordinary income. The Board of Directors may amend the Option Plan without
stockholder approval in any respect other than any amendment that requires
stockholder approval by law or pursuant to the rules of the Code regarding
qualified stock options.
PROPOSED 1997 STOCK OPTION PLAN
CFP Group intends to establish a new incentive stock option program the
("1997 Stock Option Plan") which will include the existing management of the
Company, as well as key senior executives and management of Quality Foods and
Custom Foods.
73
<PAGE>
PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of CFP Holdings is owned by CFP Group.
The following table sets forth certain information regarding the ownership of
the capital stock of CFP Group as of March 1, 1997 with respect to (i) each
person known by CFP Group to own beneficially more than 5% of the outstanding
shares of any class of its voting capital stock, (ii) each of CFP Group's
directors, (iii) the Named Executive Officers and (iv) all directors and
officers as a group. Except as otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned.
Unless otherwise indicated, the address for each stockholder is c/o CFP Group,
Inc., 1117 West Olympic Boulevard, P.O. Box 1027, Montebello, California 90640.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF NONVOTING PERCENTAGE OF
VOTING PERCENTAGE OF COMMON STOCK(1) ALL CLASSES OF
COMMON STOCK(1) VOTING -------------------- COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER CLASS A COMMON STOCK CLASS A CLASS B (FULLY-DILUTED)
- - - ------------------------------------------ ---------------- ----------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Atlantic Equity Partners, L.P.(2) 14,293 97.2 % -- -- 48.8%
Roberto Buaron(3)......................... 14,293 97.2 -- -- 48.8
Richard Griffith(4)....................... -- -- 3,161 -- 10.7
Robert Gioia(5)........................... -- -- -- 1,081 3.7
Eric Ek................................... -- -- 1,066 -- 3.6
David Cohen(6)............................ -- -- -- 1,081 3.7
Jeffry Kohlhoff........................... -- -- 459 -- 1.6
Andrew Kohn............................... -- -- -- -- --
James Long(7)............................. 173 1.2 -- -- *
Keith Pennell(7).......................... 17 * -- -- *
James Schubauer II........................ -- -- -- -- --
All officers and directors as a group
(10 persons)............................ 14,483 98.5 4,686 2,162 86.4
</TABLE>
- - - ------------------------
* Less than one percent.
(1) The authorized capital stock of CFP Group consists of 160,000 shares of
capital stock, including 150,000 shares of Common Stock, $.01 par value (the
"Common Stock") and 10,000 shares of Preferred Stock, $.01 par value (the
"Preferred Stock"). Of the 150,000 shares of Common Stock, 100,000 shares
are designated Class A Voting Common Stock (the "Class A Voting Stock"),
25,000 shares are designated Class A Nonvoting Stock (the "Class A Nonvoting
Stock"), and 25,000 shares are designated Class B Nonvoting Common Stock
(the "Class B Nonvoting Stock"). Of the 10,000 shares of Preferred Stock,
3,528 shares are designated Series A Preferred Stock (the "Preferred
Stock"). The Preferred Stock was redeemed upon the closing of the Offering.
(2) Address is P.O. Box 847, One Capital Place, Fourth Floor, Grand Cayman,
Cayman Islands, British West Indies. Atlantic Equity Associates, L.P.
("AEA") is the sole general partner of AEP and as such exercises voting
and/or investment power over shares of capital stock owned by AEP, including
the shares of Common Stock held by AEP (the "AEP Shares"). Mr. Buaron is the
sole stockholder of Buaron Capital Corporation ("BCC"). BCC is the managing
general partner of AEA. Retni Limited ("Retni"), an indirect wholly owned
subsidiary of Akros Finanziana S.p.a ("Akros"), is also a general partner of
AEA. As general partners of AEA, BCC and Retni share voting and/or
investment power over, and may be deemed to beneficially own, the AEP
Shares. BCC and Retni disclaim any beneficial ownership of any shares of
capital stock owned by AEP, including the AEP Shares. Through their
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<PAGE>
respective affiliations with BCC, Retni and AEA, Mr Buaron and Akros control
the sole general partner of AEP and therefore have the authority to control
voting and/or investment power over, and may be deemed to beneficially own,
the AEP Shares. Mr. Buaron and Akros disclaim any beneficial ownership of
any of the AEP Shares. Certain present and former employees of First
Atlantic, an affiliate of AEP, owning an additional 412 shares of Class A
Voting Stock, have granted AEP the right to vote the shares of Class A
Voting Stock beneficially owned by them.
(3) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York 10022. Represents shares of Common Stock to be owned and controlled
by AEP. Mr. Buaron is the sole shareholder of BCC. BCC is the managing
general partner of AEA. AEA is the sole general partner of AEP and as such,
exercises voting and/or investment power over shares of capital stock owned
and controlled by AEP, including the AEP Shares. Mr. Buaron, as the sole
shareholder and Chief Executive Officer of BCC, and Retni, as a general
partner of AEA, control the sole general partner of AEP and therefore share
voting and/or investment power over, and may be deemed to beneficially own,
the AEP Shares. Mr. Buaron disclaims any beneficial ownership of the AEP
Shares.
(4) Includes 70 shares of Class A Nonvoting Stock owned by Mr. Griffith's Profit
Sharing Trust and 150 shares of Class A Nonvoting Stock owned by Mr.
Griffith's wife.
(5) Represents 1,081 shares of Class B Nonvoting Stock owned by RDG Food Corp.,
Inc. ("RDG"). Mr. Gioia, as the sole shareholder of RDG, controls the voting
and disposition of the shares owned by RDG and, therefore, is deemed to
beneficially own the Class B Nonvoting Stock owned by RDG.
(6) Represents 1,081 shares of Class B Nonvoting Stock of Amjor Holdings, Inc.
("AHI"). Mr. Cohen, as the sole stockholder of AHI, controls the voting and
disposition of the shares owned by AHI and, therefore, is deemed to
beneficially own the Class B Nonvoting Stock owned by AHI.
(7) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York,
New York, 10022.
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<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH CERTAIN STOCKHOLDERS
Effective December 31, 1996, the Company entered into a new management
consulting agreement with First Atlantic which provides for the annual payment
of compensation in the amount of $600,000 plus out of pocket expenses to First
Atlantic in exchange for providing management consulting services to the Company
and its subsidiaries. Such agreement will continue until December 31, 2003
unless extended pursuant to its terms.
On December 31, 1996, CFP Group entered into a Stockholders' Agreement (as
defined) with NationsCredit Commercial Corporation, an affiliate of NCMI (as
defined), and certain other stockholders of CFP Group.
CFP Holdings paid Robert Gioia, an executive officer, director and
beneficial owner of common stock of CFP Group and an executive officer and
director of CFP Holdings, $125,000 (less amounts required to be withheld by law)
upon the consummation of the Offering. In addition, Custom Foods paid certain of
its executive officers (two of whom are also executive officers, directors and
stockholders of CFP Group) the following amounts (less amounts required to be
withheld by law), upon consummation of the Offering, as indicated:
<TABLE>
<CAPTION>
AMOUNT
PAID UPON
CONSUMMATION
NAME OF THE OFFERING
- - - ----------------------------------------------------------------------------- ---------------
<S> <C>
Richard Griffith............................................................. $ 107,143
Eric Ek...................................................................... 71,429
Jeffry Kohlhoff.............................................................. 71,429
</TABLE>
Pursuant to the terms of the Acquisition Agreement, Robert Gioia and David
Cohen, and entities controlled by them, received cash consideration for their
interests in Quality Foods upon the closing of the Acquisition of $6,232,945 and
$5,131,366, respectively, and are entitled to receive their respective pro rata
shares, with the other Sellers, of any amounts, if and when released, of the
part of the purchase price escrowed at closing.
Pursuant to an agreement between CFP Holdings and First Atlantic dated as of
December 30, 1996, CFP Holdings paid First Atlantic an investment banking fee of
$750,000 on the consummation of the Acquisition.
STOCKHOLDERS' AGREEMENT
CFP Group, AEP, NationsCredit Commercial Corporation, Richard Griffith,
Robert Gioia, David Cohen, Eric Ek and the other Stockholders named therein
entered into a Stockholders' Agreement (the "Stockholders' Agreement") dated as
of December 31, 1996, which contains certain restrictions with respect to the
transfer of CFP Group's capital stock, certain rights granted by CFP Group with
respect to such shares and certain voting and other arrangements. The rights and
obligations of each party to the Stockholders' Agreement shall terminate as to
such stockholder upon the earliest to occur of (i) the transfer of all stock of
CFP Group owned by such stockholder, (ii) the twentieth anniversary of the date
of the Stockholders' Agreement, (iii) a sale of all or substantially all of the
stock of CFP Group in a single transaction or (d) the consummation of an initial
public offering of the common stock of CFP Group which results in net proceeds
to CFP Group of at least $100 million dollars.
The Stockholders' Agreement provides that CFP Group's Board of Directors
shall consist of at least nine directors, including Richard Griffith, Eric Ek,
Robert Gioia, David Cohen (for so long as each such individual shall remain an
employee and shall own stock of CFP Group) and the remainder of which shall be
designated by AEP.
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<PAGE>
The Stockholders' Agreement provides that all of the parties to the
Stockholders' Agreement other than AEP (each such other party being referred to
herein as the "Selling Group") are prohibited from transferring any stock to any
person engaged in a business which competes in any manner with the business
conducted by CFP Group and its subsidiaries. In addition, subject to certain
exceptions, no Selling Group may transfer any stock prior to the third
anniversary of the date of the Stockholders' Agreement and thereafter no Selling
Group may transfer stock unless it first offers such stock to CFP Group. Should
CFP Group fail to accept all or any part of the stock offered for sale, AEP will
have the right to purchase all or any part of the stock offered but not accepted
for purchase by CFP Group. Should AEP fail to accept all such stock offered for
sale, then the Selling Group may transfer the stock so offered to an
Institutional Investor (as such term is defined in the Stockholders' Agreement)
or to such other purchaser as shall be approved by AEP (and its transferees).
In the event that AEP receives an offer from an unaffiliated third party to
purchase that number of shares of stock of CFP Group which constitutes, in the
aggregate, more than 50% of the total number of shares then outstanding, AEP
shall not transfer any stock unless the terms of such offer are extended to the
other stockholders and the other stockholders are given the opportunity to
participate on a pro rata basis in such sale.
Pursuant to the Stockholders' Agreement, if at any time AEP shall approve
(i) a proposal from a person that is not an affiliate of AEP for the transfer of
all of the stock of CFP Group, (ii) the merger or consolidation of CFP Group
with or into another person that is not an affiliate of AEP in which the
stockholders will receive cash or securities for their shares or (iii) the sale
by CFP Group or its subsidiaries of all or substantially all of their assets to
a person that is not an affiliate of AEP, then each stockholder shall be
required to participate in such transaction and to take all necessary action to
cause CFP Group to consummate such transaction.
In the event of a Termination of Relationship of a Management Investor (as
such terms are defined in the Stockholders' Agreement), CFP Group shall have the
right to repurchase all or any part of the stock owned by such Management
Investor. The price at which such shares are to be purchased shall be either the
lesser of the price paid by such terminated Management Investor or the fair
value per share of the stock (as determined in accordance with the provisions of
the Stockholders' Agreement), depending on whether the Management Investor was
terminated for "cause" (as defined in the Stockholders' Agreement) or for any
reason other than "cause."
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificates of Incorporation of CFP Holdings, CFP Group, Custom Foods
and Quality Foods contain provisions eliminating the personal liability of
directors for monetary damages for breaches of their duty of care, except in
certain prescribed circumstances. The Bylaws of CFP Holdings, CFP Group, Custom
Foods and Quality Foods also provide that directors and officers will be
indemnified to the fullest extent authorized by Delaware law or California law,
as the case may be, as it now exists or may in the future be amended, against
all expenses and liabilities reasonably incurred in connection with service for
or on behalf of CFP Holdings, CFP Group, Custom Foods or Quality Foods (as the
case may be). The Bylaws of CFP Holdings, CFP Group and Custom Foods provide
that the right of directors and officers to indemnification is not exclusive of
any other right now possessed or hereinafter acquired under any statute,
agreement or otherwise.
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<PAGE>
DESCRIPTION OF BANK CREDIT AGREEMENT
The Company and CFP Group have entered into a Credit Agreement dated as of
December 30, 1996 (the "Bank Credit Agreement") with NationsBank of Texas, N.A.
(the "Agent") individually and certain lenders, which provides the Company with
a new 5 1/2 year revolving credit facility (the "Revolving Credit Facility")
under which up to an aggregate principal amount of $20.0 million (subject to a
borrowing base) are available for borrowing, a 5 1/2 year $10.0 million term
loan (the "Term Loan A"), a 5 1/2 year $41.0 million term loan (the "Tranche A
Term Loan") and a 7-year $25.0 million term loan (the "Tranche B Term Loan").
Proceeds of the Term Loan A, the Tranche A Term Loan and the Tranche B Term
Loan, together with a portion of the amount available under the Revolving Credit
Facility, were used, together with the net proceeds of the Bridge Notes, to
complete the Acquisition, to refinance certain indebtedness of Custom Foods and
Quality Foods and to pay transaction costs related thereto. The balance of the
Revolving Credit Facility is available for general corporate purposes. Upon the
consummation of the Offering and the application of the net proceeds thereof as
provided in "Use of Proceeds," the Tranche A Term Loan and the Tranche B Term
Loan were repaid in full, the amount outstanding under the Revolving Credit
Facility was reduced, and the principal amount under the Term Loan A remained
outstanding.
The following summaries of the material provisions of the Bank Credit
Agreement do not purport to be complete, and such provisions, including
definitions of certain terms, are qualified in their entirety by reference to
the Bank Credit Agreement. Capitalized terms used below and not defined in this
Prospectus have the meanings assigned to such terms in the Credit Agreement.
GENERAL
The Revolving Credit Facility matures in June 2002, at which time all
outstanding borrowings will be due. Up to $3.0 million of the Revolving Credit
Facility will be available for the issuance of standby letters of credit.
Availability under the Revolving Credit Facility will also be reduced for so
long as, and to the extent that, the Agent is party to a participation and
reimbursement agreement supporting the $4.4 million original principal amount of
certain taxable revenue bonds of Quality Foods. The Term Loan A matures in June
2002, and is payable in semiannual installments beginning in June 1997 as set
forth below. The Company will also be required to make mandatory prepayments of
principal from fixed percentages of excess cash flow (based on a leverage test)
and upon the occurrence of certain events such as asset sales and certain
issuances of securities. The Company is permitted to make voluntary prepayments
at any time.
The annual amortization schedule for principal on the Term Loan A (payable
semi-annually) will be as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR TERM LOAN A
- - - ------------------------------------------------------------------------------- -----------------
<S> <C>
1997........................................................................ $ 1,000,000
1998........................................................................ 1,500,000
1999........................................................................ 2,000,000
2000........................................................................ 2,100,000
2001........................................................................ 2,200,000
2002........................................................................ 1,200,000
</TABLE>
INTEREST RATE AND FEES
Loans under the Revolving Credit Facility initially bear interest at a rate
equal to 1.25% per annum over the Agent's Base Rate or 2.50% per annum over the
Eurodollar Rate. The Term Loan A initially bears interest at a rate equal to
2.00% per annum over the Agent's Base Rate or 3.00% over the Eurodollar Rate.
Interest rates on the loans under the Revolving Credit Facility and the Term
Loan A may be reduced if the Company achieves certain leverage ratios.
Eurodollar Rates will be calculated for interest periods of one, two, three or
six months, as applicable.
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<PAGE>
The Bank Credit Agreement provides that the Company will pay certain fees
and commissions to the Lenders, including an annual administrative fee, an
underwriting fee payable to the Agent, a commitment fee payable to the Lenders
and letter of credit fees shared by the Agent and the Lenders.
GUARANTEES AND SECURITY
Borrowings and other obligations under the Bank Credit Agreement are
guaranteed on a senior secured basis by CFP Group and by Custom Foods, Quality
Foods and each other subsidiary of the Company.
Loans and other obligations under the Bank Credit Agreement and the
guarantees are secured by substantially all of the assets of the Company, CFP
Group and the Company's subsidiaries, including a pledge of the stock of the
Company and the Company's subsidiaries.
COVENANTS; EVENTS OF DEFAULT
The Bank Credit Agreement contains a number of customary covenants,
including, among other things, (i) prohibitions and/or limitations on the
incurrence of debt, liens, payment of dividends or distributions, redemptions of
capital stock, investments, transactions with affiliates, mergers, acquisitions
and asset dispositions and (ii) financial covenants covering interest coverage,
fixed charge coverage, leverage, cash flow, net worth and capital expenditures.
The Bank Credit Agreement also contains customary events of default, including
an event of default if a "change of control" occurs.
CONDITIONS
The Bank Credit Agreement contains a number of conditions to any subsequent
funding by the Lenders.
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<PAGE>
DESCRIPTION OF NOTES
The Old Notes were, and the New Notes will be, issued under an indenture
dated as of January 28, 1997 (the "Indenture") among the Company, as issuer, the
Guarantors referred to below and United States Trust Company of New York,
trustee (the "Trustee"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended. For
definitions of certain capitalized terms used in the following summary, see
"Certain Definitions" below.
GENERAL
The terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer and will not
contain certain provisions providing for an increase in the interest rate on the
Old Notes under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer.
The Notes will mature on January 15, 2004, will be limited to $115,000,000
aggregate principal amount and will be senior unsecured obligations of the
Company. Except as otherwise described below, each Note will bear interest at
the rate set forth on the cover page hereof from January 28, 1997 or from the
most recent interest payment date to which interest has been paid or duly
provided for, payable semiannually on January 15 and July 15 in each year,
commencing July 15, 1997, until the principal thereof is paid or duly provided
for, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the December 31 or June 30 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located at 114 West 47th St.,
New York, New York 10036) or, at the option of the Company, interest may be paid
by check mailed to the address of the person entitled thereto as such address
appears in the security register; PROVIDED that all payments with respect to
Global Notes and Certificated Notes (as such terms are defined below under the
caption "Book Entry, Delivery and Form") the holders of which have given wire
transfer instructions to the Trustee will be required to be made by wire
transfer of immediately available funds to the accounts specified by the holders
thereof. The Notes will be issued only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange or redemption
of Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
As of the Closing Date, all of the Company's Subsidiaries were Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries, other than Custom Foods and Quality
Foods, as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants set forth in the Indenture.
Notes that remain outstanding after the consummation of the Exchange Offer
and Exchange Notes issued in connection with the Exchange Offer will be treated
as a single class of securities under the Indenture.
Payment of the Notes will be guaranteed by the Subsidiary Guarantors and CFP
Group on a senior unsecured basis. See "Guarantees."
The Notes will not be entitled to the benefit of any sinking fund.
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GUARANTEES
Payment of the principal of (and premium, if any, on) and interest on the
Notes, when and as the same become due and payable, will be guaranteed, jointly
and severally, on a senior unsecured basis (the "Subsidiary Guarantees") by all
of the existing Subsidiaries of the Company, including Custom Foods and Quality
Foods (the "Subsidiary Guarantors" and, together with CFP Group, the
"Guarantors"). The Indenture will provide that each Subsidiary formed or
acquired after the Closing Date will become a Subsidiary Guarantor. The
obligations of the Subsidiary Guarantors under the Subsidiary Guarantees will be
limited so as not to constitute a fraudulent conveyance under applicable law.
See "Risk Factors -- Fraudulent Conveyance Considerations." The Notes will also
be unconditionally guaranteed (the "Parent Guarantee" and, together with the
Subsidiary Guarantees, the "Guarantees") by CFP Group.
The Indenture provides that, in the event of a sale, transfer or other
disposition of all of the Capital Stock of a Subsidiary Guarantor to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, or in the event all or substantially all of the assets of a
Subsidiary Guarantor are sold, transferred or otherwise disposed of to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, then such Subsidiary Guarantor will be deemed automatically and
unconditionally released and discharged from all of its obligations under its
Subsidiary Guarantee without any further action on the part of the Trustee or
any holder of the Notes; provided that the Net Proceeds of such sale, transfer
or other disposition are applied in accordance with the "Limitation on Certain
Asset Sales" covenant. In addition, any Subsidiary Guarantor that is designated
as an Unrestricted Subsidiary in accordance with the terms of the Indenture may
be released and relieved of its obligations under its Subsidiary Guarantee.
The Parent Guarantee further provides that CFP Group will not enter into or
conduct any business or engage in any activity, other than holding capital stock
of the Company or guaranteeing Indebtedness of the Company or any of its
Subsidiaries.
RANKING
The Notes, the Subsidiary Guarantees and the Parent Guarantee will be senior
unsecured obligations of the respective obligors and will rank PARI PASSU in
right of payment with all other existing and future senior obligations of the
Company, the Subsidiary Guarantors and CFP Group, respectively. Loans under the
Bank Credit Agreement will be secured by substantially all of the Company's
assets, will be guaranteed by the Company's subsidiaries, which guarantees will
be secured by substantially all of the assets of the Company's subsidiaries, and
will be guaranteed by CFP Group, which guarantee will be secured by a pledge of
all of the stock of the Company. Accordingly, the Notes and the Guarantees will
be effectively subordinated to the loans outstanding under the Bank Credit
Agreement and the guarantees by the subsidiaries and CFP Group of such loans, to
the extent of the value of the assets securing such loans and guarantees. As of
September 30, 1996, on a pro forma basis after giving effect to the Acquisition,
the Offering and the application of the estimated net proceeds therefrom and the
other transactions referred to herein, the Company would have had $22.9 million
of indebtedness outstanding other than the Notes, all of which would have been
secured. Subject to certain limitations, the Company and its Subsidiaries may
incur additional Indebtedness in the future.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable, at the option of the
Company, as a whole or from time to time in part, at any time on or after
January 15, 2001, on not less than 30 nor more than 60 days' prior notice at the
redemption prices (expressed as percentages of principal amount) set forth
below, together with accrued interest, if any, to the redemption date, if
redeemed during the 12-month period
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beginning on January 15 of the years indicated below (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- - - ------------------------------------------------------------- -----------
<S> <C>
2001......................................................... 105.813%
2002......................................................... 102.906
</TABLE>
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.
In addition, at any time or from time to time prior to January 15, 2000, the
Company may redeem up to $40 million aggregate principal amount of the Notes
within 90 days of an Equity Offering by CFP Group with the net proceeds of such
offering (that have been invested in the equity of the Company) at a redemption
price equal to 110% of the principal amount thereof, plus accrued interest, if
any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date);
provided that, immediately after giving effect to such redemption, at least $75
million aggregate principal amount of the Notes remains outstanding.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee by such method as the Trustee deems fair and appropriate.
PURCHASE OF NOTES UPON CHANGE OF CONTROL OR ASSET SALE. Each holder of the
Notes will have certain rights to require the Company to purchase such holder's
Notes upon the occurrence of a Change of Control. See "Certain Covenants --
Purchase of Notes upon a Change of Control" below. Under certain circumstances,
the Company will be required to make an offer to purchase all or a portion of
the Notes with proceeds received from an Asset Sale. See "Certain Covenants --
Limitation on Certain Asset Sales" below.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including Acquired Indebtedness and
the issuance of Disqualified Stock), except that the Company or any Subsidiary
Guarantor may incur Indebtedness if, at the time of such event, the Fixed Charge
Coverage Ratio for the immediately preceding four full fiscal quarters for which
internal financial statements are available, taken as one accounting period,
would have been equal to at least 2.0 to 1.0 through January 15, 1999 and 2.25
to 1.0 thereafter.
In making the foregoing calculation for any four-quarter period which
includes the Closing Date, pro forma effect will be given to the Offering and
the Acquisition, as if such transactions had occurred at the beginning of such
four-quarter period. In addition (but without duplication), in making the
foregoing calculation, pro forma effect will be given to: (i) the incurrence of
such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred and the application of such proceeds occurred at the beginning of
such four-quarter period, (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed of
by the Company or its Restricted Subsidiaries, as the case may be, since the
first day of such four-quarter period, as if such acquisition or disposition
occurred at the beginning of such four-quarter period. In making a computation
under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a
revolving credit facility will be computed based on the average
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daily balance of such Indebtedness during such four-quarter period, (B) if such
Indebtedness bears, at the option of the Company, a fixed or floating rate of
interest, interest thereon will be computed by applying, at the option of the
Company, either the fixed or floating rate and (C) the amount of any
Indebtedness that bears interest at a floating rate will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the date of
determination in excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company under the Bank Credit Agreement or one
or more other credit facilities (and the incurrence by any Restricted
Subsidiary of guarantees thereof) in an aggregate principal amount at any
one time outstanding not to exceed $30.0 million, less any amounts applied
to the permanent reduction of such credit facilities pursuant to the
"Limitation on Certain Asset Sales" covenant, plus an amount equal to the
excess, if any, at the time of incurrence of such Indebtedness of (A) 85% of
the net book value of accounts receivable of the Company and its Restricted
Subsidiaries and 60% of the net book value of inventories of the Company and
its Restricted Subsidiaries as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, over (B) $20.0 million;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date and listed on a schedule to the Indenture
(other than Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Restricted Subsidiary or
owed by any Restricted Subsidiary to the Company or any other Restricted
Subsidiary (provided that such Indebtedness is held by the Company or such
Restricted Subsidiary);
(iv) Indebtedness represented by the Notes and the Subsidiary
Guarantees;
(v) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations entered into in the ordinary course of business or
required by the Bank Credit Agreement or another credit facility referred to
in clause (i) above;
(vi) Indebtedness of the Company or any Restricted Subsidiary consisting
of guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(vii) Indebtedness of the Company or any Restricted Subsidiary not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed $5.0 million at any one time outstanding; and
(viii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness, other than Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi) or (vii) of this definition, including any
successive refinancings thereof, so long as (A) any such new Indebtedness is
in a principal amount that does not exceed the principal amount so
refinanced, plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Indebtedness refinanced
or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the amount of the expenses of
the Company incurred in connection with such refinancing, (B) in the case of
any refinancing of Subordinated Indebtedness, such new Indebtedness is made
subordinate to the Notes at least to the same extent as the Indebtedness
being refinanced and (C) such refinancing Indebtedness does not have an
Average Life less than the Average Life of the Indebtedness being refinanced
and does not have a final scheduled maturity earlier than the final
scheduled maturity, or permit redemption at the option of the holder earlier
than the earliest date of redemption at the option of the holder, of the
Indebtedness being refinanced.
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Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions:
(a) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company or any Restricted
Subsidiary, other than (i) dividends or distributions payable solely in
Qualified Equity Interests, (ii) dividends or distributions by a Restricted
Subsidiary payable to the Company or another Restricted Subsidiary or (iii)
pro rata dividends or distributions on common stock of Restricted
Subsidiaries held by minority stockholders, provided that such dividends do
not in the aggregate exceed the minority stockholders' pro rata share of
such Restricted Subsidiaries' net income from the first day of the Company's
fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of Capital Stock (other than Disqualified Stock)
of the Company, CFP Group or any Restricted Subsidiary, or any options,
warrants or other rights to acquire such shares of Capital Stock (other than
any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness
(other than the repayment of the Bridge Notes on the Closing Date); and
(d) make any Investment (other than a Permitted Investment) in any
person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of the "Limitation on Indebtedness" covenant
and
(iii) the aggregate amount of all Restricted Payments made after the
Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the
Company during the period (taken as one accounting period) from the first
day of the Company's fiscal quarter during which the Closing Date occurs
to the last day of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Adjusted Net Income is a loss, minus 100% of such amount),
plus
(B) the aggregate net cash proceeds received by the Company after
the Closing Date from the issuance or sale (other than to a Restricted
Subsidiary) of either (1) Qualified Equity Interests of the Company
(excluding proceeds of an Equity Offering the proceeds of which are used
to redeem Notes as discussed above) or (2) debt securities or
Disqualified Stock that have been converted into or exchanged for
Qualified Stock of the Company, together with the aggregate net cash
proceeds received by the Company at the time of such conversion or
exchange.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions, so long as (with respect to clause (e), (f) or
(h) below) no Default or Event of Default has occurred and is continuing or
would occur:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or out
of the net cash proceeds of a substantially
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concurrent issuance and sale (other than to a Restricted Subsidiary) of,
Qualified Equity Interests of the Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Restricted Subsidiary) of, shares of Qualified Equity
Interests of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance or sale (other
than to a Restricted Subsidiary) of, Subordinated Indebtedness, so long as
the Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated Indebtedness
pursuant to clause (viii) of the definition of Permitted Indebtedness;
(e) the repurchase of any Subordinated Indebtedness at a purchase price
not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a change of control in accordance with
provisions similar to the "Change of Control" covenant; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the Notes and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer;
(f) the payment of cash dividends by the Company to CFP Group in an
amount equal to the aggregate cash consideration paid by CFP Group for the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of CFP Group, options on any such shares or
related stock appreciation rights or similar securities held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) or by any employee benefit plan, upon death,
disability, retirement or termination of employment or pursuant to the terms
of any employee benefit plan or any other agreement under which such shares
of stock or related rights were issued; provided no such payment of cash
dividends shall be made pursuant to this clause (f) prior to the end of the
Company's fiscal year ending nearest the second anniversary of the Closing
Date and thereafter that the aggregate payment of cash dividends pursuant to
this clause (f) does not exceed $1.0 million in any fiscal year;
(g) the payment on or promptly after the Closing Date of the
Distribution; and
(h) the payment of Management Fees to First Atlantic.
The actions described in clauses (b), (c), (e) and (f) of this paragraph will be
Restricted Payments that will be permitted to be taken in accordance with this
paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of the first paragraph of this covenant
and the actions described in clauses (a), (d), (g) and (h) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph and will not reduce the amount that would otherwise be
available for Restricted Payments under clause (iii) of the first paragraph of
this covenant.
Notwithstanding the foregoing, the Company may not pay a dividend that
constitutes a Restricted Payment prior to the second anniversary of the Closing
Date.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the fair market value
of the net assets of such Restricted Subsidiary at the time of such designation
as determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted
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Payment, if other than cash, will be determined by the Board of Directors of the
Company, whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing the Consolidated Adjusted Net Income of the Company under the
foregoing clause (iii)(A), (i) the Company may use audited financial statements
for the portions of the relevant period for which audited financial statements
are available on the date of determination and unaudited financial statements
and other current financial data based on the books and records of the Company
for the remaining portion of such period and (ii) the Company will be permitted
to rely in good faith on the financial statements and other financial data
derived from its books and records that are available on the date of
determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of the Indenture, such
Restricted Payment will be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Adjusted Net Income of the
Company for any period.
Purchase of Notes upon a Change of Control. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things, (i) the purchase price and the
purchase date, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any Note
not tendered will continue to accrue interest; (iii) that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control purchase date; and (iv) certain other procedures that a holder
of Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The failure of the Company to make or consummate
the Change of Control Offer or pay the applicable Change of Control purchase
price when due would result in an Event of Default and would give the Trustee
and the holders of the Notes the rights described under "Events of Default."
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Under the Bank Credit Agreement, it is an event of default if a change of
control thereunder occurs, where the definition of change of control is the same
as the definition of Change of Control hereunder.
One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase in many
circumstances.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" below for the definition of
"Change of Control." A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.
The Company will comply with the applicable tender offer rules including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions existing under Indebtedness as
in effect on the Closing Date or in refinancings of such Indebtedness) that
would materially impair the ability of the Company to make a Change of Control
Offer to purchase the Notes or, if such Change of Control Offer is made, to pay
for the Notes tendered for purchase.
LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or cash equivalents.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 12 months after such Asset Sale, (i)
apply all or a portion of the Net Cash Proceeds to the permanent reduction of
amounts outstanding under the Bank Credit Agreement or to the repayment of other
senior Indebtedness of the Company or a Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) all or a portion of such Net
Cash Proceeds in properties and assets to replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be used
in businesses of the Company or its Restricted Subsidiaries, as the case may be,
existing on the Closing Date. If any such legally binding agreement to invest
such Net Cash Proceeds is terminated, the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever is later, invest
such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds."
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(c) When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes, on a pro rata basis, in accordance with the procedures set
forth in the Indenture, the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase
price in cash equal to 100% of the principal amount thereof, plus accrued
interest, if any, to the date such offer to purchase is consummated. To the
extent that the aggregate principal amount of Notes tendered pursuant to such
offer to purchase is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount of
Notes validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset to zero.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction with, or for the benefit of, any Affiliate of
the Company unless (a) such transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could have been obtained in an arm's length transaction with third parties
who are not Affiliates and (b) the Company delivers to the Trustee (i) with
respect to any transaction or series of transactions entered into after the
Closing Date involving aggregate payments in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an officers'
certificate certifying that such transaction or transactions complies with
clause (a) above and that such transaction or transactions have been approved by
the Board of Directors (including a majority of the Disinterested Directors) of
the Company and (ii) with respect to a transaction or series of transactions
involving aggregate payments equal to or greater than $5.0 million, a written
opinion as to the fairness to the Company or such Restricted Subsidiary of such
transaction or series of transactions from a financial point of view issued by
an investment banking, accounting or appraisal firm of national standing.
The foregoing covenant will not restrict
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary; and
(C) transactions permitted by the provisions of the "Limitations on
Restricted Payments" covenant.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary, (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary or (e) guarantee any Indebtedness of the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(i) any agreement in effect on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness incurred
under the agreements in effect on the Closing Date, so long as such
encumbrances or restrictions are no less favorable to the Company or any
Restricted Subsidiary than those contained in such original agreement; or
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(iv) any agreement or other instrument of a person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company (a) will not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a wholly owned Restricted
Subsidiary) and (b) will not permit any person (other than the Company or a
wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant will not prohibit (i) the sale
or other disposition of all, but not less than all, of the issued and
outstanding Capital Stock of a Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries in compliance with the other provisions of the
Indenture, (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law or (iii) the ownership by
any person of Capital Stock of a Restricted Subsidiary issued prior to the time
such entity became a Restricted Subsidiary provided that such Capital Stock was
not issued in anticipation of such transaction.
UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the "Limitation on
Restricted Payments" covenant, (iv) neither the Company nor any Restricted
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from persons who are not Affiliates of the Company
and (v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results. Notwithstanding the foregoing, the Company may not designate Custom
Foods or Quality Foods as an Unrestricted Subsidiary and may not sell, transfer
or otherwise dispose of any properties or assets of Custom Foods or Quality
Foods to an Unrestricted Subsidiary, other than in the ordinary course of
business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
will only be permitted if (i) such Indebtedness is permitted under the
"Limitation on Indebtedness" covenant and (ii) no Default or Event of Default
will have occurred and be continuing following such designation.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind on or with respect to any of its property
or assets, including any shares of stock or debt of any Restricted Subsidiary,
whether owned at the Closing Date or thereafter acquired, or any income, profits
or proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Indebtedness,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the Notes
are equally and ratably secured with the obligation or liability secured by such
Lien.
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Notwithstanding the foregoing, the Company may, and may permit any
Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than Liens securing Indebtedness under the Bank Credit
Agreement) existing as of the Closing Date;
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement or one or
more other credit facilities in a principal amount not to exceed the
principal amount of the outstanding Indebtedness permitted by clause (i) of
the definition of "Permitted Indebtedness;"
(iii) Liens on any property or assets of a Restricted Subsidiary granted
in favor of the Company or any wholly owned Restricted Subsidiary;
(iv) Liens securing the Notes;
(v) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that was not entered into in
violation of the "Limitation on Indebtedness" covenant;
(vi) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that such Lien does
not extend to any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired in connection with
the incurrence of such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (v) of the definition of "Permitted Indebtedness;"
(viii) Liens arising from purchase money mortgages and purchase money
security interests incurred in the ordinary course of the business of the
Company; provided that (A) the related Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired, (B) the Lien securing such Indebtedness
is created with 60 days of such acquisition and (C) the related Indebtedness
was not incurred in violation of the "Limitation on Indebtedness" covenant;
(ix) statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings
and, if required by GAAP, a reserve or other appropriate provision has been
made therefor;
(x) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and, if required by GAAP, a reserve or other
appropriate provision has been made therefor;
(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts for
the payment of money);
(xii) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of
the Company or any Restricted Subsidiary incurred in the ordinary course of
business;
(xiii) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the
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review of such judgment, decree or order have not been finally terminated or
the period within which such proceedings may be initiated has not expired;
and
(xiv) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (i) through (xiii); provided that
any such extension, renewal or replacement is no more restrictive in any
material respect than the Lien so extended, renewed or replaced and does not
extend to any additional property or assets.
REPORTS. The Company will be required to file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15(d) of
the Exchange Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder of Notes, without cost to such holder,
copies of such reports and documents within 15 days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if the
Company were so required and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and documents to any
prospective holder of Notes promptly upon written request.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not, and may not permit any Restricted Subsidiary to, in a
single transaction or series of related transactions, consolidate or merge with
or into (other than the consolidation or merger of a Restricted Subsidiary of
the Company with another Restricted Subsidiary of the Company or into the
Company) (whether or not the Company or such Restricted Subsidiary is the
surviving corporation), or directly and/or indirectly through its Subsidiaries
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, person or entity unless:
(a) either (i) the Company, in the case of a transaction involving the
Company, or such Restricted Subsidiary, in the case of a transaction
involving a Restricted Subsidiary, is the surviving corporation or (ii) in
the case of a transaction involving the Company, the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the obligations of
the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating any
obligation of the Company or a Restricted Subsidiary in connection with or
as a result of such transaction as having been incurred as of the time of
such transaction, no Default or Event of Default has occurred and is
continuing;
(c) the Company (or, in the case of a transaction involving the Company,
the Surviving Entity if the Company is not the continuing obligor under the
Indenture) could, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of the "Limitation on Indebtedness" covenant;
(d) if the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture
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confirmed that its Subsidiary Guarantee applies to the Surviving Entity's
obligations under the Indenture and the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with; and
(f) the Company delivers, or causes to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture;
provided, however, that any sale, transfer or disposition of all of the Capital
Stock, or all or substantially all of the assets, of a Subsidiary Guarantor will
not be restricted by the foregoing provisions but will be governed by the
provisions described under "Subsidiary Guarantees."
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(a) default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if any, on)
any Note when due;
(c) failure to perform or comply with the Indenture provisions described
under "Consolidation, Merger and Sale of Assets;"
(d) default in the performance, or breach, of any covenant or agreement
of the Company, any Subsidiary Guarantor or CFP Group contained in the
Indenture, any Subsidiary Guarantee or the Parent Guarantee (other than a
default in the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere herein), and continuance of such default
or breach for a period of 60 days after written notice has been given to the
Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Notes then outstanding;
(e) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue has an
aggregate outstanding principal amount of not less than $2.0 million, and
such default has resulted in such Indebtedness becoming, whether by
declaration or otherwise, due and payable prior to the date on which it
would otherwise become due and payable or (ii) a default in any payment when
due at final maturity of any such Indebtedness;
(f) failure by the Company or any of its Restricted Subsidiaries to pay
one or more final judgments the uninsured portion of which exceeds in the
aggregate $2.0 million, which judgment or judgments are not paid, discharged
or stayed for a period of 60 days;
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(g) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under its Guarantee, or gives notice to such effect (other than by reason of
the termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture), and such condition has continued for a
period of 30 days after written notice of such failure requiring the
Guarantor and the Company to remedy the same has been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the holders
of 25% in aggregate principal amount of the Notes then outstanding; or
(h) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary; or
(i) CFP Group fails to own all of the Capital Stock of the Company,
unless the Company and CFP Group have been merged.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare the principal of and
accrued interest on all of the outstanding Notes immediately due and payable
and, upon any such declaration, such principal and such interest will become due
and payable immediately.
If an Event of Default specified in clause (h) above occurs and is
continuing, then the principal of and accrued interest on all of the outstanding
Notes will IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (i) the Company or any Guarantor has
paid or deposited with the Trustee a sum sufficient to pay (A) all overdue
interest on all Notes, (B) all unpaid principal of (and premium, if any, on) any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (C) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Notes and (D) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(ii) all Events of Default, other than the non-payment of amounts of principal
of (or premium, if any, on) or interest on the Notes that have become due solely
by such declaration of acceleration, have been cured or waived. No such
rescission will affect any subsequent default or impair any right consequent
thereon.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on such Note on or after the respective due dates
expressed in such Note.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may, on behalf of the holders of all of the Notes, waive any
past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within five days after the
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occurrence thereof. Except in the case of a Default or an Event of Default in
payment of principal of (and premium, if any, on) or interest on any Notes, the
Trustee may withhold the notice to the holders of the Notes if a committee of
its trust officers in good faith determines that withholding such notice is in
the interests of the holders of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and the Subsidiary Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payments in respect of the principal of (and premium, if any, on) and interest
on such Notes when such payments are due, (ii) the Company's obligations to
issue temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes, maintain an office or agency for
payments in respect of the Notes and segregate and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv)
the defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
any Subsidiary Guarantor with respect to certain covenants set forth in the
Indenture under "Certain Covenants" above, and any omission to comply with such
obligations would not constitute a Default or an Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such defeasance or covenant defeasance
may not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound; (d) in the case of
defeasance, the Company must deliver to the Trustee an opinion of counsel
stating that the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or since the date hereof, there has been a
change in applicable federal income tax law, to the effect, and based thereon
such opinion must confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (e) in the case of covenant defeasance, the Company
must have delivered to the Trustee an opinion of counsel to the effect that the
Holders of the Notes outstanding will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and (f) the Company must have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
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SATISFACTION AND DISCHARGE
Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than mutilated, destroyed, lost
or stolen Notes that have been replaced or paid and Notes that have been subject
to defeasance under "Defeasance or Covenant Defeasance of Indenture") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company has irrevocably deposited or caused to
be deposited with the Trustee funds in trust for the purpose in an amount
sufficient to pay and discharge the entire Indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Notes to the date of such deposit (in
the case of Notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be; (b) the Company has paid or caused to be
paid all sums payable under the Indenture by the Company; and (c) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and any Guarantee may be made
by the Company, any affected Guarantor and the Trustee with the consent of the
holders of a majority in aggregate outstanding principal amount of the Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in
the case of redemption, on or after the redemption date);
(b) reduce the percentage in principal amount of outstanding Notes, the
consent of whose holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences provided
for under, the Indenture;
(c) modify any provisions relating to "Amendments and Waivers" except to
increase the percentage of outstanding Notes required for such actions or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the holder of each outstanding Note affected
thereby; or
(d) release any Subsidiary Guarantor that is a Significant Subsidiary
from any of its obligations under its Subsidiary Guarantee or the Indenture
other than in accordance with the terms of the Indenture.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
THE TRUSTEE
The United States Trust Company of New York, the Trustee under the
Indenture, will be the initial paying agent and registrar for the Notes. The
Company and its Affiliates maintain customary banking relationships with the
Trustee.
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The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein, contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that, if it
acquires any conflicting interest (as defined), it must eliminate such conflict
upon the occurrence of an Event of Default or else resign.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be
issued in the form of one Global Note (the "Global Note"). The Global Note will
be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Notes evidenced
by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or
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liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture then, upon surrender by the Global Note Holder of its Global
Note, Certificated Notes will be issued to each person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to Certificated Notes, the Company will make
all payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearinghouse or next-day funds. In
contrast, the Notes represented by the Global Note are expected to be eligible
to trade in the PORTAL market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in the
Certified Notes will also be settled in immediately available funds.
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CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) existing at the
time such person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such person.
"Affiliate" means, with respect to any specified person, (a) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or (b) any other person that
owns, directly or indirectly, 10% or more of such specified person's Capital
Stock or any executive officer or director of any such specified person or other
person or, with respect to any natural person, any person having a relationship
with such person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control", when used with respect
to any specified person, means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction or similar arrangement) (collectively, a
"transfer") by the Company or any Restricted Subsidiary other than in the
ordinary course of business, whether in a single transaction or a series of
related transactions, other than (a) inventory sold in the ordinary course of
business and (b) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions
does not exceed $250,000 and in all transactions during any 12-month period does
not exceed $1.0 million. For the purposes of this definition, the term "Asset
Sale" does not include any transfer of properties or assets (i) that is governed
by the provisions of the Indenture described under "Consolidation, Merger and
Sale of Assets", (ii) between or among the Company and its Restricted
Subsidiaries pursuant to transactions that do not violate any other provision of
the Indenture, (iii) representing obsolete or permanently retired equipment and
facilities or (iv) to an Unrestricted Subsidiary, if permitted under the
"Limitation on Restricted Payments" covenant.
"Average Life" means, as of the date of determination with respect to any
Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the
sum of the products of (i) the number of years from the date of determination to
the date or dates of each successive scheduled principal or liquidation value
payment of such Indebtedness or Disqualified Stock, respectively, multiplied by
(ii) the amount of each such principal or liquidation value payment by (b) the
sum of all such principal or liquidation value payments.
"Bank Credit Agreement" means the credit agreement dated as of December 30,
1996 among the Company, the Banks and NationsBank, N.A., as agent, as such
agreement may be amended, restated, supplemented, refinanced or otherwise
modified from time to time.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Bank Credit Agreement.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity interest (however designated) and any rights
(other than debt securities convertible into capital stock), warrants or options
exercisable or exchangeable for or convertible into such capital stock, whether
now outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed in the ordinary course of business under or in
connection with any capital lease of real or personal property that, in
accordance with GAAP, has been recorded as a capitalized lease.
"Change of Control" means the occurrence of any of the following events:
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(a) Prior to an Initial Public Offering, Atlantic Equity Partners, L.P.
and/or its Affiliates shall cease to beneficially own and control (x) at
least 66 2/3% of the shares of Capital Stock (excluding the redeemable
preferred stock owned by Atlantic Equity Partners, L.P. and its Affiliates)
of CFP Group (as such number of shares may be adjusted to take into account
stock splits, reverse stock splits, dividends payable in shares of Capital
Stock and similar transactions) beneficially owned and controlled by such
Persons as of the Closing Date and (y) a majority of the issued and
outstanding Voting Stock of CFP Group;
(b) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Atlantic Equity Partners, L.P.,
its Affiliates and/or management employees of CFP Group or any of its
Subsidiaries is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 50% of the
voting power of all classes of Voting Stock of CFP Group;
(c) CFP Group, either individually or in conjunction with one or more of
its subsidiaries, sells, assigns, conveys, transfers, leases or otherwise
disposes of, or such subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of CFP
Group and its subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including Capital Stock of such
subsidiaries, to any person (other than the Company or a Restricted
Subsidiary);
(d) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of CFP Group
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of CFP Group was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of CFP Group then in office;
or
(e) CFP Group or the Company is liquidated or dissolved or adopts a plan
of liquidation or dissolution, (other than as a result of a merger of the
Company into CFP Group or CFP Group into the Company).
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income (or
net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination and
(e) the net income (but not the net loss) of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is at the date of determination restricted, directly
or indirectly, except to the extent that such net income could be paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, (a) Consolidated Adjusted Net Income for such period, PLUS (b)
Fixed Charges for such period, PLUS (c) the provision for federal, state, local
and foreign income taxes of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, PLUS (d)
the aggregate depreciation, amortization and other non-cash expenses of the
Company and its Restricted Subsidiaries for such
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period, determined on a consolidated basis in accordance with GAAP (excluding
any such non-cash charge that requires an accrual of or reserve for cash charges
for any future period), to the extent deducted in computing Consolidated
Adjusted Net Income, PLUS (e) any other non-cash charges reducing Consolidated
Adjusted Net Income for such period, and minus non-cash credits increasing
Consolidated Adjusted Net Income for such period, other than non-cash charges or
credits resulting from changes in prepaid assets or accrued liabilities in the
ordinary course of business.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver a
resolution of the Board of Directors under the Indenture, a member of the Board
of Directors who does not have any material direct or indirect financial
interest in or with respect to such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that, either
by its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes, (ii) is redeemable at the option of the holder
thereof, at any time prior to such final Stated Maturity or (iii) at the option
of the holder thereof is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity.
"Distribution" means a cash distribution on the capital stock of the Company
in an amount not to exceed $17.25 million in order to permit CFP Group to make a
cash distribution of up to $16.0 million on the Class A Common Stock of CFP
Group and to effect redemption of an aggregate of up to $1.25 million of the
outstanding redeemable preferred stock of CFP Group.
"Equity Offering" means an underwritten primary offering of common stock
(which is Qualified Stock) of CFP Group.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations
of the Company and its Restricted Subsidiaries, plus (b) cash dividends paid on
Preferred Stock and Disqualified Stock by the Company and any Restricted
Subsidiary (to any person other than the Company and its Restricted
Subsidiaries), computed on a tax effected basis, plus (c) all interest on any
Indebtedness of any person guaranteed by the Company or any of its Restricted
Subsidiaries or secured by a lien on the assets of the Company or any of its
Restricted Subsidiaries; provided, however, that Fixed Charges will not include
any gain or loss from extinguishment of debt, including the write-off of debt
issuance costs.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
"Hedging Obligations" means the obligations of any person under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and (ii) other agreements or arrangements designed to protect such
person against fluctuations in interest rates or the value of foreign
currencies.
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"Indebtedness" means (without duplication), with respect to any person,
whether recourse is to all or a portion of the assets of such person and whether
or not contingent, (a) every obligation of such person for money borrowed, (b)
every obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person, (d) every obligation of such person issued or
assumed as the deferred purchase price of property or services, (e) the
attributable value of every Capitalized Lease Obligation and Sale and Leaseback
Transaction of such person, (f) all Disqualified Stock of such person valued at
its maximum fixed repurchase price, plus accrued and unpaid dividends, (g) all
obligations of such person under or in respect of Hedging Obligations and (h)
every obligation of the type referred to in clauses (a) through (g) of another
person and all dividends of another person the payment of which, in either case,
such person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were purchased on any date on
which Indebtedness is required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value will be determined in good faith by
the board of directors of the issuer of such Disqualified Stock. Notwithstanding
the foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any liability for federal, state or local taxes
or other taxes owed by such person will not be considered Indebtedness for
purposes of this definition.
"Initial Public Offering" means a public offering of the common stock of CFP
Group that first results in the common stock of CFP Group becoming listed for
trading on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market.
"Investment" means, (i) directly or indirectly (whether by means of a cash
payment or otherwise), any advance, loan (including, without limitation, by way
of guarantee or similar arrangement) or other extension of credit or capital
contribution to, the purchase of any stock, bonds, notes, debentures or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any person or making of any investment in any person,
(ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary
and (iii) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of
assets or properties made in the ordinary course of business. Investments will
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Management Fees" means management fees not in excess of $600,000 in any
single fiscal year plus reimbursement of actual out-of-pocket expenses.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of any bona fide direct costs incurred in connection
with such Asset Sale, including, without limitation, (i) taxes reasonably
estimated to be actually payable in connection with such Asset Sale, (ii)
payment of liabilities relating to assets sold at the time of, or within 30 days
after the date of such Asset Sale, (iii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than under the Bank Credit Agreement) that is secured by a lien on the stock or
assets in question and that is
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required to be repaid under the terms thereof as a result of such Asset Sale and
(iv) reasonable and customary fees, commissions, expenses and other costs paid
by the Company or any of its Subsidiaries to any person (other than an Affiliate
of the Company) in connection with such Asset Sale.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500.0 million; (iii)
any shares of money market mutual or similar funds having assets in excess
of $500.0 million; and (iv) commercial paper with a maturity of one year or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District
of Columbia and having a rating (A) from Moody's Investors Service, Inc. of
at least P-1 or (B) from Standard & Poor's Ratings Services of at least A-1;
(b) Investments by the Company or any Restricted Subsidiary in another
person, if as a result of such Investment (i) such other person becomes a
Restricted Subsidiary or (ii) such other person is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets
to, the Company or a Restricted Subsidiary;
(c) Investments by the Company or any Restricted Subsidiary in any one
of the other of them;
(d) Investments in property or assets to be used in any line of business
in which the Company or any Restricted Subsidiary is engaged on the Closing
Date;
(e) Investments in existence on the Closing Date;
(f) promissory notes received as a result of Asset Sales permitted under
the "Limitations on Certain Asset Sales" covenant; and
(g) other Investments that do not exceed $1.0 million at any time
outstanding.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Closing Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which a person sells or transfers any property or asset
in connection with the leasing, or the resale against installment payments, of
such property or asset to the seller or transferor.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the
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Company for such fiscal year or (c) was organized or acquired since the end of
such fiscal year and would have been a Significant Subsidiary if it had been
owned during such fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case may
be.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary in accordance
with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes has, or might have, voting power by reason of the happening of
any contingency).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
considerations relevant to the exchange of Old Notes for New Notes pursuant to
the Exchange Offer, and of the ownership of the New Notes. This summary is based
on the Internal Revenue Code of 1986, as amended (the "Code"), existing,
temporary, and proposed Treasury Regulations, laws, Internal Revenue Service
("IRS") rulings and pronouncements and decisions now in effect, all of which are
subject to change. Any such changes may be applied retroactively in a manner
that could adversely affect a Holder of the New Notes. This summary deals only
with Holders that will hold New Notes as "capital assets" (within the meaning of
Section 1221 of the Code) and that are (i) citizens or residents of the United
States, (ii) domestic corporations, or (iii) otherwise subject to United States
federal income taxation on a net income basis in respect of a New Note. This
summary does not address tax considerations applicable to investors that may be
subject to special tax rules, such as banks, tax-exempt organizations, insurance
companies, dealers in securities or currencies, or persons that will hold New
Notes as a position in a hedging transaction, "straddle" or "conversion
transaction" for tax purposes. This summary does not consider the effect of any
applicable foreign, state, local or other tax laws.
Holding has not sought and will not seek any rulings from the IRS with
respect to the positions of Holding discussed below. There can be no assurance
that the IRS will not take a different position concerning the tax consequences
of the purchase, ownership or disposition of the New Notes or that any such
position would not be sustained.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE EXCHANGE OF OLD NOTES FOR NEW NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for a New Note pursuant to the Exchange Offer should not be treated as an
exchange or otherwise as a taxable event for Federal income tax purposes.
Accordingly, the New Notes should have the same issue price as the Old Notes and
each Holder should have the same adjusted basis and holding period in the New
Notes as it had in the Old Notes immediately before the consummation of the
Exchange Offer. It is assumed, for purposes of the following discussion, that
the consummation of the Exchange Offer will not be treated as a taxable event to
Holders.
Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an "exchange" for federal income tax purposes. In such event the
Exchange Offer could be treated as a taxable transaction in which case a Holder
would be required to recognize gain or loss equal to the difference between such
Holder's tax basis in the Notes and the issue price of the Exchange Notes and,
in some cases, a Holder could be required to recognize original issue discount,
taxable as ordinary income.
PAYMENT OF INTEREST
Interest on a New Note generally will be includable in the income of a
Holder as ordinary income at the time such interest is received or accrued, in
accordance with such Holder's method of accounting for United States federal
income tax purposes.
OPTIONAL REDEMPTION OR REPAYMENT
The New Notes will not have original issue discount ("OID") because they
will have the same issue price as the Old Notes, which were issued at par. For
purposes of determining OID, Treasury Regulations
104
<PAGE>
provide that (i) the Holder's right to require redemption of the New Notes upon
the occurrence of a Change of Control will not be taken into account unless,
based on all the facts and circumstances as of the issue date, it is
significantly more likely than not that a Change of Control giving rise to the
redemption will occur and (ii) the Company will be deemed to exercise its option
to redeem the New Notes in a manner that minimizes the yield on the New Notes.
In the event of a Change of Control, each Holder of New Notes will have the
right to require the Company to repurchase all or a part of such Holder's New
Notes as described in "Description of Notes--Repurchase at the Option of
Holders--Change of Control." The Company may also redeem the New Notes in
certain circumstances, pursuant to the terms of the New Notes. The Company does
not believe that pursuant to the Treasury Regulations discussed above, either
the repurchase or the redemption provisions of the New Notes will cause the New
Notes to be issued with OID, or otherwise affect the computation of the yield to
maturity of the New Notes. See "Description of Notes--Redemption--Optional
Redemption."
MARKET DISCOUNT ON RESALE OF NEW NOTES
A Holder of a New Note should be aware that the purchase or resale of a New
Note may be affected by the "market discount" provisions of the Code. The market
discount rules generally provide that if a Holder of a New Note purchases the
New Note at a market discount (i.e., a discount other than at original issue),
any gain recognized upon the disposition of the New Note by the Holder will be
taxable as ordinary interest income, rather than as capital gain, to the extent
such gain does not exceed the accrued market discount on such New Note at the
time of such disposition. "Market discount" generally means the excess, if any,
of a New Note's stated redemption price at maturity over the price paid by the
Holder therefor, unless a DE MINIMIS exception applies. A Holder who acquires a
New Note at a market discount also may be required to defer the deduction of a
portion of the amount of interest that the Holder paid or accrued during the
taxable year on indebtedness incurred or maintained to purchase or carry such
New Note, if any. If a Holder makes a gift of a New Note, accrued market
discount, if any, will be recognized as if such Holder had sold such New Note
for a price equal to its fair market value.
The New Notes provide for optional redemption, in whole or in part, and, in
the case of Change of Control, a mandatory offer to redeem, prior to maturity.
If the New Notes were redeemed, a Holder generally would be required to include
in gross income as ordinary income, for Federal income tax purposes, the portion
of the payment that is attributable to accrued market discount on the New Notes,
if any.
Any principal payment on a New Note acquired by a Holder at a market
discount will be included in gross income as ordinary income (generally, as
interest income) to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of the accrued market discount
for purposes of determining the tax treatment of subsequent payments on, or
dispositions of, a New Note is to be reduced by the amounts so treated as
ordinary income.
A Holder of a New Note acquired at a market discount may elect to include
market discount in gross income, for federal income tax purposes, as such market
discount accrues, either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a Holder of a New Note makes such an election, the foregoing
rules regarding the recognition of ordinary interest income on sales and other
dispositions and the receipt of principal payments with respect to such New
Note, and regarding the deferral of interest deductions on indebtedness incurred
or maintained to purchase or carry such New Note, will not apply.
AMORTIZABLE BOND PREMIUM
A subsequent Holder that purchases a New Note for an amount in excess of the
sum of all amounts payable on the New Note after the purchase date, other than
stated interest, will be considered to have
105
<PAGE>
purchased the New Note at a "premium." A Holder generally may elect to amortize
the premium over the remaining term of the New Note on a constant yield method.
The amount amortized in any year will be treated as a reduction of the Holder's
interest income from the New Note. Bond premium on a New Note held by a Holder
that does not make such an election will decrease the gain or increase the loss
otherwise recognized on the disposition of the New Note. The election to
amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing Holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF THE NEW NOTES
In general, subject to the market discount provisions and the amortizable
bond premium provisions discussed above, upon the sale, exchange or redemption
of a New Note, a Holder generally will recognize capital gain or loss equal to
the difference between (i) the amount of cash proceeds and the fair market value
of any property received on the sale, exchange or redemption (except to the
extent such amount is attributable to accrued interest income not previously
included in income, which amount is taxable as ordinary income) and (ii) such
Holder's adjusted tax basis in the New Note. A Holder's initial tax basis in a
New Note received in exchange for an Old Note will be equal to the basis such
Holder had in the Old Note. With respect to Holders who purchase New Notes other
than at their original issuance, their tax basis in the New Notes will generally
be equal to their purchase price. Such capital gain or loss will be long-term
capital gain or loss if the Holder's holding period in the New Note is more than
one year at the time of sale, exchange or redemption.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a New Note and payments of the
proceeds of the sale of a New Note to certain noncorporate Holders, and a 31%
backup withholding tax may apply to such payments if the Holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a Holder will be allowed as a credit against such Holder's United States
federal income tax and may entitle the Holder to a refund, provided that the
required minimum information is furnished to the IRS.
106
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
PROVIDED that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of one year from
the date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1997 (90 days from the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker-dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of one year from the date of this Prospectus, the Company will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Issuer has agreed
to indemnify the Initial Purchasers and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by O'Sullivan Graev & Karabell, LLP, New York, New York.
107
<PAGE>
EXPERTS
The consolidated financial statements of CFP Holdings, Inc. and subsidiary
at September 30, 1995 and 1996 and for each of the three years in the period
ended September 30, 1996 included in this Prospectus and the related financial
statement schedule included elsewhere in the Registration Statement, have been
audited by Deloitte & Touche LLP, independent auditors, as set forth in their
reports appearing herein and elsewhere in the Registration Statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of Quality Foods, L.P. at December 31, 1995 and for
each of the two years in the period ended December 31, 1995, appearing in this
Prospectus and the Registration Statement to which this Prospectus forms a part,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Quality Foods, L.P. at December 31, 1996 and for
the year ended December 31, 1996, included in this Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their reports appearing herein and elsewhere in the Registration Statement,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The balance sheet of CFP Group, Inc. at December 28, 1996, included in this
Prospectus and the Registration Statement, has been audited by Deloitte & Touche
LLP, independent auditors, as set forth in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
108
<PAGE>
INDEX TO FINANCIAL STATEMENTS
QUALITY FOODS, L.P.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Report of Independent Auditors............................................................................. F-3
Balance Sheets at December 31, 1995 and 1996............................................................... F-4
Statements of Operations for the years ended December 31, 1994, 1995 and 1996.............................. F-5
Statements of Partners' Capital for the years ended December 31, 1994, 1995 and 1996....................... F-6
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.............................. F-7
Notes to Financial Statements.............................................................................. F-8
</TABLE>
CFP HOLDINGS, INC. AND SUBSIDIARY
<TABLE>
<S> <C>
Independent Auditors' Report......................................................... F-14
Consolidated Balance Sheets at September 30, 1995 and 1996 and (unaudited) December
28, 1996........................................................................... F-15
Consolidated Statements of Operations for the years ended September 30, 1994, 1995
and 1996 and (unaudited) three months ended December 30, 1995 and December 28,
1996............................................................................... F-16
Consolidated Statements of Stockholders' Equity for the years ended September 30,
1994, 1995 and 1996 and (unaudited) three months ended December 28, 1996........... F-17
Consolidated Statements of Cash Flows for the years ended September 30, 1994, 1995
and 1996 and (unaudited) three months ended December 30, 1995 and December 28,
1996............................................................................... F-18
Notes to Consolidated Financial Statements........................................... F-20
</TABLE>
CFP GROUP, INC.
<TABLE>
<S> <C>
Independent Auditors' Report......................................................... F-28
Consolidated Balance Sheet at December 28, 1996...................................... F-29
Notes to Opening Balance Sheet....................................................... F-30
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Quality Foods, L.P.:
We have audited the accompanying balance sheet of Quality Foods, L.P.
("Quality Foods") as of December 31, 1996, and the related statements of
operations, partners' capital, and cash flows for the year then ended December
31, 1996. These financial statements are the responsibility of Quality Foods'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Quality Foods as of December
31, 1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
February 14, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Quality Foods, L.P.
We have audited the accompanying balance sheet of Quality Foods, L.P. as of
December 31, 1995, and the related statements of operations, partners' capital,
and cash flows for each of the two years in the period ended December 31, 1995.
Our audits also included the financial statement schedule listed in the Index at
Item 21(b). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Quality Foods, L.P. at
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Philadelphia, PA
February 12, 1996
F-3
<PAGE>
QUALITY FOODS, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................................................... $ 105 $ 390
Accounts receivable, net of allowance for doubtful accounts of $35,000 and $50,000 at
December 31, 1995 and 1996, respectively.............................................. 5,944 5,892
Inventory............................................................................... 9,689 7,727
Prepaid expenses and other current assets............................................... 991 1,547
--------- -----------
Total current assets...................................................................... 16,729 15,556
Property, plant, and equipment, net....................................................... 8,772 15,395
Construction funds........................................................................ 2,649 15
Intangible and other assets............................................................... 5,664 4,626
--------- -----------
Total assets.............................................................................. $ 33,814 $ 35,592
--------- -----------
--------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Revolving line of credit................................................................ $ 5,146 $ --
Current portion of long-term debt....................................................... 2,850 189
Accounts payable........................................................................ 3,521 6,392
Accrued expenses........................................................................ 1,180 535
--------- -----------
Total current liabilities................................................................. 12,697 7,116
Long-term debt............................................................................ 12,229 5,539
Advances from CFP Holdings, Inc. ......................................................... -- 15,677
Partners' capital:
General partners........................................................................ 90 73
Limited partners........................................................................ 8,798 7,187
--------- -----------
Total partners' capital................................................................... 8,888 7,260
--------- -----------
Total liabilities and partners' capital................................................... $ 33,814 $ 35,592
--------- -----------
--------- -----------
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales........................................................................ $ 84,817 $ 84,694 $ 90,582
Cost of sales.................................................................... 72,162 67,930 71,448
--------- --------- ---------
Gross profit..................................................................... 12,655 16,764 19,134
Operating expenses............................................................... 6,887 6,926 7,519
Acquisition costs................................................................ -- -- 3,088
Facility start-up and relocation expense......................................... -- -- 1,628
--------- --------- ---------
Income from operations......................................................... 5,768 9,838 6,899
Interest expense................................................................. 2,616 2,129 1,871
--------- --------- ---------
Income before extraordinary item............................................... 3,152 7,709 5,028
Extraordinary loss on early extinguishment of debt............................... 1,771 130 546
--------- --------- ---------
Net income..................................................................... 1,381 7,579 4,482
Pro forma provision for income taxes............................................. 553 3,032 1,793
--------- --------- ---------
Pro forma net income............................................................. $ 828 $ 4,547 $ 2,689
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
----------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Partners' capital--January 1, 1994................................................ $ 26 $ 2,891 $ 2,917
Net income...................................................................... 17 1,364 1,381
Distributions................................................................... (18) (1,759) (1,777)
--- --------- ---------
Partners' capital--December 31, 1994.............................................. 25 2,496 2,521
Net income...................................................................... 77 7,502 7,579
Distributions................................................................... (12) (1,200) (1,212)
--- --------- ---------
Partners' capital--December 31, 1995.............................................. 90 8,798 8,888
Net income...................................................................... 45 4,437 4,482
Distributions................................................................... (62) (6,048) (6,110)
--- --------- ---------
Partners' capital--December 31, 1996.............................................. $ 73 $ 7,187 $ 7,260
--- --------- ---------
--- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
QUALITY FOODS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income before extraordinary item................................................ $ 3,152 $ 7,709 $ 5,028
Adjustments to reconcile income before extraordinary item to net cash provided
by operating activities:
Depreciation and amortization............................................... 1,025 1,038 1,510
(Gain) loss on disposal of equipment........................................ 130 37 14
Changes in operating assets and liabilities:
Accounts receivable....................................................... (353) (366) 52
Inventory................................................................. 1,823 (3,016) 1,962
Prepaid expenses and other assets......................................... (769) 55 (556)
Accounts payable and accrued expenses..................................... (459) 141 1,937
--------- --------- ---------
Net cash provided by operating activities....................................... 4,549 5,598 9,947
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of and deposits on property, plant and equipment...................... (858) (4,102) (7,190)
Change in investment of restricted bond proceeds................................ (4,419) 1,770 2,634
--------- --------- ---------
Net cash used in investing activities........................................... (5,277) (2,332) (4,556)
--------- --------- ---------
FINANCING ACTIVITIES
Partners' distributions......................................................... (1,777) (1,212) (6,110)
Advances from CFP Holdings, Inc. ............................................... -- -- 15,677
Proceeds from issuance of long-term debt........................................ 9,500 5,150 750
Payments of long-term debt...................................................... (4,607) (5,681) (10,101)
Prepayment penalty on early extinguishment of debt.............................. (1,530) -- (99)
Debt issuance costs............................................................. (448) (255) (77)
Change in revolving line of credit.............................................. (450) (1,381) (5,146)
--------- --------- ---------
Net cash provided by (used in) financing activities............................. 688 (3,379) (5,106)
--------- --------- ---------
Net increase (decrease) in cash................................................. (40) (113) 285
Cash at beginning of period..................................................... 258 218 105
--------- --------- ---------
Cash at end of period........................................................... $ 218 $ 105 $ 390
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.......................................................... $ 2,819 $ 2,203 $ 2,213
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Quality Foods, L.P. ("Quality Foods") is a manufacturer of pre-cooked and
uncooked, thinly-sliced beef used primarily in "Philadelphia-style" steak
sandwiches. It also supplies chicken products and lines of pre-cooked and
uncooked meatballs and hamburger patties. No individual distributor handled more
than 7% of net sales. Approximately 46% of net sales in each of the years ended
December 31, 1994, 1995 and 1996 were ultimately purchased by retail units of an
international franchising operation offering a menu of submarine sandwiches.
Quality Foods was formed on May 13, 1992 by QF Acquisition Corp. ("QFAC") as
managing general partner, an additional general partner, and four limited
partners (the "Partners"). Operations of Quality Foods commenced July 22, 1992
when QFAC contributed operating assets and certain liabilities of William Cohen
and Son Co., Inc. ("Cohen"), which it acquired on July 22, 1992.
On December 31, 1996, CFP Holdings, Inc. ("Holdings") acquired substantially
all of the limited partnership interests in Quality Foods. The remaining limited
partnership interests that were owned by certain members of management of
Quality Foods ("Rollover Interests") were exchanged for common stock of CFP
Group, Inc., the parent of Holdings. Holding also acquired all of the issued and
outstanding capital stock of QFAC and the other general partner of Quality
Foods. Immediately following the acquisition of all such partnership interests,
CFP Group, Inc. contributed the Rollover Interests to Holdings. Holdings then
contributed all of the partnership interests in Quality Foods to QFAC. Quality
Foods was then terminated and QFAC became a wholly owned subsidiary of Holdings.
The accompanying 1996 financial statements reflect the financial position and
the results of operations through December 31, 1996 immediately prior to the
transfer or exchange of share or partnership interests and include the reduction
of debt and borrowings from Holdings.
Quality Foods is not subject to federal or state income taxes; instead, any
taxable income or loss is passed through to the partners and reported on their
respective income tax returns. According to the terms of the partnership
agreement, the partners are entitled to receive quarterly distributions from
available funds for tax liabilities based upon taxable income. Income is
allocated based upon the percentage interest owned by the partners and
distributions are allocated based upon the partnership agreement. Pro forma
provision for income taxes and pro forma net income reflect the pro forma effect
of income taxes as if Quality Foods had been taxed as a corporation for all
periods presented at a statutory rate of 40%. Included in pro forma income tax
expense for the years ended December 31, 1994, 1995 and 1996 is an income tax
benefit of $708,000, $52,000 and $218,000, respectively, relating to the
extraordinary loss on the early extinguishment of debt.
2. ACCOUNTING POLICIES
CREDIT RISK Financial instruments that subject Quality Foods to credit risk
consist primarily of accounts receivable. Quality Foods performs ongoing credit
evaluations of its customers and maintains an allowance for potential credit
losses. Quality Foods generally does not require its customers to post
collateral or other security.
INVENTORY Inventory is stated at the lower of cost or market, with cost
determined on a first-in, first-out method.
DEPRECIATION Property, plant, and equipment is carried at cost.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets, ranging from 3 to 40 years.
F-8
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE AND LONG-LIVED ASSETS Quality Foods reviews the recoverability
of intangible and long-lived assets whenever events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. If the
expected future cash flows from the use of such assets (undiscounted and without
interest charges) are less than the carrying value, Quality Foods' policy is to
record a writedown that is determined based on the difference between the
carrying value of the asset and its estimated fair value.
INTANGIBLE ASSETS Loan commitment fees and other costs associated with
Quality Foods' financing have been capitalized and are being amortized over the
term of the respective debt instrument. Costs associated with the organization
of Quality Foods have been capitalized and are being amortized by the
straight-line method over five years. The excess of the cost over fair market
value of the assets acquired and from Cohen contributed to Quality Foods by QFAC
and direct costs of the acquisition paid by Quality Foods are being amortized by
the straight-line method over 15 years.
REVENUE RECOGNITION Quality Foods recognizes revenue upon shipment of its
product.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of accounts
receivable and accounts payable approximate fair value because of their
short-term nature. The carrying amounts of the revolving line of credit and
senior and subordinated notes payable approximate fair value because their
interest rates are based upon rates currently available to Quality Foods for
debt with similar terms and conditions.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported to the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS Certain reclassifications have been made to Quality
Foods' financial statements for the years ended December 31, 1994 and 1995 to
conform to the 1996 presentation.
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Finished products.............................................................................. $ 4,434 $ 3,516
Work in process................................................................................ 4,530 3,150
Meats and other ingredients.................................................................... 445 810
Packaging and shipping materials............................................................... 280 251
--------- ---------
$ 9,689 $ 7,727
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Land......................................................................................... $ 39 $ 189
Buildings.................................................................................... 2,094 11,150
Machinery and equipment...................................................................... 3,330 5,764
Construction in progress..................................................................... 4,396 176
--------- ---------
9,859 17,279
Less accumulated depreciation................................................................ (1,087) (1,884)
--------- ---------
Property, plant, and equipment, net.......................................................... $ 8,772 $ 15,395
--------- ---------
--------- ---------
</TABLE>
Interest earnings, net of expense on construction funds, of $8,000 was
deferred in 1995. Quality Foods capitalized $161,000 of interest during the year
ended December 31, 1996 in conjunction with its plant expansion.
Outstanding accounts payable for construction in progress on the
Philadelphia facility was $497,000 and $786,000 at December 31, 1995 and 1996,
respectively.
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Deferred financing costs....................................................................... $ 1,165 $ 242
Organization costs............................................................................. 257 257
Goodwill....................................................................................... 6,238 6,238
--------- ---------
7,660 6,737
Less accumulated amortization.................................................................. (1,996) (2,111)
--------- ---------
$ 5,664 $ 4,626
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CREDIT AND DEBT AGREEMENTS
Long term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
PEDFA taxable development revenue bonds, 1995 series D....................................... $ 4,400 $ 4,300
MELF term loan............................................................................... -- 428
PIDC term loan............................................................................... 750 1,000
Term loans................................................................................... 4,083
Senior subordinated notes payable to former shareholders of Cohen............................ 2,596 --
Junior subordinated note payable to a limited partner........................................ 3,250 --
--------- ---------
15,079 5,728
Less current portion......................................................................... (2,850) (189)
--------- ---------
Noncurrent portion of long-term debt......................................................... $ 12,229 $ 5,539
--------- ---------
--------- ---------
</TABLE>
On December 28, 1995, the Pennsylvania Economic Development Financing
Authority ("PEDFA") issued $4,400,000 of taxable development revenue bonds (1995
series D) to refund all outstanding 1994 series B-9 tax exempt bonds.
Unamortized deferred financing costs relating to the 1994 bonds were written off
and are reported as extraordinary charge of $130,000 in 1995. Quality Foods is
obligated to pay all costs of these bond issues pursuant to loan agreements with
PEDFA. Bond proceeds are held by PEDFA's bank trustee for release to Quality
Foods upon submission of documentation evidencing qualifying expenditures to
acquire, construct and equip the Philadelphia Facility.
Interest on the bonds is determined weekly by PEDFA's remarketing agent
(5.8% at December 31, 1995 and 1996), subject to a maximum rate of 18%. Interest
is paid monthly and monthly escrow deposits are required in amounts sufficient
to fund annual sinking fund requirements. Mandatory sinking fund redemptions are
required each December 1 continuing through final redemption in 2014. The bonds
are supported by an irrevocable bank letter of credit which is backed by a
guarantee provided by a commercial lender. The letter of credit and guarantee
are secured by a mortgage creating a first priority lien on the Philadelphia
real property subject to a reimbursement agreement between PEDFA's letter of
credit bank and a commercial lender. Quality Foods pays annual fees of .5% and
1.5% for the letter of credit and guarantee, respectively.
The Pennsylvania Department of Commerce has loaned Quality Foods $500,000
for production equipment installed at the Philadelphia facility through its
Machinery and Equipment Loan Fund program ("MELF"). The loan bears interest at
2% and will mature within a 5-year term. The loan is secured by a perfected pari
passu first lien security interest on program equipment shared with Quality
Foods' former commercial lender.
The Philadelphia Industrial Development Corporation ("PIDC") has committed
to lend Quality Foods up to $1,750,000 in two loans of $1,000,000 and $750,000,
respectively. The $1,000,000 loan has been drawn and is outstanding as of
December 31, 1996 and bears interest at 0.5% with no payments for the first 24
months following final disbursement, interest only payments for months 25
through 102 and level monthly payments of principal and interest for months 103
through 180. The $750,000 commitment will convert into a term loan that is
repayable in 180 equal monthly installments of principal and interest at 5.25%.
Both loans will be secured by a mortgage representing a third priority lien on
the Philadelphia property.
F-11
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CREDIT AND DEBT AGREEMENTS (CONTINUED)
The Pennsylvania Industrial Development Authority ("PIDA") has committed to
lend Quality Foods up to $1,750,000 at 2% with a term of 15 years which will be
secured by a mortgage creating a second priority lien on the Philadelphia real
property. The loan proceeds will be used to reduce other debt then outstanding.
On December 31, 1996, Quality foods retired the 12% senior subordinated
notes payable to former shareholders of Cohen, the 13% junior subordinated note
payable to a limited partner and the term loans and a revolving line of credit
with its former commercial lender. Quality Foods paid prepayment premiums of
$99,000 and wrote off $447,000 of related unamortized deferred financing costs
which are reported as an extraordinary charge. Interest on the revolving line of
credit and term loans was charged at a floating rate of .75% over the lender's
prime rate, at fixed rates of 2.5% over LIBOR for contract periods of 30, 60, 90
or 180 days duration as chosen by Quality Foods, or at a combination of the
floating and fixed rates.
In 1994, Quality Foods replaced senior term debt, incurred a prepayment
premium of $1,530,000 and wrote off related unamortized financing costs of
$241,000 which are reported as an extraordinary charge.
The aggregate scheduled principal maturities for long-term debt are as
follows at December 31, 1996: 1997, $189,000; 1998, $199,000; 1999, $201,000;
2000, $303,000; 2001, $234,000; and thereafter $4,600,000.
7. PENSION PLAN
Quality Foods has a defined contribution profit-sharing salary reduction
plan covering substantially all employees not otherwise covered under a
collective bargaining agreement. Profit-sharing plan contributions are
determined by QFAC and are a percentage of each participant's compensation.
Contribution expense was approximately $65,000 in 1994, $77,000 in 1995 and
$89,000 in 1996.
8. OTHER COSTS
Quality Foods incurred $3,088,000 of costs in connection with its
acquisition by CFP Holdings (see note 1). Facility start-up and relocation
expenses of $1,628,000 relate to the consolidation of three manufacturing and
administrative facilities into one in facility in Philadelphia.
9. COMMITMENTS AND CONTINGENCIES
Quality Foods leases certain equipment and real estate under noncancelable
operating leases that expire in various years through 2002. Rent expense was
approximately $533,000 in 1994, $650,000 in 1995 and $619,000 in 1996.
The following is a schedule of future minimum lease payments as of December
31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................................................ $ 387
1998........................................................................ 263
1999........................................................................ 212
2000........................................................................ 166
2001........................................................................ 131
Thereafter.................................................................. 87
</TABLE>
Quality Foods pays a management fee to an affiliate of one of its partners.
Management fee expense was $250,000, $206,000 and $210,000 for the years ended
December 31, 1994, 1995, and 1996, respectively.
F-12
<PAGE>
QUALITY FOODS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. ADVANCES FROM CFP HOLDINGS,INC.
On December 31, 1996, Holdings had advanced to Quality Foods a total of
$16,683,000 to pay certain debt and acquisition related expenses. In addition,
Quality Foods paid certain costs amounting to $1,006,000 on hehalf of Holdings.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CFP Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of CFP
Holdings, Inc. and subsidiary (the "Company") as of September 30, 1995 and 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CFP Holdings, Inc. and
subsidiary as of September 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
December 18, 1996
F-14
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS (NOTE 6)
<S> <C> <C> <C>
DECEMBER
SEPTEMBER 30, 28,
-------------------- 1996
1995 1996 (UNAUDITED)
--------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash........................................................ $ 1 $ 493 $ 3,608
Accounts receivable, net of allowance for doubtful accounts
of $138,000 and $50,000 at September 30, 1995 and 1996,
respectively (Note 2)..................................... 3,999 4,656 5,189
Inventories (Notes 2 and 3)................................. 3,429 3,908 4,593
Prepaid expenses and other current assets................... 869 302 415
Deferred income taxes (Notes 2 and 10)...................... -- 136 136
Income taxes receivable..................................... -- 86 --
--------- --------- -----------
Total current assets.................................... 8,298 9,581 13,941
Property and equipment, Net (Notes 2 and 4)................... 8,258 10,049 9,898
Costs in excess of net assets acquired, Net (Notes 1 and 2)... 10,659 10,375 10,304
Intangible and other assets, Net (Notes 2 and 5).............. 3,238 1,711 2,200
--------- --------- -----------
Total................................................. $ 30,453 $ 31,716 $ 36,343
--------- --------- -----------
--------- --------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term obligations (Note 6)........... $ 2,330 $ 3,665 $ 3,656
Accounts payable............................................ 2,062 2,146 2,322
Accrued expenses and other current liabilities.............. 909 617 698
Income taxes payable........................................ 313 -- 129
--------- --------- -----------
Total current liabilities............................... 5,614 6,428 6,805
--------- --------- -----------
Long-term obligations (Note 6)................................ 17,134 18,378 22,578
--------- --------- -----------
Deferred income taxes (Notes 2 and 10)........................ 211 487 506
--------- --------- -----------
Stock warrant purchase obligations (Note 6)................... 899 1,516 1,723
--------- --------- -----------
Commitments (Notes 11 and 12)
Redeemable preferred stock (Note 8)........................... 1,229 1,180 1,204
--------- --------- -----------
Stockholders' equity (Note 9):
Voting common stock, $.01 par value; 35,000 shares
authorized, 14,705 shares issued and outstanding.......... 3,196 3,196 3,196
Nonvoting common stock, $.01 par value; 15,000 shares
authorized, 2,725 shares issued and outstanding........... 592 592 592
Retained earnings (deficit)................................. 1,578 (61) (261)
--------- --------- -----------
Total stockholders' equity.............................. 5,366 3,727 3,527
--------- --------- -----------
Total................................................. $ 30,453 $ 31,716 $ 36,343
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(UNAUDITED)
YEARS ENDED SEPTEMBER 30, --------------------------
------------------------------- DECEMBER 30, DECEMBER 28,
1994 1995 1996 1995 1996
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales (Note 2)..................................... $ 86,598 $ 61,543 $ 65,996 $ 15,515 $ 20,624
Cost of sales...................................... 76,485 49,868 53,818 12,507 18,063
--------- --------- --------- ------------ ------------
Gross profit....................................... 10,113 11,675 12,178 3,008 2,561
Selling, general and administrative
expenses (Note 7)................................ 6,506 6,627 5,187 1,393 1,455
Sales brokerage agreement termination costs (Note
7)............................................... -- -- 4,996 -- --
--------- --------- --------- ------------ ------------
Income from operations........................... 3,607 5,048 1,995 1,615 1,106
Interest expense (Note 6).......................... 2,592 2,383 3,182 795 823
--------- --------- --------- ------------ ------------
Income (loss) before income taxes................ 1,015 2,665 (1,187) 820 283
Provision (benefit) for income taxes (Notes 2 and
10).............................................. 572 1,318 (259) 179 252
--------- --------- --------- ------------ ------------
Net income (loss)................................ $ 443 $ 1,347 $ (928) $ 641 $ 31
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
VOTING COMMON NONVOTING
STOCK COMMON STOCK RETAINED
-------------------- ------------------------ EARNINGS
SHARES AMOUNT SHARES AMOUNT (DEFICIT) TOTAL
--------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Balance, October 1, 1993.............................. 14,705 $ 3,196 2,725 $ 592 $ (17) $ 3,771
Net income.......................................... 443 443
Redeemable preferred dividends...................... (97) (97)
--------- --------- ----- ----- ----------- ---------
Balance, September 30, 1994........................... 14,705 3,196 2,725 592 329 4,117
Net income.......................................... 1,347 1,347
Redeemable preferred dividends...................... (98) (98)
--------- --------- ----- ----- ----------- ---------
Balance, September 30, 1995........................... 14,705 3,196 2,725 592 1,578 5,366
Net loss............................................ (928) (928)
Redeemable preferred dividends...................... (94) (94)
Increase in carrying value of stock warrant purchase
obligations....................................... (617) (617)
--------- --------- ----- ----- ----------- ---------
Balance, September 30, 1996........................... 14,705 $ 3,196 2,725 $ 592 (61) 3,727
Net income (unaudited)................................ 31 31
Redeemable preferred dividends (unaudited)............ (24) (24)
Increase in carrying value of stock warrant purchase
obligations (unaudited)............................. (207) (207)
Exercise of stock options (unaudited)................. 349 101 101
Repurchase of stock (unaudited)....................... (349) (101) (101)
--------- --------- ----- ----- ----------- ---------
Balance, December 28, 1996 (unaudited) 14,705 $ 3,196 2,725 $ 592 $ (261) $ 3,527
--------- --------- ----- ----- ----------- ---------
--------- --------- ----- ----- ----------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(UNAUDITED)
YEARS ENDED SEPTEMBER 30, ----------------------------
-------------------------------- DECEMBER 30, DECEMBER 28,
1994 1995 1996 1995 1996
--------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Cash flows from operating activities:
Net income (loss)................................ $ 443 $ 1,347 $ (928) $ 641 $ 209
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 2,396 1,637 1,763 444 473
Amortization of deferred financing costs and
original issue discount...................... 588 602 630 150 157
Deferred income taxes.......................... 124 (42) 140 -- 19
Changes in assets and liabilities:
Accounts receivable.......................... 503 (18) (658) 1,088 (533)
Inventories.................................. 345 430 (479) (31) (685)
Prepaid expenses and other current assets.... 40 (611) 274 (53) (408)
Income taxes receivable/payable.............. (160) 473 (399) 149 215
Accounts payable............................. 251 (57) 84 (332) 176
Accrued expenses and other current
liabilities................................ (155) 621 (292) (614) 81
--------- ---------- --------- ------ ------
Net cash provided by operating
activities............................... 4,375 4,382 135 1,442 (296)
--------- ---------- --------- ------ ------
Cash flows from investing activities:
Acquisition of property and equipment............ (739) (1,821) (1,432) (148) (182)
Proceeds from sale of property and equipment..... 53 -- -- -- --
Other assets..................................... 20 36 (379) (543) (381)
--------- ---------- --------- ------ ------
Net cash used in investing activities...... (666) (1,785) (1,811) (691) (563)
--------- ---------- --------- ------ ------
Cash flows from financing activities:
Net borrowings (repayments) under revolving loan
facility....................................... (1,500) (750) (250) (400) 4,285
Proceeds from issuance of long-term debt......... -- 8,800 5,681 957 --
Repayment of long-term debt and capitalized lease
obligations.................................... (2,037) (10,857) (3,120) (536) (133)
Proceeds from sale of common stock............... 38 -- -- -- --
Purchase of redeemable preferred stock........... -- -- (143) (143) --
Exercise of stock options........................ -- -- -- -- 101
Purchase of common stock......................... -- -- -- -- (279)
--------- ---------- --------- ------ ------
Net cash (used in) provided by financing
activities............................... (3,499) (2,807) 2,168 (122) 3,974
--------- ---------- --------- ------ ------
Net increase (decrease) in cash.................... 210 (210) 492 629 3,115
Cash, beginning of period.......................... 1 211 1 1 493
--------- ---------- --------- ------ ------
Cash, end of period................................ $ 211 $ 1 $ 493 $ 630 $ 3,608
--------- ---------- --------- ------ ------
--------- ---------- --------- ------ ------
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(UNAUDITED)
YEARS ENDED SEPTEMBER 30, ----------------------------
-------------------------------- DECEMBER 30, DECEMBER 28,
1994 1995 1996 1995 1996
--------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Supplemental disclosures of cash flow information -
Cash paid during the year for:
Interest....................................... $ 2,024 $ 1,831 $ 2,265 $ 564 $ 688
Income taxes................................... 690 973 -- 30 37
Supplemental disclosures of noncash investing and
financing activity:
Acquisition of property and equipment through
capital leases................................. $ 776 $ 3,233 $ 1,577 $ 957 --
In accordance with the terms of the subordinated
note payable (see Note 6), the Company, in
purchase price adjustments, decreased the
carrying values of the following accounts:
Costs in excess of net assets acquired......... 173 149 -- -- --
Covenant not to compete........................ -- 1,017 1,167 292 --
Subordinated debt.............................. 173 1,166 1,167 292 --
Accrued dividends on redeemable preferred stock.... 97 98 94 23 $ 24
</TABLE>
During the year ended September 30, 1996, and the three months ended December
30, 1995 and December 28, 1996, the carrying value of the stock warrant purchase
obligations was increased by $617,000, $124,000 and $207,000, respectively with
a corresponding charge to retained earnings.
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
CFP Holdings, Inc., through its wholly owned subsidiary (collectively the
"Company"), develops, manufactures and markets pre-cooked and uncooked products
sold primarily to manufacturers of branded and private label packaged foods and
restaurants.
On March 31, 1993, the Company acquired substantially all the assets of Best
Western Foods, Inc. and all the outstanding stock of Center of the Plate Foods,
Inc. The acquisitions were accounted for as purchases. The cost in excess of net
assets acquired related to the purchase of the assets of Best Western Foods,
Inc. and a portion of the stock of Center of the Plate Foods, Inc. were based on
the fair values of the identifiable assets acquired and liabilities assumed.
However, because certain shares of the stock of Center of the Plate Foods, Inc.
were purchased from a stockholder of the Company, a portion of the cost in
excess of net assets acquired was reduced to reflect the historical basis of the
stockholder's continuing interest in the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of CFP Holdings, Inc. and its wholly owned
subsidiary. All significant intercompany balances and transactions have been
eliminated in consolidation.
CONCENTRATION OF CREDIT RISK--Financial instruments that subject the Company
to credit risk consist primarily of accounts receivable. The Company performs
ongoing credit evaluations of its customers and maintains an allowance for
potential credit losses. The Company has two significant customers that
accounted for more than 10% of its sales. Sales to one customer totaled 71%, 46%
and 48%, and sales to another customer totaled 25%, 44% and 40% of total sales
for the years ended September 30, 1994, 1995 and 1996, respectively. Accounts
receivable from these customers totaled 81% and 64% of total accounts receivable
at September 30, 1995 and 1996, respectively.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost. The
Company uses the straight-line method of depreciation for buildings and
leasehold improvements and the double-declining method for all other property
and equipment. Depreciation is provided for over the estimated useful lives of
the related assets, ranging from 5 to 25 years. Leasehold improvements are
amortized over the shorter of their useful lives or the term of the lease.
INTANGIBLE AND LONG-LIVED ASSETS--The Company reviews the recoverability of
intangible and long-lived assets whenever events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. If the
expected future cash flows from the use of such assets (undiscounted and without
interest charges) are less than the carrying value, the Company's policy is to
record a writedown that is determined based on the difference between the
carrying value of the asset and its estimated fair value.
COST IN EXCESS OF NET ASSETS ACQUIRED--Cost in excess of net assets acquired
is amortized over a period of 40 years. Accumulated amortization was $711,000
and $995,000 at September 30, 1995 and 1996, respectively.
F-20
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
During the years ended September 30, 1994 and 1995, the Company reduced
goodwill by $173,000 and $149,000, respectively, due to the decrease in the
subordinated note payable discussed in Note 6.
COVENANTS NOT TO COMPETE--Covenants not to compete are stated at cost and
are amortized on a straight-line basis over five years. Accumulated amortization
was $2,010,000 and $2,263,000 at September 30, 1995 and 1996, respectively.
During the years ended September 30, 1995 and 1996, the Company reduced the
covenant not to compete by $1,017,000 and $1,167,000, respectively, due to the
decrease in the subordinated note payable discussed in Note 6.
INCOME TAXES--Deferred income taxes are determined based on temporary
differences between the financial reporting and income tax bases of assets and
liabilities at the balance sheet date, multiplied by the applicable tax rates.
Future tax benefits are recognized to the extent that realization of such
benefits is more likely than not.
FISCAL YEAR-END--The Company's fiscal year is the 52- or 53-week period
ending on the Saturday nearest to September 30. All years presented are 52-week
years. For clarity of presentation, the Company has described the years
presented as September 30. The Company's fiscal quarter end is the Saturday
closest to the calendar quarter end.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of accounts
receivable and accounts payable approximate fair value because of their
short-term nature. The carrying amounts of the revolving line of credit and
senior notes payable approximate fair value because their interest rates are
based on variable reference rates. The fair value of the subordinated notes
payable with a carrying value of $4.7 million at September 30, 1996 is estimated
to be $4.6 million, based upon rates currently available to the Company for debt
with similar terms. The fair value of the remaining subordinated note payable is
not determinable due to the lack of comparable securities that contain similar
principal reduction terms.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS--The Company will measure compensation cost
for employee stock-based compensation plans using the intrinsic value-based
method of accounting prescribed by APB 25, and will adopt the new disclosure
requirements of Statement of Financial Accounting Standards ("SFAS") No. 123
"Accounting for Stock-Based Compensation" in fiscal year 1997.
F-21
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28,
SEPTEMBER 30, -------------
-------------------- 1996
1995 1996 (UNAUDITED)
--------- --------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Raw materials............................................... $ 2,126 $ 2,157 $ 2,637
Work-in-process............................................. 81 96 151
Finished goods.............................................. 1,222 1,655 1,805
--------- --------- ------
Total....................................................... $ 3,429 $ 3,908 $ 4,593
--------- --------- ------
--------- --------- ------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Land..................................................................... $ 30 $ 187
Building................................................................. 4,030 5,471
Machinery and equipment.................................................. 4,007 5,003
Office furniture and fixtures............................................ 127 228
Leasehold improvements................................................... 1,513 1,816
Automobiles.............................................................. 15 15
--------- ---------
9,722 12,720
Accumulated depreciation and amortization................................ (1,464) (2,671)
--------- ---------
Property and equipment, net.............................................. $ 8,258 $ 10,049
--------- ---------
--------- ---------
</TABLE>
5. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Covenants not to compete................................................. $ 3,810 $ 2,643
Deferred financing costs................................................. 2,379 2,428
Other assets............................................................. 170 495
--------- ---------
6,359 5,566
Accumulated amortization................................................. (3,121) (3,855)
--------- ---------
Total.................................................................... $ 3,238 $ 1,711
--------- ---------
--------- ---------
</TABLE>
F-22
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28,
SEPTEMBER 30, ------------
-------------------- 1996
1995 1996 (UNAUDITED)
--------- --------- ------------
<S> <C> <C> <C>
(IN THOUSANDS)
Revolving loan payable, interest due monthly at the commercial paper rate
(5.0% and 5.5% at September 30, 1995 and 1996, respectively) plus 4.25%;
expires in March 1998...................................................... $ 1,750 $ 1,500 $ 5,785
Senior notes payable, interest payable monthly at the commercial paper rate
(5.0% and 5.5% at September 30, 1995 and 1996, respectively) plus 4.5%;
principal payable in quarterly installments ranging from $438,000 to
$563,000, through March 1998............................................... 4,136 6,168 6,168
Senior note payable, interest payable monthly at the greater of 12% or the
commercial paper rate (5.0% and 5.5% at September 30, 1995 and 1996,
respectively) plus 8%; principal due in March 1998......................... 3,000 3,000 3,000
Unamortized discount......................................................... (390) (234) (195)
Subordinated note payable, interest payable at 10%; principal amount
determined based on the number of a customer's facilities in operation;
principal payable in 36 monthly installments beginning in March 1996....... 2,161 594 541
Subordinated notes payable, interest payable monthly at 10%, principal
payable in March 1998...................................................... 4,700 4,700 4,700
Capital lease obligations payable in varying monthly installments through
2019; collateralized by buildings and equipment with a net book value of
approximately $4,129,000 and $6,209,000 at September 30, 1995 and 1996,
respectively............................................................... 4,107 6,315 6,235
--------- --------- ------------
Total........................................................................ 19,464 22,043 26,234
Current portion.............................................................. (2,330) (3,665) (3,656)
--------- --------- ------------
Long-term portion............................................................ $ 17,134 $ 18,378 $ 22,578
--------- --------- ------------
--------- --------- ------------
</TABLE>
The Company has a loan agreement that provides for two senior notes and a
revolving loan facility that expires in March 1998. Borrowings under this
agreement are collateralized by substantially all of the assets of the Company.
Under the revolving loan facility, the Company may borrow up to $6.0 million,
limited to a borrowing base, as defined.
The loan agreement requires annual mandatory prepayment of the senior notes
in an amount equal to 80% of the Company's excess cash flow, as defined.
Covenants in connection with the agreement impose restrictions and requirements
relating to, among other things, maintenance of financial ratios and limitations
on executive compensation, additional borrowings, dividend payments, lease
payments and capital expenditures. Subsequent to September 30, 1996, the
agreement was amended such that the Company was in compliance.
The Company is required to pay an annual commitment fee equal to 0.5% of the
average unused portion of the amount available under the revolving loan
facility. In addition, the Company paid closing fees and other expenses of
$2,162,000 in connection with the loan agreement. This amount is being amortized
over the term of the agreement. Accumulated amortization was $1,081,000 and
$1,513,000 at September 30, 1995 and 1996, respectively.
F-23
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM OBLIGATIONS (CONTINUED)
The subordinated note payable was issued in connection with the acquisition
of the assets of Best Western Foods, Inc. The principal amount of the
subordinated note payable is determined based on the number of a certain
customer's facilities serviced. During the years ended September 30, 1994, 1995
and 1996, the principal amount of this note decreased by $173,000, $1,166,000
and $1,167,000, respectively, due to a reduction in the number of customer
facilities serviced. The Company offset this decrease by first eliminating the
carrying value of costs in excess of net assets acquired from the acquisition
and then reducing the carrying value of covenants not to compete.
In connection with the loan agreement, the Company issued a warrant to
purchase 2,700 shares of common stock at $.01 per share, subject to certain
antidilution provisions. The warrant is exercisable through March 2003. The
warrant contains a mandatory redemption feature that requires the Company, at
the option of the warrant holder, to repurchase the warrant at any time during
the period beginning the earlier of March 1998 or when the related notes are
repaid or refinanced through March 2003 (the "repurchase period") at a price
equal to fair market value. In addition, the Company has the option to
repurchase the warrant at any time during the repurchase period at 10% above
fair market value. As of September 30, 1996, the Company increased the carrying
value of the warrant from $780,000 to $1,366,000, with a corresponding charge to
retained earnings of $586,000.
In connection with a capital lease agreement, the Company issued a warrant
to purchase 412 shares of common stock at $.01 per share, subject to certain
antidilution provisions. The warrant is exercisable through September 2004. The
warrant contains a mandatory redemption feature that requires the Company, at
the option of the warrant holder, to repurchase the warrant at any time during
the period beginning September 30, 2001 through September 2004 at a price equal
to its fair market value. In addition, the Company has an option to repurchase
the warrants at any time after September 30, 1996 at 10% above fair market
value. As of September 30, 1996, the Company increased the carrying value of the
warrant from $119,000 to $150,000, with a corresponding charge to retained
earnings of $31,000.
The stock warrant purchase obligations were initially recorded at their
estimated fair value at the date of issuance. Adjustments to the carrying value
of the stock warrants purchase obligation to the estimated redemption price are
recognized during the period from the date of issuance to the earliest put date
of the warrants. During the years ended September 30, 1994 and 1995 no
adjustments to the carrying value of the stock warrant purchase obligations were
required.
Minimum principal payments of long-term obligations as of September 30, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30 (IN THOUSANDS)
- - - ------------------------------------------------------------------------------ --------------
<S> <C>
1997.......................................................................... $ 3,665
1998.......................................................................... 12,754
1999.......................................................................... 404
2000.......................................................................... 112
2001.......................................................................... 48
Thereafter.................................................................... 5,294
-------
Total......................................................................... 22,277
Unamortized discount.......................................................... (234)
-------
Net long-term debt............................................................ $ 22,043
-------
-------
</TABLE>
F-24
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RELATED PARTY TRANSACTIONS
The Company had a sales brokerage agreement with a stockholder under which
the stockholder was paid a specified commission based on sales of certain
products to certain customers. The agreement was terminated in January 1996 for
a fee of $4,996,000. Commission expense under this agreement was $1,536,000,
$2,142,000 and $570,000 for the years ended September 30, 1994, 1995 and 1996,
respectively. Upon termination of the sales brokerage agreement, the Company
entered into a consulting agreement that provides for a one-year contract with
an option to extend for one additional year. The consulting agreement provides
for annual payments of $100,000 with an additional bonus of $100,000 at the
discretion of the Company.
The Company has a management consulting agreement with an affiliate of a
stockholder under which the Company is obligated to pay $360,000 per year
through December 2003, at which time the agreement is automatically extended
annually, until terminated by the Company or the stockholder. Consulting expense
under this agreement was $396,000, $393,000 and $400,000, including reimbursed
expenses, for the years ended September 30, 1994, 1995 and 1996, respectively.
8. REDEEMABLE PREFERRED STOCK
In May 1993, the Company sold 4,000 shares of its $.01 par value Series A
preferred stock for $1.0 million or $250 per share. Total redeemable preferred
stock authorized is 5,000 shares. Annual cash dividends range from 8% to 12% and
are cumulative. The dividends are accrued using the interest method through the
date of mandatory redemption. The Series A preferred stock must be redeemed at
the earlier of a public sale of securities, a change of control, a merger or May
2000. The redeemable preferred stock is also redeemable at the Company's option.
On November 22, 1995, the Company redeemed 472 shares of this preferred
stock. The total redemption price was $143,000, which included $118,000 of
principal and $25,000 in accrued dividends.
9. STOCK OPTION PLAN
The Company has a stock option plan that is administered by the Board of
Directors. Under the plan, 11,586 shares of nonvoting common stock have been
reserved for the issuance of incentive stock options or nonqualified stock
options to directors, employees and consultants of the Company. The price, terms
and conditions of each issuance are determined based on the provisions of the
plan. The options are exercisable on various dates and vesting can be
accelerated based on attainment of certain performance targets. During the year
ended September 30, 1995, 11,239 options were granted at an exercise price of
$289, of which 3,871 and 7,431 options were exercisable as of September 30, 1995
and 1996, respectively.
F-25
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal.......................................................... $ 358 $ 1,092 $ (401)
State............................................................ 90 268 2
--------- --------- ---------
448 1,360 (399)
--------- --------- ---------
Deferred:
Federal.......................................................... 68 (34) 156
State............................................................ 56 (8) (16)
--------- --------- ---------
124 (42) 140
--------- --------- ---------
Total provision (benefit)........................................ $ 572 $ 1,318 $ (259)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The major elements contributing to the difference between the federal
statutory income tax rate and the effective income tax rate are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate..................................................... 35.0% 35.0% (35.0)%
Officer's life insurance and other nondeductible expenses.......... 3.7 1.6 5.2
Goodwill amortization.............................................. 9.0 3.8 8.4
State taxes, net................................................... 8.7 9.1 (0.4)
--- --- ---------
Effective tax rate................................................. 56.4% 49.5% (21.8)%
--- --- ---------
--- --- ---------
</TABLE>
Deferred income tax liabilities and assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Deferred income tax liabilities:
Depreciation.......................................................... $ 211 $ 487
Prepaid expenses...................................................... 53 51
Other................................................................. 41 131
--------- ---------
$ 305 $ 669
--------- ---------
--------- ---------
Deferred income tax assets:
State taxes........................................................... $ 53 $ 26
Accrued vacation...................................................... 29 39
Expense accruals...................................................... 12 21
State net operating loss carryforwards................................ -- 43
AMT credit carryforward............................................... -- 189
--------- ---------
$ 94 $ 318
--------- ---------
--------- ---------
</TABLE>
F-26
<PAGE>
CFP HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. LEASE COMMITMENTS
The Company leases its facilities and certain equipment under both capital
and noncancelable operating leases that expire through November 2019. Rent
expense under operating leases totaled $652,000, $618,000 and $618,000 for the
years ended September 30, 1994, 1995 and 1996, respectively. Certain of the
leases require the payment of related property taxes, insurance, maintenance and
other costs.
Minimum future lease payments under both capital and operating leases,
together with the present value of the net minimum lease payments under capital
leases as of September 30, 1996, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
SEPTEMBER 30 LEASES LEASES
- - - ----------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
(IN THOUSANDS)
1997................................................................... $ 1,193 $ 600
1998................................................................... 1,114 402
1999................................................................... 1,094 402
2000................................................................... 913 402
2001................................................................... 841 402
Thereafter............................................................. 15,693 603
---------- -----------
Total minimum lease payments........................................... 20,848 $ 2,811
-----------
-----------
Amount representing interest........................................... (14,533)
----------
Present value of net minimum lease payments............................ $ 6,315
----------
----------
</TABLE>
12. SUBSEQUENT EVENT (UNAUDITED)
On December 31, 1996, the Company acquired substantially all of the equity
interests of Quality Foods, L.P., a Pennsylvania-based manufacturer of meat
products for a cash purchase price of $64.0 million pursuant to a securities
purchase agreement. The acquisition will be accounted for under the purchase
method of accounting. Funds used for the acquisition, the repayment of certain
existing indebtedness, and for working capital were primarily provided by $76.0
million of term loans, a $20.0 million revolving credit facility and $25.0
million of subordinated bridge notes. In addition, the Company's newly formed
parent acquired and contributed to the Company the remaining equity interests in
Quality Foods, L.P. that were valued at $1.5 million. The purchase price is
subject to a postclosing adjustment based on the working capital, as defined, of
Quality Foods, L.P. as of December 31, 1996.
On January 28, 1997, the Company received $109.8 million, net of $5.2
million of debt issue costs from the proceeds of $115 million 11 5/8% Senior
Guaranteed Notes, due 2004. The Company repaid $66 million and $25 million of
the term loans, and the bridge notes, respectively, and distributed $16 million
to the stockholders. The Notes are guaranteed by the Company's subsidiaries and
its parent.
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CFP Group, Inc.
We have audited the accompanying balance sheet of CFP Group, Inc. (the
"Company") as of December 28, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of CFP Group, Inc. as of December 28, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 8, 1997
F-28
<PAGE>
CFP GROUP, INC.
BALANCE SHEET
DECEMBER 28, 1996
<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 1,341
---------
TOTAL............................................................................... $ 1,341
---------
---------
STOCKHOLDER'S EQUITY (NOTE 2)
Series A preferred stock, par value $0.01 per share, 3,529 shares authorized, none
issued
Undesignated preferred stock, par value $0.01 per share, 6,472 shares authorized,
none issued
Class A nonvoting common stock, par value $0.01 per share, 25,000 shares authorized,
none issued
Class A voting common stock, par value $0.01 per share, 100,000 shares authorized, 1
share issued and outstanding...................................................... $ 1,341
---------
TOTAL............................................................................... $ 1,341
---------
---------
</TABLE>
See accompanying notes to the balance sheet.
F-29
<PAGE>
CFP GROUP, INC.
NOTES TO BALANCE SHEET
DECEMBER 28, 1996
1. INTRODUCTION
CFP Group, Inc. ("CGI") was incorporated on November 26, 1996 as New CFP
Holdings, Inc. and subsequently changed its name to CFP Group, Inc.
2. SUBSEQUENT EVENT
On December 31, 1996, in connection with the acquisition of Quality Foods
L.P. ("Quality Foods") by CPF Holdings, Inc. ("Holdings"), CGI issued common
stock to acquire certain limited partnership interests in Quality Foods and
contributed the limited partnership interest to Holdings. Holdings acquired
substantially all of the equity interests of Quality Foods, a Pennsylvania based
manufacturer of meat products. Concurrent with the acquisition transaction, each
person owning capital stock of Holdings exchanged each share of capital stock
held by such person for an equivalent share of capital stock of CGI. In
addition, CGI assumed all obligations of Holdings pursuant to the Holdings 1995
Stock Option Plan, whereupon each issued and outstanding option to acquire
nonvoting capital stock of Holdings was converted to an option to acquire
equivalent shares of nonvoting common stock of CGI. As a result of these
transactions, Holdings became a wholly owned subsidiary of CGI. On January 28,
1997, Holdings received $109.8 million, net of $5.2 million of offering costs,
from the proceeds of $115 million 11.63% Senior Guaranteed Notes, due 2004. The
proceeds of the notes were used to repay acquisition indebtedness and to
distribute $16 million to the Holdings stockholders. CGI guaranteed Holdings
obligations under the Senior Notes.
Holdings has two operating subsidiaries who are engaged in the meat
processing and distribution business.
F-30
<PAGE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL
PURCHASES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... ii
Prospectus Summary............................. 1
Risk Factors................................... 18
The Exchange Offer............................. 24
The Quality Foods Acquisition.................. 33
Use of Proceeds................................ 34
Capitalization................................. 35
Unaudited Pro Forma Condensed
Combined Financial Statements................ 36
Unaudited Pro Forma Condensed
Combined Balance Sheet....................... 37
Unaudited Pro Forma Condensed Combined
Statement of Operations...................... 38
Selected Historical Financial Data
of Quality Foods............................. 44
Selected Historical Financial Data
of CFP Holdings.............................. 46
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 48
Business....................................... 59
Management..................................... 68
Principal Stockholders....................... . 74
Certain Transactions........................... 76
Description of Bank Credit Agreement........... 78
Description of Notes........................... 80
Certain Federal Income Tax Considerations...... 103
Plan of Distribution........................... 106
Legal Matters.................................. 106
Experts........................................ 107
Index to Financial Statements.................. F-1
</TABLE>
CFP HOLDINGS, INC.
$115,000,000
11 5/8% SERIES B SENIOR GUARANTEED
NOTES DUE 2004
-----------------
PROSPECTUS
-----------------
, 1997
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article VII of the Registrant's Restated Certificate of Incorporation
(the "Certificate of Incorporation") (Exhibit 3.1 to this Registration
Statement) eliminates the liability of the Registrant's directors to the
Registrant or its stockholders, except for liabilities related to breach of duty
of loyalty, actions not in good faith and certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's By-Laws (the "By-laws") (Exhibit 3.2 to this Registration
Statement) requires the Registrant to indemnify any current or former director
or officer to the fullest extent permitted by the DGCL. The Registrant has also
obtained officers' and directors' liability insurance which insures against
liabilities that officers and directors of the Registrant may incur in such
capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- - - --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Purchase Agreement dated January 23, 1997, among CFP Holdings, Inc. (the "Company"), CFP Group, Inc.
("CFP Group"), Custom Food Products, Inc. ("Custom Foods"), QF Acquisition Corp. ("QFAC"),
NationsBanc Capital Markets, Inc. ("NCMI") and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") relating to the 11 5/8% Senior Guaranteed Notes due 2004.
*3.1 Amended and Restated Certificate of Incorporation of the Company.
*3.2 By-laws of the Company.
*4.1 Indenture dated January 28, 1997, among the Company, CFP Group, Custom Foods, QFAC and United States
Trust Company of New York, as Trustee (the "Trustee") (including the form of Note as Exhibit A and
the other exhibits thereto).
*4.2 Registration Rights Agreement dated January 28, 1997, among the Company, CFP Group, Custom Foods, QFAC,
NCMI and DLJ.
*4.3 Credit Agreement dated December 30, 1996, among the Company, CFP Group, NCMI, NationsBank of Texas,
N.A., Fleet National Bank and the Lenders listed therein.
**5 Opinion of O'Sullivan Graev & Karabell, LLP (including consent of such firm) regarding legality of
securities being offered.
*10.1 Securities Purchase Agreement dated December 31, 1996, among the Company, Quality Foods, L.P., the
Partners of Quality Foods, L.P., certain additional beneficial owners of Quality Foods, L.P., the
Stockholders of QFAC and the stockholders of QF Management Corp.
*10.2 Employment Agreement dated December 31, 1996, between the Company and David Cohen.
*10.3 Employment Agreement dated December 31, 1996, between the Company and Eric W. Ek.
*10.4 Employment Agreement dated December 31, 1996 between the Company and Robert D. Gioia.
*10.5 Employment Agreement dated December 31, 1996, between the Company and Richard W. Griffith.
*10.7 Management Consulting Agreement dated December 31, 1996, between the Company and First Atlantic
Capital, Ltd. ("FACL").
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- - - --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*10.8 Investment Banking Agreement dated March 1, 1996, between the Company and FACL.
*10.9 Stockholders' Agreement dated December 31, 1996, among CFP Group and the stockholders listed on Annex I
thereto.
*10.10 Standard Industrial Lease dated April 27, 1981, between Philip E. Bauer Properties and Best Western
Foods, Inc. (including material Amendments and Addendums thereto).
*10.11 Standard Industrial Lease--Net dated November 3, 1991, among William I. Altshuler, Maxine Altshulter
and Center of the Plate Foods Inc. (including material Amendments and Addendums thereto).
*10.12 Lease Agreement dated September 30, 1994, between CFP Associates and Custom Foods (Including material
Amendments and Addendums thereto).
*12.1 Computation of Ratio of Earnings to Fixed Charges.
*21 List of Subsidiaries.
**23.1 Consent of O'Sullivan Graev & Karabell, LLP (included as part of its opinion filed as Exhibit 5
hereto).
*23.2 Consent of Ernst & Young LLP, independent auditors (included on page S-6).
*23.3 Consents of Deloitte & Touche LLP, independent auditors (included on
page S-3, S-4 and S-5).
*24.1 Powers of Attorney (included on page II-4).
*24.2 Officers Certificate certifying Resolutions adopted by the Board of Directors of the Company
authorizing signatories to sign the Registration Statement on Form S-4.
*25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United
States Trust Company of New York, as Trustee.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of Letter to Clients.
**99.5 Form of Exchange Agent Agreement between the Registrant and United States Trust Company of New York, as
Exchange Agent.
</TABLE>
- - - ------------------------------
* Filed herewith.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts -- Three years ended September 30, 1994, 1995 and 1996.... S-1
</TABLE>
Schedules other than the above have been omitted because they are either not
applicable or the required information has been disclosed in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the DGCL, the Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a
II-2
<PAGE>
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of that time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial BONA FIDE offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 21st day of March, 1997.
CFP HOLDINGS, INC.
By: *
-----------------------------------------
Roberto Buaron
CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
We, the undersigned directors and officers of CFP Holdings, Inc., do hereby
constitute and appoint Robert Gioia and Eric Ek, or either of them, our true and
lawful attorneys and agents, to do any and all acts and things in our name and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or either of them, may deem necessary or advisable to
enable said Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorneys
and agents, or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 21st day of March, 1997, by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
NAME TITLE
- - - ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ ROBERTO BUARON
-------------------------------------------
Roberto Buaron Chairman of the Board and Director
/s/ ROBERT GIOIA
------------------------------------------- President, Chief Executive Officer and Director
Robert Gioia (Principal Executive Officer)
/s/ ERIC EK Vice President, Chief Financial Officer, Secretary and
------------------------------------------- Director (Principal Financial Officer and Principal
Eric Ek Accounting Officer)
/s/ RICHARD GRIFFITH
-------------------------------------------
Richard Griffith Director
/s/ JAMES A. LONG
-------------------------------------------
James A. Long Director
/s/ DAVID COHEN
-------------------------------------------
David Cohen Director
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
- - - ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ ANDREW KOHN
-------------------------------------------
Andrew Kohn Director
/s/ KEITH PENNELL
-------------------------------------------
Keith Pennell Director
/s/ JAMES SCHUBAUER II
-------------------------------------------
James Schubauer II Director
</TABLE>
*By: Eric Ek, Attorney-in-fact
II-5
<PAGE>
CFP HOLDINGS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE -------------------------------- BALANCE
AT BEGINNING CHARGED TO CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
- - - --------------------------------------------------- --------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Accounts Receivable-
Allowance for doubtful accounts
Year ended September 30, 1994................ 11 -- -- (2) 9
Year ended September 30, 1995................ 9 129 -- -- 138
Year ended September 30, 1996................ 138 12 -- (100) 50
</TABLE>
S-1
<PAGE>
QUALITY FOODS, L.P.,
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE ---------------------------- BALANCE
AT BEGINNING CHARGED TO CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
- - - --------------------------------------------------- --------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Accounts Receivable --
Allowance for doubtful accounts
Year ended December 30, 1994................... $ 55 $ 46 (46) 55
Year ended December 30, 1995................... 55 85 (105) 35
Year ended December 30, 1996................... 35 82 (67) 50
</TABLE>
S-2
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
CFP Holdings, Inc.
We consent to the use in this Registration of CFP Holdings, Inc. on Form S-4 of
our report dated December 18, 1996, appearing in the Prospectus, which is a part
of this Registration Statement, and to the references to us under the heading
"Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of CFP Holdings, Inc., listed in
Item 21. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 20, 1997
S-3
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Partners of Quality Foods, L.P.
We consent to the use in this Registration Statement of CFP Holdings, Inc. on
Form S-4 of our report on the financial statements of Quality Foods, L.P. for
the year ended December 31, 1996, dated February 14, 1997, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the 1996 information contained in the financial statement schedule
of Quality Foods, L.P., listed in Item 21. These financial statements are the
responsibility of Quality Foods' management. Our resonsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 20, 1997
S-4
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of CFP Holdings, Inc.
on Form S-4 of our report on the balance sheet of CFP Group, Inc. as of December
28, 1996, dated March 8, 1997, appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 20, 1997
S-5
<PAGE>
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 12, 1996 with respect to the financial
statements and schedule of Quality Foods, L.P. included in the Registration
Statement (Form S-4 No. 333-00000) and related Prospectus of CFP Holdings, Inc
for the registration of $115,000,000 of its 11 5/8% Series B Senior Guaranteed
Notes due 2004.
/s/ ERNST & YOUNG LLP
Philadelphia, Pa
March 21, 1997
S-6
<PAGE>
Exhibit 1.1
[CONFORMED COPY]
CFP HOLDINGS, INC.
CFP GROUP, INC.
CUSTOM FOOD PRODUCTS, INC.
QF ACQUISITION CORP.
$115,000,000 115/8% SENIOR GUARANTEED NOTES DUE 2004
PURCHASE AGREEMENT
January 23, 1997
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center, 7th Floor
100 North Tryon Street
Charlotte, North Carolina 28255
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
CFP Holdings, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to NationsBanc Capital Markets, Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation (the "Initial Purchasers" and, individually,
each an "Initial Purchaser") an aggregate of $115,000,000 principal amount of
its 115/8% Senior Guaranteed Notes Due 2004 (the "Notes"). The Notes are to be
issued under an indenture (the "Indenture") dated as of January 28, 1997 among
the Company, CFP Group, Inc., a Delaware corporation (the "Parent Guarantor"),
Custom Food Products, Inc., a California corporation ("Custom Foods"), and QF
Acquisition Corp., a Delaware corporation ("QF Acquisition Corp."), as
guarantors (the "Subsidiary Guarantors" and, individually, each a "Subsidiary
Guarantor" and together with the Parent Guarantor, each a "Guarantor") and
United States Trust Company, as trustee (the "Trustee"). The obligations of the
Company under the Notes and the Indenture will be guaranteed by the Guarantors
on a senior unsecured basis pursuant to the terms of the Indenture (the
"Guarantees"). The Subsidiary Guarantors are wholly owned subsidiaries of the
Company and therefore all references to subsidiaries of the
<PAGE>
2
Company include the Subsidiary Guarantors. The Company is a wholly owned
subsidiary of the Parent Guarantor.
The sale of the Notes to the Initial Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. You have advised the Company that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 4
hereof as soon as you deem advisable. The Notes will have the benefit of certain
registration rights, pursuant to a Registration Rights Agreement, dated as of
January 28, 1997, among the Company, the Guarantors and the Initial Purchasers
(the "Registration Rights Agreement").
In connection with the sale of the Notes, the Company and the
Subsidiary Guarantors have prepared a preliminary offering memorandum, dated
January 7, 1997 (the "Preliminary Memorandum"), and a final offering memorandum,
dated January 23, 1997 (the "Final Memorandum"). Each of the Preliminary
Memorandum and the Final Memorandum sets forth certain information concerning
the Company, the Subsidiary Guarantors and the Notes. The Company and the
Subsidiary Guarantors hereby confirm that they have authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Notes by the Initial
Purchasers. Unless stated to the contrary, all references herein to the Final
Memorandum are to the Final Memorandum at the Execution Time (as defined below)
and are not meant to include any amendment or supplement subsequent to the
Execution Time.
1. Representations and Warranties. The Company and the Guarantors
jointly and severally represent and warrant to the Initial Purchasers as set
forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not, and at the Closing Date (as
defined below) will not (and any amendment or supplement thereto, at the
date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company
and the Guarantors make no representation or warranty as to the
information contained in or omitted from the Preliminary Memorandum or the
Final Memorandum, or any amendment or supplement thereto, in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Initial Purchasers specifically for inclusion therein.
<PAGE>
3
(b) Each of the Parent Guarantor, the Company and the subsidiaries
of the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which
it is chartered or organized and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or leases
material properties or conducts material business, except in such
jurisdictions in which the failure to so qualify, singly or in the
aggregate, would not have a Material Adverse Effect (as defined below).
(c) Each of the Parent Guarantor, the Company and the subsidiaries
of the Company has full power (corporate and other) to own or lease its
properties and conduct its business as described in the Final Memorandum;
and each of the Company, the Parent Guarantor and the Subsidiary
Guarantors has full power (corporate and other) to enter into this
Agreement and the Registration Rights Agreement and the Indenture
(including the Guarantees provided for therein) (collectively, the
"Offering Documents") and to carry out all the terms and provisions hereof
and thereof to be carried out by it.
(d) The Company, the Parent Guarantor and the Subsidiary Guarantors
have authorized, issued and outstanding capitalizations as set forth in
the Final Memorandum. All of the issued shares of capital stock of the
Company, the Parent Guarantor and the Subsidiary Guarantors have been duly
authorized and validly issued and are fully paid and nonassessable. All of
the capital stock of each of the Subsidiary Guarantors is owned of record
and beneficially by the Company, free and clear of any pledge, lien,
encumbrance, security interest, restriction on voting or transfer,
preemptive rights or other defect or claim of any third party, except as
otherwise set forth in the Final Memorandum. All of the capital stock of
the Company is owned of record and beneficially by the Parent Guarantor,
free and clear of any pledge, lien, encumbrance, security interest,
restriction on voting or transfer, preemptive rights or other defect or
claim of any third party, except as otherwise set forth in the Final
Memorandum. The capital stock of the Company, the Parent Guarantor and the
Subsidiary Guarantors conform to the descriptions thereof in the Final
Memorandum.
(e) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and, except for directors' qualifying shares and except
as otherwise set forth in the Final Memorandum are owned of record and
beneficially by the Company, either directly or through wholly owned
subsidiaries, free and clear of any pledge, lien, encumbrance, security
interest, restriction on voting or transfer, preemptive rights or other
defect or claim of any third party.
<PAGE>
4
(f) No subsidiary of the Company is prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such subsidiary's capital stock, from repaying to
the Company any loans or advances to such subsidiary from the Company or
from transferring any of such subsidiary's property or assets to the
Company or any other subsidiary of the Company, except as described in or
contemplated by the Final Memorandum.
(g) Deloitte & Touche LLP, who have audited certain financial
statements of the Company and its consolidated subsidiaries and delivered
their reports with respect to the audited consolidated financial
statements and schedules in the Final Memorandum, are independent public
accountants within the meaning of the Securities Act and the applicable
rules and regulations thereunder.
(h) Ernst & Young LLP, who have certified certain financial
statements of the Quality Foods, L.P. ("Quality Foods") and delivered
their reports with respect to the audited consolidated financial
statements and schedules in the Final Memorandum, are independent public
accountants within the meaning of the Securities Act and the applicable
rules and regulations thereunder.
(i) The consolidated financial statements (including the notes
thereto) and schedules of the Parent Guarantor, the Company and its
consolidated subsidiaries, and the financial statements (including the
notes thereto) of Quality Foods, set forth in the Final Memorandum fairly
present, respectively, the financial position of the Parent Guarantor, the
Company and its consolidated subsidiaries and of Quality Foods, and the
results of operations as of the dates and for the periods specified
therein; since the date of the latest of such financial statements, there
has been no change nor any development or event involving a prospective
change which has had a material adverse effect on (i) the business,
operations, properties, assets, liabilities, net worth, condition
(financial or otherwise) or prospects of the Company and its consolidated
subsidiaries, taken as a whole, as the case may be, or (ii) the ability of
the Company, the Parent Guarantor or the Subsidiary Guarantors to perform
any of their respective obligations under the Offering Documents or the
Notes ("Material Adverse Effect"); such financial statements and schedules
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise expressly noted in the Final Memorandum); the summary and
selected historical financial information included in the Final Memorandum
has been fairly extracted from the financial statements of the Company and
Quality Foods and fairly presents, on the basis stated in the Final
Memorandum, the information included therein; and the unaudited pro forma
financial statements included in the Final Memorandum comply in form in
all material respects with the applicable accounting
<PAGE>
5
requirements, which have been properly applied to the historical amounts
in the compilation of such statements.
(j) Subsequent to the respective dates as of which information is
given in the Final Memorandum, (i) the Parent Guarantor, the Company and
the subsidiaries of the Company have not incurred any material liability
or obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (ii) each of the
Company and the Guarantors has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock; and (iii) there has not
been any material change in the capital stock, short-term debt or
long-term debt of the Parent Guarantor, the Company and the subsidiaries
of the Company, except in each case as described in or contemplated by the
Final Memorandum.
(k) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(l) The Offering Documents have been duly authorized by all
necessary corporate actions of the Company and the Guarantors, when duly
executed and delivered by the Company and the Guarantors and, as the case
may be, by the Trustee, and will constitute legal, valid and binding
obligations of such of the Company and the Guarantors as are a party
thereto, enforceable against the Company and the Guarantors in accordance
with their terms, except as the same may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally, including without limitation the effect of
statutory or other laws regarding fraudulent conveyances or transfers or
preferential transfers or (ii) general principles of equity, whether
considered at law or at equity, and except as rights to indemnity and
contribution may be limited by federal or state securities laws.
(m) The Notes have been duly authorized by all necessary corporate
action for issuance and sale pursuant to this Agreement and, when
executed, authenticated, issued and delivered in the manner provided for
in the Indenture and sold and paid for as provided in this Agreement, the
Notes will constitute legal, valid and binding obligations of the Company
and the Guarantors entitled to the benefits of the Indenture
<PAGE>
6
and enforceable against the Company and the Guarantors in accordance with
its terms, except as the same may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally, including without limitation the effect of statutory or
other laws regarding fraudulent conveyances or transfers or preferential
transfers or (ii) general principles of equity, whether considered at law
or at equity.
(n) The Guarantees have been duly authorized by all necessary
corporate action for issuance and sale pursuant to this Agreement and,
when the Notes are executed, authenticated, issued and delivered in the
manner provided for in the Indenture and sold and paid for as provided in
this Agreement, the Guarantees will constitute legal, valid and binding
obligations of the respective Guarantors entitled to the benefits of the
Indenture and enforceable against the Guarantors in accordance with its
terms, except as the same may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws regarding creditors'
rights generally, including without limitation the effect of statutory or
other laws regarding fraudulent conveyances or transfers or preferential
transfers or (ii) general principles of equity, whether considered at law
or at equity.
(o) The issuance, offering and sale of the Notes to the Initial
Purchasers by the Company pursuant to this Agreement, the compliance by
the Company and the Guarantors with the other provisions of this Agreement
and the other Offering Documents, the consummation of the other
transactions herein and therein contemplated and the consummation of the
Financial Transactions and the other transactions contemplated hereby and
in the Final Memorandum do not (i) require the consent, approval,
authorization, order, registration or qualification of or with any
governmental authority or court, except such as may be required under
state securities or blue sky laws or (ii) conflict with, result in a
breach or violation of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Company or any of the subsidiaries of the Company, including the
Subsidiary Guarantors, is a party or by which the Company or any of the
subsidiaries of the Company, or any of their respective properties is
bound, or the charter or by-laws of the Company or any of the subsidiaries
of the Company, or any statute, rule or regulation or any judgment, order
or decree of any governmental authority or court or arbitrator applicable
to the Company or any of the subsidiaries of the Company.
(p) No legal or governmental proceedings or investigations are
pending to which the Parent Guarantor, the Company or any of the
subsidiaries of the Company, is a party or to which the property of the
Parent Guarantor, the Company or any of the subsidiaries of the Company,
is subject that are not described in the Final
<PAGE>
7
Memorandum, and no such proceedings or investigations, to the best
knowledge of the Company, have been threatened against the Parent
Guarantor, the Company or any of the subsidiaries of the Company, or with
respect to any of their respective properties, except in each case for
such proceedings or investigations that, if the subject of an unfavorable
decision, ruling or finding, would not, singly or in the aggregate, result
in a Material Adverse Effect.
(q) Neither the Parent Guarantor, the Company nor any of the
subsidiaries of the Company, is now or, after giving effect to the
issuance of the Notes and the execution, delivery and performance of the
Offering Documents and the consummation of the transactions contemplated
thereby will be (i) insolvent, (ii) left with unreasonably small capital
with which to engage in its anticipated businesses or (iii) incurring
debts beyond its ability to pay such debts as they become due.
(r) The Parent Guarantor, the Company and each of the subsidiaries
of the Company have good and marketable title in fee simple to all items
of real property and marketable title to all personal property owned by
each of them, in each case free and clear of any pledge, lien encumbrance,
security interest or other defect or claim of any third party, except (i)
for security interests granted by the Parent Guarantor, the Company and
each of the subsidiaries of the Company pursuant to the Credit Agreement
dated as of December 30, 1996 among the Parent Guarantor, the Company,
NationsBank of Texas, N.A., and the other parties thereto, (ii) such as do
not materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Parent Guarantor, the Company or such subsidiary, and (iii) as otherwise
set forth in the Final Memorandum. Any real property and buildings held
under lease by the Company or any such subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made or proposed to be made of
such property and buildings by the Company or such subsidiary.
(s) ERISA:
(i) Definitions:
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) that for purposes of Title IV of ERISA is
a member of the controlled group of the Company, or under
common control with the
<PAGE>
8
Company, within the meaning of Section 414 of the Internal
Revenue Code.
"ERISA Event" means (a)(i) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA,
with respect to any Plan unless the 30-day notice requirement
with respect to such event has been waived by the PBGC, or
(ii) the requirements of subsection (1) of Section 4043(b) of
ERISA are met with respect to a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Plan, and an
event described in paragraph (9), (10), (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with
respect to such Plan within the following 30 days; (b) the
application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to
a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Company or
any ERISA Affiliate in the circumstances described in Section
4062(e) of ERISA; (e) the withdrawal by the Company or any
ERISA Affiliate from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (f) the conditions for imposition
of a lien under Section 302(f) of ERISA shall have been met
with respect to any Plan; (g) the adoption of an amendment to
a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by
the PBGC of proceedings to terminate a Plan pursuant to
Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that constitutes
grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five
plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of the Company or any ERISA Affiliate
and at least one trade or business (whether or not
incorporated) other than the Company and the ERISA Affiliates
or (b) was so maintained and in respect of
<PAGE>
9
which the Company or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of the Company or any ERISA Affiliate
and no trade or business (whether or not incorporated) other
than the Company and the ERISA Affiliates or (b) was so
maintained and in respect of which the Company or any ERISA
Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Underfunding" means, with respect to any Plan, the
excess, if any, of the "projected benefit obligations" (within
the meaning of Statement of Financial Accounting Standards 87)
under such Plan (determined using the actuarial assumptions
used for purposes of calculating funding requirements in the
most recent actuarial report for such plan) over the fair
market value of the assets held under the Plan.
"Withdrawal Liability" has the meaning specified in Part
I of Subtitle E of Title IV of ERISA.
(ii) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan.
(iii) The aggregate Underfunding with respect to all Plans
which have any Underfunding does not exceed $100,000.
(iv) Neither the Company nor any ERISA Affiliate has incurred
or is reasonably expected to incur any Withdrawal Liability.
(v) Neither the Company nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated,
within the meaning of Title IV of ERISA, and no such Multiemployer
Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
<PAGE>
10
(t) No labor dispute with the employees of the Company, or any of
the subsidiaries of the Company, exists or to the best knowledge and
belief of the Company and its subsidiaries is threatened or imminent which
is likely to result in a Material Adverse Effect.
(u) The Company and the subsidiaries of the Company own or otherwise
possess the right to use all patents, trademarks, service marks, trade
names and copyrights, all applications and registrations for each of the
foregoing, and all other proprietary rights and confidential information
used in the conduct of their respective businesses as currently conducted;
and neither the Company nor any subsidiary of the Company has received any
notice, or is otherwise aware, of any infringement of or conflict with the
rights of any third party with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(v) The Company and the subsidiaries of the Company are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which they are engaged and neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(w) The Parent Guarantor, the Company and the subsidiaries of the
Company possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and none of the Parent Guarantor, the
Company or any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(x) Environmental Matters:
(i) The Parent Guarantor, the Company and the subsidiaries of
the Company are and have been in compliance with all applicable
laws, statutes, ordinances, rules, regulations, orders, judgments,
decisions, decrees, standards, and requirements ("Legal
Requirements") relating to: human health and safety; pollution;
management, disposal or release of any chemical substance, product
<PAGE>
11
or waste; and protection, cleanup, remediation or corrective action
relating to the environment or natural resources ("Environmental
Law");
(ii) The Parent Guarantor, the Company and the subsidiaries of
the Company have obtained and are in compliance with the conditions
of all permits, licenses, approvals, authorizations, and variances
necessary under any Environmental Law for the continued conduct of
the business of the Company and each subsidiary of the Company, in
the manner now conducted ("Environmental Permits");
(iii) There are no past or present conditions or
circumstances, including but not limited to pending changes in any
Environmental Law or Environmental Permit, that are likely to
interfere with the conduct of the business of the Company or any
subsidiary of the Company, in the manner now conducted or which
would interfere with compliance with any Environmental Law or
Environmental Permit; and
(iv) There are no past or present conditions or circumstances
at, or arising out of, the business, assets and properties of the
Parent Guarantor, the Company or any subsidiary of the Company, or
any formerly leased, operated or owned businesses, assets or
properties of the Parent Guarantor, the Company or any subsidiary of
the Company, including but not limited to on-site or off-site
disposal or release of any chemical substance, product or waste,
which may give rise to: (A) liabilities or obligations for any
cleanup, remediation or corrective action under any Environmental
Law, (B) claims arising under any Environmental Law for personal
injury, property damage, or damage to natural resources, (C)
liabilities or obligations incurred to enable the Parent Guarantor,
the Company or any subsidiary of the Company, to comply with any
Environmental Law, or (D) fines or penalties arising under any
Environmental Law;
except in each case for any noncompliance or conditions or circumstances
that, singly or in the aggregate, would not result in a Material Adverse
Effect.
(y) No default exists, and no event has occurred which, with notice
or lapse of time or both, would constitute a default in the due
performance and observation of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Parent Guarantor, the Company or any of the subsidiaries of
the Company is a party or by which the Parent Guarantor, the Company or
any of the subsidiaries of the Company, or any of their respective
properties, is bound which would have a Material Adverse Effect.
<PAGE>
12
(z) The Parent Guarantor, the Company and the Subsidiary Guarantors
have filed all foreign, federal, state and local tax returns that are
required to be filed or have requested extensions thereof and have paid
all taxes required to be paid by them and any other assessment, fine or
penalty levied against them, to the extent that any of the foregoing is
due and payable, other than those being contested in good faith and for
which adequate reserves have been provided or those currently payable
without penalty or interest and other than taxes of less than $250,000 in
the aggregate.
(aa) Assuming the accuracy of the representations made by the
Initial Purchasers in Section 4, none of the Company, the Guarantors, or
any Affiliate (as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D")) of the Company or the Guarantors, or any
person acting on its or their behalf has, directly or indirectly, made
offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of the Notes under
the Securities Act.
(bb) Assuming the accuracy of the representations made by the
Initial Purchasers in Section 4, none of the Company, the Guarantors, or
any Affiliate of the Company or the Guarantors, or any person acting on
its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection
with any offer or sale of the Notes.
(cc) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(dd) The Company has been advised by the National Association of
Securities Dealers, Inc. (the "NASD") PORTAL Market ("PORTAL") that the
Notes have been designated PORTAL-eligible securities in accordance with
the rules and regulations of the NASD.
(ee) With respect to those Notes sold in reliance on Regulation S
under the Securities Act ("Regulation S"), (i) none of the Company, its
Affiliates, the Guarantors, or any person acting on its or their behalf
(other than the Initial Purchasers or their respective Affiliates, as to
whom the Company makes no representation) has engaged or will engage in
any directed selling efforts within the meaning of Regulation S and (ii)
each of the Company and its Affiliates, the Guarantors and any person
acting on its or their behalf (other than the Initial Purchasers or their
respective Affiliates) has complied with and will comply with the offering
restrictions requirement of Regulation S.
<PAGE>
13
(ff) Neither the Company nor any Guarantor is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), without taking account of any
exemption arising out of the number of holders of the securities of the
Company or the Guarantors, as the case may be; and each of the Company and
the Guarantors will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment
Company Act.
(gg) None of the Company, the Guarantors or any Affiliate of the
Company or the Guarantors has taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company or the Guarantors
to facilitate the sale or resale of the Notes; nor has the Company or the
Guarantors or any Affiliate of the Company or the Guarantors paid or
agreed to pay to any person any compensation for soliciting another to
purchase any securities of the Company (except as contemplated by this
Agreement).
(hh) The information provided by the Company pursuant to Section
5(i) hereof will not, at the date thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(ii) Each certificate signed by any officer of the Company or of the
Guarantors and delivered to the Initial Purchasers or its counsel shall be
deemed to be a representation and warranty by the Company and the
Guarantors to the Initial Purchasers as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchasers, and the Initial Purchasers agree
severally and not jointly to purchase in the respective amounts set forth in
Schedule 1 from the Company, at a purchase price of 97% of the principal amount
thereof, plus accrued interest, if any, from January 28, 1997 to the Closing
Date, $115,000,000 in principal amount of Notes.
3. Delivery and Payment. Delivery of and payment for the Notes shall
be made at 10:00 AM, New York City time, on January 28, 1997, or such later date
(not later than February 5, 1997) as the Initial Purchasers shall designate,
which date and time may be postponed by agreement between the Initial Purchasers
and the Company (such date and time of delivery and payment for the Notes being
herein called the "Closing Date"). Delivery of the Notes shall be made to the
Initial Purchasers against payment by the Initial Purchasers of the purchase
price thereof to or upon the order of the Company in immediately available
<PAGE>
14
funds. Delivery of the Notes shall be made at such location as the Initial
Purchasers shall reasonably designate at least one business day in advance of
the Closing Date and payment for the Notes shall be made at the offices of
Shearman & Sterling ("Counsel for the Initial Purchasers"), 599 Lexington
Avenue, New York, New York, with any transfer taxes payable in connection with
the transfer of the Notes fully paid, against payment of the purchase price
therefor. Certificates for the Notes shall be registered in such names and in
such denominations as the Initial Purchasers may request not less than two full
business days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Notes. Each Initial Purchaser represents and warrants
to and agrees with the Company and the Guarantors that:
(a) It has not offered or sold, and will not offer or sell, any
Notes except to those it reasonably believes to be (i) "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
or (ii) other institutional "accredited investors" (as defined in Rule 501
of Regulation D) that, prior to their purchase of the Notes, deliver to
such Initial Purchaser a letter containing the representations and
agreements set forth in Annex A to the Final Memorandum or (iii) non-U.S.
persons outside the United States to whom it reasonably believes offers
and sales of the Notes may be made in reliance upon Regulation S in
transactions meeting the requirements of Regulation S.
(b) In connection with each sale described in Section 4(a), it has
taken or will take reasonable steps to ensure that the purchaser of such
Notes is aware that such sale is being made in reliance on an exception
from the registration requirements of the Securities Act.
(c) Neither of the Initial Purchasers nor any person acting on their
behalf has made or will make offers or sales of the Notes by means of any
form of general solicitation or general advertising (within the meaning of
Regulation D).
(d) With respect to Notes sold in reliance on Regulation S, the
Initial Purchasers have not offered or sold, and will not offer or sell,
any Notes by means of any directed selling efforts (as defined in Rule 902
of Regulation S) in the United States.
5. Agreements. The Company and the Guarantors jointly and severally
agree with the Initial Purchasers that:
<PAGE>
15
(a) The Company and the Guarantors will furnish to the Initial
Purchasers and to Counsel for the Initial Purchasers, without charge,
during the period referred to in paragraph (c) below, as many copies of
the Final Memorandum and any amendments and supplements thereto as it may
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the offering.
(b) Neither the Company nor the Guarantors will amend or supplement
the Final Memorandum without the prior written consent of the Initial
Purchasers.
(c) If at any time prior to the completion of the sale of the Notes
by the Initial Purchasers, any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it should be necessary to
amend or supplement the Final Memorandum to comply with applicable law,
the Company and the Guarantors will promptly notify the Initial Purchasers
of the same and, subject to the requirements of paragraph (b) of this
Section 5, will prepare and provide to the Initial Purchasers pursuant to
paragraph (a) of this Section 5 an amendment or supplement which will
correct such statement or omission or effect such compliance.
(d) The Company will arrange for the qualification of the Notes for
sale by the Initial Purchasers under the laws of such jurisdictions as the
Initial Purchasers may designate and will maintain such qualifications in
effect so long as required for the sale of the Notes, provided, however,
that neither the Company nor the Guarantors shall be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent
to service of process in any jurisdiction in which it is not now so
subject or to subject itself to taxation in any such jurisdiction. The
Company will promptly advise the Initial Purchasers of the receipt by the
Company or the Guarantors of any notification with respect to the
suspension of the qualification of the Notes for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose.
(e) Whenever the Company or the Guarantors publish or make available
to the public (by filing with any regulatory authority or securities
exchange or by publishing a press release or otherwise) any information
that could reasonably be expected to be material in the context of the
issue of Notes under this Agreement, the same shall immediately notify the
Initial Purchasers as to the nature of such information or event. The
Company and the Guarantors will likewise notify the Initial Purchasers of
(i) any decrease in the rating of the Notes or any other debt securities
of the
<PAGE>
16
Company or the Guarantors by any nationally recognized statistical rating
organization (as defined in Rule 436(g) under the Securities Act) or (ii)
any notice given of any intended or potential decrease in any such rating
or of a possible change in any such rating which does not indicate the
direction of the possible change, as soon as the Company or the Guarantor
becomes aware of any such decrease or notice. For a period of five years
after the Closing Time, the Company and the Guarantors will also deliver
to the Initial Purchasers, as soon as available and to the extent
individually prepared, and without request, copies of their respective
latest annual reports and quarterly statements and any reports of their
auditors thereon.
(f) The Company and the Guarantors will not, and will not permit any
of their Affiliates to, resell any Notes that have been acquired by any of
them.
(g) None of the Company, the Guarantors, any of their Affiliates, or
any person acting on their behalf will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of the Notes under
the Securities Act.
(h) None of the Company, the Guarantors, any of their Affiliates, or
any person acting on their behalf will engage in connection with the
offering of the Notes (i) in any form of general solicitation or general
advertising (within the meaning of Regulation D), (ii) in any public
offering within the meaning of Section 4(2) of the Act or (iii) in any
directed selling efforts (as defined in Rule 902 under the Act and the
Securities and Exchange Commission's Release No. 33-6863) in the United
States in connection with the Notes proposed to be offered and sold
pursuant to Regulation S by the Initial Purchasers in connection with any
offer or sale of the Notes.
(i) The Company and the Guarantors will provide to each holder of
Notes and to each prospective purchaser (as designated by such holder) of
Notes, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the
Securities Act. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from
time to time of Notes.
(j) The Company and the Guarantors will cooperate with the Initial
Purchasers and use their best efforts to (i) permit the Notes to be
eligible for clearance and settlement through The Depository Trust Company
and (ii) permit the Notes to be designated PORTAL-eligible securities in
accordance with the rules and regulations of the NASD.
<PAGE>
17
6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Notes shall be subject to
the accuracy of the representations and warranties on the part of the Company
and the Guarantors contained herein at the date and time that this Agreement is
executed and delivered by the parties hereto (the "Execution Time") and the
Closing Date, to the accuracy of the statements of the Company and the
Guarantors made in any certificates pursuant to the provisions hereof, to the
performance by the Company and the Guarantors of their obligations hereunder and
to the following additional conditions:
(a) The Company and the Guarantors shall have entered into a
Registration Rights Agreement with the Initial Purchasers in the form
attached hereto as Exhibit 1;
(b) The Company shall have furnished to the Initial Purchasers the
opinion of O'Sullivan Graev & Karabell, LLP, counsel for the Company, the
Parent Guarantor, Custom Foods and QF Acquisition Corp., dated the Closing
Date substantially to the effect that:
(i) each of the Parent Guarantor, the Company and the
subsidiaries of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with full
corporate power and authority to own or lease its properties and
conduct its business as described in the Final Memorandum, and is
duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which requires
such qualification wherein it owns or leases properties or conducts
business, except where the failure to be so qualified, singly or in
the aggregate, would not have a Material Adverse Effect;
(ii) the Company has an authorized, issued and outstanding
capitalization as set forth in the Final Memorandum. All of the
issued shares of capital stock of the Company, the Parent Guarantor
and the Subsidiary Guarantors have been duly authorized and validly
issued and are fully paid and nonassessable. All of the capital
stock of each of the Subsidiary Guarantors is owned of record and
beneficially by the Company, free and clear of any pledge, lien,
encumbrance, security interest, restriction on voting or transfer,
preemptive rights or other defect or claim of any third party,
except as otherwise set forth in the Final Memorandum. All of the
capital stock of the Company is owned of record and beneficially by
the Parent Guarantor, free and clear of any pledge, lien,
encumbrance, security interest, restriction on voting or transfer,
preemptive rights or other defect or claim of any third party,
except as otherwise set forth in the Final Memorandum. The capital
stock of the Company, the Parent Guarantor and the Subsidiary
Guarantors conform to the descriptions thereof in the Final
Memorandum;
<PAGE>
18
(iii) the issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and, except for directors'
qualifying shares and except as otherwise set forth in the Final
Memorandum are owned of record and beneficially by the Company,
either directly or through wholly owned subsidiaries, free and clear
of any pledge, lien, encumbrance, security interest, restriction on
voting or transfer, preemptive rights or other defect or claim of
any third party;
(iv) each of this Agreement, the Registration Rights Agreement
and the Indenture, including the Guarantees of the Parent Guarantor,
Custom Foods and QF Acquisition Corp. has been duly authorized,
executed and delivered by the Company, the Parent Guarantor, Custom
Foods and QF Acquisition Corp.; each of the Indenture, the
Guarantees of the Parent Guarantor, Custom Foods and QF Acquisition
Corp. and the Registration Rights Agreement constitutes a legal,
valid and binding instrument enforceable against the Company, the
Parent Guarantor, Custom Foods and QF Acquisition Corp. as the case
may be, in accordance with its terms; and the Notes have been duly
authorized and, when executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers pursuant to this Agreement, will constitute
legal, valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable against the Company in
accordance with their terms and the Guarantees of the Parent
Guarantor, Custom Foods and QF Acquisition Corp. will constitute
legal, valid and binding obligations of the respective Guarantor
entitled to the benefits of the Indenture and enforceable against
the respective Guarantor in accordance with their terms; except, in
each case, as the same may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally, including without limitation the effect
of statutory or other laws regarding fraudulent conveyances or
transfers or preferential transfers or (ii) general principles of
equity, whether considered at law or at equity, and except as rights
to indemnity and contribution may be limited by federal or state
securities laws;
(v) the statements set forth under the heading "Description of
Notes" in the Final Memorandum, insofar as such statements purport
to summarize certain provisions of the Notes, the Indenture and the
Registration Rights Agreement are accurate in all material respects;
(vi) no consent, approval, authorization or order of any
governmental authority or court is required for the consummation of
the transactions contemplated herein, except such as may be required
under the securities or blue
<PAGE>
19
sky laws of any jurisdiction in connection with the purchase and
sale of the Notes by the Initial Purchasers;
(vii) assuming the accuracy of the representations and
warranties of the Initial Purchasers and compliance by it with its
agreements contained herein, neither the issuance, offering and sale
of the Notes to the Initial Purchasers by the Company pursuant to
this Agreement, the compliance by the Company, the Parent Guarantor,
Custom Foods and QF Acquisition Corp. with the other provisions of
this Agreement and the other Offering Documents, or the consummation
of the other transactions herein and therein contemplated will
conflict with, result in a breach or violation of, or constitute a
default under any statute, rule or regulation or the charter or
by-laws of the Company, the Parent Guarantor, Custom Foods or QF
Acquisition Corp., or the indentures, mortgages, deeds of trust,
leases or other agreements or instruments to which the Company, the
Parent Guarantor or any of the subsidiaries of the Company is a
party or by which the Company, the Parent Guarantor or any of the
subsidiaries of the Company or any of their respective properties is
bound as listed in Exhibit A to such opinion or any judgment, order
or decree known to such counsel to be applicable to the Company, the
Parent Guarantor or any of the subsidiaries of the Company or of any
governmental authority or court or arbitrator having jurisdiction
over the Company, the Parent Guarantor or any of the subsidiaries of
the Company;
(viii) assuming the accuracy of the representations and
warranties of the Initial Purchasers and compliance by it with its
agreements contained herein, no registration of the Notes under the
Securities Act is required, and no qualification of the Indenture
under the Trust Indenture Act of 1939 is necessary, for the offer
and sale by the Initial Purchasers of the Notes in the manner
contemplated by this Agreement; and
(ix) none of the Company, the Parent Guarantor, Custom Foods
or QF Acquisition Corp. is an "investment company" within the
meaning of the Investment Company Act without taking account of any
exemption arising out of the number of holders of securities of the
Company, the Parent Guarantor, Custom Foods or QF Acquisition Corp..
Such counsel shall also state that they have no reason to believe
that at the Execution Time the Final Memorandum contained an untrue
statement of a material fact or omitted to state a material
<PAGE>
20
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or that the
Final Memorandum includes an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York, the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to Counsel for the Initial Purchasers and (B) as to matters
of fact, to the extent they deem proper, on certificates of responsible
officers of the Company or Custom Foods and public officials.
Matters governed by California law may be opined upon by California
counsel satisfactory to Counsel to the Initial Purchasers.
All references in this Section 6(b) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the Closing Date.
(c) The Initial Purchasers shall have received from Counsel for the
Initial Purchasers such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and other related matters as
the Initial Purchasers may reasonably require, and Company and the
Guarantors shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters;
(d) (i) the representations and warranties of the Company or the
Guarantors, as the case may be, in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date, and the Company or the
Guarantors, as the case may be, shall have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there shall have been no change nor any
development or event involving a prospective change constituting a
Material Adverse Effect; and
(iii) each of the Company and the Guarantors shall have
furnished to the Initial Purchasers a certificate of the Company or the
Guarantor, as the case may be, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company
or the Guarantor, as the case may be, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the
Final Memorandum, any amendment or supplement to the Final Memorandum and
this Agreement and to the effect set forth in clauses (i) and (ii) above.
<PAGE>
21
(e) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Initial Purchasers a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Initial Purchasers, confirming that
they are independent accountants within the meaning of the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the applicable rules and regulations thereunder and Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and substantially to the effect that:
(i) in their opinion the audited financial statements included
in the Final Memorandum and reported on by them comply in form in
all material respects with the applicable accounting requirements of
the Exchange Act and the related published rules and regulations
thereunder; and
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with the standards
established by the AICPA of the unaudited interim financial
information; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter;
a reading of the minutes of the meetings of the stockholders,
directors and audit and compensation committees of the Company and
the subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters of the
Company and its subsidiaries as to transactions and events
subsequent to September 30, 1996, nothing came to their attention
which caused them to believe that:
(A) any unaudited financial statements included in the
Final Memorandum are not, in all material respects, in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements included in the Final Memorandum;
or
(B) with respect to the period subsequent to September
30, 1996, there were any changes, at a specified date not more
than three business days prior to the date of the letter, in
the long-term debt or other long-term liabilities of the
Company and its subsidiaries or net investment of the Company
in Custom Foods, or decreases in total current assets or
increases in total current liabilities of the Company and its
subsidiaries as compared with the amounts shown on the
September 30, 1996
<PAGE>
22
consolidated balance sheet included in the Final Memorandum,
or for the period from October 1, 1996 to such specified date
there were, as compared with the corresponding period in the
preceding year, any decreases in net sales, gross profit,
operating income or net income or any increases in interest
expense of the Company and its subsidiaries, except in all
instances for changes, decreases or increases set forth in
such letter, in which case the letter shall be accompanied by
an explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the Initial
Purchasers; or
(C) the information included under the headings
"Selected Consolidated Financial Data" and
"Management--Executive Compensation" is not in conformity with
the disclosure requirements of Regulation S-K; or
(D) the unaudited pro forma financial statements do not
comply as to form in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X and that the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of the unaudited pro
forma; and
(iii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with the standards
established by the AICPA of the unaudited interim financial
information; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders, directors and audit and compensation committees of the
Company and its subsidiaries; and inquiries of certain officials of
the Company and its subsidiaries who have responsibility for
financial and accounting matters of the Company and its subsidiaries
as to transactions and events subsequent to December 31, 1996,
nothing came to their attention which caused them to believe that
with respect to the period subsequent to December 31, 1996, there
were any changes, at a specified date not more than three business
days prior to the date of the letter, in the short-term debt or the
long-term debt of the Company and its subsidiaries, preferred stock
of the Company and its subsidiaries or common stock of the Company
and its subsidiaries, or decreases in the accumulated deficit or in
the total stockholders' deficit of the Company and its subsidiaries
as compared with the amounts set forth in the Final Memorandum under
the caption "Capitalization" except in all instances for changes or
decreases set forth in such
<PAGE>
23
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless
said explanation is not deemed necessary by the Initial Purchasers;
and
(iv) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of Quality Foods, the Company and the
subsidiaries of the Company) set forth in the Final Memorandum,
including without limitation the information set forth under the
captions "Offering Memorandum Summary," "Risk Factors," "The Quality
Foods Acquisition," "Use of Proceeds," "Capitalization," "Unaudited
Pro Forma Condensed Combined Financial Statements," "Unaudited Pro
Forma Condensed Combined Balance Sheet," "Unaudited Pro Forma
Condensed Combined Statement of Operations," "Selected Historical
Financial Data of CFP Holdings," "Management's Discussion and
Analysis," "Business," "Management," "Certain Transactions,"
"Description of Bank Credit Agreement" and "Description of Notes" in
the Final Memorandum, agrees with the accounting records of Quality
Foods, the Company and the subsidiaries of the Company, excluding
any questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma
financial statements (the "pro forma financial statements") included
in the Final Memorandum; carrying out certain specified procedures;
inquiries of certain officials of the Company who have
responsibility for financial and accounting matters; and proving the
arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the pro forma financial statements,
nothing came to their attention which caused them to believe that
the pro forma financial statements do not comply in form in all
material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of such statements.
All references in this Section 6(e) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the
letter.
(f) At the Execution Time and at the Closing Date, Ernst & Young LLP shall
have furnished to the Initial Purchasers a letter or letters, dated respectively
as of the Execution Time and as of the Closing Date, in form and substance
satisfactory to the Initial Purchasers, confirming that they are independent
accountants within the meaning of the Securities Act and
<PAGE>
24
the Exchange Act and the applicable rules and regulations thereunder and Rule
101 of the Code of Professional Conduct of the AICPA and stating in effect that:
(i) in their opinion the audited financial statements included
in the Final Memorandum and reported on by them comply in form in
all material respects with the applicable accounting requirements of
the Exchange Act and the related published rules and regulations
thereunder; and
(ii) on the basis of a reading of the latest unaudited
financial statements made available by Quality Foods; their limited
review in accordance with the standards established by the AICPA of
the unaudited interim financial information; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of
the partners and audit and compensation committees of Quality Foods
and the subsidiaries; and inquiries of certain officials of Quality
Foods who have responsibility for financial and accounting matters
of Quality Foods and its subsidiaries as to transactions and events
subsequent to December 31, 1995, nothing came to their attention
which caused them to believe that:
(A) any unaudited financial statements included in the
Final Memorandum are not, in all material respects, in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements included in the Final Memorandum;
or
(B) with respect to the period subsequent to September
30, 1996, there were any changes, at a specified date not more
than three business days prior to the date of the letter, in
the long-term debt or other long-term liabilities of Quality
Foods or net investment of QF Acquisition Corporation in
Quality Foods, or decreases in total current assets or
increases in total current liabilities of Quality Foods as
compared with the amounts shown on the September 30, 1996
consolidated balance sheet included in the Final Memorandum,
or for the period from September 30, 1996 to such specified
date there were, as compared with the corresponding period in
the preceding year, any decreases in net sales, gross profit,
operating income or net income or any increases in interest
expense of Quality Foods, except in all instances for changes,
decreases or increases set forth in such letter, in which case
the letter shall be accompanied by an explanation by Quality
Foods as to the significance
<PAGE>
25
thereof unless said explanation is not deemed necessary by the
Initial Purchasers; or
(C) the information included under the headings "Quality
Foods, L.P. Selected Consolidated Financial Data" is not in
conformity with the disclosure requirements of Regulation S-K;
and
(iii) on the basis of a reading of the latest unaudited
financial statements made available by Quality Foods; their limited
review in accordance with the standards established by the AICPA of
the unaudited interim financial information; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of
the board and audit and compensation committees of Quality Foods;
and inquiries of certain officials of Quality Foods who have
responsibility for financial and accounting matters of Quality Foods
as to transactions and events subsequent to September 30, 1996,
nothing came to their attention which caused them to believe that
with respect to the period subsequent to September 30, 1996, there
were any changes, at a specified date not more than three business
days prior to the date of the letter, in the short-term debt or the
long-term debt of Quality Foods, preferred stock of Quality Foods or
common stock of Quality Foods, or decreases in the accumulated
deficit or in the total partners' deficit of Quality Foods as
compared with the amounts set forth in the Final Memorandum under
the caption "Capitalization--Quality Foods," except in all instances
for changes or decreases set forth in such letter or in the Final
Memorandum, in which case the letter shall be accompanied by an
explanation by Quality Foods as to the significance thereof unless
said explanation is not deemed necessary by the Initial Purchasers;
and
(iv) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of Quality Foods, the Company and the
subsidiaries of the Company) set forth in the Final Memorandum,
including without limitation the information set forth under the
captions "Offering Memorandum Summary," "Risk Factors," "The Quality
Foods Acquisition," "Use of Proceeds," "Capitalization," "Selected
Historical Financial Data of Quality Foods," "Management's
Discussion and Analysis," "Business," "Management" and "Certain
Transactions" in the Final Memorandum, agrees with the accounting
records of Quality Foods, excluding any questions of legal
interpretation.
<PAGE>
26
All references in this Section 6(f) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the
letter.
(g) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letters referred to in
paragraphs (e) and (f) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business
or properties of the Company and the subsidiaries of the Company, whether
or not constituting a Material Adverse Effect, the effect of which, in any
case referred to in clause (i) or (ii) above, in the judgment of the
Initial Purchasers is to make impractical or inadvisable the marketing of
the Notes as contemplated by the Final Memorandum.
(h) The Initial Purchasers shall have received an opinion from
counsel to the Trustee, dated the Closing Date, addressed to the Initial
Purchasers and in form and substance satisfactory to Counsel for the
Initial Purchasers, to the effect that:
(i) the Trustee is a national banking association or state
chartered bank or trust company and is validly existing in good
standing under the laws of the jurisdiction in which it is
incorporated;
(ii) the Trustee has the power and authority to enter into the
Indenture and authenticate the Notes as Trustee under such
Indenture;
(iii) the Indenture has been duly authorized, executed and
delivered by the Trustee, as Trustee under such Indenture, and such
Indenture is valid and binding on such Trustee and enforceable
against the Trustee in accordance with its terms, subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights
generally from time to time in effect; and
(iv) the Notes have been duly authenticated and delivered by
the Trustee, as Trustee, under the Indenture.
(i) Prior to the Closing Date, the Company and the Subsidiary
Guarantors shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects
<PAGE>
27
reasonably satisfactory in form and substance to the Initial Purchasers and
Counsel for the Initial Purchasers, this Agreement and all obligations of the
Initial Purchasers hereunder may be canceled at, or at any time prior to, the
Closing Date by the Initial Purchasers. Notice of such cancellation shall be
given to the Company in writing or by telephone or telegraph confirmed in
writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Counsel for the Initial Purchasers, at 599 Lexington
Avenue, New York, New York, on the Closing Date.
7. Payment of Expenses. The Company shall, whether or not the
transactions contemplated by the Offering Documents are consummated, (i) pay all
expenses incident to the performance of its obligations and the obligations of
the Guarantors under the Offering Documents, including the fees and
disbursements of its accountants and counsel, the cost of printing or other
production and delivery of the Preliminary Memorandum, the Final Memorandum, all
amendments thereof and supplements thereto, the Offering Documents and all other
documents relating to the offering, the cost of preparing, printing, packaging
and delivering the Notes, the fees and disbursements, including fees of counsel,
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, the fees and expenses,
if any, incurred in connection with the admission of the Notes for trading in
the PORTAL system, (ii) pay the fees and expenses of Counsel for the Initial
Purchasers incurred in connection with the proposed purchase and resale of the
Notes and (iii) reimburse the Initial Purchasers as requested for all other
out-of-pocket expenses incurred by the Initial Purchasers in connection with the
proposed purchase and resale of the Notes.
8. Indemnification and Contribution. (a) The Company and each of the
Guarantors jointly and severally agree to indemnify and hold harmless the
Initial Purchasers, the directors, officers, employees and agents of the Initial
Purchasers and each person who controls the Initial Purchasers within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Company or a Guarantor to any
holder or prospective purchaser of Notes pursuant to Section 5(i), or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and jointly and
severally agree to reimburse each such indemnified party, as incurred, for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such
<PAGE>
28
loss, claim, damage, liability or action; provided, however, that the Company
and the Guarantors will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission (i)
made in the Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchasers
specifically for inclusion therein or (ii) made in the Preliminary Memorandum if
a copy of the Final Memorandum was not delivered by or on behalf of the Initial
Purchasers to the person asserting any claim against the Initial Purchasers, the
Final Memorandum was required by law to have been so delivered by the Initial
Purchasers and the untrue statement contained in or omission from such
Preliminary Memorandum was corrected in the Final Memorandum. This indemnity
agreement will be in addition to any liability which the Company or the
Guarantors may otherwise have.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company and the Guarantors, the directors and officers of the Company and of the
Guarantors, and each person who controls the Company or the Guarantors within
the meaning of either the Securities Act or the Exchange Act, to the same extent
as the foregoing indemnity from the Company and each of the Guarantors to the
Initial Purchasers, but only with reference to written information relating to
the Initial Purchasers furnished to the Company by or on behalf of the Initial
Purchasers specifically for inclusion in the Preliminary Memorandum or the Final
Memorandum (or in any amendment or supplement thereto). This indemnity agreement
will be in addition to any liability which the Initial Purchasers may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees,
<PAGE>
29
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each of the Guarantors,
jointly and severally, and the Initial Purchasers agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and the Guarantors, on the one
hand, and the Initial Purchasers, on the other hand, may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and by the Initial Purchasers, on
the other hand, from the offering of the Notes; provided, however, that in no
case shall the Initial Purchasers be responsible for any amount in excess of the
purchase discount or commission applicable to the Notes purchased by the Initial
Purchasers hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company and the Guarantors, on the
one hand, and the Initial Purchasers, on the other hand, shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Guarantors, on the one hand, and
of the Initial Purchasers, on the other hand, in connection with the statements
or omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company and the Guarantors
shall be deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Initial Purchasers shall be
deemed to be equal to the total purchase discounts and commissions received by
the Initial Purchasers from the Company in connection with the purchase of the
Notes hereunder. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Guarantors or the Initial Purchasers. The Company and the
Guarantors and the Initial Purchasers agree that it would not be just and
<PAGE>
30
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person who controls the Initial Purchasers within the meaning of
either the Securities Act or the Exchange Act and each director, officer,
employee and agent of the Initial Purchasers shall have the same rights to
contribution as the Initial Purchasers, and each person who controls the Company
or the Guarantors within the meaning of either the Securities Act or the
Exchange Act and each officer and director of the Company or of the Guarantors,
as the case may be, shall have the same rights to contribution as the Company or
of the Guarantors, as the case may be, subject in each case to the applicable
terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchasers, by notice given to the
Company prior to delivery of and payment for the Notes, if prior to such time
(i) trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
limited or minimum prices shall have been established on such Exchange, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Initial Purchasers, impracticable or inadvisable
to proceed with the offering or delivery of the Notes as contemplated by the
Final Memorandum.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company and the Guarantors and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or the Guarantors or any of the other persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Notes. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or telecopied and confirmed to NationsBanc Capital Markets,
Inc., NationsBank Corporate Center, 7th Floor, 100 North Tryon Street,
Charlotte, North Carolina 28255; or, if sent to the Company or the Subsidiary
Guarantors, will be mailed, delivered or telecopied and confirmed to the Company
at 1117 West Olympic Blvd., P.O. Box 1027, Montbello, California 90640,
Attention: Eric W. Ek, Vice President and Chief Financial Officer.
<PAGE>
31
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the other
persons referred to in Section 8 hereof, and, except as expressly set forth in
Section 5(i) hereof, no other person will have any right or obligation
hereunder.
13. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
14. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement among the
Company, the Guarantors and the Initial Purchasers.
Very truly yours,
CFP HOLDINGS, INC.
By: /s/ Keith Pennell
-------------------------------
Name: Keith Pennell
Title: Assistant Secretary
CFP GROUP, INC.
By: /s/ Keith Pennell
-------------------------------
Name: Keith Pennell
Title: Assistant Secretary
CUSTOM FOOD PRODUCTS, INC.
By: /s/ Keith Pennell
-------------------------------
Name: Keith Pennell
Title: Assistant Secretary
QF ACQUISITION CORP.
By: /s/ Keith Pennell
-------------------------------
Name: Keith Pennell
Title: Assistant Secretary
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ David B. Stith
- - - --------------------------------
Name: David B. Stith
Title: Managing Director
<PAGE>
34
SCHEDULE 1
INITIAL PURCHASERS
Initial Purchasers Principal Amount
- - - ------------------ ----------------
NationsBanc Capital Markets, Inc. ............................ 86,250,000
Donaldson Lufkin & Jenrette Securities Corporation ........... 28,750,000
------------
Total ........................................................ $115,000,000
============
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CFP HOLDINGS, INC.
The undersigned, being the Executive Vice President of CFP Holdings,
Inc., a Delaware corporation (the "Corporation"), hereby certifies on behalf of
the Corporation as follows:
1. The name of the Corporation is CFP Holdings, Inc. The date of
filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was February 10,
1993.
2. The text of the Corporation's Certificate of
Incorporation is amended and restated to read in
its entirety as set forth on Exhibit A.
3. The Corporation has not received any payment for
any of its capital stock.
4. The Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 141(f),
241 and 245 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this certificate has been duly executed by the
Executive Vice President of the Corporation as of this 26th day of March, 1993.
CFP HOLDINGS, INC.
By:__________________________
James A. Long,
Executive Vice President
Attest:
By: ___________________________
Michael G. Fisch, Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CFP HOLDINGS, INC.
---------------------------
ARTICLE ONE
The name of the corporation is CFP Holdings, Inc. (the
"Corporation").
ARTICLE TWO
The address of the registered office of the Corporation in the State
of Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent.
The name of the registered agent of the Corporation at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000 shares, consisting of (a)
5,000 shares of preferred stock, $.01 par value (the "Preferred Stock"), and (b)
50,000 shares of common stock, $.01 par value (the "Common Stock"), of which (i)
35,000 shares shall be designated voting common stock (the "Voting Common
Stock") and (ii) 15,000 shares shall be designated nonvoting common stock (the
"Nonvoting Common Stock").
The designations, preferences and relative participating, optional
or other special rights, qualifications, limitations or restrictions of each
class of stock are as follows:
-1-
<PAGE>
A. Common Stock. Except as otherwise provided in this Article III,
all shares of Voting Common Stock and Nonvoting Common Stock will be identical
and will entitle the holders thereof to the same rights and privileges.
1. Voting Rights. (a) Voting Common Stock. Each holder of
Voting Common Stock shall be entitled to one vote per share of Voting
Common Stock held by such holder on all matters to be voted on by the
stockholders of the Corporation.
(b) Nonvoting Common Stock. Except as set forth herein
or as otherwise required by law, holders of Nonvoting Common Stock shall
not be entitled to vote on any matters to be voted on by the stockholders
of the Corporation. On any matter on which holders of shares of Nonvoting
Common Stock are entitled to vote in accordance with the General
Corporation Law, both classes of Common Stock shall vote together as a
single class and each holder of shares of Nonvoting Common Stock shall be
entitled to one vote for each share of such stock held by such holder.
Notwithstanding the foregoing, holders of shares of Nonvoting Common Stock
shall be entitled to vote as a separate class on any amendment to this
subparagraph 1(b) and on any amendment, repeal or modification of any
provision (including, without limitation, subparagraph 4) of this Restated
Certificate of Incorporation that adversely affects the powers,
preferences or special rights of holders of the Nonvoting Common Stock.
2. Dividends. Any dividend or distribution on the Common Stock
shall be payable on shares of Voting Common Stock and Nonvoting Common
Stock, share and share alike; provided that in the case of a dividend
payable in shares of Common Stock, or options, warrants or rights to
acquire shares of such Common Stock, or securities convertible into or
exchangeable for shares of such Common Stock, the shares, options,
warrants, rights or securities so payable shall be payable in shares of,
or options, warrants or rights to acquire or securities convertible into
or exchangeable for, Common Stock of the same class upon which the
dividend or distribution is being paid.
3. Liquidation. In any liquidation, dissolution or winding up
of the Corporation, the holders of the Voting Common Stock and the
Nonvoting Common Stock shall be entitled to participate ratably on a per
share basis in all distributions to the holders of Common Stock.
4. Conversion. (a) Conversion of Voting Common Stock. Shares
of Voting Common Stock shall not be convertible into shares of Nonvoting
Common Stock.
-2-
<PAGE>
(b) Conversion of Nonvoting Common Stock. (i) Upon the
occurrence of a Conversion Event, each share of Nonvoting Common Stock
shall automatically and simultaneously convert into one share of Voting
Common Stock without further action on the part of the holder thereof.
(ii) As used herein, (A) "Conversion Event" means the
earliest to occur of (a) a public offering or public sale of securities of
the Corporation registered under the Securities Act of 1933, as amended,
(b) any sale of securities of the Corporation to a person or group of
persons (within the meaning of the Securities Exchange Act of 1934 (the
"Exchange Act")) which is not an affiliate (within the meaning of the
Exchange Act) of Atlantic Equity Partners, L.P., if, after such sale, such
person or group of persons would own or control securities which possess
the ordinary voting power to elect a majority of the Corporation's
directors or (c) a merger, consolidation or similar transaction involving
the Corporation if, after such transaction, a person or group of persons
(within the meaning of the Exchange Act) which is not an affiliate (within
the meaning of the Exchange Act) of Atlantic Equity Partners, L.P., would
own or control securities which possess the ordinary voting power to elect
a majority of the surviving corporation's directors and (B) "person" means
any natural person and any corporation, partnership, joint venture, trust,
unincorporated organization and any other entity or organization.
(c) Conversion Procedure. (i) Promptly upon the
occurrence of a Conversion Event, each holder of shares of Nonvoting
Common Stock shall surrender the certificate or certificates representing
such shares to the Corporation at its principal office during normal
business hours. Following the surrender of a certificate, the Corporation
shall issue and deliver a certificate or certificates to the holder
thereof for the Voting Common Stock issuable upon such conversion.
(ii) The issuance of certificates for Voting Common
Stock upon conversion of Nonvoting Common Stock will be made without
charge to the holders of such shares for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of Voting Common Stock.
(iii) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Voting Common
Stock, solely for the purpose of issuance upon the conversion of the
Nonvoting Common Stock, such number of shares of Voting Common Stock
issuable upon the conversion of all outstanding Nonvoting Common Stock.
-3-
<PAGE>
(iv) The Corporation shall not close its books against
the transfer of shares of Common Stock in any manner which would interfere
with the timely conversion of any shares of Common Stock.
5. Stock Splits. If the Corporation in any manner subdivides
or combines the outstanding shares of one class of Common Stock, the
outstanding shares of the other class of Common Stock shall be
proportionately subdivided or combined in a similar manner.
B. Preferred Stock. The Board of Directors of the Corporation is
hereby expressly authorized to adopt, at any time and from time to time, a
resolution or resolutions providing for the issuance of Preferred Stock in one
or more series, with such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights and qualifications, or restriction thereof, as shall be
stated and expressed in such resolution or resolutions.
ARTICLE FIVE
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them, or between the Corporation
and its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree on any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE SIX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damag-
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<PAGE>
es for breach of fiduciary duty as a director, but the foregoing provision shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the General Corporation Law is amended after the date of
incorporation of the Corporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE SEVEN
The election of directors of the Corporation need not be by ballot,
unless so required by the By-laws of the Corporation.
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<PAGE>
Exhibit 3.2
================================================================================
CFP HOLDINGS, INC.
Incorporated under the laws
of the State of Delaware
---------------------------
BY-LAWS
---------------------------
As adopted on February 16, 1993
================================================================================
<PAGE>
================================================================================
CFP HOLDINGS, INC.
BY-LAWS
TABLE OF CONTENTS
================================================================================
Page
----
ARTICLE I Offices.................................................. 1
SECTION 1. Registered Office............................... 1
SECTION 2. Other Offices................................... 1
ARTICLE II Meeting of Stockholders; Stockholders'
Consent in Lieu of Meeting............................... 1
SECTION 1. Annual Meetings................................. 1
SECTION 2. Special Meetings................................ 1
SECTION 3. Notice of Meetings.............................. 1
SECTION 4. Quorum.......................................... 2
SECTION 5. Organization.................................... 2
SECTION 6. Order of Business............................... 3
SECTION 7. Voting.......................................... 3
SECTION 8. Inspection...................................... 4
SECTION 9. List of Stockholders............................ 4
SECTION 10. Stockholders' Consent in Lieu of
Meeting......................................... 5
ARTICLE III Board of Directors....................................... 5
SECTION 1. General Powers.................................. 5
SECTION 2. Number and Term of Office....................... 5
SECTION 3. Election of Directors........................... 5
SECTION 4. Resignation, Removal and Vacancies.............. 5
SECTION 5. Meetings........................................ 6
SECTION 6. Directors' Consent in Lieu of Meeting........... 7
SECTION 7. Action by Means of Conference Telephone
or Similar Communications
Equipment....................................... 7
SECTION 8. Committees...................................... 7
ARTICLE IV Officers................................................. 8
SECTION 1. Executive Officers.............................. 8
SECTION 2. Authority and Duties............................ 8
SECTION 3. Other Officers.................................. 8
SECTION 4. Term of Office, Resignation and Removal......... 8
SECTION 5. Vacancies....................................... 9
SECTION 6. The Chairman.................................... 9
SECTION 7. The President................................... 9
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<PAGE>
Page
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SECTION 8. The Secretary................................... 9
SECTION 9. The Treasurer.................................. 10
ARTICLE V Contracts, Checks, Drafts, Bank Accounts,
Etc..................................................... 10
SECTION 1. Execution of Documents......................... 10
SECTION 2. Deposits....................................... 10
SECTION 3. Proxies with Respect to Stock or Other
Securities of Other Corporations............... 10
ARTICLE VI Shares and Their Transfer; Fixing Record
Date.................................................... 11
SECTION 1. Certificates for Shares........................ 11
SECTION 2. Record......................................... 11
SECTION 3. Transfer and Registration of Stock............. 11
SECTION 4. Addresses of Stockholders...................... 12
SECTION 5. Lost, Destroyed and Mutilated
Certificates................................... 12
SECTION 6. Regulations.................................... 12
SECTION 7. Fixing Date for Determination of
Stockholders of Record......................... 12
ARTICLE VII Seal.................................................... 14
ARTICLE VIII Fiscal Year............................................. 14
ARTICLE IX Indemnification and Insurance........................... 14
SECTION 1. Indemnification................................ 14
SECTION 2. Insurance...................................... 16
ARTICLE X Amendment............................................... 17
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<PAGE>
BY-LAWS OF
CFP HOLDINGS, INC.
--------------------
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of CFP Holdings,
Inc. (the "Corporation"), in the State of Delaware shall be at 32 Loockerman
Square, Suite L-100, City of Dover, County of Kent, Delaware 19901, and the
registered agent in charge thereof shall be The Prentice-Hall Corporation
System.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at any other place or places within or outside the State of Delaware.
ARTICLE II
Meeting of Stockholders; Stockholders'
Consent in Lieu of Meeting
SECTION 1. Annual Meetings. The annual meeting of the stockholders
for the election of directors, and for the transaction of such other business as
may properly come before the meeting, shall be held at such place, date and hour
as shall be fixed by the Board of Directors (the "Board") and designated in the
notice or waiver of notice thereof, except that no annual meeting need be held
if all actions, including the election of directors, required by the General
Corporation Law of the State of Delaware (the "Delaware Statute") to be taken at
a stockholders' annual meeting are taken by written consent in lieu of meeting
pursuant to Section 10 of this Article II.
SECTION 2. Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called by the Board, the Chairman, the
President or the record holders of at least a majority of the issued and
outstanding shares of Common Stock of the Corporation, to be held at such place,
date and hour as shall be designated in the notice or waiver of notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise required by
statute, the Certificate of Incorporation of the Corporation (the "Certificate")
or these By-laws, notice of each annual or special meeting of the stockholders
shall be given to each stockholder of record entitled to vote at such meeting
not less than 10 nor more than 60 days before the day on which the meeting is to
be held, by delivering written notice thereof to
<PAGE>
him personally, or by mailing a copy of such notice, postage prepaid, directly
to him at his address as it appears in the records of the Corporation, or by
transmitting such notice thereof to him at such address by telegraph, cable or
other telephonic transmission. Every such notice shall state the place, the date
and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called. Notice of any meeting of stockholders
shall not be required to be given to any stockholder who shall attend such
meeting in person or by proxy, or who shall, in person or by attorney thereunto
authorized, waive such notice in writing, either before or after such meeting.
Except as otherwise provided in these By-laws, neither the business to be
transacted at, nor the purpose of, any meeting of the stockholders need be
specified in any such notice or waiver of notice. Notice of any adjourned
meeting of stockholders shall not be required to be given, except when expressly
required by law.
SECTION 4. Quorum. At each meeting of the stockholders, except where
otherwise provided by the Certificate or these By-laws, the holders of a
majority of the issued and outstanding shares of Common Stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business. In the absence of a
quorum, a majority in interest of the stockholders present in person or
represented by proxy and entitled to vote, or, in the absence of all the
stockholders entitled to vote, any officer entitled to preside at, or act as
secretary of, such meeting, shall have the power to adjourn the meeting from
time to time, until stockholders holding the requisite amount of stock to
constitute a quorum shall be present or represented. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 5. Organization.
(a) Unless otherwise determined by the Board, at each meeting
of the stockholders, one of the following shall act as chairman of the meeting
and preside thereat, in the following order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any director, officer or stockholder of the Corporation
designated by the Board to act as chairman of such meeting and to preside
thereat if the Chairman or the President shall be absent from such
meeting; or
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<PAGE>
(iv) a stockholder of record who shall be chosen chairman of
such meeting by a majority in voting interest of the stockholders present
in person or by proxy and entitled to vote thereat.
(b) The Secretary or, if he shall be presiding over such
meeting in accordance with the provisions of this Section 5 or if he shall be
absent from such meeting, the person (who shall be an Assistant Secretary, if an
Assistant Secretary has been appointed and is present) whom the chairman of such
meeting shall appoint, shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 6. Order of Business. The order of business at each meeting
of the stockholders shall be determined by the chairman of such meeting, but
such order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 7. Voting. Except as otherwise provided by law, the
Certificate or these By-laws, at each meeting of the stockholders, every
stockholder of the Corporation shall be entitled to one vote in person or by
proxy for each share of Common Stock of the Corporation held by him and
registered in his name on the books of the Corporation on the date fixed
pursuant to Section 7 of Article VI as the record date for the determination of
stockholders entitled to vote at such meeting. Persons holding stock in a
fiduciary capacity shall be entitled to vote the shares so held. A person whose
stock is pledged shall be entitled to vote, unless, in the transfer by the
pledgor on the books of the Corporation, he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee or his proxy may represent such
stock and vote thereon. If shares or other securities having voting power stand
in the record of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary shall be given written notice
to the contrary and furnished with a copy of the instrument or order appointing
them or creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting
binds all; and
(c) if more than one votes, but the vote is evenly split on
any particular matter, such shares shall be voted in the manner provided
by law.
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<PAGE>
If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purposes of this Section 7 shall be
a majority or even-split in interest. The Corporation shall not vote directly or
indirectly any share of its own capital stock. Any vote of stock may be given by
the stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted after three years from its date, unless
said proxy provides for a longer period. At all meetings of the stockholders,
all matters (except where other provision is made by law, the Certificate or
these By-laws) shall be decided by the vote of a majority in interest of the
stockholders present in person or by proxy at such meeting and entitled to vote
thereon, a quorum being present. Unless demanded by a stockholder present in
person or by proxy at any meeting and entitled to vote thereon, the vote on any
question need not be by ballot. Upon a demand by any such stockholder for a vote
by ballot upon any question, such vote by ballot shall be taken. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
SECTION 8. Inspection. The chairman of the meeting may at any time
appoint two or more inspectors to serve at any meeting of the stockholders. Any
inspector may be removed, and a new inspector or inspectors appointed, by the
Board at any time. Such inspectors shall decide upon the qualifications of
voters, accept and count votes, declare the results of such vote, and subscribe
and deliver to the secretary of the meeting a certificate stating the number of
shares of stock issued and outstanding and entitled to vote thereon and the
number of shares voted for and against the question, respectively. The
inspectors need not be stockholders of the Corporation, and any director or
officer of the Corporation may be an inspector on any question other than a vote
for or against his election to any position with the Corporation or on any other
matter in which he may be directly interested. Before acting as herein provided,
each inspector shall subscribe an oath faithfully to execute the duties of an
inspector with strict impartiality and according to the best of his ability.
SECTION 9. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its stock
ledger to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to any
such meeting, during ordinary business hours, for a period of at least 10 days
prior
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<PAGE>
to such meeting, either at a place within the city where such meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 10. Stockholders' Consent in Lieu of Meeting. Any action
required by the Delaware Statute to be taken at any annual or special meeting of
the stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, by a consent in writing, as permitted
by the Delaware Statute.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate directed or required to be
exercised or done by the stockholders.
SECTION 2. Number and Term of Office. The number of directors
initially shall be three and thereafter shall be such number as may be fixed
from time to time by the Board or the stockholders. Directors need not be
stockholders. Each director shall hold office until his successor is elected and
qualified, or until his earlier death or resignation or removal in the manner
hereinafter provided.
SECTION 3. Election of Directors. At each meeting of the
stockholders for the election of directors at which a quorum is present, the
persons receiving the greatest number of votes, up to the number of directors to
be elected, of the stockholders present in person or by proxy and entitled to
vote thereon shall be the directors; provided, however, that for purposes of
such vote no stockholder shall be allowed to cumulate his votes. Unless an
election by ballot shall be demanded as provided in Section 7 of Article II,
election of directors may be conducted in any manner approved at such meeting.
SECTION 4. Resignation, Removal and Vacancies.
(a) Any director may resign at any time by giving written
notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified therein or, if the time be
not specified, upon receipt
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<PAGE>
thereof; unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
(b) Any director or the entire Board may be removed, with or
without cause, at any time by vote of the holders of a majority of the shares
then entitled to vote at an election of directors or by written consent of the
stockholders pursuant to Section 10 of Article II.
(c) Vacancies occurring on the Board for any reason may be
filled by vote of the stockholders or by the stockholders' written consent
pursuant to Section 10 of Article II, or by vote of the Board or by the
directors' written consent pursuant to Section 6 of this Article III. If the
number of directors then in office is less than a quorum, such vacancies may be
filled by a vote of a majority of the directors then in office.
SECTION 5. Meetings.
(a) Annual Meetings. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization and
the transaction of other business, unless it shall have transacted all such
business by written consent pursuant to Section 6 of this Article III.
(b) Other Meetings. Other meetings of the Board shall be held
at such times and places as the Board, the Chairman, the President or any
director shall from time to time determine.
(c) Notice of Meetings. Notice shall be given to each director
of each meeting, including the time, place and purpose of such meeting. Notice
of each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days before the date on which
such meeting is to be held, or shall be sent to him at such place by telegraph,
cable, wireless or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held, but notice need not be given to any director who shall
attend such meeting. A written waiver of notice, signed by the person entitled
thereto, whether before or after the time of the meeting stated therein, shall
be deemed equivalent to notice.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or outside the State of Delaware as the Board may from
time to time determine, or as shall be designated in the respective notices or
waivers of notice thereof.
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<PAGE>
(e) Quorum and Manner of Acting. A majority of the total
number of directors then in office shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and the vote of a majority of those directors present at any such
meeting at which a quorum is present shall be necessary for the passage of any
resolution or act of the Board, except as otherwise expressly required by law or
these By-laws. In the absence of a quorum for any such meeting, a majority of
the directors present thereat may adjourn such meeting from time to time until a
quorum shall be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(i) the Chairman;
(ii) the President (if a director); or
(iii) any director designated by a majority of the
directors present.
The Secretary or, in the case of his absence, an Assistant Secretary, if an
Assistant Secretary has been appointed and is present, or any person whom the
chairman of the meeting shall appoint shall act as secretary of such meeting and
keep the minutes thereof.
SECTION 6. Directors' Consent in Lieu of Meeting. Any action
required or permitted to be taken at any meeting of the Board may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all the directors
then in office and such consent is filed with the minutes of the proceedings of
the Board.
SECTION 7. Action by Means of Conference Telephone or Similar
Communications Equipment. Any one or more members of the Board may participate
in a meeting of the Board by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
SECTION 8. Committees. The Board may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees, each
such committee to consist of one or more directors of the Corporation, which to
the extent provided in said resolution or resolutions shall have and may
exercise the powers of the Board in the management of the business and affairs
of the Corporation and may authorize the seal of the Corporation
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<PAGE>
to be affixed to all papers which may require it, such committee or committees
to have such name or names as may be determined from time to time by resolution
adopted by the Board. A majority of all the members of any such committee may
determine its action and fix the time and place of its meetings, unless the
Board shall otherwise provide. The Board shall have power to change the members
of any such committee at any time, to fill vacancies and to discharge any such
committee, either with or without cause, at any time.
ARTICLE IV
Officers
SECTION 1. Executive Officers. The principal officers of the
Corporation shall be a Chairman, if one is appointed (and any references to the
Chairman shall not apply if a Chairman has not been appointed), a President, a
Secretary, and a Treasurer, and may include such other officers as the Board may
appoint pursuant to Section 3 of this Article IV. Any two or more offices may be
held by the same person.
SECTION 2. Authority and Duties. All officers, as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-laws or, to the
extent so provided, by the Board.
SECTION 3. Other Officers. The Corporation may have such other
officers, agents and employees as the Board may deem necessary, including one or
more Assistant Secretaries, one or more Assistant Treasurers and one or more
Vice Presidents, each of whom shall hold office for such period, have such
authority, and perform such duties as the Board, the Chairman, or the President
may from time to time determine. The Board may delegate to any principal officer
the power to appoint and define the authority and duties of, or remove, any such
officers, agents, or employees.
SECTION 4. Term of Office, Resignation and Removal.
(a) All officers shall be elected or appointed by the Board
and shall hold office for such term as may be prescribed by the Board. Each
officer shall hold office until his successor has been elected or appointed and
qualified or until his earlier death or resignation or removal in the manner
hereinafter provided. The Board may require any officer to give security for the
faithful performance of his duties.
(b) Any officer may resign at any time by giving written
notice to the Board, the Chairman, the President or the
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<PAGE>
Secretary. Such resignation shall take effect at the time specified therein or,
if the time be not specified, at the time it is accepted by action of the Board.
Except as aforesaid, the acceptance of such resignation shall not be necessary
to make it effective.
(c) All officers and agents elected or appointed by the Board
shall be subject to removal at any time by the Board or by the stockholders of
the Corporation with or without cause.
SECTION 5. Vacancies. If the office of Chairman, President,
Secretary or Treasurer becomes vacant for any reason, the Board shall fill such
vacancy, and if any other office becomes vacant, the Board may fill such
vacancy. Any officer so appointed or elected by the Board shall serve only until
such time as the unexpired term of his predecessor shall have expired, unless
reelected or reappointed by the Board.
SECTION 6. The Chairman. The Chairman shall give counsel and advice
to the Board and the officers of the Corporation on all subjects concerning the
welfare of the Corporation and the conduct of its business and shall perform
such other duties as the Board may from time to time determine. Unless otherwise
determined by the Board, he shall preside at meetings of the Board and of the
Stockholders at which he is present.
SECTION 7. The President. The President shall be the chief executive
officer of the Corporation. The President shall have general and active
management and control of the business and affairs of the Corporation subject to
the control of the Board and shall see that all orders and resolutions of the
Board are carried into effect. The President shall from time to time make such
reports of the affairs of the Corporation as the Board of Directors may require
and shall perform such other duties as the Board may from time to time
determine.
SECTION 8. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the
stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose. He may give, or cause to be given, notice of
all meetings of the stockholders and of the Board, and shall perform such other
duties as may be prescribed by the Board, the Chairman or the President, under
whose supervision he shall act. He shall keep in safe custody the seal of the
Corporation and affix the same to any duly authorized instrument requiring it
and, when so affixed, it shall be attested by his signature or by the signature
of the Treasurer or, if appointed, an Assistant Secretary or an Assistant
Treasurer. He shall keep in safe custody the certificate books and stockholder
records and such other books
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<PAGE>
and records as the Board may direct, and shall perform all other duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the Board, the Chairman or the President.
SECTION 9. The Treasurer. The Treasurer shall have the care and
custody of the corporate funds and other valuable effects, including securities,
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, shall render to the Chairman, President and directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation and shall perform all other duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board, the Chairman or the President.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Documents. The Board shall designate, by
either specific or general resolution, the officers, employees and agents of the
Corporation who shall have the power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation, and may
authorize such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation; unless so designated or expressly authorized by these
By-laws, no officer, employee or agent shall have any power or authority to bind
the Corporation by any contract or engagement, to pledge its credit or to render
it liable pecuniarily for any purpose or amount.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or Treasurer, or any other officer of the Corporation
to whom power in this respect shall have been given by the Board, shall select.
SECTION 3. Proxies with Respect to Stock or Other Securities of
Other Corporations. The Board shall designate the officers of the Corporation
who shall have authority from time to time to appoint an agent or agents of the
Corporation to exercise
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<PAGE>
in the name and on behalf of the Corporation the powers and rights which the
Corporation may have as the holder of stock or other securities in any other
corporation, and to vote or consent with respect to such stock or securities.
Such designated officers may instruct the person or persons so appointed as to
the manner of exercising such powers and rights, and such designated officers
may execute or cause to be executed in the name and on behalf of the Corporation
and under its corporate seal or otherwise, such written proxies, powers of
attorney or other instruments as they may deem necessary or proper in order that
the Corporation may exercise its powers and rights.
ARTICLE VI
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificates for Shares. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number and
class of shares owned by him in the Corporation, which shall be in such form as
shall be prescribed by the Board. Certificates shall be numbered and issued in
consecutive order and shall be signed by, or in the name of, the Corporation by
the Chairman, the President or any Vice President, and by the Treasurer (or an
Assistant Treasurer, if appointed) or the Secretary (or an Assistant Secretary,
if appointed). In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate had not ceased to be such officer or officers of the Corporation.
SECTION 2. Record. A record in one or more counterparts shall be
kept of the name of the person, firm or corporation owning the shares
represented by each certificate for stock of the Corporation issued, the number
of shares represented by each such certificate, the date thereof and, in the
case of cancellation, the date of cancellation. Except as otherwise expressly
required by law, the person in whose name shares of stock stand on the stock
record of the Corporation shall be deemed the owner thereof for all purposes
regarding the Corporation.
SECTION 3. Transfer and Registration of Stock.
(a) The transfer of stock and certificates which represent the
stock of the Corporation shall be governed by
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<PAGE>
Article 8 of Subtitle 1 of Title 6 of the Delaware Code (the Uniform Commercial
Code), as amended from time to time.
(b) Registration of transfers of shares of the Corporation
shall be made only on the books of the Corporation upon request of the
registered holder thereof, or of his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and upon
the surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a stock power duly executed.
SECTION 4. Addresses of Stockholders. Each stockholder shall
designate to the Secretary an address at which notices of meetings and all other
corporate notices may be served or mailed to him, and, if any stockholder shall
fail to designate such address, corporate notices may be served upon him by mail
directed to him at his post-office address, if any, as the same appears on the
share record books of the Corporation or at his last known post-office address.
SECTION 5. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board may,
in its discretion, cause to be issued to him a new certificate or certificates
for such shares, upon the surrender of the mutilated certificates or, in the
case of loss or destruction of the certificate, upon satisfactory proof of such
loss or destruction, and the Board may, in its discretion, require the owner of
the lost or destroyed certificate or his legal representative to give the
Corporation a bond in such sum and with such surety or sureties as it may direct
to indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate.
SECTION 6. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates for stock of the
Corporation.
SECTION 7. Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall be not more than 60 nor less
than 10 days before the date of such meeting. If no record date is fixed by the
Board, the record date for determining stockholders entitled to notice of or to
vote at a meeting of
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stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which date shall be not more than 10 days after the date upon which
the resolution fixing the record date is adopted by the Board. If no record date
has been fixed by the Board, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is required by the Delaware Statute, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in this State, its principal place of business or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board and prior
action by the Board is required by the Delaware Statute, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board adopts the resolution relating thereto.
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ARTICLE VII
Seal
The Board may provide a corporate seal, which shall be in the form
of a circle and shall bear the full name of the Corporation, the year of
incorporation of the Corporation and the words and figures "Corporate Seal -
Delaware."
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board.
ARTICLE IX
Indemnification and Insurance
SECTION 1. Indemnification.
(a) As provided in the Charter, to the fullest extent
permitted by the Delaware Statute as the same exists or may hereafter be
amended, a director of this Corporation shall not be liable to the Corporation
or its stockholders for breach of fiduciary duty as a director.
(b) Without limitation of any right conferred by paragraph (a)
of this Section 1, each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director, officer or employee of the Corporation or is or was
serving at the request of the Corporation as a director, officer or employee of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity while serving as a director, officer or employee
or in any other capacity while serving as a director, officer or employee, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware Statute, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss
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(including attorneys' fees, judgments, fines, excise taxes or amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer or employee and shall inure to the benefit of
the indemnitee's heirs, testators, intestates, executors and administrators;
provided, however, that such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and with respect to a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided further, however,
that no indemnification shall be made in the case of an action, suit or
proceeding by or in the right of the Corporation in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
director, officer, employee or agent is liable to the Corporation, unless a
court having jurisdiction shall determine that, despite such adjudication, such
person is fairly and reasonably entitled to indemnification; provided further,
however, that, except as provided in Section 1(c) of this Article IX with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
initiated by such indemnitee was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article IX shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Delaware Statute requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise.
(c) If a claim under Section (b) of this Article IX is not
paid in full by the Corporation with 60 days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such suit,
or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of any undertaking, the indemnitee shall be entitled to be
paid also the
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<PAGE>
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware Statute. Neither the failure of the Corporation (including the Board,
independent legal counsel, or the stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware Statute, nor an actual
determination by the Corporation (including the Board, independent legal
counsel, or the stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Section or otherwise shall be on the Corporation.
(d) The rights to indemnification and to the advancement of
expenses conferred in this Article IX shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the Charter,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 2. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was a
director, officer, employee or agent of the Corporation or any person who is or
was serving at the request of the Corporation as a director, officer, employer
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware Statute.
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ARTICLE X
Amendment
Any by-law (including these By-laws) may be adopted, amended or
repealed by the vote of the holders of a majority of the shares then entitled to
vote or by the stockholders' written consent pursuant to Section 10 of Article
II, or by the vote of the Board or by the directors' written consent pursuant to
Section 6 of Article III.
* * * * *
* * *
*
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Exhibit 4.1
INDENTURE, dated as of January 28, 1997 between CFP Holdings, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), CFP Group, Inc., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
"CFP Group" or the "Parent Guarantor"), Custom Food Products, Inc., a
corporation duly organized and existing under the laws of the State of
California (herein called "Custom Foods"), QF Acquisition Corp., a corporation
duly organized under the laws of the State of Delaware (herein called "Quality
Foods", and together with Custom Foods and each of the future subsidiaries of
the Company herein called the "Subsidiary Guarantors") and United States Trust
Company of New York, a bank and trust company duly organized and existing under
the laws of New York, trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of 11 5/8%
Senior Guaranteed Notes Due 2004 (herein called the "Initial Securities"), and
11 5/8% Series B Senior Guaranteed Notes Due 2004 (the "Exchange Securities"
and, together with the Initial Securities, the "Securities") of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture.
Each of CFP Group, Custom Foods and Quality Foods has duly
authorized its guarantee of the Securities, and to provide therefor each of them
has duly authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Exchange Offer Registration Statement (as defined herein)
or, under certain circumstances, the effectiveness of the Shelf Registration
Statement (as defined herein), this Indenture will be subject to the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be part of
this Indenture and shall, to the extent applicable, be governed by such
provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, Custom Foods and Quality Foods, each
in accordance with their respective terms.
<PAGE>
2
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Two, Eight, Ten and
Twelve are defined in that Article.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing
at the time such Person becomes a Subsidiary or (b) assumed in connection with
the acquisition of assets from such Person.
<PAGE>
3
"Acquisition" means the acquisition by Quality Foods of all of the
Capital Stock of the general partners of, and substantially all of the
partnership interests in, Quality Foods, L.P., a Delaware limited partnership,
on December 31, 1996.
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"Affiliate" means, with respect to any specified Person, (a) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person or (b) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's
Capital Stock or any executive officer or director of any such specified Person
or other Person, or, with respect to any natural Person, any Person having a
relationship with such Person by blood, marriage or adoption not more remote
than first cousin. For the purposes of this definition, "control", when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction or similar arrangement)
(collectively, a "transfer") by the Company or any Restricted Subsidiary other
than in the ordinary course of business, whether in a single transaction or a
series of related transactions, other than (a) inventory sold in the ordinary
course of business and (b) any such other assets to the extent that the
aggregate value of such assets sold in any single transaction or related series
of transactions does not exceed $250,000 and in all transactions during any
12-month period does not exceed $1,000,000. For the purposes of this definition,
the term "Asset Sale" does not include any transfer of properties or assets (i)
that is governed by the provisions of this Indenture described in Article Eight,
(ii) between or among the Company and its Restricted Subsidiaries pursuant to
transactions that do not violate any other provisions of this Indenture, (iii)
representing obsolete or permanently retired equipment and facilities or (iv) to
an Unrestricted Subsidiary, if permitted under Section 1011.
"Average Life" means, as of the date of determination with respect
to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a)
the sum of the products of (i) the number of the years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
<PAGE>
4
"Bank Credit Agreement" means the credit agreement dated as of
December 30, 1996 among the Company, the Banks and NationsBank, N.A., as agent,
as such agreement may be amended, restated, supplemented, refinanced or
otherwise modified from time to time.
"Banks" means the banks and other financial institutions that from
time to time are lenders under the Bank Credit Agreement.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Bridge Securities" means the $25,000,000 of subordinated bridge
notes issued by the Company on December 31, 1996.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such Person's equity interest (however designated) and any rights
(other than debt securities convertible into capital stock), warrants or options
exercisable or exchangeable for or convertible into such capital stock, whether
now outstanding or issued after the Closing date.
"Capitalized Lease Obligation" means, with respect to any Person, an
obligation incurred or assumed in the ordinary course of business under or in
connection with any capital lease of real or personal property that, in
accordance with GAAP, has been recorded as a capitalized lease.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; and (iii) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the
<PAGE>
5
laws of any state of the United States or the District of Columbia and rated at
least A-1 by S&P or at least P-1 by Moody's.
"CFP Group" means the Person named as such in the first paragraph of
this Indenture, the parent company of the Company, and its successors.
"Change in Control" means the occurrence of any of the following
events:
(a) Prior to an Initial Public Offering, Atlantic Equity
Partners, L.P. and/or its Affiliates shall cease to beneficially own
and control (x) at least 66 2/3% of the shares of Capital Stock
(excluding the redeemable preferred stock owned by Atlantic Equity
Partners, L.P. and its Affiliates) of CFP Group (as such number of
shares may be adjusted to take into account stock splits, reverse
stock splits, dividends payable in shares of Capital Stock and
similar transactions) beneficially owned and controlled by such
Persons as of the Closing Date and (y) a majority of the issued and
outstanding Voting Stock of CFP Group;
(b) any "person" or "group" (as such terms are used in
Sections 13(d) and 14 (d) of the Exchange Act), other than Atlantic
Equity Partners, L.P., its Affiliates and/or management employees of
CFP Group or any of its Subsidiaries is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the voting power of all classes
of Voting Stock of CFP Group;
(c) CFP Group, either individually or in conjunction with one
or more of its subsidiaries, sells, assigns, conveys, transfers,
leases or otherwise disposes of, or such subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of, all or
substantially all of the properties of CFP Group and its
subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including Capital Stock of such
subsidiaries, to any Person (other than the Company or a Restricted
Subsidiary);
(d) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors of
CFP Group (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
stockholders of CFP Group was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of CFP Group then in
office; or
<PAGE>
6
(e) CFP Group or the Company is liquidated or dissolved or
adopts a plan of liquidation or dissolution, (other than as a result
of a merger of the Company into CFP Group or CFP Group into the
Company).
"Closing Date" means the date on which the Securities are originally
issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, and includes, without
limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Adjusted Net Income" means, for any period, the net
income (or net loss) of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, adjusted
to the extent included in calculating such net income or loss by excluding (a)
any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to Asset Sales, (c) the portion of net
income (or loss) of any Person (other than the Company or a Restricted
Subsidiary), including Unrestricted Subsidiaries, in which the Company or any
Restricted Subsidiary has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
Restricted Subsidiary in cash during such period, (d) the net income (or loss)
of any Person combined with the Company or any Restricted Subsidiary on a
"pooling of interest" basis attributable to any period prior to the date of
combination and (e) the net income (but not the net loss) of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is at the date of determination
restricted, directly or indirectly, except to the extent that such net income
<PAGE>
7
could be paid to the Company or a Restricted Subsidiary thereof by loans,
advances, intercompany transfers, principal repayments or otherwise.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, (a) Consolidated Adjusted Net Income for such period, plus (b)
Fixed Charges for such period, plus (c) the provision for federal, state, local
and foreign income taxes of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, plus (d)
the aggregate depreciation, amortization and other non-cash expenses of the
Company and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such non-cash charge
that requires an accrual of or reserve for cash charges for any future period),
to the extent deducted in computing Consolidated Adjusted Net Income, plus (e)
any other non-cash charges reducing Consolidated Adjusted Net Income for such
period, and minus non-cash credits increasing Consolidated Adjusted Net Income
for such period, other than non-cash charges or credits resulting from changes
in prepaid assets or accrued liabilities in the ordinary course of business.
"Corporate Trust Office" means the principal corporate trust office
of the Trustee, at which at any particular time its corporate trust business
shall be administered, which office at the date of execution of this Indenture
is located at 114 West 47th Street, New York, NY 10036, except that with respect
to presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate trust and agency business shall be conducted.
"corporation" includes corporations, associations, companies and
business trusts.
"Custom Foods" means the Person named as such in the first paragraph
of this Indenture, a wholly-owned Subsidiary of the Company, and its successors.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Disinterested Directors" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does
<PAGE>
8
not have any material direct or indirect financial interest in or with respect
to such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (i) is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities, (ii) is redeemable at the option
of the holder thereof, at any time prior to such final Stated Maturity or (iii)
at the option of the holder thereof is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity.
"Distribution" means a cash distribution on the Capital Stock of the
Company in an amount not to exceed $17,250,000 in order to permit CFP Group to
make a cash distribution of up to $16,000,000 on the Class A Common Stock of CFP
Group and to effect redemption of an aggregate of up to $1,250,000 of the
outstanding redeemable preferred stock of CFP Group.
"Equity Offering" means an underwritten primary offering of common
stock (which is Qualified Stock) of CFP Group.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to the interest rate step-up
provision and transfer restrictions) that are issued and exchanged for the
Initial Securities pursuant to the Registration Right Agreement and this
Indenture.
"Fair Market Value" means, with respect to any asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction.
<PAGE>
9
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"First Atlantic" means First Atlantic Capital, Ltd.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Fixed Charges" means, for any period, without duplication, the sum
of (a) the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations
of the Company and its Restricted Subsidiaries, plus (b) cash dividends paid on
Preferred Stock and Disqualified Stock by the Company and any Restricted
Subsidiary (to any Person other than the Company and its Restricted
Subsidiaries), computed on a tax effected basis, plus (c) all interest on any
Indebtedness of any Person guaranteed by the Company or any of its Restricted
Subsidiaries or secured by a lien on the assets of the Company or any of its
Restricted Subsidiaries; provided, however, that Fixed Charges will not include
any gain or loss from extinguishment of debt, including the write-off of debt
issuance costs.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
"Guarantees" means the Subsidiary Guarantees and the Parent
Guarantee.
"Guarantors" means the Subsidiary Guarantors and the Parent
Guarantor.
"Hedging Obligations" means the obligations of any Person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or the value of foreign
currencies.
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of
<PAGE>
10
such Person evidenced by bonds, debentures, notes or other similar instruments,
(c) every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person, (d) every obligation of such Person issued or assumed as the
deferred purchase price of property or services, (e) the attributable value of
every Capitalized Lease Obligation and Sale and Leaseback Transaction of such
Person, (f) all Disqualified Stock of such Person valued at its maximum fixed
repurchase price, plus accrued and unpaid dividends, (g) all obligations of such
Person under or in respect of Hedging Obligations and (h) every obligation of
the type referred to in clauses (a) through (g) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed. For purposes of this definition, the "maximum fixed repurchase
price" of any Disqualified Stock that does not have a fixed repurchase price
will be calculated in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were purchased on any date on which Indebtedness is
required to be determined pursuant to this Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value will be determined in good faith by the board of directors of
the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade
accounts payable and accrued liabilities arising in the ordinary course of
business and any liabilities for federal, state or local taxes or other taxes
owed by such Person will not be considered Indebtedness for purposes of this
definition.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any
other obligor hereunder or under the Securities, including the Guarantors to pay
principal of (and premium, if any) and interest on the Securities when due and
payable at Maturity, and all other amounts due or to become due under or in
connection with this Indenture, the Securities and the performance of all other
obligations to the Trustee (including all amounts due to the Trustee under
Section 606 hereof) and the Holders under this Indenture and the Securities,
according to the terms hereof and thereof.
"Initial Public Offering" means a public offering of the common
stock of CFP Group that first results in the common stock of CFP Group becoming
listed for trading on the New York Stock Exchange, the American Stock Exchange
or the NASDAQ National Market.
"Initial Securities" has the meaning stated in the first recital of
this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
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11
"Investment" means, (i) directly or indirectly (whether by means of
a cash payment or otherwise), any advance, loan (including, without limitation,
by way of guarantee or other similar arrangement) or other extension of credit
or capital contribution to, the purchase of any stock, bonds, notes, debentures
or other securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any Person or making of any investment in any Person,
(ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary
and (iii) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of
assets or properties made in the ordinary course of business. Investments will
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property that such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Management Fees" means management fees not in excess of $600,000 in
any single fiscal year plus reimbursement of actual out-of-pocket expenses.
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of any bona fide direct costs incurred in
connection with such Asset Sale, including, without limitation, (i) taxes
reasonably estimated to be actually payable in connection with such Asset Sale,
(ii) payment of liabilities relating to assets sold at the time of, or within 30
days after the date of such Asset Sale, (iii) payment of the outstanding amount
of, premium or penalty, if any, and interest on any Indebtedness (other than
under the Bank Credit Agreement) that is secured by a lien on the stock or
assets in question and that is required to be repaid under the terms thereof as
a result of such Asset Sale and (iv) reasonable and customary fees, commissions,
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12
expenses and other costs paid by the Company or any of its Subsidiaries to any
Person (other than an Affiliate of the Company) in connection with such Asset
Sale.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as
defined in Regulation S.
"Offering" means the offering of 11 5/8% Senior Guaranteed Notes Due
2004 by the Company.
"Officers' Certificate" means a certificate signed by the Chairman,
the President or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall be
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that, if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made; and
(c) Securities, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Twelve; and
(d) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands the Securities are valid obligations of the Company;
<PAGE>
13
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Parent Guarantee" means the unconditional guarantee by the Parent
Guarantor pursuant to Article Thirteen.
"Parent Guarantor" means CFP Group.
"Paying Agent" means United States Trust Company of New York and any
successor (including the Company acting as Paying Agent) authorized by the
Company to pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year
or less issued or directly and fully guaranteed or insured by the
United States or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in
support thereof); (ii) certificates of deposit or acceptances with a
maturity of one year or less of any financial institution that is a
member of the Federal Reserve System having combined capital and
surplus of not less than $500,000,000; (iii) any shares of money
market mutual or similar funds having assets in excess of
$500,000,000; and (iv) commercial paper with a maturity of one year
or less issued by a corporation that is not an Affiliate of the
Company and is organized under the laws of any state of the United
States or the District of Columbia and having a rating (A) from
Moody's of at least P-1 or (B) from S&P of at least A-1;
(b) Investments by the Company or any Restricted Subsidiary in
another Person, if as a result of such Investment (i) such other
Person becomes a Restricted Subsidiary or (ii) such other Person is
merged or consolidated
<PAGE>
14
with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Subsidiary;
(c) Investments by the Company or any Restricted Subsidiary in
any one of the other of them;
(d) Investments in property or assets to be used in any line
of business in which the Company or any Restricted Subsidiary is
engaged on the Closing Date;
(e) Investments in existence on the Closing Date;
(f) promissory notes received as a result of Asset Sales
permitted under Section 1013; and
(g) other Investments that do not exceed $1,000,000 at any
time outstanding.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated) of such Person's preferred or preference stock,
whether now outstanding or issued after the Closing Date, and including, without
limitation, all classes and series of preferred or preference stock of such
Person.
"Qualified Equity Interest" means any Qualified Stock and all
warrants, options or other rights to acquire Qualified Stock (but excluding any
debt security that is convertible into or exchangeable for Capital Stock).
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
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15
"Qualified Stock" of any Person means any and all Capital Stock of
such Person, other than Disqualified Stock.
"Quality Foods" means the Person named as such in the first
paragraph of this Indenture, a wholly-owned Subsidiary of the Company, and its
successors.
"Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrar" means United States Trust Company of New York and any
successor authorized by the Company to act as Registrar.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of January 28, 1997 relating to the Securities.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 30 or December 31 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which a Person sells or transfers any property
or asset in connection with the leasing, or the resale against installment
payments, of such property or asset to the seller or transferor.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Securities"
shall include any Exchange Securities to
<PAGE>
16
be issued and exchanged for any Securities pursuant to the Registration Rights
Agreement and this Indenture and, for purposes of this Indenture, all Initial
Securities and Exchange Securities shall vote together as one series of
Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that together with its subsidiaries, (a) for the most recent fiscal year
of the Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired since the end of such fiscal
year and would have been a Significant Subsidiary if it had been owned during
such fiscal year.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, and its successors.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or
any installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable and, when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness or
any installment of interest thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Securities
or the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case
may be.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more Subsidiaries of the Company.
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17
"Subsidiary Guarantee" means with respect to each Subsidiary
Guarantor, the unconditional guarantee by such Subsidiary Guarantor, pursuant to
Article Thirteen.
"Subsidiary Guarantors" means Custom Foods and Quality Foods and any
future Subsidiaries which guarantee the Securities pursuant to Article Thirteen
hereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary in accordance with Section 1018 and (b) any subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company and the Guarantors to
the Trustee to take any action under any provision of this Indenture, the
Company and the Guarantors shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
(including any covenant compliance with which constitutes a condition precedent)
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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18
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company and/or the
Guarantors may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company and/or the Guarantors stating that the information with respect to such
factual matters is in the possession of the Company and/or the Guarantors,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such
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19
Holders in Person or by agents duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company or the Guarantors. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee, the Company and the Guarantors, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by
any Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company or any Guarantor shall solicit from the Holders
of Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company or any such Guarantor (as the case may be),
may, at its option, by or pursuant to a Board Resolution, fix in advance a
record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company or any such Guarantor (as the case may be) shall have no obligation to
do so. Notwithstanding TIA Section 316(c), such record date shall be the record
date specified in or pursuant to such Board Resolution, which shall be a date
not earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after the
record date.
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20
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company and/or the Guarantors in reliance thereon, whether or not notation of
such action is made upon such Security.
SECTION 105. Notices, etc., to Trustee, Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, the Company or any Guarantor shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing or mailed, first-class postage prepaid, to or with the Trustee
at its Corporate Trust Office, Attention: Corporate Trust Administration
Division, or sent by facsimile to the Trustee at (212) 852-1626 (with
receipt confirmed by telephone); or
(b) the Company by the Trustee, any Holder or any Guarantor shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the
Company addressed to it at 1117 West Olympic Boulevard, P.O. Box 1027,
Montebello, California 90640, Attention: Chief Financial Officer, or sent
by facsimile to the Company at (213) 727-0412 (with receipt confirmed by
telephone), or at any other address or facsimile number previously
furnished in writing to the Trustee by the Company; or
(c) any Guarantor by the Company, any other Guarantor, the Trustee
or any Holder shall be sufficient for any purpose hereunder (unless
otherwise herein expressly provided) if in writing, and mailed, first
class postage prepaid, to such Guarantor addressed to it at 1117 West
Olympic Boulevard, P.O. Box 1027, Montebello, California 90640, Attention:
Chief Financial Officer, or sent by facsimile to such Guarantor at (213)
727-0412 (with receipt confirmed by telephone), or at any other address or
facsimile number previously furnished in writing to the Trustee by such
Guarantor.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the
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21
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder, whether or
not such Holder actually receives such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
the Guarantors shall bind its respective successors and assigns, whether so
expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, the Holders any benefit or
any legal or equitable right, remedy or claim under this Indenture.
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22
SECTION 111. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the law of the State of New York. Upon the issuance of the
Exchange Securities, if any, or the effectiveness of the Exchange Offer
Registration Statement (as defined herein) or, under certain circumstances, the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture shall be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity with respect to any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of principal (or premium, if any) or interest need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
date established for payment of Defaulted Interest pursuant to Section 309,
Stated Maturity or Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity, Change in Control Purchase Date or Asset Sale Purchase
Date, as the case may be, to the next succeeding Business Day.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be in substantially the form annexed hereto as Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
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The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A shall
be issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A (the "U.S. Global Security")
deposited with, or on behalf of, the Depositary or with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the U.S.
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary or its
nominee, as hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S
shall be issued initially in the form of temporary certificated Securities in
registered form substantially in the form set forth in Exhibit A (the "Temporary
Offshore Global Securities"). The Temporary Offshore Global Securities will be
registered in the name of, and held by, a temporary certificate holder
designated by NationsBanc Capital Markets, Inc. until the termination of the
"restricted period" (as defined in Regulation S) with respect to the offer and
sale of the Initial Securities (the "Offshore Securities Exchange Date"). At any
time following the Offshore Securities Exchange Date, upon receipt by the
Trustee and the Company of a certificate substantially in the form of Exhibit B
hereto, the Company shall execute, and the Trustee shall authenticate and
deliver, one or more permanent certificated Securities in registered form
substantially in the form set forth in Exhibit A (the "Permanent Offshore
Physical Securities"), in exchange for the surrender of Temporary Offshore
Global Securities of like tenor and amount.
Initial Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Global Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
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SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, each certificate representing a
Security shall contain a legend substantially to the following effect (the
"Private Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH CFP HOLDINGS, INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN
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25
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each U.S. Global Security, whether or not an Initial Security, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
<PAGE>
26
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $110,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 307, 308, 906, 1012, 1013 or 1108 or pursuant to an Exchange Offer.
The Initial Securities shall be known and designated as the "11 5/8%
Senior Guaranteed Notes Due 2004" and the Exchange Securities shall be known and
designated as the "11 5/8% Series B Senior Guaranteed Notes Due 2004"of the
Company. Their Stated Maturity shall be January 15, 2004, and they shall bear
interest at the rate of 11 5/8% per annum from January 28, 1997, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, payable semiannually on January 15 and July 15 in each year,
commencing July 15, 1997, until the principal thereof is paid or duly provided
for, to the Person in whose name the Security (or any predecessor Security) is
registered at the close of business on the December 31 or June 30 next preceding
such Interest Payment Date.
The principal of (and premium, if any), and interest on the
Securities shall be payable, and the Securities shall be exchangeable and
transferable, at the office or agency of the Company in The City of New York
maintained for such purposes, (which initially shall be the office of the
Trustee located at 114 West 47th Street, New York, NY 10036) or, at the option
of the Company, interest may be paid by check mailed to the address of the
Person entitled thereto as such address shall appear on the Security Register;
provided that all payments with respect to the U.S. Global Security, as well as
Physical Securities the Holders of which have given wire transfer instructions
to the Trustee (or other Paying Agent) by the Regular Record Date for such
payment, will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
The Securities shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
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27
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman, its President, a Vice President, its Secretary or an Assistant
Secretary. The signature of any of these officers on the Securities may be
manual or facsimile signatures of the present or any future such authorized
officer and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Initial Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Initial Securities directing the Trustee to
authenticate the Securities and certifying that all conditions precedent to the
issuance of Securities contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Securities. On Company Order, the Trustee shall authenticate for
original issue Exchange Securities in an aggregate principal amount not to
exceed $115,000,000; provided that such Exchange Securities shall be issuable
only upon the valid surrender for cancellation of Initial Securities of a like
aggregate principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement and a Company Order for the authentication of such
securities certifying that all conditions precedent to the issuance have been
complied with (including the effectiveness of a registration statement related
thereto). In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Securities. Such order shall
specify the amount of Securities to be authenticated and the date on which the
original issue of Initial Securities or Exchange Securities is to be
authenticated.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
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28
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
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29
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange (including an
exchange of Initial Securities for Exchange Securities), the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive; provided that no exchange
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission and that the Initial Securities to be exchanged for the Exchange
Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
<PAGE>
30
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1012, 1013 or 1108 not involving
any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
Notwithstanding anything to the contrary contained herein, the
Trustee shall have no duty whatsoever to monitor Federal or State securities
laws other than to collect the certificates required herein.
SECTION 306. Book-Entry Provisions for U.S. Global Security.
(a) The U.S. Global Security initially shall (i) be registered in
the name of Cede & Co., as nominee of the Depositary, (2) be deposited with, or
on behalf of, the Depositary or with the Trustee, as custodian for such
Depositary, and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any U.S. Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Security, and the Depositary may be treated
by the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such U.S. Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of any
Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of beneficial
owners in the U.S. Global Security may be transferred in accordance with the
rules and procedures of the Depositary and the provisions of Section 307. In
addition, if (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the
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31
Trustee in writing that it elects to cause the issuance of Securities in the
form of Physical Securities hereunder then, upon surrender by the Global
Security Holder of its Global Security, Physical Securities will be issued to
each Person that the Global Security Holder and the Depositary identify as being
the beneficial owner of the related Securities.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security to beneficial owners pursuant to subsection
(b) of this Section, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Securities of
like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security to beneficial owners pursuant to subsection (b) of this Section, the
U.S. Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security, an equal aggregate
principal amount of U.S. Physical Securities of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (c) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph
(f) of Section 307, bear the applicable legend regarding transfer restrictions
applicable to the U.S. Physical Security set forth in Section 202.
(f) The Holder of the U.S. Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or
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32
(7) of Regulation D under the Securities Act) which is not a QIB (excluding
Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial
Security, whether or not such Initial Security bears the Private Placement
Legend, if (x) the requested transfer is at least three years after the
original issue date of the Initial Securities or (y) the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
U.S. Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S.
Persons):
(i) If the Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Global Securities or Permanent Offshore
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Initial Security for its own account or
an account with respect to which it exercises sole investment discretion
and that it, or the Person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, Temporary
Offshore Global
<PAGE>
33
Securities or Permanent Offshore Physical Securities, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
U.S. Global Security in an amount equal to the principal amount of the
U.S. Physical Securities, Temporary Offshore Global Securities or
Permanent Offshore Physical Securities, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Security so
transferred.
(c) Transfers by Non-U.S. Persons on or Prior to March 10, 1997. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Security by a Non-U.S. Person on or prior to March 10,
1997:
(i) The Registrar shall register the transfer of any Initial
Security (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Initial Security for its own account or
an account with respect to which it exercises sole investment discretion
and that it, or the Person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A. Unless clause (ii) below is
applicable, the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Temporary Offshore Physical Securities of like
tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Global Security to be transferred, and the Trustee
shall cancel the Temporary Offshore Global Security so transferred.
(d) Transfers by Non-U.S. Persons on or After March 10, 1997. The
following provisions shall apply with respect to any transfer of an Initial
Security by a Non-U.S. Person on or after March 10, 1997:
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34
(i) (x) If the Initial Security to be transferred is a Permanent
Offshore Physical Security, the Registrar shall register such transfer,
(y) if the Initial Security to be transferred is a Temporary Offshore
Global Security, upon receipt of a certificate substantially in the form
of Exhibit D from the proposed transferor, the Registrar shall register
such transfer and (z) in the case of either clause (x) or (y), unless
clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore
Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Global Security or Permanent Offshore Physical Security
to be transferred, and the Trustee shall cancel the Physical Security so
transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) Prior to March 10, 1997, the Registrar shall register any
proposed transfer of an Initial Security to a Non-U.S. Person upon receipt
of a certificate substantially in the form of Exhibit D hereto from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Global Securities
of like tenor and amount.
(ii) On and after March 10, 1997, the Registrar shall register any
proposed transfer to any Non-U.S. Person (w) if the Initial Security to be
transferred is a Permanent Offshore Physical Security, (x) if the Initial
Security to be transferred is a Temporary Offshore Global Security, upon
receipt of a certificate substantially in the form of Exhibit D from the
proposed transferor, (y) if the Initial Security to be transferred is a
U.S. Physical Security or an interest in the U.S. Global Security, upon
receipt of a certificate substantially in the form of Exhibit D from the
proposed transferor and (z) in the case of either clause (w), (x) or (y),
the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Permanent Offshore Physical Securities of like tenor and
amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S.
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35
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred and the
Company shall execute, and the Trustee shall authenticate and deliver, one
or more Permanent Offshore Physical Securities of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless either (i) the circumstances contemplated by
the fifth paragraph of Section 201 or paragraphs (a)(i)(x), (d)(i) or (e)(ii) of
this Section 307 exist and the Company directs the Trustee pursuant to an
Officers' Certificate to remove such legend or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain as required by law copies of all letters,
notices and other written communications received pursuant to Section 306 or
this Section 307. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated Security or
in lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
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36
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially shall be the office of the Trustee located at 114 West
47th Street, New York, NY 10036) pursuant to Section 1002 or, at the option of
the Company, interest may be paid by check mailed to the address of the Person
entitled thereto pursuant to 310 as such address appears in the Security
Register; provided, that all payments with respect to Global Securities and
Physical Securities the Holders of which have given wire transfer instructions
to the Trustee (or other Paying Agent) by the Regular Record Date shall be
required to be made by wire transfer of immediately available funds to the
accounts specified be the holders thereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
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(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
given, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no longer
be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
If the Company shall be required to pay any additional interest
pursuant to the terms of the Registration Rights Agreement, it shall deliver an
Officers' Certificate to the Trustee setting forth the new interest rate and the
period for which such rate is applicable.
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SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 309) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
SECTION 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
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39
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(a) either
(i) all the Securities theretofore authenticated and delivered
(other than mutilated, destroyed, lost or stolen Securities that
have been replaced or paid as provided in Section 308 and Securities
that have been subject to defeasance under Article Twelve have been
delivered to the Trustee for cancellation); or
(ii) all Securities not theretofore delivered to the Trustee
for cancellation
(A) have become due and payable,
(B) will become due and payable at Stated Maturity
within one year, or
(C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the Trustee
funds in trust for the purpose in an amount sufficient to pay and
discharge the entire Indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Securities to the date of
such deposit (in the case of Securities that have become due and
payable) or to the Stated Maturity or Redemption Date, as the case
may be;
(b) the Company has paid or caused to be paid all sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) of this Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest on any Security when it
becomes due and payable, and continuance of such default for a period of
30 days;
(2) default in the payment of the principal of (or premium, if any,
on) any Security when due;
(3) failure to perform or comply with the provisions described in
Article Eight;
(4) default in the performance, or breach, of any covenant or
agreement of the Company, any Subsidiary Guarantor or CFP Group contained
in this Indenture, any Subsidiary Guarantee or the Parent Guarantee (other
than a default in the performance, or breach, of a covenant or agreement
that is specifically dealt with elsewhere herein), and continuance of such
default or breach for a period of 60 days
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41
after written notice has been given to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Securities then Outstanding;
(5) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue has
an aggregate outstanding principal amount of not less than $2,000,000, and
such default has resulted in such Indebtedness becoming, whether by
declaration or otherwise, due and payable prior to the date on which it
would otherwise become due and payable or (ii) a default in any payment
when due at final Maturity of any such Indebtedness;
(6) failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $2,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days;
(7) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under its Guarantee, or gives notice to such effect (other than
by reason of the termination of this Indenture or the release of any such
Guarantee in accordance with the Indenture), and such condition has
continued for a period of 30 days after written notice of such failure
requiring the Guarantor and the Company to remedy the same has been given
(x) to the Company by the Trustee or (y) to the Company and the Trustee by
the Holders of 25% in aggregate principal amount of the Securities then
Outstanding;
(8) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustments or composition of or in respect
of the Company or any Significant Subsidiary under the Federal Bankruptcy
Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days;
(9) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or the consent by it to
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42
the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or any Significant Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due; or
(10) CFP Group fails to own all of the Capital Stock of the Company,
unless the Company and CFP Group have been merged.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than as specified in Section 501 (8)
or (9)) occurs and is continuing, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Securities then Outstanding may declare
the principal of and accrued interest on all of the Outstanding Securities
immediately due and payable and, upon any such declaration, such principal and
such interest will become due and payable immediately.
If an Event of Default specified in Section 501 (8) or (9) above
occurs and is continuing, then the principal of and accrued interest on all of
the Outstanding Securities will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of Securities.
At any time after a declaration of acceleration, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
Securities Outstanding, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if
(i) the Company or any Guarantor has paid or deposited with the
Trustee a sum sufficient to pay,
(A) all overdue interest on all Securities,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Securities that has become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne
by the Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne
by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
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(ii) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the Securities that
have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Securities because of an Event of
Default specified in Section 501(5) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
Securities, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and each of the Guarantors covenants that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company and each Guarantor will, upon demand of the Trustee, pay to the
Trustee for the benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal (and premium, if any) and
interest, and interest on any overdue principal (and premium, if any) and, to
the extent that payment of such interest shall be legally enforceable, upon any
overdue installment of interest, at the rate borne by the Securities, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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If the Company or any Guarantor, as the case may be, fails to pay
such amounts forthwith upon such demand, the Trustee, in its own name as trustee
of an express trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company, such Guarantor or any other
obligor upon the Securities and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Company, such
Guarantor or any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities (including the Guarantors) or the property of the Company or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other securities or
property payable or deliverable upon the conversion or exchange of such
securities or upon any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable
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45
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
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46
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities (including fees and
expenses of its agents and counsel) to be incurred in compliance with such
request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any) and (subject to
Section 309) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
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47
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
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(c) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may, on behalf of the Holders of all of the Securities,
waive any past defaults hereunder, except a default
(a) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(b) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Security Outstanding.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail to each Holder of the Securities in
the manner and to the
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extent provided in TIA Section 313(c) notice of the Default or Event of Default
within five days after the occurrence thereof; provided, however, that, except
in the case of a Default or an Event of Default in the payment of principal of
(and premium, if any, on) or interest on any Securities, the Trustee may
withhold the notice to the Holders of the Securities if a committee of its trust
officers in good faith determines that withholding such notice is in the
interests of the Holders of the Securities.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting, pursuant to the terms of this Indenture
or otherwise, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order with
sufficient detail as may be requested by the Trustee and any resolution of
the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate and/or an
Opinion of Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities (including fees and expenses
of its agents and counsel) which might be incurred by it in compliance
with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into,
and may conclusively rely upon, the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; and
(i) except during the continuance of an Event of Default, the
Trustee need perform only those duties as are specifically set forth in
this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture, the Securities or any Guarantee, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations hereunder
and, upon the effectiveness of the Registration Statement, that the statements
made by it in a Statement of Eligibility on Form T-1 supplied to the Company are
true and accurate, subject to the qualifications set forth therein. The Trustee
shall not be accountable for the use or application by the Company of Securities
or the proceeds thereof.
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SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Security Registrar or such
other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company or any Guarantor, as the case may be.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee (in its capacity as Trustee, Paying Agent
and Registrar) from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
enforcing this Indenture against the Company (including this Section 606)
and of defending itself against any claim (whether asserted by any Holder
or the Company) or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall
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survive the satisfaction and discharge of this Indenture and any termination
under any bankruptcy law. As security for the performance of such obligations of
the Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(8) or (9), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
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(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, except when the Trustee's duty to resign is stayed in accordance
with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
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SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder subject to the retiring Trustee's rights
as provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities. In
case at that time any of the Securities shall not have been authenticated, any
successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such cases
such certificates shall have the full force and effect which this Indenture
provides that the certificate of authentication of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
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ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first
May 15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not, and shall not permit any Restricted
Subsidiary to, in a single transaction or series of related transactions,
consolidate or merge with or into (other than the consolidation and merger of a
Restricted Subsidiary of the Company with another Restricted Subsidiary of the
Company or into the Company) (whether or not the Company or such Restricted
Subsidiary is the surviving corporation), or directly and/or indirectly through
its Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Subsidiaries taken as a whole) in one
or more related transactions to, another corporation, Person or entity unless:
(a) either (i) the Company, in the case of a transaction involving
the Company, or such Restricted Subsidiary, in the case of a transaction
involving a Restricted Subsidiary, is the surviving corporation or (ii) in
the case of a transaction
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involving the Company, the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made (the "Surviving Entity") is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia and assumes all the obligations of the Company under
the Securities and this Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating
any obligation of the Company or a Restricted Subsidiary in connection
with or as a result of such transaction as having been incurred as of the
time of such transaction, no Default or Event of Default has occurred and
is continuing;
(c) the Company (or, in the case of a transaction involving the
Company, the Surviving Entity if the Company is not the continuing obligor
under this Indenture) could, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
the first paragraph of Section 1010;
(d) if the Company is not the continuing obligor under this
Indenture, each Subsidiary Guarantor, unless it is the other party to the
transaction described above, has by supplemental indenture confirmed that
its Subsidiary Guarantee applies to the Surviving Entity's obligations
under this Indenture and the Securities;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1017 are complied with; and
(f) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
complies with the requirements of this Indenture;
provided, however, that any sale, transfer or disposition of all of the Capital
Stock, or all or substantially all of the assets, of a Subsidiary Guarantor will
not be restricted by the foregoing provisions but will be governed by the
provisions described under Article Thirteen.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be
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deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the Company
with or into any other corporation in which the Company is not the continuing
obligor under this Indenture, or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety to any Person
in accordance with Section 801, the Surviving Entity formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Entity had been named as the Company herein,
and in the event of any such conveyance or transfer, the Company (which term
shall for this purpose mean the Person named as the "Company" in the first
paragraph of this Indenture or any Surviving Entity which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this Indenture
and the Securities and may be dissolved and liquidated.
SECTION 803. Securities to Be Secured in Certain Events.
If, upon any such consolidation of the Company with or merger of the
Company into any other corporation, or upon any conveyance, lease or transfer of
the property of the Company substantially as an entirety to any other Person,
any property or assets of the Company would thereupon become subject to any
Lien, then unless such Lien could be created pursuant to Section 1014 without
equally and ratably securing the Securities, the Company, prior to or
simultaneously with such consolidation, merger, conveyance, lease or transfer,
will as to such property or assets, secure the Securities Outstanding (together
with, if the Company shall so determine any other Indebtedness of the Company
now existing or hereinafter created which is not subordinate in right of payment
to the Securities) equally and ratably with (or prior to) the Indebtedness which
upon such consolidation, merger, conveyance, lease or transfer is to become
secured as to such property or assets by such Lien, or will cause such
Securities to be so secured.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND GUARANTEES
SECTION 901. Without Consent of Holders.
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Without the consent of any Holders, the Company and any affected
Guarantor, each when authorized by a Board Resolution, and the Trustee may amend
or supplement this Indenture, the Securities or any Guarantee without the
consent of any Holder of a Security:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(c) to add any additional Events of Default; or
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
(e) to cure any ambiguity or mistake, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action shall
not adversely affect the interests of the Holders in any material respect;
or
(f) to secure the Securities pursuant to the requirements of Section
803 or 1014 or otherwise; or
(g) to qualify, or maintain the qualification of, this Indenture
under the Trust Indenture Act; or
(h) to add a Subsidiary Guarantor pursuant to Section 1308 hereof.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture,
Security or Subsidiary Guarantee, and upon receipt by the Trustee of the
documents described in Section 602 hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental Indenture or Subsidiary
Guarantee authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture or Subsidiary Guarantee that affects its own rights,
duties or immunities under this Indenture or otherwise.
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SECTION 902. With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate Outstanding principal amount of the Securities, by Act of said Holders
delivered to the Company, any affected Guarantor and the Trustee, the Company
and the Guarantor, each when authorized by a Board Resolution, and the Trustee
may amend or supplement in any manner this Indenture or any Guarantee modify in
any manner the rights of the Holders under this Indenture or any Guarantee;
provided, however, that no such supplement, amendment or modification may,
without the consent of the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any Security
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(b) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any waiver of
compliance with certain provisions of, or certain defaults and their
consequences provided for under this Indenture, or
(c) modify any of the provisions of this Section or Sections 513 and
1019, except to increase the percentage of Outstanding Securities required
for such actions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder
of each Outstanding Security affected thereby, or
(d) release any Subsidiary Guarantor that is a Significant
Subsidiary from any of its obligations under its Subsidiary Guarantee or
this Indenture other than in accordance with the terms of this Indenture.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture and that such supplemental indenture constitutes the legal, valid and
binding obligation of the Company subject to the customary exceptions. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustees own rights, duties or immunities under this
Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company, any affected Guarantor
and the Trustee of any supplemental indenture or Guarantee pursuant to the
provisions of Section 902, the Company shall give notice thereof to the Holders
of each Outstanding Security affected, in the manner provided for in Section
106, setting forth in general terms the substance of such supplemental indenture
or Guarantee.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office located at 114 West 47th
Street, New York, NY 10036 of the Trustee shall be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such
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62
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of (or premium,
if any) or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of such action or any
failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (or premium,
if any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the
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63
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
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64
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
SECTION 1008. Statement by Officers As to Default.
(a) The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of compliance by the Company and the Guarantors with all
conditions and covenants under this Indenture. For purposes of this Section
1008(a), such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $2,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an officers certificate specifying such event, notice or
other action within five Business Days of its occurrence.
SECTION 1009. Provision of Reports and Financial Statements.
The Company shall be required to file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15(d) of
the Exchange Act. The Company shall also be required (a) to file with the
Trustee, and provide to each holder of Securities, without cost to such holder,
copies of such reports and documents within 15 days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if the
Company were so required and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and documents to any
prospective holder of Securities promptly upon written request.
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SECTION 1010. Limitation on Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, issue, assume, guarantee or in any manner become directly
or indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including Acquired Indebtedness and the issuance of
Disqualified Stock), except that the Company or any Subsidiary Guarantor may
incur Indebtedness if, at the time of such event, the Fixed Charge Coverage
Ratio for the immediately preceding four full fiscal quarters for which internal
financial statements are available, taken as one accounting period, would have
been equal to at least 2.0 to 1.0 through January 15, 1999 and 2.25 to 1.0
thereafter.
In making the foregoing calculation for any four-quarter period
which includes the Closing Date, pro forma effect will be given to the Offering
and the Acquisition, as if such transactions had occurred at the beginning of
such four-quarter period. In addition (but without duplication), in making the
foregoing calculation, pro forma effect will be given to: (i) the incurrence of
such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred and the application of such proceeds occurred at the beginning of
such four-quarter period, (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed of
by the Company or its Restricted Subsidiaries, as the case may be, since the
first day of such four-quarter period, as if such acquisition or disposition
occurred at the beginning of such four-quarter period. In making a computation
under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a
revolving credit facility will be computed based on the average daily balance of
such Indebtedness during such four-quarter period, (B) if such Indebtedness
bears, at the option of the Company, a fixed or floating rate of interest,
interest thereon will be computed by applying, at the option of the Company,
either the fixed or floating rate and (C) the amount of any Indebtedness that
bears interest at a floating rate will be calculated as if the rate in effect on
the date of determination had been the applicable rate for the entire period
(taking into account any Hedging Obligations applicable to such Indebtedness if
such Hedging Obligations have a remaining term at the date of determination in
excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company under the Bank Credit Agreement or
one or more other credit facilities (and the incurrence by any Restricted
Subsidiary of guarantees thereof) in an aggregate principal amount at any
one time outstanding not
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to exceed $30,000,000, less any amounts applied to the permanent reduction
of such credit facilities pursuant to Section 1013, plus an amount equal
to the excess, if any, at the time of incurrence of such Indebtedness of
(A) 85% of the net book value of accounts receivable of the Company and
its Restricted Subsidiaries and 60% of the net book value of inventories
of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries, over (B) $20,000,000;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date and listed on Schedule I hereto (other
than Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Restricted Subsidiary
or owed by any Restricted Subsidiary to the Company or any other
Restricted Subsidiary (provided that such Indebtedness is held by the
Company or such Restricted Subsidiary);
(iv) Indebtedness represented by the Securities and the Subsidiary
Guarantees;
(v) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations entered into in the ordinary course of business or
required by the Bank Credit Agreement or another credit facility referred
to in clause (i) above;
(vi) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of Capital
Stock;
(vii) Indebtedness of the Company or any Restricted Subsidiary not
permitted by any other clause of this definition, in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding; and
(viii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness, other than Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi) or (vii) of this definition, including any
successive refinancings thereof, so long as (A) any such new Indebtedness
is in a principal amount that does not exceed the principal amount so
refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing, plus the amount of
the expenses of the Company incurred in
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connection with such refinancing, (B) in the case of any refinancing of
Subordinated Indebtedness, such new Indebtedness is made subordinate to
the Securities at least to the same extent as the Indebtedness being
refinanced and (C) such refinancing Indebtedness does not have an Average
Life less than the Average Life of the Indebtedness being refinanced and
does not have a final scheduled Maturity earlier than the final scheduled
Maturity, or permit redemption at the option of the holder earlier than
the earliest date of redemption at the option of the holder, of the
Indebtedness being refinanced.
SECTION 1011. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
Restricted Subsidiaries held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiaries' net income from the first day
of the Company's fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (other than
Disqualified Stock) of the Company, CFP Group or any Restricted
Subsidiary, or any options, warrants or other rights to acquire such
shares of Capital Stock (other than any such Capital Stock owned by the
Company or any of its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or Maturity, any Subordinated Indebtedness
(other than the repayment of the Bridge Securities on the Closing Date);
and
(d) make any Investment (other than a Permitted Investment) in any
Person (such payments or other actions described in (but not excluded
from) clauses (a) through (d) being referred to as "Restricted Payments"),
unless at the time of, and immediately after giving effect to, the
proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing;
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(ii) the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 1010; and
(iii) the aggregate amount of all Restricted Payments made after the
Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of
the Company during the period (taken as one accounting period) from
the first day of the Company's fiscal quarter during which the
Closing Date occurs to the last day of the Company's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such proposed Restricted Payment (or, if
such aggregate cumulative Consolidated Adjusted Net Income is a
loss, minus 100% of such amount), plus
(B) the aggregate net cash proceeds received by the Company
after the Closing Date from the issuance or sale (other than to a
Restricted Subsidiary) of either (1) Qualified Equity Interests of
the Company (excluding proceeds of an Equity Offering the proceeds
of which are used to redeem Securities as provided in Section 1101
(b)) or (2) debt securities or Disqualified Stock that have been
converted into or exchanged for Qualified Stock of the Company,
together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may take the following actions, so long as (with respect to clause
(e), (f) or (h) below) no Default or Event of Default has occurred and is
continuing or would occur:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not
have been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement
for value of any shares of Capital Stock of the Company, in exchange for,
or out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of, Qualified Equity
Interests of the Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of, shares of Qualified
Equity Interests of the Company;
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(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance or sale
(other than to a Restricted Subsidiary) of, Subordinated Indebtedness, so
long as the Company or a Restricted Subsidiary would be permitted to
refinance such original Subordinated Indebtedness with such new
Subordinated Indebtedness pursuant to clause (viii) of the definition of
Permitted Indebtedness;
(e) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a change of control in accordance with
provisions similar to the provisions of Section 1012; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the
Securities and has repurchased all Securities validly tendered for payment
in connection with such Change of Control Offer;
(f) the payment of cash dividends by the Company to CFP Group in an
amount equal to the aggregate cash consideration paid by CFP Group for the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of CFP Group, options on any such shares
or related stock appreciation rights or similar securities held by
officers or employees or former officers or employees (or their estates or
beneficiaries under their estates) or by any employee benefit plan, upon
death, disability, retirement or termination of employment or pursuant to
the terms of any employee benefit plan or any other agreement under which
such shares of stock or related rights were issued; provided that no such
payment of cash dividends shall be made pursuant to this clause (f) prior
to the end of the Company's fiscal year ending nearest the second
anniversary of the Closing Date and thereafter that the aggregate payment
of cash dividends pursuant to this clause (f) does not exceed $1,000,000
in any fiscal year;
(g) the payment on or promptly after the Closing Date of the
Distribution; and
(h) the payment of Management Fees to First Atlantic.
The actions described in clauses (b), (c), (e) and (f) of this paragraph will be
Restricted Payments that will be permitted to be taken in accordance with this
paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of the first paragraph of this Section
1011 and the actions described in clauses (a), (d), (g) and (h) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will not reduce the amount that would
otherwise be
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available for Restricted Payments under clause (iii) of the first paragraph of
this Section 1011.
Notwithstanding the foregoing, the Company may not pay a dividend
that constitutes a Restricted Payment prior to the second anniversary of the
Closing Date, except for the actions described in clauses (f), (g) and (h) of
the immediately preceding paragraph.
For the purpose of making any calculations under this Indenture (i)
if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
will be deemed to have made an Investment in an amount equal to the fair market
value of the net assets of such Restricted Subsidiary at the time of such
designation as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive, (ii) any property transferred to or from
an Unrestricted Subsidiary will be valued at fair market value at the time of
such transfer, as determined by the Board of Directors of the Company, whose
good faith determination will be conclusive and (iii) subject to the foregoing,
the amount of any Restricted Payment, if other than cash, will be determined by
the Board of Directors of the Company, whose good faith determination will be
conclusive.
If the aggregate amount of all Restricted Payments calculated under
the foregoing provision includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing the Consolidated Adjusted Net Income of the Company
under the foregoing clause (iii)(A), (i) the Company may use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (ii) the Company will
be permitted to rely in good faith on the financial statements and other
financial data derived from its books and records that are available on the date
of
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determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of this Indenture, such
Restricted Payment will be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Adjusted Net Income of the
Company for any period.
SECTION 1012. Purchase of Securities upon a Change of Control.
If a Change of Control occurs at any time, then each Holder of
Securities will have the right to require that the Company purchase such
Holder's Securities, in whole or in part in integral multiples of $1,000, at a
purchase price in cash equal to 101% of the principal amount of such Securities,
plus accrued and unpaid interest, if any, to the date of purchase, pursuant to
the offer described below (the "Change of Control Offer") and the other
procedures set forth in this Indenture.
Within 30 days following any Change of Control, the Company shall
notify the Trustee thereof and give written notice of such Change of Control to
each holder of Securities by first-class mail, postage prepaid, at its address
appearing in the security register, stating, among other things, (i) the
purchase price and the purchase date, which will be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with requirements under the Exchange Act;
(ii) that any Security not tendered will continue to accrue interest; (iii)
that, unless the Company defaults in the payment of the purchase price, any
Securities accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest after the Change of Control purchase date; (iv) that
Holders electing to have any Securities purchased pursuant to a Change of
Control Offer shall be required to surrender the Securities, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the purchase date (the
"Change of Control Payment Date"); (v) that Holders shall be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Securities delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Securities
purchased; (vi) that Holders whose Securities are being purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof; (vii) the
instructions that the Holders of Securities must follow in order to tender their
Securities; and (viii) the circumstances and relevant facts regarding such
Change of Control.
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The Company shall comply with the applicable tender offer rules
including Rule-14e under the Exchange Act, and any other applicable securities
laws and regulations in connection with a Change of Control Offer.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create any restriction (other than restrictions existing under
Indebtedness as in effect on the Closing Date or in refinancings of such
Indebtedness) that would materially impair the ability of the Company to make a
Change of Control Offer to purchase the Securities or, if such Change of Control
Offer is made, to pay for the Securities tendered for purchase.
SECTION 1013. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the fair market value of the assets sold (as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive) and
(ii) the consideration received by the Company or the relevant Restricted
Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash
Equivalents.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may, at its option, within 12 months after such Asset Sale,
(i) apply all or a portion of the Net Cash Proceeds to the permanent reduction
of amounts outstanding under the Bank Credit Agreement or to the repayment of
other senior Indebtedness of the Company or a Restricted Subsidiary or (ii)
invest (or enter into a legally binding agreement to invest) all or a portion of
such Net Cash Proceeds in properties and assets to replace the properties and
assets that were the subject of the Asset Sale or in properties and assets that
will be used in businesses of the Company or its Restricted Subsidiaries, as the
case may be, existing on the Closing Date. If any such legally binding agreement
to invest such Net Cash Proceeds is terminated, the Company may, within 90 days
of such termination or within 12 months of such Asset Sale, whichever is later,
invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard
to the parenthetical contained in such clause (ii)) above. The amount of such
Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000,
the Company shall, within 30 days thereafter, make an offer to purchase from all
Holders of Securities, on a pro rata basis, in accordance with the procedures
set forth in paragraph (d) below, the maximum principal amount (expressed as a
multiple of $1,000) of Securities that may be purchased with the Excess
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued interest, if any, to the date such offer to purchase is
consummated (the "Asset Sale Offer"). To the extent that the aggregate principal
amount
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of Securities tendered pursuant to such offer to purchase is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Securities validly tendered and
not withdrawn by holders thereof exceeds the Excess Proceeds, the Securities to
be purchased will be selected on a pro rata basis. Upon completion of such offer
to purchase, the amount of Excess Proceeds will be reset to zero.
(d) Within the time period described in (c) above for making an
Asset Sale Offer, the Company shall mail a notice to each Holder in the manner
provided in Section 106 stating: (1) that the Asset Sale Offer is being made
pursuant to the provisions of Section 1013 of this Indenture and that all
Securities duly and timely tendered shall be accepted for payment (except, as
provided above, if the aggregate principal amount as the case may be, of the
Securities surrendered exceeds the amount of Excess Proceeds); (2) the purchase
price (the "Asset Sale Purchase Price") and the purchase date (the "Asset Sale
Payment Date"), which date shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed; (3) that any Securities not tendered
shall continue to accrue interest; (4) that, unless the Company defaults in the
payment of the Asset Sale Purchase Price, all Securities accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset
Sale Payment Date; (5) that Holders electing to have any Securities purchased
pursuant to an Asset Sale Offer shall be required to surrender the Securities,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Securities completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding the
Asset Sale Payment Date; (6) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Asset Sale Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Securities delivered for purchase, and a statement that
such Holder is withdrawing his election to have such Securities purchased; (7)
that Holders whose Securities are being purchased only in part shall be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; (8) the instructions that the
Holders of Securities must follow in order to tender their Securities; and (9)
the circumstances and relevant facts regarding such Asset Sale.
SECTION 1014. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction with, or for the benefit of, any Affiliate of the Company unless (a)
such transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's length transaction with third parties who are not
Affiliates and (b) the Company delivers to the Trustee (i) with respect to any
transaction or series of transactions entered into after the Closing Date
involving aggregate payments in
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excess of $1,000,000, a resolution of the Board of Directors of the Company set
forth in an Officers' Certificate certifying that such transaction or
transactions complies with clause (a) above and that such transaction or
transactions have been approved by the Board of Directors (including a majority
of the Disinterested Directors) of the Company and (ii) with respect to a
transaction or series of transactions involving aggregate payments equal to or
greater than $5,000,000, a written opinion as to the fairness to the Company or
such Restricted Subsidiary of such transaction or series of transactions from a
financial point of view issued by an investment banking, accounting or appraisal
firm of national standing.
The foregoing covenant shall not restrict
(A) transactions among the Company and/or its Restricted
Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary; and
(C) transactions permitted by the provisions of Section 1011.
SECTION 1015. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary, (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary or (e) guarantee any Indebtedness of the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(i) any agreement in effect on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness
incurred under the agreements in effect on the Closing Date, so long as
such encumbrances or restrictions are no less favorable to the Company or
any Restricted Subsidiary than those contained in such original agreement;
or
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(iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired.
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
The Company (a) shall not permit any Restricted Subsidiary to issue
any Capital Stock (other than to the Company or a wholly-owned Restricted
Subsidiary) and (b) shall not permit any Person (other than the Company or a
wholly-owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prohibit (i) the
sale or other disposition of all, but not less than all, of the issued and
outstanding Capital Stock of a Restricted Subsidiary owned by the Company and
its Restricted Subsidiaries in compliance with the other provisions of this
Indenture, (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law or (iii) the ownership by
any Person of Capital Stock of a Restricted Subsidiary issued prior to the time
such entity became a Restricted Subsidiary provided that such Capital Stock was
not issued in anticipation of such transaction.
SECTION 1017. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind on or with respect to any of its property or assets,
including any shares of stock or debt of any Restricted Subsidiary, whether
owned at the Closing Date or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Indebtedness,
the Securities are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Lien and (b) in the case of any other Lien, the
Securities are equally and ratably secured with the obligation or liability
secured by such Lien.
Notwithstanding the foregoing, the Company may, and may permit any
Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than Liens securing Indebtedness under the Bank
Credit Agreement) existing as of the Closing Date;
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement or one or
more
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other credit facilities in a principal amount not to exceed the principal
amount of the outstanding Indebtedness permitted by clause (i) of the
definition of "Permitted Indebtedness" in Section 1010;
(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any wholly-owned Restricted Subsidiary;
(iv) Liens securing the Securities;
(v) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that was not entered into in
violation of Section 1010;
(vi) Liens securing Acquired Indebtedness created prior to (and not
in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; provided that
such Lien does not extend to any property or assets of the Company or any
Restricted Subsidiary other than the property and assets acquired in
connection with the incurrence of such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (v) of the definition of "Permitted Indebtedness" in
Section 1010;
(viii) Liens arising from purchase money mortgages and purchase
money security interests incurred in the ordinary course of the business
of the Company; provided that (A) the related Indebtedness is not secured
by any property or assets of the Company or any Restricted Subsidiary
other than the property and assets so acquired, (B) the Lien securing such
Indebtedness is created within 60 days of such acquisition and (C) the
related Indebtedness was not incurred in violation of Section 1010;
(ix) statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings
and, if required by GAAP, a reserve or other appropriate provision has
been made therefor;
(x) Liens for taxes, assessments, government charges or claims that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and, if required by GAAP, a reserve or
other appropriate provision has been made therefor;
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(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money);
(xii) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any Restricted Subsidiary incurred in the
ordinary course of business;
(xiii) Liens arising by reason of any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired; and
(xiv) any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xiii); provided
that any such extension, renewal or replacement is no more restrictive in
any material respect than the Lien so extended, renewed or replaced and
does not extend to any additional property or assets.
SECTION 1018. Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity, (iii) any Investment in such Subsidiary
made as a result of designating such Subsidiary an Unrestricted Subsidiary will
not violate the provisions of Section 1011, (iv) neither the Company nor any
Restricted Subsidiary has a contract, agreement, arrangement, understanding or
obligation of any kind, whether written or oral, with such Subsidiary other than
those that might be obtained at the time from Persons who are not Affiliates of
the Company and (v) neither the Company nor any Restricted Subsidiary has any
obligation to subscribe for additional shares of Capital Stock or other equity
interest in such Subsidiary, or to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results. Notwithstanding the foregoing, the Company may not designate
Custom Foods or Quality Foods as an Unrestricted Subsidiary and may not sell,
transfer or otherwise dispose of any properties or
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assets of Custom Foods or Quality Foods to an Unrestricted Subsidiary, other
than in the ordinary course of business.
(b) The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation will only be permitted if (i) such Indebtedness is permitted
under Section 1010 and (ii) no Default or Event of Default will have occurred
and be continuing following such designation.
SECTION 1019. Waiver of Certain Covenants.
The Company or any Subsidiary may omit in any particular instance to
comply with any term, provision or condition set forth in Section 803 or
Sections 1007 through 1018, inclusive, if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities, by Act of such Holders, waive such compliance in such
instance with such term, provision or condition, but no such waiver shall extend
to or affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the option of the Company, as
a whole or from time to time in part, at any time on or after January 15, 2001,
subject to the conditions and at the Redemption Prices specified in the form of
Security, together with accrued interest to the Redemption Date.
(b) In addition, at any time or from time to time prior to January
15, 2000, the Company may redeem up to $40,000,000 aggregate principal amount of
the Securities within 90 days of a Equity Offering with the net proceeds of such
offering at a redemption price equal to 110% of the principal amount thereof,
plus accrued interest, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date); provided that, immediately after giving effect to such
redemption, at least $75,000,000 aggregate principal amount of the Securities
remains outstanding.
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SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Securities; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 107 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
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(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder will receive,
without charge, a new Security or Securities of authorized denominations
for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Security, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue on
and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, and
(7) the CUSIP number.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from
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and after such date (unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for redemption in accordance with
said notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Securities, or one
or more Predecessor Securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of Section
309.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holders
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution at any time, with
respect to the Securities, elect to have either Section 1202 or Section 1203 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve.
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SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Guarantors shall be deemed
to have been discharged from its obligations with respect to all Outstanding
Securities on the date the conditions set forth in Section 1204 are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities, which shall thereafter be deemed to
be "Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities to receive, solely from the trust
fund described in Section 1204 and as more fully set forth in such Section,
payments in respect of the principal of (and premium, if any, on) and interest
on such Securities when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 304, 305, 308, 1002 and 1003, (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(D) this Article Twelve. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203 with respect to the Securities.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and any Guarantor shall be released
from its obligations under any covenant contained in Section 801 and Section 803
and in Sections 1007 through 1018 with respect to the Outstanding Securities on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Company and any Guarantor may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 501(4), but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
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SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations (as defined herein) that through the scheduled payment of
principal and interest thereon will provide money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay and discharge the principal
of (and premium, if any) and interest on the Outstanding Securities on the
Stated Maturity (or upon Redemption Date, if applicable) of such principal
(and premium, if any) or installment of interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to said payments with respect
to the Securities. Before such a deposit, the Company may give to the
Trustee, in accordance with Section 1103 hereof, a notice of its election
to redeem all of the Outstanding Securities at a future date in accordance
with Article Eleven hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in applying
the foregoing. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of America
for the timely payment of which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraphs (8) and (9) of Section 501 hereof are concerned, at
any time during the period ending on
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the 91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound.
(4) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since January 23, 1997, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred.
(6) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Securities Outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1202 or the covenant defeasance under Section 1203, as the case may be,
have been complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal (and
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premium, if any) and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
principal of (or premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Guarantees.
Each Subsidiary Guarantor and the Parent Guarantor (hereinafter
collectively referred to as the Guarantors) hereby jointly and severally,
absolutely, unconditionally and irrevocably guarantees the Securities and
obligations of the Company hereunder and thereunder, and guarantees to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee on behalf of such Holder, that: (a) the principal of (and premium,
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if any) and interest on the Securities will be paid in full when due, whether at
Stated Maturity, by acceleration, call for redemption or otherwise (including,
without limitation, the amount that would become due but for the operation of
the automatic stay under Section 362(a) of the Federal Bankruptcy Code),
together with interest on the overdue principal, if any, and interest on any
overdue interest, to the extent lawful, and all other obligations of the Company
to the Holders or the Trustee hereunder or thereunder will be paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Securities or of any such
other obligations, the same will be paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise, subject, however, with respect to the
Subsidiary Guarantors, in the case of clauses (a) and (b) above, to the
limitations set forth in Section 1304 hereof.
Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives the benefits of diligence, presentment,
demand for payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company or any other Person, protest, notice and all demands whatsoever and
covenants that the Guarantee of such Guarantor will not be discharged as to any
Security except by complete performance of the obligations contained in such
Security and such Guarantee. Each of the Guarantors hereby agrees that, in the
event of a default in payment of principal (or premium, if any) or interest on
such Security, whether at its Stated Maturity, by acceleration, call for
redemption, purchase or otherwise, legal proceedings may be instituted by the
Trustee on behalf of, or by, the Holder of such Security, subject to the terms
and conditions set forth in this Indenture, directly against each of the
Guarantors to enforce such Guarantor's Guarantee without first proceeding
against the Company or any other Guarantor. Each Guarantor agrees that if, after
the occurrence and during the continuance of an Event of Default, the Trustee or
any of the Holders are prevented by applicable law from exercising their
respective rights to accelerate the maturity of the Securities, to collect
interest on the Securities, or to enforce or exercise any other right or remedy
with respect to the Securities, such Guarantor will pay to the Trustee for the
account of the Holders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Holders.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company or any Guarantor, or any custodian, trustee, liquidator
or other similar official
<PAGE>
87
acting in relation to either the Company or any Guarantor, any amount paid by
any of them to the Trustee or such Holder, the Guarantee of each of the
Guarantors, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as between each Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five hereof for the purposes of the Guarantee of such Guarantor,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Five
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by each Guarantor for the purpose of the Guarantee of such
Guarantor.
SECTION 1302. Severability.
In case any provision of any Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1303. Seniority of Guarantees.
The obligations of each Guarantor to the Holders of Securities and
to the Trustee pursuant to such Guarantor's Guarantee and this Indenture are
senior unsecured obligations of such Guarantor.
SECTION 1304. Limitation of Subsidiary Guarantors' Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
confirms that it is the intention of all such parties that the guarantee by each
such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Federal Bankruptcy Code,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law or the provisions of its local law relating to
fraudulent transfer or conveyance. To effectuate the foregoing intention, the
Holders and each such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee shall be
limited to the maximum amount that will not, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or, with respect to the Subsidiary Guarantors, pursuant to Section
1305 hereof, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee constituting such fraudulent transfer or conveyance.
<PAGE>
88
SECTION 1305. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under a Guarantee,
such Funding Guarantor shall be entitled to a contribution from all other
Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to the Guarantee of such Guarantor. "Adjusted Net Assets" of such
Guarantor at any date shall mean the lesser of (x) the amount by which the fair
value of the property of such Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving effect to
all other fixed and contingent liabilities incurred or assumed on such date),
but excluding liabilities under the Guarantee of such Guarantor at such date and
(y) the amount by which the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date),
excluding debt in respect of the Guarantee of such Guarantor, as they become
absolute and matured.
SECTION 1306. Release of a Subsidiary Guarantor.
(a) Upon the sale, transfer or other disposition of all of the
Capital Stock of a Subsidiary Guarantor to a Person that is not an Affiliate of
the Company in compliance with this Section 1306 and Section 1013, or in the
event all or substantially all of the assets of a Subsidiary Guarantor are sold,
transferred or otherwise disposed of, by way of merger, consolidation or
otherwise, to a Person that is not an Affiliate of the Company in compliance
with this Section 1306 and Section 1013 hereof, then such Subsidiary Guarantor
(or Person acquiring such assets in the event of a sale or other disposition of
all of the assets of such Subsidiary Guarantor) shall be deemed automatically
and unconditionally released from and discharged from all of its obligations
under this Article Thirteen and its Subsidiary Guarantee without any further
action required on the part of the Trustee or any Holder; provided that, in the
event such transaction constitutes an Asset Sale, the Net Proceeds of such sale,
transfer or other disposition are applied in accordance with Section 1013
hereof.
(b) Any Subsidiary Guarantor that is designated by the Board of
Directors of the Company as an Unrestricted Subsidiary in accordance with the
terms of this Indenture may, at such time, at the option of the Board of
Directors, be released and relieved of its obligations under its Subsidiary
Guarantee. The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a Company Request accompanied by an Officers'
Certificate certifying as to the compliance with this Section 1306. Any
Subsidiary
<PAGE>
89
Guarantor not so released shall remain liable for the full amount of principal
of and interest on the Securities as provided in its Subsidiary Guarantee.
(c) Concurrently with the defeasance of the Securities under Section
1202 hereof, or the covenant defeasance of the Securities under Section 1203
hereof, the Subsidiary Guarantors shall be released from all their obligations
under their Subsidiary Guarantees under this Article Thirteen.
SECTION 1307. Benefits Acknowledged.
Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
its guarantee and waivers pursuant to its Guarantee are knowingly made in
contemplation of such benefits.
SECTION 1308. Additional Subsidiary Guarantors.
The Company will cause each Person that becomes a Subsidiary after
the date of this Indenture to become a Subsidiary Guarantor with respect to the
Indenture Obligations by executing and delivering a supplemental indenture to
this Indenture providing for a Subsidiary Guarantee by such Subsidiary under
this Article Thirteen (or under a separate guarantee agreement consistent in all
material respects with this Article Thirteen). The Company shall deliver to the
Trustee, together with the supplemental indenture referred to above, an Opinion
of Counsel that such Subsidiary Guarantee is a legal, valid, binding and
enforceable obligation of such Subsidiary Guarantor, subject to customary local
law exceptions and customary exceptions for bankruptcy and equitable principles.
SECTION 1309. Covenant of Parent Guarantor
The Parent Guarantor covenants and agrees that, so long as any part
of the Indenture Obligations shall remain unpaid or any of the Securities shall
be outstanding, the Parent Guarantor will not enter into or conduct any
business, or engage in any activity other than:
(i) the holding of the Capital Stock of the Company; and
(ii) the performance of its Indenture Obligations or the
guaranteeing of Indebtedness of the Company or any of its Subsidiaries.
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
<PAGE>
90
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
CFP HOLDINGS, INC.
By________________________________________
Name:
Title:
CFP GROUP, INC.
By________________________________________
Name:
Title:
CUSTOM FOOD PRODUCTS, INC.
By________________________________________
Name:
Title:
QF ACQUISITION CORP.
By________________________________________
Name:
Title:
UNITED STATES TRUST
COMPANY OF NEW YORK
By________________________________________
Name:
Title:
<PAGE>
91
SCHEDULE I - Outstanding Indebtedness
Loan Agreement dated as of December 1, 1995, between the Pennsylvania Economic
Development Financing Authority and Quality Foods, L.P. For the issuance of
Taxable Development Revenue Bonds in the amount of $4,300,000.
Loans in the aggregate principal amount of $1,750,000 to be made to QF
Acquisition Corp. pursuant to commitment letter issued by the Pennsylvania
Industrial Development Authority.
Note dated as of March 21, 1995, issued by Quality Foods, L.P. to the
Commonwealth of Pennsylvania, Pennsylvania Machinery and Equipment Loan Fund
(MELF), in the principal amount of $500,000.
Mortgage note dated as of May 25, 1995, issued by Quality Foods, L.P. to
PIDC/PESP Local Development Corporation in the principal amount of $1,750,000.
Promissory Note dated as of September 30, 1994, issued by Custom Food Products,
Inc. ("Custom Foods") to CFP Associates in the principal sum of $200,000, offset
by mirror loan receivable.
Lease Agreement between CFP Associates, a Kentucky partnership and Custom Foods
for premises in Owingsville, Kentucky dated September 30, 1994, as amended by
the Letter Agreement dated of even date therewith. Total amount $4,200,000.
Principal still outstanding is $3,980,771; interest rate of 16.04%. Maturity
date is April 2020.
First Amendment to the Lease Agreement dated as of July 11, 1996 between CFP
Associates and Custom Foods. Principal still outstanding is $1,497,792; interest
rate of 11.84%.
Maturity date is July 2021.
Second Amendment to the Lease Agreement dated as of December 31, 1996 between
CFP Associates and Custom Foods.
Equipment Lease Agreement dated as of January 23, 1990, between Liquid Carbonic
Industries Corporation and Center of the Plate Foods, Inc. Principal still owed
is $6,048; interest rate of 3.90%. Maturity date is April 1997.
Equipment Lease Agreement dated as of June 10, 1992, between Liquid Carbonic
Industries Corporation and Center of the Plate Foods, Inc. Principal still owed
is $50,356; interest rate of 9.67%. Maturity date is September 1997.
Master Equipment Lease dated as of December 7, 1995, between The CIT
Group/Equipment Financing, Inc. ("CIT") and Custom Foods. Principal still owed
is $779,960; interest rate is 8.35%. Maturity date is December 1999.
<PAGE>
92
Guaranty Agreement guaranteeing the obligation of Custom Foods under the Master
Equipment Lease dated as of December 7, 1995, between CFP Holdings, Inc. and
CIT.
Guaranty and Suretyship Agreement guaranteeing the obligation of Custom Foods
under the Lease Agreement dated as of September 30, 1994, between CFP Holdings,
Inc. and CFP Associates, as amended by Letter Agreement dated as of September
30, 1994 (the "Lease Agreement").
First Amendment to the Guaranty and Suretyship Agreement guaranteeing the
obligation of Custom Foods under the Lease Agreement together with and as
modified by the First Amendment to the Lease Agreement (the "First Amendment")
dated as of July 11, 1996, between CFP Holdings, Inc. and CFP Associates.
Second Amendment to the Guaranty and Suretyship Agreement guaranteeing the
obligation of Custom Foods under the Lease Agreement together with and as
modified by the First and Second Amendment to the Lease Agreement (the "Second
Amendment") dated as of December 31, 1996, between CFP Holdings, Inc. and CFP
Associates.
Guaranty and Suretyship Agreement guaranteeing the obligation of Custom Foods
under the Lease Agreement together with and as modified by the First Amendment
and the Second Amendment dated as of December 31, 1996, between CFP Group, Inc.
and CFP Associates.
Stockholders' Agreement dated as of December 31, 1996, among CFP Group, Inc. and
the "Stockholders" of the Corporation identified on Annex I
Employment Agreement dated as of December 31, 1996, between CFP Holdings, Inc.
and Robert Gioia
Employment Agreement dated as of December 31, 1996, between CFP Holdings, Inc.
and David Cohen
Employment Agreement dated as of December 31, 1996, between CFP Holdings, Inc.
and Richard W. Griffith
<PAGE>
Exhibit A
[FACE OF SECURITY]
CFP HOLDINGS, INC.
11 5/8% [Series B]** Senior Guaranteed Note Due 2004
CUSIP _________
No. _______ $_________________
CFP HOLDINGS, INC., a Delaware corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to ___________, or its registered assigns, the
principal sum of ____________________________________ ($___________), on January
15, 2004.
[Initial Interest Rate: 11 5/8% per annum.]*
[Interest Rate: 11 5/8% per annum.]**
Interest Payment Dates: January 15 and July 15 of each year
commencing July 15, 1997.
Regular Record Dates: June 30 and December 31 of each year.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Date: ______________ CFP HOLDINGS, INC.
By: __________________________
Title:
- - - --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE>
A-2
(Form of Trustee's Certificate of Authentication)
This is one of the 11 5/8% [Series B]* Senior Guaranteed Notes Due 2004
described in the within-mentioned Indenture.
UNITED STATES TRUST
COMPANY OF NEW YORK, as Trustee
By: _____________________________
Authorized Signatory
- - - --------
* Include only for Exchange Securities.
<PAGE>
A-3
[REVERSE SIDE OF SECURITY]
CFP HOLDINGS, INC.
11 5/8% [Series B]** Senior Guaranteed Note Due 2004
1. Principal and Interest.
The Company will pay the principal of this Security on January 15,
2004.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate of [11
5/8% per annum (subject to adjustment as provided below)]* [11 5/8% per annum,
except that interest accrued on this Security pursuant to the penultimate
paragraph of this Section 1 for periods prior to the applicable Exchange Date
(as such term is defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Securities from time to time
during such periods].**
Interest will be payable semiannually (to the holders of record of
the Securities (or any predecessor Securities) at the close of business on the
June 30 or December 31 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing July 15, 1997.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated January 28, 1997, among the Company, the
Guarantors and the Initial Purchasers named therein (the "Registration Rights
Agreement"). In the event that either (a) the Exchange Offer Registration
Statement (as such term is defined in the Registration Rights Agreement) is not
filed with the Securities and Exchange Commission on or prior to the 90th
calendar day following the date of original issue of the Securities or (b) the
Exchange Offer (as such term is defined in the Registration Rights Agreement) is
not consummated or a Shelf Registration Statement (as such term is defined in
the Registration Rights Agreement) is not declared effective on or prior to the
180th calendar day following the date of original issue of the Securities, the
interest rate borne by this Security shall be increased by 0.25% per annum
following the first 30 days following the 90-day period referred to in clause
(a) above or the first 90 days following the 180-day period referred to in
- - - --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE>
A-4
clause (b) above. Such interest will be increased by an additional 0.25% per
annum at the beginning of each subsequent 30-day period in the case of clause
(a) above or 90-day period in the case of clause (b) above; provided, however,
that in no event will the interest rate borne by the Securities be increased by
more than 1.50% per annum. Upon the filing of the Exchange Offer Registration
Statement, the consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, the interest rate borne by
this Security from the date of such filing, consummation or effectiveness, as
the case may be, will be reduced to the original interest rate set forth above;
provided, however, that, if after such reduction in interest rate, a different
event specified in clause (a) or (b) above occurs, the interest rate may again
be increased pursuant to the foregoing provisions.]*
Interest on this Security will accrue from the most recent date to
which interest has been paid [on this Security or the Security surrendered in
exchange herefor]** or, if no interest has been paid, from January 28, 1997;
provided that, if there is no existing default in the payment of interest and if
this Security is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum equal to the rate of interest applicable to the Securities.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each January 15 and July 15 to the persons
who are Holders (as reflected in the Security Register at the close of business
on the June 30 and December 31 immediately preceding the Interest Payment Date),
in each case, even if the Security is cancelled on registration of transfer or
registration of exchange after such record date; provided that, with respect to
the payment of principal, the Company will make payment to the Holder that
surrenders this Security to any Paying Agent on or after January 15, 2004.
The Company will pay principal, premium, if any, and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. [Payment of the principal of (and premium,
if any) and interest on the Securities will be made at the office or agency of
the Company maintained for that purpose in The City of
- - - --------
* Include only for Initial Securities.
** Include only for Exchange Securities
<PAGE>
A-5
New York (which shall be the Corporate Trust Office of the Trustee, unless the
Company shall designate and maintain some other office or agency for such
purpose), or at such other office or agency of the Company as may be maintained
for such purpose, in lawful money of the United States of America, or payment of
interest may be made at the option of the Company by check mailed to the address
of the Person entitled thereto as such address shall appear on the Security
Register; provided, however, that all payments to Holders who have given wire
transfer instructions to the Company will be made by wire transfer of
immediately available funds to the accounts specified by such Holder.]*** [All
payments will be made by wire transfer of immediately available funds to the
accounts specified by the Holder.]**** If a payment date is a date other than a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar upon written notice thereto.
The Company, any Subsidiary or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Securities under an Indenture dated as of
January 28, 1997 (the "Indenture"), among the Company, CFP Group, Inc., a
corporation organized under the laws of the State of Delaware ("CFP Group" or
"Parent Guarantor" which term will include all successor parent guarantors under
the Indenture), Custom Food Products, Inc., a corporation organized under the
laws of the State of California ("Custom Foods"), QF Acquisition Corp., a
corporation organized under the laws of the State of Delaware ("Quality Foods",
and together with Custom Foods, the "Subsidiary Guarantors", which term will
include all successor subsidiary guarantors under the Indenture) and United
States Trust Company of New York, as trustee (the "Trustee"). Capitalized terms
herein are used as defined in the Indenture unless otherwise indicated. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act. The Securities
are subject to all such terms, and Holders are referred to the Indenture and the
Trust Indenture Act for a statement of all such terms. To the extent
- - - --------
*** Include for Physical Securities only.
**** Include for U.S. Global Security only.
<PAGE>
A-6
permitted by applicable law, in the event of any inconsistency between the terms
of this Security and the terms of the Indenture, the terms of the Indenture
shall control.
The Securities are general unsecured obligations of the Company. The
Indenture limits the aggregate principal amount of the Securities to
$115,000,000.
5. Redemption.
Optional Redemption. The Securities may be redeemed at the option of
the Company, in whole or in part, at any time and from time to time on or after
January 15, 2001, at the following Redemption Prices (expressed in percentages
of principal amount), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the 12-month period
beginning January 15 of each of the years set forth below:
Redemption
Year Price
---- ----------
2001....................................105.813%
2002 ...................................102.906%
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.
In addition to the optional redemption of the Securities in
accordance with the provisions of the preceding paragraph, at any time or from
time to time prior to January 15, 2000, the Company may redeem up to $40,000,000
aggregate principal amount of the Securities, within 90 days of an Equity
Offering by CFP Group with the net proceeds of such offering (that have been
invested in the equity of the Company), at 110% of the principal amount thereof,
together with accrued interest, if any, to the Redemption Date (subject to the
right of holders of record on relevant record dates to receive interest due on
an Interest Payment Date); provided, however, that at least $75,000,000 of the
original aggregate principal amount of the Securities remains outstanding
thereafter.
Notice of a redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder to be redeemed at such
Holder's last address as it appears in the Security Register. Securities in
original denominations larger than $1,000 may be redeemed in part in integral
multiples of $1,000. On and after the Redemption Date, interest ceases to accrue
on Securities or portions of Securities called for redemption, unless the
Company defaults in the payment of the Redemption Price.
<PAGE>
A-7
6. Repurchase upon a Change in Control and Asset Sales.
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase and (b) upon Asset Sales, the
Company may be obligated to make offers to purchase Securities with a portion of
the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
7. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities selected for redemption (except the
unredeemed portion of any Security being redeemed in part). Also, it need not
register the transfer or exchange of any Securities for a period of 15 days
before a selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
<PAGE>
A-8
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of, premium, if any, and accrued interest on the
Securities (a) to redemption or maturity, the Company will be discharged from
the Indenture and the Securities, except in certain circumstances for certain
sections thereof, and (b) to the Stated Maturity, the Company will be discharged
from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency and make any
change that does not materially adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) certain Asset Sales; (iv) transactions with
Affiliates; (v) dividends and other payment restrictions affecting Restricted
Subsidiaries; (vi) issuances and sale of Capital Stock of Restricted
Subsidiaries; (vii) designation of Unrestricted Subsidiaries; (viii) Liens; and
(ix) merger and certain transfers of assets. Within 120 days after the end of
each fiscal year, the Company must report to the Trustee on compliance with such
limitations.
13. Successor Persons.
When a successor person or other entity assumes all the obligations
of its predecessor under the Securities and the Indenture, the predecessor
person will be released from those obligations.
<PAGE>
A-9
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Securities then outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Securities automatically become immediately due and payable. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at least
a majority in principal amount of the Securities then outstanding may direct the
Trustee in its exercise of any trust or power.
15 Guarantees.
The Company's obligations under the Securities are fully and
irrevocably guaranteed, jointly and severally, by each of the Subsidiary
Guarantors and the Parent Guarantor.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
17. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
<PAGE>
A-10
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to CFP Holdings,
Inc., 1117 West Olympic Boulevard, P.O. Box 1027, Montebello, California 90640,
Attention: Chief Financial Officer.
<PAGE>
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or January 28, 2000 the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Security and the
Indenture.
<PAGE>
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date: ____________________ _________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive
officer
<PAGE>
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant
to Section 1012 or Section 1013 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1012 or Section 1013 of the Indenture, state the
amount (in original principal amount) below:
$_____________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
<PAGE>
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after March 10, 1997
CFP Holdings, Inc.
1117 West Olympic Boulevard
P.O. Box 1027
Montebello, California 90640
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: CFP Holdings, Inc. (the "Company") 11 5/8% Senior
Guaranteed Notes Due 2004 (the "Notes")
Ladies and Gentlemen:
This letter relates to $________ principal amount of Notes
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of January 28,
1997 relating to the Notes (the "Indenture"), we hereby certify that (1) we are
the beneficial owner of such principal amount of Notes represented by the
Temporary Certificate and (2) we are a person outside the United States to whom
the Notes could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you
are hereby requested to issue a Certificated Note representing the undersigned's
interest in the principal amount of Notes represented by the Temporary
Certificate, all in the manner provided by the Indenture.
<PAGE>
B-2
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:__________________________________
Authorized Signature
<PAGE>
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
___________________, ____
CFP Holdings, Inc.
1117 West Olympic Boulevard
P.O. Box 1027
Montebello, California 90640
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: CFP Holdings, Inc. (the "Company") 11 5/8% Senior
Guaranteed Notes Due 2004 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $____________ aggregate
principal amount of the Notes:
1. We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an
"Institutional Accredited Investor");
(ii) any purchase of the Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors;
<PAGE>
C-2
(iii) in the event that we purchase any of the Notes, we will
acquire Notes having a minimum purchase price of not less than
$100,000 for our own account or for any separate account for which
we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing the Notes;
(v) we are not acquiring the Notes with a view to any
distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United
States or any other applicable jurisdictions, provided that the
disposition of our property and the property of any accounts for
which we are acting as fiduciary shall remain at all times within
our control;
(vi) we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase the Notes.
2. We understand that the Notes are being offered in a transaction
not involving any public offering within the meaning of the Securities Act
and that the Notes have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that such Notes may be offered, resold, pledged or
otherwise transferred only (i) to a person whom we reasonably believe to
be a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, in
a transaction meeting the requirements of Rule 144 under the Securities
Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
if the Company so requests), (ii) to the Company or (iii) pursuant to an
effective registration statement under the Securities Act, and, in each
case, in accordance with any applicable securities laws of any State of
the United States or any other applicable jurisdiction. We understand that
the registrar and transfer agent will not be required to accept for
registration of transfer any Notes, except upon presentation of evidence
satisfactory to the Company as applicable, that the foregoing restrictions
on transfer have been complied with. We further understand that the Notes
will be in the form of definitive physical certificates and that any such
certificates will bear a legend reflecting the substance of this
paragraph.
<PAGE>
C-3
3. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
(NAME OF PURCHASER)
Date:
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
<PAGE>
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________________, ___
CFP Holdings, Inc.
1117 West Olympic Boulevard
P.O. Box 1027
Montebello, California 90640
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: CFP Holdings, Inc. (the "Company") 11 5/8% Senior
Guaranteed Notes Due 2004 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
<PAGE>
D-2
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
<PAGE>
CFP HOLDINGS, INC.,
Issuer,
CFP GROUP, INC.,
CUSTOM FOOD PRODUCTS, INC.
and
QF ACQUISITION CORP.,
Guarantors
and
UNITED STATES
TRUST COMPANY OF NEW YORK
Trustee
--------------------
Indenture
Dated as of January 28, 1997
---------------------
$115,000,000
11 5/8% Senior Guaranteed Notes Due 2004
11 5/8% Series B Senior Guaranteed Notes Due 2004
================================================================================
<PAGE>
CFP HOLDINGS, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January 28, 1997
Trust Indenture
Act Section Indenture Section
ss. 310(a)(1) .......................................... 607
(a)(2) .......................................... 607
(b) .......................................... 608
ss. 312(c) .......................................... 701
ss. 314(a) .......................................... 703
(a)(4) .......................................... 1008(a)
(c)(1) .......................................... 102
(c)(2) .......................................... 102
(e) .......................................... 102
ss. 315(b) .......................................... 601
ss. 316(a)(last
sentence) .......................................... 101 ("Outstanding")
(a)(1)(A) .......................................... 502, 512
(a)(1)(B) .......................................... 513
(b) .......................................... 508
(c) .......................................... 105(d)
ss. 317(a)(1) .......................................... 503
(a)(2) .......................................... 504
(b) .......................................... 1003
ss. 318(a) .......................................... 111
<PAGE>
TABLE OF CONTENTS
Page
PARTIES...................................................................... 1
RECITALS OF THE COMPANY...................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.................................................... 2
Acquired Indebtedness...................................... 2
Acquisition................................................ 2
Act........................................................ 3
Affiliate.................................................. 3
Asset Sale................................................. 3
Average Life............................................... 3
Bank Credit Agreement...................................... 4
Banks...................................................... 4
Board of Directors......................................... 4
Board Resolution........................................... 4
Bridge Securities.......................................... 4
Business Day............................................... 4
Capital Stock.............................................. 4
Capitalized Lease Obligation............................... 4
Cash Equivalents........................................... 4
CFP Group.................................................. 5
Change in Control.......................................... 5
Closing Date............................................... 6
Commission................................................. 6
Common Stock............................................... 6
Company.................................................... 6
Company Request or Company Order........................... 6
Consolidated Adjusted Net Income........................... 6
Consolidated EBITDA........................................ 7
Corporate Trust Office..................................... 7
corporation................................................ 7
- - - --------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE>
ii
Page
Custom Foods............................................... 7
Default.................................................... 7
Defaulted Interest......................................... 7
Depositary................................................. 7
Disinterested Directors.................................... 7
Disqualified Stock......................................... 8
Distribution............................................... 8
Equity Offering............................................ 8
Event of Default........................................... 8
Exchange Act............................................... 8
Exchange Offer............................................. 8
Exchange Offer Registration Statement...................... 8
Exchange Securities........................................ 8
Fair Market Value.......................................... 8
Federal Bankruptcy Code.................................... 9
First Atlantic............................................. 9
Fixed Charge Coverage Ratio................................ 9
Fixed Charges.............................................. 9
Generally Accepted Accounting Principles or GAAP........... 9
Guarantees................................................. 9
Guarantors................................................. 9
Hedging Obligations........................................ 9
Holder..................................................... 9
Indebtedness............................................... 9
Indenture.................................................. 10
Indenture Obligations...................................... 10
Initial Public Offering.................................... 10
Initial Securities......................................... 10
Interest Payment Date...................................... 10
Investment................................................. 11
Lien....................................................... 11
Management Fees............................................ 11
Maturity................................................... 11
Moody's.................................................... 11
Net Cash Proceeds.......................................... 11
Non-U.S. Person............................................ 12
Offering................................................... 12
Officers' Certificate...................................... 12
Opinion of Counsel......................................... 12
Outstanding................................................ 12
<PAGE>
iii
Page
Parent Guarantee........................................... 13
Parent Guarantor........................................... 13
Paying Agent............................................... 13
Permitted Investments...................................... 13
Person..................................................... 14
Predecessor Security....................................... 14
Preferred Stock............................................ 14
Qualified Equity Interest.................................. 14
QIB........................................................ 14
Qualified Stock............................................ 15
Quality Foods.............................................. 15
Redemption Date............................................ 15
Redemption Price........................................... 15
Registrar.................................................. 15
Registration Rights Agreement.............................. 15
Registration Statement..................................... 15
Regular Record Date........................................ 15
Regulation S............................................... 15
Restricted Subsidiary...................................... 15
Rule 144A.................................................. 15
Sale and Leaseback Transaction............................. 15
Securities................................................. 15
Securities Act............................................. 16
Security Register and Security Registrar................... 16
Shelf Registration Statement............................... 16
Significant Subsidiary..................................... 16
S&P........................................................ 16
Special Record Date........................................ 16
Stated Maturity............................................ 16
Subordinated Indebtedness.................................. 16
Subsidiary................................................. 16
Subsidiary Guarantee....................................... 17
Subsidiary Guarantors...................................... 17
Trust Indenture Act or TIA................................. 17
Trustee.................................................... 17
Unrestricted Subsidiary.................................... 17
Voting Stock............................................... 17
SECTION 102. Compliance Certificates and Opinions........................... 17
SECTION 103. Form of Documents Delivered to Trustee......................... 18
SECTION 104. Acts of Holders................................................ 18
<PAGE>
iv
Page
SECTION 105. Notices, etc., to Trustee, Company............................. 20
SECTION 106. Notice to Holders; Waiver...................................... 20
SECTION 107. Effect of Headings and Table of Contents....................... 21
SECTION 108. Successors and Assigns......................................... 21
SECTION 109. Separability Clause............................................ 21
SECTION 110. Benefits of Indenture.......................................... 21
SECTION 111. Governing Law.................................................. 22
SECTION 112. Legal Holidays................................................. 22
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally................................................ 22
SECTION 202. Restrictive Legends............................................ 24
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms................................................ 26
SECTION 302. Denominations.................................................. 26
SECTION 303. Execution, Authentication, Delivery and Dating................. 27
SECTION 304. Temporary Securities........................................... 28
SECTION 305. Registration, Registration of Transfer and Exchange............ 29
SECTION 306. Book-Entry Provisions for U.S. Global Security................. 30
SECTION 307. Special Transfer Provisions.................................... 31
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities............... 35
SECTION 309. Payment of Interest; Interest Rights Preserved................. 36
SECTION 310. Persons Deemed Owners.......................................... 38
SECTION 311. Cancellation................................................... 38
SECTION 312. Computation of Interest........................................ 38
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture........................ 38
SECTION 402. Application of Trust Money..................................... 40
<PAGE>
v
Page
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.............................................. 40
SECTION 502. Acceleration of Maturity; Rescission and Annulment............. 42
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee 43
SECTION 504. Trustee May File Proofs of Claim............................... 44
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.... 45
SECTION 506. Application of Money Collected................................. 45
SECTION 507. Limitation on Suits............................................ 46
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest................................. 46
SECTION 509. Restoration of Rights and Remedies............................. 47
SECTION 510. Rights and Remedies Cumulative................................. 47
SECTION 511. Delay or Omission Not Waiver................................... 47
SECTION 512. Control by Holders............................................. 47
SECTION 513. Waiver of Past Defaults........................................ 48
SECTION 514. Waiver of Stay or Extension Laws............................... 48
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults............................................. 48
SECTION 602. Certain Rights of Trustee...................................... 49
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities. 50
SECTION 604. May Hold Securities............................................ 51
SECTION 605. Money Held in Trust............................................ 51
SECTION 606. Compensation and Reimbursement................................. 51
SECTION 607. Corporate Trustee Required; Eligibility........................ 52
SECTION 608. Resignation and Removal; Appointment of Successor.............. 52
SECTION 609. Acceptance of Appointment by Successor......................... 54
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.... 54
<PAGE>
vi
Page
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders................... 55
SECTION 702. Reports by Trustee............................................. 55
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms........... 55
SECTION 802. Successor Substituted.......................................... 57
SECTION 803. Securities to Be Secured in Certain Events..................... 57
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND GUARANTEES
SECTION 901. Without Consent of Holders..................................... 57
SECTION 902. With Consent of Holders........................................ 59
SECTION 903. Execution of Supplemental Indentures........................... 60
SECTION 904. Effect of Supplemental Indentures.............................. 60
SECTION 905. Conformity with Trust Indenture Act............................ 60
SECTION 906. Reference in Securities to Supplemental Indentures............. 60
SECTION 907. Notice of Supplemental Indentures.............................. 60
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest........... 61
SECTION 1002. Maintenance of Office or Agency............................... 61
SECTION 1003. Money for Security Payments to Be Held in Trust............... 61
SECTION 1004. Corporate Existence........................................... 63
SECTION 1005. Payment of Taxes and Other Claims............................. 63
SECTION 1006. Maintenance of Properties..................................... 63
<PAGE>
vii
Page
SECTION 1007. Insurance..................................................... 64
SECTION 1008. Statement by Officers As to Default........................... 64
SECTION 1009. Provision of Reports and Financial Statements................. 64
SECTION 1010. Limitation on Indebtedness.................................... 65
SECTION 1011. Limitation on Restricted Payments............................. 67
SECTION 1012. Purchase of Securities upon a Change of Control............... 71
SECTION 1013. Limitation on Certain Asset Sales............................. 72
SECTION 1014. Limitation on Transactions with Affiliates.................... 73
SECTION 1015. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.................... 74
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.............................. 75
SECTION 1017. Limitation on Liens........................................... 75
SECTION 1018. Unrestricted Subsidiaries..................................... 77
SECTION 1019. Waiver of Certain Covenants................................... 78
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption........................................... 78
SECTION 1102. Applicability of Article...................................... 79
SECTION 1103. Election to Redeem; Notice to Trustee......................... 79
SECTION 1104. Selection by Trustee of Securities to Be Redeemed............. 79
SECTION 1105. Notice of Redemption.......................................... 79
SECTION 1106. Deposit of Redemption Price................................... 80
SECTION 1107. Securities Payable on Redemption Date......................... 80
SECTION 1108. Securities Redeemed in Part................................... 81
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or Covenant Defeasance.... 81
SECTION 1202. Defeasance and Discharge...................................... 82
SECTION 1203. Covenant Defeasance........................................... 82
SECTION 1204. Conditions to Defeasance or Covenant Defeasance............... 83
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions........ 84
SECTION 1206. Reinstatement................................................. 85
<PAGE>
viii
ARTICLE THIRTEEN
GUARANTEES
Page
SECTION 1301. Guarantees.................................................... 85
SECTION 1302. Severability.................................................. 87
SECTION 1303. Seniority of Guarantees....................................... 87
SECTION 1304. Limitation of Subsidiary Guarantors' Liability................ 87
SECTION 1305. Contribution.................................................. 88
SECTION 1306. Release of a Subsidiary Guarantor............................. 88
SECTION 1307. Benefits Acknowledged......................................... 89
SECTION 1308. Additional Subsidiary Guarantors.............................. 89
SECTION 1309. Covenant of Parent Guarantor.................................. 89
TESTIMONIUM.................................................................. 90
SIGNATURES................................................................... 90
SCHEDULE I - Outstanding Indebtedness........................................ 91
EXHIBITS
Exhibit A -Form of Security
Exhibit B - Form of Certificate to Be Delivered upon Termination of Restricted
Period
Exhibit C - Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Institutional Accredited Investors
Exhibit D - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
<PAGE>
Exhibit 4.2
CFP HOLDINGS, INC. EXECUTION COPY
CFP GROUP, INC.
CUSTOM FOOD PRODUCTS, INC.
QF ACQUISITION CORP.
$115,000,000
11 5/8% SENIOR GUARANTEED NOTES DUE 2004
REGISTRATION RIGHTS AGREEMENT
New York, New York
January 28, 1997
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255-0001
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
CFP Holdings, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell (the "Initial Placement") to the Initial Purchasers, upon the
terms set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), its 11 5/8% Senior Guaranteed Notes Due 2004 (the "Notes"). The
Notes are to be unconditionally guaranteed on a senior unsecured basis by CFP
Group, Inc., a Delaware corporation (the "Parent Guarantor"), Custom Food
Products, Inc., a Delaware corporation, QF Acquisition Corp., a Delaware
corporation, and each of the future subsidiaries of the Company, as guarantors
(the "Subsidiary Guarantors" and, individually, each a "Subsidiary Guarantor"
and together with the Parent Guarantor, each a "Guarantor"). As an inducement to
the Initial Purchasers to enter into the Purchase Agreement and purchase the
Notes and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company and the Guarantors agree with you for the benefit of the
holders from time to time of the Notes (including the Initial Purchasers) (each
of the foregoing a "Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
<PAGE>
2
"Affiliate" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Notes" means debt securities issued by the Company and
guaranteed by the Guarantors, identical in all material respects to the
Notes (except that (i) interest thereon shall accrue from the last date on
which interest was paid on the Notes or, if no such interest has been
paid, from January 28, 1997 and (ii) the interest rate step-up provisions
and the transfer restrictions pertaining to the Notes will be modified or
eliminated, as appropriate, in the Exchange Notes), to be issued under the
Indenture.
"Exchange Offer" means the proposed offer to the Holders to issue
and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Exchange Offer Registration Period" means the longer of (A) the
period until the consummation of the Exchange Offer and (B) three years
after effectiveness of the Exchange Offer Registration Statement,
exclusive of any period during which any stop order shall be in effect
suspending the effectiveness of the Exchange Offer Registration Statement;
provided, however, that in the event that all resales of Exchange Notes
(including, subject to the time periods set forth herein, any resales by
Exchanging Dealers) covered by such Exchange Offer Registration Statement
have been made, the Exchange Offer Registration Statement need not remain
continuously effective for the period set forth in clause (B) above.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Securities Act
with respect to the Exchange Offer, all amendments and supplements to such
registration statement, including post-
<PAGE>
3
effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Exchanging Dealer" means any Holder (which may include the Initial
Purchasers) that is a broker-dealer, electing to exchange Notes acquired
for its own account as a result of market-making activities or other
trading activities for Exchange Notes.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Guarantees" has the meaning set forth in the Purchase Agreement.
"Guarantors" has the meaning set forth in the preamble hereto.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the indenture relating to the Notes and the
Exchange Notes, to be dated as of the Closing Date, among the Company, CFP
Group, Inc., Custom Food Products, Inc. and QF Acquisition Corp. as
Guarantors, and the United States Trust Company of New York, as trustee,
as the same may be amended, supplemented, waived or otherwise modified
from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Initial Purchasers" has the meaning set forth in the Purchase
Agreement.
"Losses" has the meaning set forth in Section 6(d) hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of Notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Notes or
the
<PAGE>
4
Exchange Notes covered by such Registration Statement, and all amendments
and supplements to the Prospectus, including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes or
the Exchange Notes (including the Guarantees thereon) pursuant to the
provisions of this Agreement, amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto, and all
material incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof,
which covers some or all of the Notes or Exchange Notes, as applicable
(including the Guarantees thereon), on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Subsidiary Guarantors" has the meaning set forth in the preamble
hereto.
"Trustee" means the trustee with respect to the Notes or Exchange
Notes, as applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
2. Exchange Offer; Resales of Exchange Notes by Exchanging Dealers;
Private Exchange.
(a) The Company and the Guarantors shall prepare and, on or prior to
the 90th calendar day following the Closing Date, shall file with the Commission
the Exchange Offer Registration Statement with respect to the Exchange Offer.
The Company and the Guarantors
<PAGE>
5
shall use their best efforts (i) to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or prior to the
150th calendar day following the Closing Date and remain effective until the
closing of the Exchange Offer and (ii) to consummate the Exchange Offer on or
prior to the 180th calendar day following the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
electing to exchange Notes for Exchange Notes (assuming that such Holder (x) is
not an "affiliate" of the Company within the meaning of the Securities Act, (y)
is not a broker-dealer that acquired the Notes in a transaction other than as a
part of its market-making or other trading activities and (z) if such Holder is
not a broker-dealer, acquires the Exchange Notes in the ordinary course of such
Holder's business, is not participating in the distribution of the Exchange
Notes and has no arrangements or understandings with any person to participate
in the distribution of the Exchange Notes) to resell such Exchange Notes from
and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of a
substantial proportion of the several states of the United States.
(c) In connection with the Exchange Offer, the Company shall mail to
each Holder a copy of the Prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal and
related documents, stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to this Agreement
and that all Notes validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a Note exchanged pursuant to the
Exchange Offer will be required to surrender such Note, together with the
enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in
the notice prior to the close of business on the last day of acceptance
for exchange; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last day of acceptance for
exchange, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the name
of
<PAGE>
6
such Holder, the principal amount of Notes delivered for exchange and a
statement that such Holder is withdrawing his election to have such Notes
exchanged; and shall keep the Exchange Offer open for acceptance for not
less than 30 days and not more than 45 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York; and comply in
all respects with all applicable laws relating to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder Exchange Notes equal in principal amount to the Notes of such
Holder so accepted for exchange.
(e) The Initial Purchasers, the Company and the Guarantors
acknowledge that, pursuant to interpretations by the staff of the Commission of
Section 5 of the Securities Act, and in the absence of an applicable exemption
therefrom, each Exchanging Dealer is required to deliver a Prospectus in
connection with a sale of any Exchange Notes received by such Exchanging Dealer
pursuant to the Exchange Offer in exchange for Notes acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Company and the Guarantors shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, in Annex C hereto in the underwriting
or plan of distribution section of the Prospectus forming a part of the
Exchange Offer Registration Statement, and in Annex D hereto in the letter
of transmittal delivered pursuant to the Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of Exchange Notes
received pursuant to the Exchange Offer, as contemplated by Section 4(h)
below; provided, however, that the Company shall not be required to
maintain
<PAGE>
7
the effectiveness of the Exchange Offer Registration Statement for more
than 60 days following the consummation of the Exchange Offer unless the
Company has been notified in writing on or prior to the 60th day following
the consummation of the Exchange Offer by one or more Exchanging Dealers
that such Holder has received Exchange Notes as to which it will be
required to deliver a prospectus upon resale.
(f) In the event that the Initial Purchasers determine that they are
not eligible to participate in the Exchange Offer with respect to the exchange
of Notes constituting any portion of an unsold allotment, upon the effectiveness
of the Shelf Registration Statement as contemplated by Section 3 hereof and at
the request of the Initial Purchasers, the Company shall issue and deliver to
the Initial Purchasers, or to the party purchasing Exchange Notes registered
under the Shelf Registration Statement from the Initial Purchasers, in exchange
for such Notes, a like principal amount of Exchange Notes. The Company shall use
its best efforts to cause the CUSIP Service Bureau to issue the same CUSIP
number for such Exchange Notes as for Exchange Notes issued pursuant to the
Exchange Offer.
(g) The Company and the Guarantors shall use their best efforts to
complete the Exchange Offer as provided above and shall comply with the
applicable requirements of the Securities Act, the Exchange Act and other
applicable laws and regulations in connection with the Exchange Offer. The
Exchange Offer shall not be subject to any conditions, other than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the Commission. The Company shall inform the Initial Purchasers
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchasers shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Notes in the
Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer as contemplated by Section 2 hereof, or (ii) for any reason
other than those specified clause (i) above, the Exchange Offer is not
consummated within 180 days of the Closing Date unless the Exchange Offer has
commenced, in which case, the Exchange Offer is not consummated within 30 days
after the date on which the Exchange Offer was commenced, or (iv) any Initial
Purchaser so requests with respect to Notes held by it following consummation of
the Exchange Offer, or (v) any Holder (other than the Initial Purchaser) is not
eligible to participate in the Exchange Offer or has participated in the
Exchange Offer and has received Exchange Notes that are not freely tradeable or
(vi) in the case where the Initial Purchasers participate in the Exchange Offer
or acquire Exchange Notes pursuant to Section 2(f) hereof, the Initial
Purchasers do not receive freely tradeable Exchange Notes in exchange for Notes
constituting any portion of an unsold allotment (it being understood that, for
purposes of this Section 3, (x) the requirement that the Initial Purchasers
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Securities Act in
<PAGE>
8
connection with sales of Exchange Notes acquired in exchange for such Notes
shall result in such Exchange Notes being not "freely tradeable" and (y) the
requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of Exchange Notes acquired in the Exchange Offer in exchange for Notes
acquired as a result of market-making activities or other trading activities
shall not result in such Exchange Notes being not "freely tradeable"), the
following provisions shall apply:
(a) The Company and the Guarantors shall, as promptly as practicable
(but in any event on or prior to 60 days after such filing obligation
arises), file with the Commission a Shelf Registration Statement relating
to the offer and sale of the Notes or the Exchange Notes, as applicable,
by the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such Shelf
Registration Statement and Rule 415 under the Securities Act, provided,
that, with respect to Exchange Notes received by the Initial Purchasers in
exchange for Notes constituting any portion of an unsold allotment, the
Company and the Guarantors may, if permitted by current interpretations by
the Commission's staff, file a post-effective amendment to the Exchange
Offer Registration Statement containing the information required by
Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its
obligations under this paragraph (a) with respect thereto, and any such
Exchange Offer Registration Statement, as so amended, shall be referred to
herein as, and governed by the provisions herein applicable to, a Shelf
Registration Statement.
(b) The Company and the Guarantors shall use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act as promptly as possible after filing such Shelf
Registration Statement pursuant to this Section 3 and to keep such Shelf
Registration Statement continuously effective in order to permit the
Prospectus contained therein to be usable by Holders for a period of three
years from the date the Shelf Registration Statement is declared effective
by the Commission or such shorter period that will terminate when all the
Notes or Exchange Notes, as applicable, covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement (in
any such case, such period being called the "Shelf Registration Period").
The Company shall be deemed not to have used its best efforts to keep the
Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Notes covered
thereby not being able to offer and sell such Notes during that period,
unless (i) such action is required by applicable law or (ii) such action
is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 4(k) hereof, if
applicable.
<PAGE>
9
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company and the Guarantors shall, within a reasonable time
prior to the filing of any Registration Statement, any Prospectus, any
amendment to a Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after initial filing of a
Registration Statement, provide copies of such document to the Initial
Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) and make such representatives of
the Company and the Guarantors as shall be reasonably requested by the
Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment
of or supplement to a Registration Statement or a Prospectus or any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Initial Purchasers and their
counsel (and, in the case of a Shelf Registration Statement, the Holders
and their counsel) shall not have previously been advised and furnished a
copy or to which the Initial Purchasers or their counsel (and, in the case
of a Shelf Registration Statement, the Holders or their counsel) shall
reasonably object, except for any amendment or supplement or document (a
copy of which has been previously furnished to the Initial Purchasers and
their counsel (and, in the case of a Shelf Registration Statement, the
Holders and their counsel)) which counsel to the Company and the
Guarantors shall advise the Company and the Guarantors is required in
order to comply with applicable law; each of the Initial Purchasers agrees
that, if it receives timely notice and drafts under this clause (a), it
will not take actions or make objections pursuant to this clause (a) such
that the Company and the Guarantors are unable to comply with their
obligations under Section 2.
(b) The Company and the Guarantors shall ensure that:
(i) any Registration Statement and any amendment thereto and
any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder;
(ii) any Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and
<PAGE>
10
(iii) any Prospectus forming part of any Registration
Statement, including any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(c) (1) The Company shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Notes covered
thereby, and, if requested by the Initial Purchasers or any such Holder,
confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchasers and, in the case of a Shelf Registration Statement, the Holders
of Notes covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has provided in writing
to the Company a telephone or facsimile number and address for notices,
and, if requested by the Initial Purchasers or any such Holder or
Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes included
therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the Registration Statement or the Prospectus
does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an
<PAGE>
11
instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(d) The Company and the Guarantors shall use their best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Notes covered by any
Shelf Registration Statement, without charge, at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those incorporated by
reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Notes covered by any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Notes in connection
with the offering and sale of the Notes covered by the Prospectus or any
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by
reference therein and, if the Exchanging Dealer so requests in writing,
all exhibits thereto (including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging
Dealer may reasonably request for delivery by such Exchanging Dealer in
connection with a sale of Exchange Notes received by it pursuant to the
Exchange Offer; and the Company consents to the use of the Prospectus or
any amendment or supplement thereto by any such Exchanging Dealer, as
provided in Section (2)(e) above.
(i) Prior to the Exchange Offer or any other offering of Notes
pursuant to any Registration Statement, the Company and the Guarantors
shall register or qualify or cooperate with the Holders of Notes included
therein and their respective counsel in connection with the registration
or qualification of such Notes for offer and sale under the
<PAGE>
12
Securities or blue sky laws of such states as any such Holders reasonably
request in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such states of the Notes covered
by such Registration statement; provided however, that the Company and the
Guarantors will not be required to qualify as a foreign corporation or as
a dealer in securities in any jurisdiction in which it is not then so
qualified, to file any general consent to service of process or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
(j) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Notes to be
sold pursuant to any Registration Statement free of any restrictive
legends and in denominations of $1,000 or an integral multiple thereof and
registered in such names as Holders may request prior to sales of Notes
pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 4, the Company and the Guarantors shall
promptly prepare and file a post-effective amendment to any Registration
Statement or an amendment or supplement to the related Prospectus or any
other required document so that, as thereafter delivered to purchasers of
the Notes included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading and, in the case of a Shelf Registration
Statement, notify the Holders to suspend use of the Prospectus as promptly
as practicable after the occurrence of such an event.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Notes or Exchange Notes, as the case may be, registered under such
Registration Statement, and provide the Trustee with printed certificates
for such Notes or Exchange Notes, in a form eligible for deposit with The
Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable after
the effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act.
(n) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a
timely manner.
<PAGE>
13
(o) The Company may require each Holder of Notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Notes as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters, if any, and
Majority Holders reasonably agree should be included therein, and shall
make all required filings of such Prospectus supplement or post-effective
amendment promptly upon notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company and
the Guarantors shall enter into such customary agreements (including
underwriting agreements) and take all other appropriate actions in order
to expedite or to facilitate the registration or the disposition of any
Notes included therein, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification
provisions and procedures no less favorable than those set forth in
Section 6 (or such other provisions and procedures acceptable to the
Majority Holders and the Managing Underwriters, if any) with respect to
all parties to be indemnified pursuant to Section 6.
(r) In the case of any Shelf Registration Statement, the Company and
the Guarantors shall:
(i) make reasonably available for inspection by the Holders of
Notes to be registered thereunder, any underwriter participating in
any disposition pursuant to such Shelf Registration Statement, and
any attorney, accountant or other agent retained by the Holders or
any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company any and
its subsidiaries;
(ii) cause the Company's and the Guarantors' officers,
directors and employees to supply all relevant information
reasonably requested by the Holders or any such underwriter,
attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations and make such representatives of the Company and the
Guarantors as shall be reasonably requested by the Initial
Purchasers or Managing Underwriters, if any, available for
discussion of any such Registration Statement; provided, however,
that any information that is designated in writing by the Company or
the Guarantors, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the
Holders or any such underwriter, attorney, accountant or agent,
<PAGE>
14
unless such disclosure is made in connection with a court proceeding
or required by law, or such information becomes available to the
public generally or through a third party without an accompanying
obligation of confidentiality other than as a result of a disclosure
of such information by any such Holder, underwriter, attorney,
accountant or agent;
(iii) make such representations and warranties to the Holders
of Notes registered thereunder and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(iv) obtain opinions of counsel to the Company and the
Guarantors and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and
the underwriters, if any, covering such matters as are customarily
covered in opinions requested in similar underwritten offerings and
such other matters as may be reasonably requested by such Holders
and underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company and the
Guarantors (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the
Registration Statement), addressed to the underwriters, if any, and
use reasonable efforts to have such letter addressed to the selling
Holders of Notes registered thereunder (to the extent consistent
with Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accountants (AICPA) ("SAS 72")), in
customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with similar underwritten
offerings, or if the provision of such "cold comfort" letters is not
permitted by SAS No. 72 or if requested by the Initial Purchasers or
its counsel in lieu of a "cold comfort" letter, an agreed-upon
procedures letter under Statement on Auditing Standards No. 35 of
the AICPA, covering matters reasonably requested by the Initial
Purchasers or its counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, and customarily delivered in similar
offerings, including those to evidence compliance with Section 4(k)
and with any conditions contained in the underwriting agreement or
other agreement entered into by the Company.
<PAGE>
15
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 4(r) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) The Company and the Guarantors shall, in the case of a Shelf
Registration, use their best efforts to cause all Notes to be listed on
any securities exchange or any automated quotation system on which similar
securities issued by the Company or the Parent Guarantor are then listed
if requested by the Majority Holders, to the extent such Notes satisfy
applicable listing requirements.
(t) The Company and the Guarantors shall use their best efforts to
cause the Exchange Notes or Notes, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act).
5. Registration Expenses; Remedies. (a) The Company and the
Guarantors shall bear all expenses incurred in connection with the performance
of their obligations under Sections 2, 3 and 4 hereof, including without
limitation: (i) all Commission, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any of the
Exchange Notes or Notes), (iii) all expenses of any persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi) the fees
and disbursements of the Trustee and its counsel, (vii) the fees and
disbursements of counsel for the Company and the Guarantors and, in the case of
a Shelf Registration Statement, the fees and disbursements of one counsel for
the Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Initial Purchasers) and in the case of any
Exchange Offer Registration Statement, the reasonable fees and expenses of
counsel to the Initial Purchasers acting in connection therewith and (viii) the
fees and disbursements of the independent public accountants of the Company and
the Guarantors, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Notes by a Holder.
<PAGE>
16
(b) The Notes provide that in the event that either (i) the Exchange
Offer Registration Statement is not filed with the Commission on or prior to the
90th calendar day following the Closing Date or (ii) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective on or
prior to the 180th calendar day following the Closing Date, the interest rate
borne by the Notes will be increased by 0.25% per annum following the first 30
days following the 90-day period referred to in clause (i) above or the first 90
days following the 180-day period referred to in clause (ii) above. Such
interest will be increased by an additional 0.25% per annum at the beginning of
each subsequent 30-day period in the case of clause (i) above or 90-day period
in the case of clause (ii) above; provided, however, that in no event will the
interest rate borne by the Notes be increased by more than 1.50% per annum. Upon
the filing of the Exchange Offer Registration Statement, the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, the interest rate borne by the Notes from the date of such filing,
consummation or effectiveness, as the case may be, will be reduced to the
original interest rate; provided, however, that, if after such reduction in
interest rate, a different event specified in clause (i) or (ii) above occurs,
the interest rate may again be increased pursuant to the foregoing provisions.
(c) Without limiting the remedies available to the Initial
Purchasers and the Holders, the Company and the Guarantors acknowledge that any
failure by the Company and the Guarantors to comply with their respective
obligations under Sections 2 and 3 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 2 and 3 hereof.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company and each Guarantor jointly and severally
agree to indemnify and hold harmless each Holder of Notes covered thereby
(including the Initial Purchasers and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer) the
directors, officers, employees and agents of such Holder and each person who
controls such Holder within the meaning of either the Securities Act or the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made)
<PAGE>
17
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage or
liability (or action in respect thereof); provided, however, that the Company
and each Guarantor will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any such Holder specifically for inclusion
therein; provided further, however, that the Company and each Guarantor will not
be liable in any case with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary Prospectus or
Prospectus, or in any amendment thereof or supplement thereto to the extent that
any such loss, claim, damage or liability (or action in respect thereof)
resulted from the fact that any Holder sold Notes or Exchange Notes to a person
to whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus as then amended or supplemented in any case
where such delivery is required by the Securities Act, if the Company had
previously complied with the provisions of Section 4(c)(2) and 4(f) or 4(g)
hereof and if the untrue statement contained in or omission from such
preliminary Prospectus or Prospectus was corrected in the Prospectus or then
amended or supplemented. This indemnity agreement will be in addition to any
liability that the Company or any Guarantor may otherwise have.
The Company and each Guarantor also agree jointly and severally to
indemnify or contribute to Losses of, as provided in Section 6(d) hereof, any
underwriters of Notes registered under a Shelf Registration Statement, their
employees, officers, directors and agents and each person who controls such
underwriters on the same basis as that of the indemnification of the Initial
Purchasers and the selling Holders provided in this Section 6(a) and shall, if
requested by any Holder, enter into an underwriting agreement reflecting such
agreement, as provided in Section 4(q) hereof.
(b) Each Holder of Notes covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer)
severally agrees to indemnify and hold harmless (i) the Company and each
Guarantor, (ii) each of the directors of the Company and each Guarantor, (iii)
each of the officers of the Company and the Guarantors who signs such
Registration Statement and (iv) each Person who controls the Company or any
Guarantor within the meaning of either the Securities Act or the Exchange Act to
the same extent as the foregoing indemnity from the Company and each Guarantor
to each such Holder, but only with respect to written information furnished to
the Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability that any such Holder may otherwise have.
<PAGE>
18
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying
<PAGE>
19
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Registration Statement that resulted in such Losses;
provided, however, that in no case shall any Initial Purchaser or any subsequent
Holder of any Note or Exchange Note be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such Note,
or in the case of an Exchange Note, applicable to the Note that was exchangeable
into such Exchange Note, as set forth on the cover page of the Final Memorandum,
nor shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the Notes purchased by such
underwriter under the Registration Statement that resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Guarantors shall be
deemed to be equal to the total net proceeds from the Initial Placement (before
deducting expenses) as set forth on the cover page of the Final Memorandum.
Benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Final Memorandum, and benefits received by any other Holders shall be deemed to
be equal to the value of receiving Notes or Exchange Notes, as applicable,
registered under the Securities Act. Benefits received by any underwriter shall
be deemed to be equal to the total underwriting discounts and commissions, as
set forth on the cover page of the Prospectus forming a part of the Registration
Statement that resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation that did not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls a
Holder within the meaning of either the Securities Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
or any Guarantor within the meaning of either the Securities Act or the Exchange
Act, each officer of the Company or any Guarantor who shall have signed the
Registration Statement and each director of the Company and each Guarantor shall
have the same rights to contribution as the Company and each Guarantor, subject
in each case to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any
<PAGE>
20
Guarantor or any of the officers, directors or controlling persons referred to
in Section 6 hereof, and will survive the sale by a Holder of Notes covered by a
Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreement. The Company and the Guarantors have
not, as of the date hereof, entered into, nor shall any of them, on or after the
date hereof, enter into, any agreement that conflicts with the rights granted to
the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then - outstanding
aggregate principal amount of Notes (or, after the consummation of any Exchange
Offer in accordance with Section 2 hereof, of Exchange Notes); provided that, no
amendment, qualification, modification, supplement waiver or consent to any
departure from the provisions of Section 6 shall be effective against any Holder
of Notes unless consented to in writing by such Holder. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to departure from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Notes are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders, determined on the basis of Notes
being sold rather than registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to NationsBanc Capital Markets, Inc.;
(ii) if to the Initial Purchasers, at NationsBank Corporate Center,
100 North Tryon Street NCl-007-07-01, Charlotte, North Carolina
28255-0001;
(iii) if to the Company or any Guarantor, c/o the Company at 1117
West Olympic Boulevard, P.O. Box 1027, Montebello, California 90640,
Attention: Chief Financial Officer, with copies to O'Sullivan Graev &
Karabell, 30 Rockefeller Plaza, New York, New York 10022, Attention:
Lawrence G. Graev.
<PAGE>
21
All such notices and communications shall be deemed to have been
duly given when received. The Initial Purchasers, on the one hand, or the
Company or any Guarantor, on the other, by notice to the other party or parties
may designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company or any Guarantor thereto, subsequent Holders of Notes and/or
Exchange Notes. The Company and the Guarantors hereby agree to extend the
benefits of this Agreement to any Holder of Notes and/or Exchange Notes and any
such Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, etc. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Notes or Exchange
Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the
Company or its Affiliates (other than subsequent Holders of Notes or Exchange
Notes if such subsequent Holders are deemed to be Affiliates solely by reason of
their holdings of such Notes or Exchange Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE>
22
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and you.
Very truly yours,
CFP HOLDINGS, INC.
By: ___________________________
Name:
Title:
CFP GROUP, INC.
By: ___________________________
Name:
Title:
CUSTOM FOOD PRODUCTS, INC.
By: ___________________________
Name:
Title:
QF ACQUISITION CORP.
By: ___________________________
Name:
Title:
<PAGE>
23
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: NATIONSBANC CAPITAL MARKETS, INC.
By: __________________________
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amend or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business one year
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Notes where
such Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration Date
and ending on the close of business one year after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. In addition, until such date all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
<PAGE>
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Notes, it represents that the Notes to be exchanged
for the Exchange Notes were acquired by it as a result of market-making
activities or other trading activities and acknowledges that it will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.3
CFP GROUP, INC.
CFP HOLDINGS, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of December 30, 1996 and entered into by
and among CFP HOLDINGS, INC., a Delaware corporation ("Borrower"), CFP GROUP,
INC., a Delaware corporation ("Parent"), THE FINANCIAL INSTITUTIONS LISTED ON
THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender"
and collectively as "Lenders"), NATIONSBANK OF TEXAS, N.A. ("NATIONSBANK"), as
administrative agent for Lenders (in such capacity, "Administrative Agent"),
NATIONS-BANC CAPITAL MARKETS, INC. ("NCMI"), as arranging agent (in such
capacity, "Arranging Agent") and as syndication agent (in such capacity,
"Syndication Agent"), and FLEET NATIONAL BANK, as Documentation Agent (in such
capacity, "Documentation Agent").
R E C I T A L S
WHEREAS, on the Closing Date (this and other capitalized terms used herein
without definition shall have the meanings assigned to those terms in subsection
1.1), (x) Borrower intends to purchase substantially all of the outstanding
limited partnership interests in Quality Foods, L.P. and all of the outstanding
shares of capital stock of QF Acquisition and QF Management pursuant to the
Acquisition Agreement, (y) the remaining limited partnership interests in
Quality Foods, L.P. will be exchanged for capital stock of Parent and all
limited partnership interests of Quality Foods, L.P. will be contributed to QF
Acquisition and (z) immediately upon the consummation of the Acquisition, (i) QF
Management will be merged with and into QF Acquisition with QF Acquisition being
the surviving corporation in such merger, (ii) Quality Foods, L.P. will transfer
all of its assets and liabilities to QF Acquisition and (iii) Quality Foods,
L.P. will be liquidated and dissolved;
WHEREAS, Lenders have agreed to extend certain credit facilities to
Borrower, the proceeds of which will be used (i) together with the proceeds of
the Bridge Financing, to fund (1) the purchase price payable in connection with
the Acquisition, (2) the refinancing of certain indebtedness, (3) the repurchase
of certain preferred stock of Parent, and (4) the payment of the Transaction
Costs, and (ii) to provide financing for general corporate purposes of Borrower
and its Subsidiaries;
WHEREAS, upon the request of Borrower and subject to the terms and
conditions hereof, on the Closing Date, Lenders have agreed to make certain Term
Loans and Revolving Loans, to issue the Acquisition Letter of Credit in support
of the Seller Notes and to enter into the IRB Reimbursement Agreement;
<PAGE>
WHEREAS, Lenders have agreed to make the remaining Term Loans available
hereunder to Borrower to pay the sum due on the Seller Notes, or if not paid, to
reimburse the Issuing Lender for a drawing under the Acquisition Letter of
Credit;
WHEREAS, upon a Permitted Securities Issuance, the Net Securities Proceeds
therefrom shall be applied (i) to all obligations of Borrower under the Bridge
Notes, (ii) under certain circumstances set forth herein, to fund the
Distribution Transaction in an amount not to exceed $16,000,000, (iii) to the
extent of any remaining portion of such Net Securities Proceeds, first to prepay
the Tranche A and Tranche B Term Loans as provided herein and to the extent of
any remaining proceeds, to prepay Revolving Loans to the full extent thereof;
WHEREAS, Borrower desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a first priority Lien on substantially all of its real, personal and
mixed property, including without limitation a pledge of all of the capital
stock of each of its Subsidiaries; and
WHEREAS, Parent and all of the Subsidiaries of Borrower have agreed to
guarantee the Obligations hereunder and under the other Loan Documents and to
secure their guaranties by granting to Administrative Agent, on behalf of
Lenders, a first priority Lien on substantially all of their respective real,
personal and mixed property, including without limitation a pledge of all of the
capital stock of each of their respective Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Parent, Borrower, Lenders, Arranging
Agent and Syndication Agent agree as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Accepting Tranche B Lenders" has the meaning assigned to that term in
subsection 2.4B(iv)(c).
"Accounts Receivable" means, as at any date of determination, the unpaid
portion of the obligations (which, if an invoice has been issued, shall be as
stated on the respective invoice issued to a customer) with respect to (a)
Inventory sold and shipped in the ordinary course of business by any Operating
Subsidiary and (b) services provided in the ordinary course of business by any
Operating Subsidiary.
"Acquisition" means the acquisition by Borrower of all of the outstanding
limited partnership interests in Quality Foods, L.P. and all of the outstanding
shares of capital stock of
2
<PAGE>
QF Acquisition and QF Management, and the other transactions contemplated by the
Acquisition Agreement.
"Acquisition Agreement" means that certain Securities Purchase Agreement
by and among Quality Foods, L.P., the partners of Quality Foods, L.P., the
stockholders of QF Acquisition and QF Management and Borrower dated as of
December 31, 1996, in the form delivered to Administrative Agent and Lenders
prior to their execution of this Agreement and as such agreement may be amended
from time to time thereafter to the extent permitted under subsection 7.13A.
"Acquisition Documents" means the Acquisition Agreement and all material
agreements and documents entered into in connection with the Acquisition
(including the Assignment and Assumption Agreement between Quality Foods, L.P.
and QF Acquisition), in each case, in the form delivered to Administrative Agent
and Lenders prior to their execution of this Agreement, as any such Acquisition
Document may be amended from time to time thereafter to the extent permitted
under subsection 7.13A
"Acquisition Financing Requirements" means the aggregate of all amounts
necessary (i) to finance the purchase price payable in connection with the
Acquisition, (ii) to refinance the Indebtedness set forth on Schedule 4.1E and
(iii) to pay Transaction Costs.
"Acquisition Letter of Credit" means the letters of credit substantially
in the forms attached hereto as Exhibit IV issued for the purpose of supporting
the obligation of Borrower to pay the Seller Notes pursuant to subsection
3.1A(2).
"Acquisition Reimbursement Date" means the earlier of (i) the
Reimbursement Date in respect of the Acquisition Letter of Credit and (ii)
January 8, 1997.
"Additional Subordinated Note Documents" the Additional Subordinated Notes
and all material agreements entered into in connection with the Additional
Subordinated Notes in such form and substance reasonably satisfactory to
Administrative Agent and Requisite Lenders, as any of such Additional
Subordinated Note Documents may be amended from time to time to the extent
permitted under subsection 7.13B.
"Additional Subordinated Notes" means the promissory notes of Borrower or
its Subsidiaries issued after the Closing Date in an aggregate principal amount
permitted under subsection 7.1(xii) pursuant to documentation containing
maturities, amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms which taken as a whole are no less favorable
to Lenders or Borrower and its Subsidiaries than the corresponding terms in the
Bridge Financing Documents; provided that in no event shall such Additional
Subordinated Notes contain any provision granting holders thereof the rights
with respect to amendments to the Loan Documents set forth in Section 9.16(a) of
the note purchase agreement relating to the Bridge Notes as in effect on the
Closing Date.
3
<PAGE>
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date
with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the offered quotation (rounded upward to the
nearest 1/16 of one percent) to first class banks in the London interbank market
by NationsBank for U.S. dollar deposits of amounts in same day funds comparable
to the principal amount of the Eurodollar Rate Loan of NationsBank for which the
Adjusted Eurodollar Rate is then being determined (which principal amount shall
be deemed to be $1,000,000 in the event NationsBank is not making, converting to
or continuing such a Eurodollar Rate Loan) with maturities comparable to such
Interest Period as of approximately 11:00 a.m. (London time) on such Interest
Rate Determination Date by (ii) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable on such
Interest Rate Determination Date to any member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" as defined in Regulation D (or
any successor category of liabilities under Regulation D).
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affected Loan" has the meaning assigned to that term in subsection 2.6C.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any executive officer
or director of any such specified Person or other Person or, with respect to any
natural Person, any Person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousin. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling", "controlled" and "under common control" have
meanings correlative to the foregoing.
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"Agreement" means this Credit Agreement dated as of December 30, 1996, as
it may be amended, supplemented or otherwise modified from time to time.
"Applicable Margin" means the following:
(i) for Term Loans A and Tranche A Term Loans for the period prior
to the Permitted Securities Issuance Prepayment Date, (1) from the Closing
Date until delivery of financial statements for the period ending December
31, 1997 as required pursuant to subsection 6.1(ii), 1.5% per annum for
Base Rate Loans and 2.75% per annum for Eurodollar Rate Loans, and (2)
thereafter, the percentage per annum determined by reference to the
applicable Level set forth below:
4
<PAGE>
=====================================================
Eurodollar Base
Level Rate Loans Rate Loans
=====================================================
Level I 2.75% 1.50%
=====================================================
Level II 2.50% 1.50%
=====================================================
Level III 2.25% 1.25%
=====================================================
Level IV 2.00% 1.00%
=====================================================
(ii) for Term Loans A for the period from and after the Permitted
Securities Issuance Prepayment Date, (1) from the Permitted Securities
Issuance Prepayment Date until delivery of financial statements for the
period ending December 31, 1997 as required pursuant to subsection
6.1(ii), 2% per annum for Base Rate Loans and 3% per annum for Eurodollar
Rate Loans, and (2) thereafter, the percentage per annum determined by
reference to the applicable Level set forth below:
=====================================================
Eurodollar Base
Level Rate Loans Rate Loans
=====================================================
Level I 3.00% 2.00%
=====================================================
Level II 2.75% 1.75%
=====================================================
Level III 2.50% 1.50%
=====================================================
Level IV 2.25% 1.25%
=====================================================
(iii) for Revolving Loans (1) from the Closing Date until delivery
of financial statements for the period ending December 31, 1997 as
required pursuant to subsection 6.1(ii), 1.25% per annum for Base Rate
Loans and 2.5% per annum for Eurodollar Rate Loans, and (2) thereafter,
the percentage per annum determined by reference to the applicable Level
set forth below:
5
<PAGE>
=====================================================
Eurodollar Base
Level Rate Loans Rate Loans
=====================================================
Level I 2.50% 1.25%
=====================================================
Level II 2.25% 1.25%
=====================================================
Level III 2.00% 1.00%
=====================================================
Level IV 1.75% 0.75%
=====================================================
The Level with respect to the Applicable Margin shall be determined
as of each Measurement Date and shall be the basis for determining the
Applicable Margin until the next succeeding Measurement Date; provided,
however, that the Applicable Margin for each Loan shall be the percentage
per annum determined by reference to Level I for such Loan, for so long as
Borrower has not submitted to the Administrative Agent the information
necessary for determining the applicable Level as and when required under
subsection 6.1(ii) and 6.1(iv).
"Applied Amount" has the meaning assigned to that term in subsection
2.4B(iv)(b).
"Asset Sale" means the sale by Parent or any of its Subsidiaries to any
Person other than Borrower or any of its Subsidiaries of (i) any of the stock of
Borrower or any of Borrower's Subsidiaries, (ii) all or substantially all of the
assets of any division or line of business of Parent or any of its Subsidiaries,
or (iii) any other assets (whether tangible or intangible) of Parent or any of
its Subsidiaries outside of the ordinary course of business (other than (a)
inventory sold in the ordinary course of business and (b) any such other assets
to the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions does not exceed $250,000 and in
all transactions during any twelve month period does not exceed $1,000,000).
"Assignment Agreement" means an Assignment Agreement in substantially the
form of Exhibit XII annexed hereto.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or (y)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Borrower" means CFP Holdings, Inc., a Delaware corporation.
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"Borrower Pledge Agreement" means the Borrower Pledge Agreement executed
and delivered by Borrower on the Closing Date, substantially in the form of
Exhibit XVII annexed hereto, as such Borrower Pledge Agreement may thereafter be
amended, supplemented or otherwise modified from time to time.
"Borrower Security Agreement" means the Borrower Security Agreement
executed and delivered by Borrower on the Closing Date, substantially in the
form of Exhibit XVIII annexed hereto, as such Borrower Security Agreement may
thereafter be amended, supplemented or otherwise modified from time to time.
"Borrowing Base" means, as of any date of determination, the sum of 85% of
Eligible Accounts Receivable plus 60% of Eligible Inventory in which
Administrative Agent, for the benefit of itself and Lenders, holds a fully
perfected First Priority security interest, plus, from the Closing Date until
the second anniversary of the Closing Date, an amount equal to $750,000 less any
proceeds of PIDC Loans (up to $750,000) received after the Closing Date
(provided that such amount shall not exceed $375,000 from the first anniversary
of the Closing Date to the second anniversary of the Closing Date), as
calculated pursuant to the most recent Borrowing Base Certificate and otherwise
in accordance with the provisions of subsection 6.12.
"Borrowing Base Certificate" means a certificate substantially in the form
annexed hereto as Exhibit XXVIII delivered by Borrower pursuant to subsection
6.1(xviii).
"Bridge Financing" means the loans obtained from the issuance by Borrower
of the Bridge Notes.
"Bridge Financing Documents" means all of the Bridge Notes, the note
purchase agreements and related agreements and documents pursuant to which the
Bridge Financing is being made, in each case, in the form delivered to
Administrative Agent and Lenders prior to their execution of this Agreement, as
any such Bridge Financing Document may be amended, supplemented or otherwise
modified from time to time thereafter to the extent permitted under subsection
7.13B.
"Bridge Notes" means the promissory notes of Borrower in the initial
principal amount of $25,000,000 issued on the Closing Date (and any notes issued
in exchange therefor in the same principal amount pursuant to the Bridge
Financing Documents and any additional notes issued in payment of interest
thereon, in either case, pursuant to the Bridge Financing Documents) in the form
delivered to Administrative Agent and Lenders prior to their execution of this
Agreement, as such Bridge Notes may be amended, supplemented or otherwise
modified from time to time thereafter to the extent permitted under subsection
7.13B.
"Business Day" means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted Eurodollar
Rate or any
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<PAGE>
Eurodollar Rate Loans, any day that is a Business Day described in clause (i)
above and that is also a day for trading by and between banks in Dollar deposits
in the London interbank market.
"Capital Lease", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account of
Parent or any of its Subsidiaries.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificate re Non-Bank Status" means a certificate substantially in the
form of Exhibit XIV annexed hereto delivered by a Lender to Administrative Agent
pursuant to subsection 2.7B(iii).
"Change of Control" means the occurrence of any of the following events:
(i) prior to an Initial Public Offering, Atlantic Equity Partners,
L.P. and/or its Affiliates shall cease to beneficially own and control (x)
at least 66-2/3% of the number of shares of equity Securities (excluding
(a) the Series A Preferred Stock owned by Atlantic Equity Partners, L.P.
and its Affiliates and (b) from and after the Permitted Securities
Issuance Prepayment Date, the Preferred Distribution Stock) of
Parent (as such number of shares may be adjusted to take into account
stock splits, reverse stock splits, dividends payable in share of capital
stock and similar transactions) beneficially owned and controlled by such
Persons as of the Closing Date and (y) a majority of the issued and
outstanding Voting Stock of Parent;
8
<PAGE>
(ii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than Atlantic Equity Partners,
L.P., its Affiliates and/or management employees of Parent or any of its
Subsidiaries is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of (1) more than
30% of the voting power of all classes of Voting Stock of Parent prior to
the Permitted Securities Issuance Prepayment Date and (2) more than 50% of
voting power of all classes of Voting Stock of Parent from and after the
Permitted Securities Issuance Prepayment Date;
(iii) Parent, either individually or in conjunction with one or more
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise
disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of Parent
and the Subsidiaries, taken as a whole (either in one transaction or a
series of related transactions), including capital stock of the
Subsidiaries, to any person (other than Borrower or a Subsidiary);
(iv) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of Parent
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of Parent was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of Parent then in
office; or
(v) Parent or Borrower is liquidated or dissolved or adopts a plan
of liquidation or dissolution (other than as a result of a merger,
liquidation or dissolution of Borrower into Parent or Parent into
Borrower).
"Class" means, as applied to Lenders, each of the following two classes of
Lenders: (i) Lenders having Term Loans A, Tranche A Term Loan Exposure and/or
Revolving Loan Exposure (taken together as a single class) and (ii) Lenders
having Tranche B Term Loan Exposure.
"Closing Date" means the date on or before December 31, 1996, on which
either the initial Loans are made and/or the Acquisition Letter of Credit is
issued.
"Collateral" means, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by Borrower and Administrative Agent on the Closing Date,
substantially in the form
9
<PAGE>
of Exhibit XVI annexed hereto, as such Collateral Account Agreement may
hereafter be amended, supplemented or otherwise modified from time to time.
"Collateral Documents" means the Parent Pledge Agreement, the Borrower
Pledge Agreement, the Parent Security Agreement, the Borrower Security
Agreement, the Collateral Account Agreement, the Subsidiary Pledge Agreements,
the Subsidiary Security Agreements, the Subsidiary Patent Security Agreements,
the Subsidiary Trademark Security Agreements, the Mortgages, the MELF
Intercreditor Agreement and all other instruments or documents delivered by any
Loan Party pursuant to this Agreement or any of the other Loan Documents in
order to grant to Administrative Agent, on behalf of Lenders, a Lien on any
real, personal or mixed property of that Loan Party as security for the
Obligations.
"Commitments" means the commitments of Lenders to make Loans as set forth
in subsection 2.1A.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit IX annexed hereto delivered to Administrative Agent and Lenders by
Borrower pursuant to subsection 6.1(iv).
"Conforming Leasehold Interest" means any Recorded Leasehold Interest as
to which the lessor has agreed in writing for the benefit of Administrative
Agent (which writing has been delivered to Administrative Agent), whether under
the terms of the applicable lease, under the terms of a Landlord Consent and
Estoppel, or otherwise, to the matters described in the definition of "Landlord
Consent and Estoppel", which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) total Transaction
Costs (to the extent deducted in arriving at Consolidated Net Income), (vii)
non-recurring non-operating costs and non-recurring adjustments reducing
Consolidated Net Income, in each case, as mutually acceptable to Borrower and
Administrative Agent (after consultation with Lenders), and (viii) other
non-cash items reducing Consolidated Net Income less other non-cash items
increasing Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for Parent and its Subsidiaries in conformity with GAAP.
"Consolidated Adjusted Net Income" means Consolidated Net Income in any
Fiscal period adjusted for the after-tax effect, on a cumulative basis from the
Closing Date, of (i) purchase accounting adjustments including, but not limited
to, amortization of acquired intangibles and step-up depreciation, (ii) the
amount of all fees and expenses incurred, expensed, written off, or amortized in
conjunction with the Acquisition, the Restructuring, the Distribution
Transaction and subsequent refinancings, and (iii) other non-cash expenses
incurred including accretion of warrant value and compensation costs resulting
from exercise and disposition of, or accretion in value of employee stock
options.
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<PAGE>
"Consolidated Adjusted Net Worth" means Consolidated Net Worth at the time
of determination, adjusted for the after-tax effect, on a cumulative basis from
the Closing Date, of (i) purchase accounting adjustments including, but not
limited to, amortization of acquired intangibles, step-up depreciation and
write-up and/or write-down of inventory and accounts receivable, (ii) the amount
of all fees and expenses incurred, expensed, written-off, or amortized in
conjunction with the Acquisition, the Restructuring, the Distribution
Transaction and subsequent refinancings, and (iii) other non-cash expenses
incurred including accretion of warrant value and compensation costs resulting
from exercise and disposition of, or accretion in value of employee stock
options.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Parent and its Subsidiaries) by
Parent and its Subsidiaries during such period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Parent and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Parent and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Parent minus the sum of all Net Asset Sale Proceeds and proceeds
of sales of assets pursuant to clause (b) of the definition of "Asset Sale";
provided that expenditures made in order to consummate acquisitions pursuant to
subsection 7.7(vii) shall not be included in the defined term Consolidated
Capital Expenditures.
"Consolidated Cash Interest Expense" means, for any period, Consolidated
Interest Expense for such period excluding, however, any interest expense not
payable in Cash (including amortization of discount, amortization of debt
issuance costs and accretion of value of warrants or non-cash charges with
respect to warrants).
"Consolidated Current Assets" means, as at any date of determination, the
total assets of Parent and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of determination,
the total liabilities of Parent and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with GAAP,
excluding any current portion of any long term liabilities and any other
liabilities for borrowed money payable in one year or less from the date of
incurrence.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated Adjusted EBITDA and (b) the Consolidated Working
Capital Adjustment minus (ii) the sum, without duplication, of the amounts for
such period of (a) voluntary and scheduled repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the
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<PAGE>
Revolving Loan Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Capital Expenditures and expenditures made to
consummate acquisitions in accordance with the provisions of subsection 7.7(vii)
(net of any proceeds of any related financings with respect to such
expenditures), (c) Consolidated Cash Interest Expense, (d) the provision for
current taxes based on income of Parent and its Subsidiaries and payable in cash
with respect to such period and (e) non-recurring and non operating costs
referred to in clause (vii) of the definition of Consolidated Adjusted EBITDA
with respect to such period.
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Interest
Expense, (ii) all scheduled principal payments on Consolidated Total Debt
(including the principal portion of Capitalized Leases), (iii) actual payments
of taxes, and (iv) to the extent not included in Consolidated Adjusted EBITDA,
all Restricted Junior Payments (excluding the Distribution Transactions, the
Preferred Stock Redemption and any payments made to First Atlantic, Ltd. or any
of its Affiliates in respect of management consulting or other services to
Parent and/or its Subsidiaries), all of the foregoing as determined on a
consolidated basis for Parent and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest and Operating Lease payments to the extent
not deducted in calculating Consolidated Net Income) of Parent and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Parent 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
Agreements, but excluding, however, any amounts referred to in subsection 2.3
payable to Administrative Agent and Lenders on or before the Closing Date.
"Consolidated Net Income" means, for any period, the net income (or loss)
of Parent and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Parent) in which any other Person (other than Parent or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Parent or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Parent or is merged
into or consolidated with Parent or any of its Subsidiaries or that Person's
assets are acquired by Parent or any of its Subsidiaries, (iii) the income of
any Subsidiary of Parent to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any Pension Plan, (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses and (vi) the after-tax effect of
purchase accounting adjustments related to the write-up and/or write-down of
inventory and accounts receivable.
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<PAGE>
"Consolidated Net Worth" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Parent and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Parent and its Subsidiaries on a consolidated
basis during that period under all Operating Leases to which Parent or any of
its Subsidiaries is a party as lessee (net of sublease income).
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Parent and its
Subsidiaries less Cash and Cash Equivalents, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Working Capital" means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period, excluding
the effect of purchase accounting adjustments related to the write-up and/or
write-down of inventory and accounts receivable.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
under acceptance or similar facilities or as to which that Person is otherwise
liable for reimbursement of drawings, or (iii) under Hedge Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
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<PAGE>
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument relating to the issuance of
such Security to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement to which Parent or any of its Subsidiaries is a party.
"Custom Foods" means Custom Food Products, Inc., a California corporation.
"Declined Tranche B Prepayment Amount" has the meaning assigned to that
term in subsection 2.4B(iv)(c).
"Declining Tranche B Lenders" has the meaning assigned to that term in
subsection 2.4B(iv)(c).
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Distribution Transaction" means the declaration and payment by Borrower
of a distribution to Parent and the subsequent declaration and payment of a
distribution by Parent, in an aggregate amount not exceeding $16,000,000, on and
with respect to Parent's Class A (Voting and Nonvoting) Common Stock.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"Eligible Accounts Receivable" means, at any date of determination, except
as hereinafter provided in this definition, the face amount of all Accounts
Receivable of any Operating Subsidiary payable in Dollars, reduced (without
duplication for the amounts referred to in clauses (i) through (xv) below) by
the amount of all returns, discounts, claims, credits, charges or other
allowances. Unless otherwise approved in writing by Administrative Agent, no
Account Receivable shall be deemed to be an Eligible Account Receivable if:
(i) it arises out of a sale made by any Operating Subsidiary to an
Affiliate (other than a Subsidiary of Borrower) unless made on an arms
length basis in accordance with past practice; or
(ii) the Account Receivable is unpaid more than 75 days after its
due date or more than 105 days after the date of the original invoice with
respect thereto; or
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<PAGE>
(iii) it is from the same account debtor (or any Affiliate thereof)
and 50% or more, in face amount, of all Accounts Receivable from such
account debtor (or any Affiliate thereof) are ineligible pursuant to
clause (ii) above; or
(iv) it is from (a) an account debtor (other than a Major Customer)
the aggregate Accounts Receivable of which, at the date of determination,
exceed 10% of the aggregate amount of all Accounts Receivable at such date
of determination or (b) any Major Customer or any Affiliate thereof the
aggregate Accounts Receivable of which, at the date of determination,
exceed 40% of the aggregate amount of all Accounts Receivable at such date
of determination, but in each case under (a) or (b) only to the extent of
such excess; or
(v) the account debtor has disputed in writing its liability on, or
the account debtor has made any claim with respect to, such Account
Receivable or any other Account Receivable due from such account debtor to
the applicable Operating Subsidiary, which has not been resolved within 90
days, to the extent of the amount of such dispute or claim; or
(vi) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or if a decree or order for
relief has been entered by a court having jurisdiction over the account
debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or if any other petition or other
application for relief under the federal bankruptcy laws has been filed by
or against the account debtor, or if the account debtor has filed a
certificate of dissolution under applicable law or shall be liquidated,
dissolved or wound-up, or shall authorize or commence any action or
proceeding for dissolution, winding-up or liquidation, or if the account
debtor has failed, suspended business, declared itself to be insolvent, is
generally not paying its debts as they become due or has consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; unless
(a) the payment of Accounts Receivable from such account debtor is secured
in a manner reasonably satisfactory to Administrative Agent and
Administrative Agent does not notify Borrower in writing within 10 days of
receipt of notice with respect thereto that such security is not
reasonably satisfactory or (b) the Account Receivable from such account
debtor arises subsequent to a decree or order for relief with respect to
such account debtor under the federal bankruptcy laws as now or hereafter
in effect and Agent notifies Borrower in writing that it has determined
that the timely payment and collection of such Account Receivable will not
be impaired; or
(vii) the sale is to an account debtor outside of the continental
United States or Canada, unless (a) the account debtor thereon has
supplied Borrower or the applicable Operating Subsidiary with an
irrevocable letter of credit in form and substance reasonably satisfactory
to Administrative Agent, issued by a financial institution reasonably
satisfactory to Administrative Agent and which has been duly transferred
to Administrative Agent (together with sufficient documentation to permit
direct draws by Administra-
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<PAGE>
tive Agent) and Administrative Agent does not notify Borrower in writing
within 10 days of receipt that such security is not reasonably
satisfactory or (b) payment of the Accounts Receivable is unconditionally
guarantied by an Affiliate of such account debtor located in the United
States or Canada (and, at Administrative Agent's reasonable request,
Administrative Agent shall have received reasonable assurance of the
enforceability of such guaranty) or secured by a letter of credit or other
arrangement that is, in each case, upon terms and conditions reasonably
satisfactory to Administrative Agent; or
(viii) Administrative Agent determines in its reasonable discretion
based upon standard practices in the banking industry consistent with past
determinations made by Administrative Agent pursuant to this Agreement
that collection of such Account Receivable is unlikely or that such
Account Receivable may not be paid by reason of the account debtor's
financial inability to pay and notifies Borrower in writing to such
effect; or
(ix) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable
Operating Subsidiary duly assigns its rights to payment of such Account
Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss.3727 et seq.); or
(x) the goods giving rise to such Account Receivable have not been
shipped to the account debtor or the services giving rise to such Account
Receivable have not been performed by the applicable Operating Subsidiary
and accepted by the account debtor or the Account Receivable otherwise
does not represent a final sale or is on a guarantied sale,
sale-and-return, sale on approval or consignment basis or made pursuant to
any other written agreement providing for repurchase or return; or
(xi) Administrative Agent does not have a valid and perfected First
Priority security interest in such Account Receivable or the Account
Receivable does not otherwise materially conform to the representations
and warranties contained in this Agreement or the other Loan Documents; or
(xii) the Accounts Receivable arises out of a service contract or
other contract other than with respect to Inventory sold to an account
debtor or pursuant to co-packing or other commodity processing
arrangements; or
(xiii) any Accounts Receivable against which the account debtor or
any Person obligated to make payment thereon asserts in writing any
defense, offset, counterclaim, or other right to avoid or reduce the
liability represented by such Accounts Receivable, other than discounts in
the ordinary course of business (but only to the extent thereof); or
(xiv) the Account Receivable is not based upon an actual and bona
fide sale and shipment or delivery of goods to customers, or upon the
provision of services to
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customers, in either case made by the Operating Subsidiaries in the
ordinary course of business; or
(xv) the Account Receivable does not meet such additional standards
of eligibility for Eligible Accounts Receivable as shall be imposed by
Administrative Agent in its reasonable discretion based upon standard
practices in the banking industry consistent with past determinations made
by Administrative Agent pursuant to this Agreement and of which Borrower
has been notified in advance in writing.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies; and (B) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Borrower shall be an Eligible Assignee.
"Eligible Inventory" means, as at any date of determination, the Dollar
value valued at the lower of cost or market value of all of each Operating
Subsidiary's Inventory, excluding the following:
(a) any Inventory which is not owned solely by an Operating
Subsidiary free and clear of all Liens except the security interests
granted pursuant to the Collateral Documents;
(b) any Inventory which is (i) not located on an Operating
Subsidiary's owned premises or (ii) not located on premises leased by an
Operating Subsidiary with respect to which a Landlord's Consent and
Estoppel has been obtained, or (iii) is in transit to a location other
than an Operating Subsidiary's owned premises or premises leased by an
Operating Subsidiary with respect to which a Landlord's Consent and
Estoppel has been obtained, or (iv) in any case, not located in the United
States of America or other locations approved by Administrative Agent;
(c) any Inventory which is on lease or consignment from any Person
to an Operating Subsidiary;
(d) any Inventory which is packaging material or supplies;
(e) any Inventory which is obsolete, damaged, unsalable or otherwise
unfit for its intended use or sale; and
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(f) to the extent not already excluded from or reflected in the
value of Eligible Inventory, any reserves required by the Administrative
Agent in its discretion for special order goods, market value declines and
bill-and-hold (deferred shipment) sales in accordance with standard
practices in the banking industry consistent, as applicable, with past
determinations made by Administrative Agent pursuant to this Agreement for
the evaluation of Inventory.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is or was maintained or contributed to by Borrower,
any of its Subsidiaries or any of their respective ERISA Affiliates.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirements of governmental
authorities relating to (i) environmental matters, including those relating to
any Hazardous Materials Activity, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Parent or any of its
Subsidiaries or any Facility, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), the Federal Insec- ticide, Fungicide and Rodenticide Act (7 U.S.C.
ss.136 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.), the Oil Pollution Act (33 U.S.C. ss. 2701 et seq) and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.), each as
amended or supplemented, any analogous present or future state or local statutes
or laws, and any regulations promulgated pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the rules and regulations promulgated thereunder from
time to time in effect, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a
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member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Parent or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of Parent or
such Subsidiary within the meaning of this definition with respect to the period
such entity was an ERISA Affiliate of Parent or such Subsidiary and with respect
to liabilities arising after such period for which Parent or such Subsidiary
could be liable under the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation); (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any Pension
Plan (whether or not waived in accordance with Section 412(d) of the Internal
Revenue Code) or the failure to make by its due date a required installment
under Section 412(m) of the Internal Revenue Code with respect to any Pension
Plan or the failure to make any required contribution to a Multiemployer Plan;
(iii) the provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by
Parent, any of its Subsidiaries or any of their respective ERISA Affiliates from
any Pension Plan with two or more contributing sponsors or the termination of
any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of
ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension
Plan, or the occurrence of any event or condition which might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on Parent, any of
its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal of Parent, any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multi-employer Plan if
there is any potential liability therefor, or the receipt by Parent, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could give rise to the imposition on Parent, any of its
Subsidiaries or any of their respective ERISA Affiliates of fines, penalties,
taxes or related charges under Chapter 43 of the Internal Revenue Code or under
Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against Parent, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or
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(xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.
"Escrow Funds" shall mean any and all Cash held in escrow as provided in
the Acquisition Agreement.
"Estimated Tranche B Prepayment Amount" has the meaning assigned to that
term in subsection 2.4B(iv)(c).
"Eurodollar Rate Loans" means Loans bearing interest at rates determined
by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Parent or any of its
Subsidiaries or any of their respective predecessors.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to 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 for such day (or,
if such day is not a Business Day, for the next preceding 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 such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"Financial Statements" has the meaning assigned to that term in subsection
4.1L.
"First Priority" means, with respect to any Lien purported to be created
in any Collateral pursuant to any Collateral Document, that such Lien is the
most senior Lien (other than Permitted Liens to the extent not perfected by
filing of any UCC financing statements) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Parent and its Subsidiaries ending
on September 30 (provided that at Borrower's election the Fiscal Year of Parent
and its Subsidiaries may be changed on or prior to September 30, 1997 to any
date from December 31 through March 31 of each calendar year) except that, in
the case of Quality Foods, L.P., QF Management
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and QF Acquisition for any period prior to the Closing Date, "Fiscal Year" means
the fiscal year of such Persons ending on December 31 of each calendar year. For
purposes of this Agreement, any particular Fiscal Year shall be designated by
reference to the calendar year in which such Fiscal Year ends.
"Flood Hazard Property" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"Funding and Payment Office" means (i) the office of Administrative Agent
and Swing Line Lender located at 901 Main Street, Dallas, Texas 75202 or (ii)
such other office of Administrative Agent and Swing Line Lender as may from time
to time hereafter be designated as such in a written notice delivered by
Administrative Agent and Swing Line Lender to Borrower and each Lender.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination.
"Governmental Acts" has the meaning assigned to that term in subsection
3.5A.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Guaranties" means the Parent Guaranty and the Subsidiary Guaranty.
"Hazardous Materials" means (i) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste", acutely
hazardous waste, "radioactive waste", "biohazardous waste", "pollutant", "toxic
pollutant", "contaminant", "restricted hazardous waste", "infectious waste",
"toxic substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including harmful properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) any asbestos-containing
materials; (vii) urea formaldehyde foam insulation;
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(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard to
the health and safety of the owners, occupants or any Persons in the vicinity of
any Facility or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"Hedge Agreement" means an Interest Rate Agreement or a Currency Agreement
designed to hedge against fluctuations in interest rates or currency values,
respectively.
"Indebtedness", as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations of such Person as lessee under
Capital Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements shall constitute (X) in the case of Hedge Agreements, Contingent
Obligations and (Y) in all other cases, Investments, and in neither case
constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Initial Public Offering" means a public offering of the capital stock of
Parent that first results in the capital stock of Parent becoming listed for
trading on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market and, if the Permitted Securities Issuance Prepayment Date
has not occurred, results in gross proceeds to Parent of not less than
$30,000,000.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Borrower and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Borrower and its Subsidiaries, taken as a whole.
"Interest Payment Date" means (i) with respect to any Base Rate Loan, each
March 31, June 30, September 30 and December 31 of each year, commencing on
March 31, 1997, and
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(ii) with respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each Interest
Period of longer than three months "Interest Payment Date" shall also include
each date that is three months, or an integral multiple thereof, after the
commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement to which Borrower or any of its Subsidiaries is a party.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"Inventory" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which are then
held by such Person for sale or lease, including raw materials and work in
process.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Parent or any Subsidiary of Parent of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Parent), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by Parent or any Subsidiary of Parent from any Person
other than Parent or any of its Subsidiaries, of any equity Securities of such
Loan Party, (iii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Parent or any of its Subsidiaries to, or any other investment by Parent or
any of its Subsidiaries in, any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business, or
(iv) Interest Rate Agreements or Currency Agreements not constituting Hedge
Agreements. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"IP Collateral" means, collectively, the Collateral under the Subsidiary
Trademark Security Agreements and the Subsidiary Patent Security Agreements.
"IRB Debt" means the Indebtedness evidenced by the Taxable Development
Revenue Bonds, 1995 Series D issued by PEDFA on December 27, 1995 in the
original aggregate principal amount of $4,400,000.
"IRB Letter of Credit" means the PNC Letter of Credit attached hereto as
Schedule 9.2 and any replacement letter of credit issued by the Issuing Lender
as set forth in subsection 9.2A.
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"IRB Reimbursement Advance" means any amounts paid or payable by the
Issuing Lender under the IRB Reimbursement Agreement.
"IRB Reimbursement Agreement" means the Participation and Reimbursement
Agreement and the Pledge, Security and Indemnification Agreement, in each case,
dated as of December 30, 1996 between NationsBank and PNC Bank, National
Association, substantially in the form of Exhibit XXIX annexed hereto, as such
Participation and Reimbursement Agreement or Pledge, Security and
Indemnification Agreement may be amended, supplemented or otherwise modified
from time to time, together with the any replacement agreements having
substantially the same terms.
"IRB Trust Indenture" means that certain Trust Indenture dated as of
December 1, 1995 between PEDFA and Mellon Bank, N.A., as in effect on the
Closing Date.
"Issuing Lender" means NationsBank in its capacity as the issuer of a
Letter of Credit or in its capacity as the "Participation Bank" under the IRB
Reimbursement Agreement, as applicable.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, substantially in the form of either Exhibit XXIIIA or
Exhibit XXIIIB.
"Leasehold Property" means any leasehold interest of any Loan Party as
lessee under any lease of real property, other than any such leasehold interest
designated from time to time by Administrative Agent in its sole discretion as
not being required to be included in the Collateral.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; provided that
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means the Revolving Letters of
Credit and the Acquisition Letter of Credit.
"Level" means Level I, Level II or Level III, as applicable.
"Level I" means the existence, as of any Measurement Date, of a Leverage
Ratio for the twelve consecutive month period ending on the last day of the
period covered by the financial statements relating to such Measurement Date of
greater than or equal to 3.70 to 1.00; provided
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that for purposes of determining the Applicable Margin for Term Loans A after
the Permitted Securities Issuance Prepayment Date, Level I means the existence
of a Leverage Ratio of greater than or equal to 4.40 to 1.00.
"Level II" means the existence, as of any Measurement Date, of a Leverage
Ratio for the twelve consecutive month period ending on the last day of the
period covered by the financial statements relating to such Measurement Date of
less than 3.70 to 1.00 but greater than or equal to 3.00 to 1.00; provided that
for purposes of determining the Applicable Margin for Term Loans A after the
Permitted Securities Issuance Prepayment Date, Level II means the existence of a
Leverage Ratio of less than 4.40 to 1.00 but greater than or equal to 3.80 to
1.00.
"Level III" means the existence, as of any Measurement Date, of a Leverage
Ratio for the twelve consecutive month period ending on the last day of the
period covered by the financial statements relating to such Measurement Date of
less than 3.00 to 1.00 but greater than or equal to 2.30 to 1.00; provided that
for purposes of determining the Applicable Margin for Term Loans A after the
Permitted Securities Issuance Prepayment Date, Level III means the existence of
a Leverage Ratio of less than 3.80 to 1.00 but greater than or equal to 3.00 to
1.00.
"Level IV" means the existence, as of any Measurement Date, of a Leverage
Ratio for the twelve consecutive month period ending on the last day of the
twelve consecutive month period ending on the last day of the period covered by
the financial statements relating to such measurement Date of less than 2.30 to
1.00; provided that for purposes of determining the Applicable Margin for Term
Loans A after the Permitted Securities Issuance Prepayment Date, Level IV means
the existence of a Leverage Ratio of less than 3.00 to 1.00.
"Leverage Ratio" has the meaning set forth in subsection 7.6C.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Term Loans A, Tranche A Term
Loans, Tranche B Term Loans, Revolving Loans or Swing Line Loans or any
combination thereof.
"Loan Documents" means this Agreement, the Notes and the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Borrower in favor of Issuing Lender relating to the
Letters of Credit), the Guaranties, IRB Reimbursement Agreement and the
Collateral Documents.
"Loan Party" means each of Parent, Borrower and any of Borrower's
Subsidiaries from time to time executing a Loan Document, and "Loan Parties"
means all such Persons, collectively.
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"Major Customer" means any of (i) Chef America, Inc., (ii) Sysco Corp.,
(iii) Arby's, together with all of its distributors, franchisees, buying
cooperatives and company-owned stores, and (iv) Subway, together with all of its
distributors, franchisees, buying cooperatives and company-owned stores.
"Management Consulting Agreement" means that certain Management Consulting
Agreement dated as of December 30, 1996, by and between First Atlantic Capital,
Ltd. and Parent.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means any change or changes, or effect or
effects, that have occurred or are threatened, and that individually or in the
aggregate could be reasonably likely to be materially adverse to (a) the
business, operations, assets, prospects or condition (financial or otherwise) of
Borrower individually or Parent together with its Subsidiaries taken as a whole,
or (b) the legality, validity, binding nature or enforceability against Borrower
of any Loan Document or any Material Contract to which it is a party or pursuant
to which it has any obligation.
"Material Contract" means any contract or other arrangement to which
Parent or any of its Subsidiaries is a party (other than the Loan Documents and
the Related Agreements), or by which any of their assets or properties are
bound, for which breach, nonperformance, cancellation or failure to renew would
have a Material Adverse Effect.
"Material Leasehold Property" means a Leasehold Property reasonably
determined by Administrative Agent to be of material value as Collateral or of
material importance to the operations of Borrower or any of its Subsidiaries;
provided, however that a Leasehold Property with respect to which the aggregate
amount of all rents payable during any one Fiscal Year does not exceed $350,000
shall not be a "Material Leasehold Property".
"Material Subsidiary" means Custom Foods, QF Acquisition and each
Subsidiary of Borrower or Parent now existing or hereafter acquired or formed by
Borrower which, on a consolidated basis for such Subsidiary and its
Subsidiaries, (i) for the most recent Fiscal Year accounted for more than 7.5%
of the consolidated revenues of Borrower and its Subsidiaries or (ii) as at the
end of such Fiscal Year, was the owner of more than 7.5% of the consolidated
assets of Borrower and its Subsidiaries.
"Maximum Exposure Under IRB Reimbursement Agreement" means, as of the date
of determination, the maximum exposure of Issuing Lender under the IRB
Reimbursement Agreement, including possible exposure for reimbursement payments,
interest, fees, expenses, increased costs and indemnification claims, all as
determined in good faith by Issuing Lender.
"Measurement Date" means the third Business Day following receipt by
Lenders of the financial statements required to be delivered pursuant to
subsection 6.1(ii) and the Compliance
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Certificate required to be delivered by subsection 6.1(iv)(b) with respect to
the accounting period covered by such financial statements.
"MELF" means the Commonwealth of Pennsylvania, acting through the
Department of Commerce Machinery and Equipment Loan Fund.
"MELF Intercreditor Agreement" means the Intercreditor Agreement executed
and delivered by Administrative Agent and MELF on the Closing Date,
substantially in the form of Exhibit XXX annexed hereto, as such Intercreditor
Agreement may be amended, supplemented or otherwise modified from time to time.
"Mortgage" means (i) a security instrument (whether designated as a deed
of trust or a mortgage or by any similar title) executed and delivered by any
Loan Party, substantially in the form of Exhibit XXVII annexed hereto or in such
other form as may be approved by Administrative Agent in its sole discretion, in
each case with such changes thereto as may be recommended by Administrative
Agent's local counsel based on local laws or customary local mortgage or deed of
trust practices, or (ii) at Administrative Agent's option, in the case of an
Additional Mortgaged Property (as defined in subsection 6.9), an amendment to an
existing Mortgage, in form satisfactory to Administrative Agent, adding such
Additional Mortgaged Property to the Real Property Assets encumbered by such
existing Mortgage, in either case as such security instrument or amendment may
be amended, supplemented or otherwise modified from time to time. "Mortgages"
means all such instruments, including the Closing Date Mortgages (as defined in
subsection 4.1H) and any Additional Mortgages (as defined in subsection 6.9),
collectively.
"Mortgaged Property" means a Closing Date Mortgaged Property (as defined
in subsection 4.1H) or an Additional Mortgaged Property (as defined in
subsection 6.9).
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NationsBank" has the meaning assigned to that term in the introduction to
this Agreement.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received by Parent or any of its Subsidiaries from such Asset Sale,
net of any bona fide direct costs incurred in connection with such Asset Sale,
including without limitation (i) taxes reasonably estimated to be actually
payable in connection with such Asset Sale, (ii) payment of liabilities relating
to assets sold at the time of, or within 30 days after the date of such Asset
Sale, (iii) payment of the outstanding principal amount of, premium or penalty,
if any, and interest on any Indebtedness (other than the Loans, the Bridge
Financing or any Permitted Securities Issuance) that is secured by a Lien on the
stock or assets in question and that is required to be repaid under the terms
thereof as a result of such Asset Sale and (iv) reasonable and customary fees,
commissions and expenses, other costs paid
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by Parent or any of its Subsidiaries to any Person (other than an Affiliate of
Parent) in connection with such Asset Sale.
"Net Insurance/Condemnation Proceeds" means any Cash payments or proceeds
received by Parent or any of its Subsidiaries (i) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Parent or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Parent or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Parent or such Subsidiary in respect thereof.
"Net Pension Proceeds" has the meaning assigned to that term in subsec-
tion 2.4B(iii)(c).
"Net Securities Proceeds" means, with respect to any sale or issuance of
any Indebtedness or capital stock or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other ownership
or profit interest or any warrants, rights, options or other securities to
acquire capital stock or other ownership or profit interest or any other
Securities by any Person, the aggregate amount of Cash received from time to
time (whether as initial consideration or through payment or disposition of
deferred consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a) reasonable
and customary brokerage commissions, underwriting fees and discounts, legal
fees, finder's fees and other similar fees and commissions and (b) the amount of
taxes payable in connection with or as a result of such transaction, in each
case to the extent, but only to the extent, that the fees, commissions and other
amounts so deducted are, at the time of receipt of such Cash, actually paid to a
Person pursuant to an arm's-length transaction on commercially reasonable terms
to Parent and/or its Subsidiaries and are properly attributable to such
transaction or to the asset that is the subject thereof.
"Notes" means one or more of the Term Loans A Notes, Tranche A Term Notes,
Tranche B Term Notes, Revolving Notes or Swing Line Note or any combination
thereof.
"Notice of Borrowing" means a notice substantially in the form of Exhibit
I annexed hereto delivered by Borrower to Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Borrower to Administrative Agent
pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice substantially in
the form of Exhibit III annexed hereto delivered by Borrower to Administrative
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
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"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to Administrative Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit or the IRB Reimbursement Agreement, fees, expenses,
indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer; provided that every Officers' Certificate
with respect to the compliance with a condition precedent to the making of any
Loans hereunder shall include (i) a statement that the officer or officers
making or giving such Officers' Certificate have read such condition and any
definitions or other provisions contained in this Agreement relating thereto,
(ii) a statement that, in the opinion of the signers, they have made or have
caused to be made such examination or investigation as is necessary to enable
them to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with; provided further that no officer
of any Loan Party executing and delivering an Officer's Certificate in good
faith shall be personally liable under such Officer's Certificate, except to the
extent of fraud, gross negligence or willful misconduct.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Operating Subsidiary" means each Subsidiary of Parent other than
Borrower, and "Operating Subsidiaries" means all such Subsidiaries collectively.
"Parent" means CFP Group, Inc., a Delaware corporation.
"Parent Guaranty" means the Parent Guaranty executed and delivered by
Parent on the Closing Date, substantially in the form of Exhibit XXIV annexed
hereto, as such Parent Guaranty may thereafter be amended, supplemented or
otherwise modified from time to time.
"Parent Pledge Agreement" means the Parent Pledge Agreement executed and
delivered by Parent on the Closing Date, substantially in the form of Exhibit
XXV annexed hereto, as such Parent Pledge Agreement may thereafter be amended,
supplemented or otherwise modified from time to time.
"Parent Security Agreement" means the Parent Security Agreement executed
and delivered by Parent on the Closing Date, substantially in the form of
Exhibit XXVI annexed hereto, as such Parent Security Agreement may thereafter be
amended, supplemented or otherwise modified from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
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"PEDFA" means the Pennsylvania Economic Development Financing Authority, a
public instrumentality and body corporate and politic of the Commonwealth of
Pennsylvania.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to Section 412 of the Internal Revenue Code or Section
302 of ERISA.
"Permitted Encumbrances" means the following types of Liens (excluding any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in
each case incurred in the ordinary course of business (a) for amounts not
yet overdue or (b) for amounts that are overdue and that (in the case of
any such amounts overdue for a period in excess of 5 days) are being
contested in good faith by appropriate proceedings, so long as (1) such
reserves or other appropriate provisions, if any, as shall be required by
GAAP shall have been made for any such contested amounts, and (2) in the
case of a Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance with
any applicable terms of the Collateral Documents and not interfering in
any material respect with the ordinary conduct of the business of Borrower
or any of its Subsidiaries or resulting in a material diminution in the
value of any Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct
of the business of Borrower or any of its
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Subsidiaries or result in a material diminution in the value of any
Collateral as security for the Obligations and exceptions to title set
forth on title reports delivered to Administrative Agent pursuant to
subsection 4.1H(v);
(vii) any (a) interest or title of a lessor or sublessor under any
lease, (b) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to, or (c) subordination of the
interest of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b), so long as the holder
of such restriction or encumbrance agrees to recognize the rights of such
lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;
(xi) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of
Borrower and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Borrower or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of Borrower or such Subsidiary.
"Permitted Liens" means the Liens permitted pursuant to subsection 7.2A.
"Permitted Securities Issuance" means any of the following issued after
the Closing Date: (i) the Senior Guaranteed Notes; (ii) the Subordinated Notes;
and (iii) equity Securities of Parent, in each case, to the extent proceeds
thereof are applied in accordance with subsection 2.4B(iii)(e).
"Permitted Securities Issuance Prepayment Date" means the date on which
the Net Securities Proceeds from one or more Permitted Securities Issuances
results in a prepayment of all Term Loans other than Term Loans A.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or
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local, domestic or foreign, and including political subdivisions thereof) and
agencies or other administrative or regulatory bodies thereof.
"PIDA Loan" means the loans in the aggregate principal amount of
$1,750,000 to be made by the Pennsylvania Industrial Development Authority after
the Closing Date, in form and substance reasonably satisfactory to
Administrative Agent and the Requisite Lenders.
"PIDC Loan" means the loans in the aggregate principal amount of at least
$750,000 to be made by the Pennsylvania Industrial Development Corporation after
the Closing Date, in form and substance reasonably satisfactory to
Administrative Agent and the Requisite Lenders.
"Pledged Collateral" means, collectively, the "Pledged Collateral" as
defined in the Parent Pledge Agreement, Borrower Pledge Agreement and the
Subsidiary Pledge Agreements.
"Potential Event of Default" means a condition or event that, after notice
or lapse of time or both, would constitute an Event of Default.
"Preferred Distribution Stock" means a new class of preferred stock of
Parent (having aggregate liquidation preference of $16,000,000) issued as a
dividend or distribution on and with respect to Parent's Class A (Voting and
Nonvoting) Common Stock, which preferred stock shall have rights, preferences
and designations reasonably acceptable to Administrative Agent (after
consultation with Lenders).
"Preferred Stock Redemption" means the redemption or repurchase by Parent
of up to 3,528 shares of the Series A Preferred Stock of Parent, in accordance
with Parent's Certificate of Incorporation on or prior to June 30, 1997 for an
aggregate amount not to exceed $1,225,000.
"Prepayment Date" has the meaning assigned to that term in subsection
2.4B(iv)(c).
"Prepayment Notice" has the meaning assigned to that term in subsection
2.4B(iv)(c).
"Prime Rate" means the rate that NationsBank announces from time to time
as its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. NationsBank or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"Pro Rata Share" means (i) with respect to all payments, computations and
other matters relating to the Term Loans A Commitment or Term Loans A of any
Lender, the percentage obtained by dividing (x) the outstanding principal amount
of the Term Loans A of that Lender by (y) the aggregate principal amount of all
Term Loans A of all Lenders, (ii) with respect to all payments, computations and
other matters relating to the Tranche A Term Loan Commitment or the Tranche A
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche A
Term Loan Exposure of that Lender by (y) the aggregate Tranche A Term Loan
Exposure of all Lenders, (iii) with respect to all payments, computations and
other matters
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relating to the Tranche B Term Loan Commitment or the Tranche B Term Loan of any
Lender, the percentage obtained by dividing (x) the Tranche B Term Loan Exposure
of that Lender by (y) the aggregate Tranche B Term Loan Exposure of all Lenders,
(iv) with respect to all payments, computations and other matters relating to
the Revolving Loan Commitment or the Revolving Loans of any Lender or any
Letters of Credit issued or participations therein purchased by any Lender or
the IRB Reimbursement Agreement or any participations in any Swing Line Loans
purchased by any Lender, the percentage obtained by dividing (x) the Revolving
Loan Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all
Lenders, and (v) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Term Loans A of that Lender,
the Tranche A Term Loan Exposure of that Lender plus the Tranche B Term Loan
Exposure of that Lender plus the Revolving Loan Exposure of that Lender by (y)
the sum of the aggregate Term Loans A of all Lenders, Tranche A Term Loan
Exposure of all Lenders plus the aggregate Tranche B Term Loan Exposure of all
Lenders plus the aggregate Revolving Loan Exposure of all Lenders, in any such
case as the applicable percentage may be adjusted as a result of prepayments of
the Declined Tranche B Prepayment Amount pursuant to subsection 2.4B(iv)(c) or
by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share
of each Lender for purposes of each of clauses (i), (ii), (iii), (iv) and (v) of
the preceding sentence is set forth opposite the name of that Lender in Schedule
2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any successor
or substitute office in which filings are necessary or, in the opinion of
Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"Purchase Price Adjustment Payments" means any and all Cash received by
Borrower or any other Loan Party pursuant to the purchase price adjustment
provisions of the Acquisition Agreement.
"QF Acquisition" means QF Acquisition Corp., a Delaware corporation.
"QF Management" means QF Management Corp., a Delaware corporation.
"Quality Foods, L.P." means Quality Foods, L.P., a Delaware limited
partnership.
"Real Property Asset" means, at any time of determination, any interest
then owned by any Loan Party in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with respect to
which a Record Document (as hereinafter defined) has been recorded in all places
necessary or desirable, in Administrative Agent's reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property. For purposes of this definition,
the term "Record Document" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof, executed
and acknowledged by the owner of the affected real property, as lessor, or (b)
if such Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the
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applicable assignment or sublease document, executed and acknowledged by such
holder, in each case in form sufficient to give such constructive notice upon
recordation and otherwise in form reasonably satisfactory to Administrative
Agent.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(v).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in subsection
3.3B.
"Related Agreements" means, collectively, the Acquisition Documents, the
Senior Guaranteed Note Documents, the Bridge Financing Documents, the
Subordinated Note Documents, the Seller Notes, the Stockholders Agreement, the
Additional Subordinated Note Documents and all material agreements entered into
in connection with the IRB Debt, PIDA Loan, PIDC Loan or any loan from MELF to
any Loan Party.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials),
including the movement of any Hazardous Materials through the air, soil, surface
water or groundwater.
"Requisite Class Lenders" means, at any time of determination (i) for the
Class of Lenders having outstanding Term Loans A, Tranche A Term Loan Exposure
and/or Revolving Loan Exposure, Lenders having or holding more than 50% of the
sum of the aggregate outstanding Term Loans A of all Lenders plus the aggregate
Tranche A Term Loan Exposure of all Lenders plus the aggregate Revolving Loan
Exposure of all Lenders and (ii) for the Class of Lenders having Tranche B Term
Loan Exposure, Lenders having or holding more than 50% of the aggregate Tranche
B Term Loan Exposure of all Lenders.
"Requisite Lenders" means Lenders having or holding more than 66 2/3% of
the sum of the aggregate principal amount of outstanding Term Loans A, plus
Tranche A Term Loan Exposure of all Lenders plus the aggregate Tranche B Term
Loan Exposure of all Lenders plus the aggregate Revolving Loan Exposure of all
Lenders.
"Responsible Officer" means any senior financial officer and any other
officer of Parent, Borrower or any of their Subsidiaries with responsibility for
the administration of the relevant portion of this Agreement.
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"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or Parent now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Borrower or
Parent now or hereafter outstanding, (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Borrower or Parent now or hereafter
outstanding, (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, the Bridge Financing, Seller Notes, any Senior Guaranteed Notes, any
Subordinated Notes and any Additional Subordinated Notes and (v) any payment
made to First Atlantic Capital, Ltd. or any of its Affiliates in respect of
management consulting or other services provided to Parent and/or its
Subsidiaries.
"Restructuring" means the following transactions, as a result of which
substantially all of the assets and liabilities of Quality Foods, L.P. will be
transferred to and assumed by QF Acquisition: (i) the merger of QF Management
with and into QF Acquisition with QF Acquisition being the surviving
corporation; (ii) the contribution by Parent and Borrower of all limited
partnership interests of Quality Foods, L.P. to QF Acquisition, as a result of
which QF Acquisition holds all of the limited partnership interests of Quality
Foods, L.P.; (iii) the transfer of all assets and liabilities of Quality Foods,
L.P. to QF Acquisitions; and (iv) the liquidation and dissolution of Quality
Foods, L.P., all on terms and conditions reasonably satisfactory to
Administrative Agent and Requisite Lenders.
"Revolving Letter of Credit" or "Revolving Letters of Credit" means the
Letters of Credit issued or to be issued by Issuing Lender for the account of
Borrower pursuant to subsection 3.1A(1) for the purpose of supporting
obligations of Borrower and or any of its Subsidiaries in the ordinary course of
business of Borrower or such Subsidiary.
"Revolving Letter of Credit Usage" means, as at any date of determination,
the sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Revolving Letters of Credit then
outstanding plus (ii) the aggregate amount of all drawings under Revolving
Letters of Credit honored by Issuing Lender and not theretofore reimbursed by
Borrower (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B) plus (iii) the Maximum Exposure Under IRB
Reimbursement Agreement.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Borrower pursuant to subsection 2.1A(iv), and "Revolving Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means June 30, 2002.
"Revolving Loan Exposure" means, with respect to any Lender as of any date
of determination (i) prior to the termination of the Revolving Loan Commitments,
that Lender's
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Revolving Loan Commitment and (ii) after the termination of the Revolving Loan
Commitments, the sum of (a) the aggregate outstanding principal amount of the
Revolving Loans of that Lender plus (b) in the case of Issuing Lender, the
aggregate Revolving Letter of Credit Usage (net of any participations purchased
by other Lenders in any Letter of Credit, the IRB Reimbursement Agreement or any
unreimbursed drawings under such Letter of Credit or IRB Reimbursement Advance)
plus (c) the aggregate amount of all participations purchased by that Lender in
any outstanding Letters of Credit, the IRB Reimbursement Agreement or any
unreimbursed drawings under any Letters of Credit or IRB Reimbursement Advance
plus (d) in the case of Swing Line Lender, the aggregate outstanding principal
amount of all Swing Line Loans (net of any participations therein purchased by
other Lenders) plus (e) the aggregate amount of all participations purchased by
that Lender in any outstanding Swing Line Loans.
"Revolving Loans" means the Loans made by Lenders to Borrower pursuant to
subsection 2.1A(iv).
"Revolving Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(c) on the Closing Date and (ii) any promissory
notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Revolving Loan Commitments and Revolving
Loans of any Lenders, in each case substantially in the form of Exhibit VII
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Sellers" means all of the stockholders of QF Acquisition and QF
Management and all of the limited partners of Quality Foods, L.P.
"Seller Notes" means the promissory notes of Borrower in an aggregate
principal amount of up to $58,000,000 issued on the Closing Date to the Sellers
in connection with the Acquisition in the form delivered to Administrative Agent
and Lenders prior to their execution of this Agreement, as such Seller Notes may
be amended from time to time thereafter to the extent permitted under subsection
7.13B.
"Seller Notes Maturity Date" means January 3, 1997.
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"Senior Guaranteed Note Documents" means the Senior Guaranteed Notes, the
indenture pursuant to which the Senior Guaranteed Notes will be issued, and all
other material agreements entered into in connection with the Senior Guaranteed
Notes (including only such terms and conditions as described in the draft
"Description of the Notes" section of the Preliminary Offering Memorandum
delivered to Lenders on or before the Closing Date pursuant to subsection 4.1E
or other terms and conditions no less favorable to Borrower and its Subsidiaries
or Lenders, taken as a whole, from those set forth therein), as any of such
Senior Guaranteed Note Documents may be amended from time to time to the extent
permitted under subsection 7.13B.
"Senior Guaranteed Notes" means the Senior Guaranteed Notes of Borrower in
an aggregate amount of not less than $110,000,000 (or, if the Distribution
Transaction is not effected, $94,000,000) issued pursuant to the Senior
Guaranteed Note Documents, as such Senior Guaranteed Notes may be amended from
time to time to the extent permitted under subsection 7.13B.
"Solvent" and "Solvency" mean, with respect to any Person on a particular
date, that on such date (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 saleable 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
or matured, (c) such Person does not intend to, and does not believe that it
will, incur debts and liabilities beyond such Person's ability to pay as such
debts and liabilities mature and (d) such Person is not engaged in a business or
a transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute an unreasonably small capital.
"Stockholders Agreement" means the Stockholders Agreement executed and
delivered by Parent and certain of its stockholders on the Closing Date,
delivered to Administrative Agent and Lenders pursuant to subsection 4.1A, as
such Stockholders Agreement may thereafter be amended, supplemented or otherwise
modified from time to time to the extent permitted under subsection 7.13B.
"Subordinated Note Documents" means Subordinated Notes, the indenture
pursuant to which the Subordinated Notes will be issued, and all other material
agreements entered into in connection with the Subordinated Notes, as any of
such Subordinated Note Documents may be amended from time to time to the extent
permitted under subsection 7.13B.
"Subordinated Notes" means the promissory notes of Borrower issued after
the Closing Date in an aggregate principal amount of not less than the amount of
all outstanding Bridge Financing outstanding on the date of issuance of the
Subordinated Notes issued pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions
and other material terms which taken as a whole are no less favorable to Lenders
or Borrower and its Subsidiaries taken as a whole than the corresponding terms
of the Bridge Financing being repaid with the proceeds thereof; provided that
(x) such Subordinated Notes shall not contain any provision granting holders
thereof the right to approve amendments
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to or waiver of the Loan Documents and (y) such Subordinated Notes shall contain
a provision comparable to the "standstill" provisions of subsection
13.2(b)(b)(2) of the note purchase agreement for the Bridge Financing except
that the standstill period provided thereby shall be no less than twenty-five
days.
"Subsidiary" of any Person at any time shall mean (i) any corporation,
joint venture, limited liability company, trust, estate or other entity of which
50% or more (by number of shares or number of votes) of the outstanding Voting
Stock is at such time owned directly or indirectly by such Person or one or more
of such Person's Subsidiaries, or any partnership of which such Person is a
general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, or (ii) any corporation, trust, partnership or other entity which
is controlled or capable of being controlled by such Person and/or one or more
of such Person's Subsidiaries.
"Subsidiary Guarantor" means any Subsidiary of Borrower that executes and
delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from
time to time thereafter pursuant to subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered
by existing Subsidiaries of Borrower on the Closing Date and to be executed and
delivered by additional Subsidiaries of Borrower from time to time thereafter in
accordance with subsection 6.8, substantially in the form of Exhibit XIX annexed
hereto, as such Subsidiary Guaranty may hereafter be amended, supplemented or
otherwise modified from time to time.
"Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
(if any) or executed and delivered by any additional Subsidiary Guarantor from
time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of Exhibit XX annexed hereto, as such Subsidiary
Pledge Agreement may be amended, supplemented or otherwise modified from time to
time, and "Subsidiary Pledge Agreements" means all such Subsidiary Pledge
Agreements, collectively.
"Subsidiary Security Agreement" means each Subsidiary Security Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8, in each case substantially in
the form of Exhibit XXI annexed hereto, as such Subsidiary Security Agreement
may be amended, supplemented or
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otherwise modified from time to time, and "Subsidiary Security Agreements" means
all such Subsidiary Security Agreements, collectively.
"Subsidiary Patent Security Agreement" means each Subsidiary Patent
Security Agreement executed and delivered by an existing Subsidiary Guarantor on
the Closing Date or executed and delivered by any additional Subsidiary
Guarantor from time to time thereafter in accordance with subsection 6.8, in
each case substantially in the form of Exhibit XXII annexed hereto, as such
Subsidiary Patent Security Agreement may be amended, supplemented or otherwise
modified from time to time, and "Subsidiary Patent Security Agreements" means
all such Subsidiary Patent Security Agreements, collectively.
"Subsidiary Trademark Security Agreement" means each Subsidiary Trademark
Security Agreement executed and delivered by an existing Subsidiary Guarantor on
the Closing Date or executed and delivered by an additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of Exhibit XXIII annexed hereto, as such Subsidiary
Trademark Security Agreement amy be amended, supplemented or otherwise modified
from time to time, and "Subsidiary Trademark Security Agreements" means all such
Subsidiary Trademark Security Agreements, collectively.
"Supplemental Collateral Agent" has the meaning assigned to that term in
subsection 9.1B.
"Swing Line Lender" means NationsBank, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender to
make Swing Line Loans to Borrower pursuant to subsection 2.1A(v).
"Swing Line Loans" means the Loans made by Swing Line Lender to Borrower
pursuant to subsection 2.1A(v).
"Swing Line Note" means (i) the promissory note of Borrower issued
pursuant to subsection 2.1E(ii) on the Closing Date and (ii) any promissory note
issued by Borrower to any successor Administrative Agent and Swing Line Lender
pursuant to the last sentence of subsection 9.5B, in each case substantially in
the form of Exhibit VIII annexed hereto, as it may be amended, supplemented or
otherwise modified from time to time.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office), including a franchise tax that is
measured by net income.
"Term Loans" means, collectively, Term Loans A, the Tranche A Term Loans
and the Tranche B Term Loans.
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"Term Loans A Commitment" means the commitment of a Lender to make Term
Loans A to Borrower pursuant to subsection 2.1A(i), and "Term Loans A
Commitments" means such commitments of all Lenders in the aggregate.
"Term Loans A" means the Loans made by Lenders to Borrower pursuant to
subsection 2.1A(i).
"Term Loans A Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(a) on the Closing Date and (ii) any promissory
notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Term Loan A Commitments or Term Loans A of
any Lenders, in each case substantially in the form of Exhibit V-A annexed
hereto, as they may be amended, supplemented or otherwise modified from time to
time.
"Title Company" means, collectively, First American Title Insurance
Company and/or one or more other title insurance companies reasonably
satisfactory to Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of repaying any
Refunded Swing Line Loans or reimbursing Issuing Lender for any amount drawn
under any Revolving Letter of Credit but not yet so applied) plus (ii) the
aggregate principal amount of all outstanding Swing Line Loans plus (iii) the
Revolving Letter of Credit Usage.
"Tranche A Term Loan Commitment" means the commitment of a Lender to make
Tranche A Term Loans to Borrower pursuant to subsection 2.1A(ii), and "Tranche A
Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the Acquisition Reimbursement Date, that
Lender's Tranche A Term Loan Commitment plus the outstanding principal amount of
any Tranche A Term Loan of that Lender and (ii) after the Acquisition
Reimbursement Date, the outstanding principal amount of all Tranche A Term Loans
of that Lender.
"Tranche A Term Loans" means the Loans made by Lenders to Borrower
pursuant to subsection 2.1A(ii).
"Tranche A Term Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(b) on the Closing Date and (ii) any promissory
notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche A Term Loan Commitments or Tranche A
Term Loans of any Lenders, in each case substantially in the form of Exhibit V-B
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
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"Tranche B Prepayment Amount" has the meaning assigned to that term in
subsection 2.4B(iv)(c).
"Tranche B Term Lender" means any Lender of the Tranche B Term Loans.
"Tranche B Term Loan Commitment" means the commitment of a Lender to make
Tranche B Term Loans to Borrower pursuant to subsection 2.1A(iii), and "Tranche
B Term Loan Commitments" means such commitments of all Lenders in the aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the Acquisition Reimbursement Date, that
Lender's Tranche B Term Loan Commitment plus the outstanding principal amount of
any Tranche B Term Loan of that Lender and (ii) after the Acquisition
Reimbursement Date, the outstanding principal amount of all Tranche B Term Loans
of that Lender.
"Tranche B Term Loans" means the Loans made by Lenders to Borrower
pursuant to subsection 2.1A(iii).
"Tranche B Term Notes" means (i) the promissory notes of Borrower issued
pursuant to subsection 2.1E(i)(c) on the Closing Date and (ii) any promissory
notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Tranche B Term Loan Commitments or Tranche B
Term Loans of any Lenders, in each case substantially in the form of Exhibit VI
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"Transaction Costs" means the fees, costs and expenses payable by Borrower
or Parent on or before the Closing Date in connection with the transactions
contemplated by the Loan Documents and the Related Agreements.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Voting Stock" means capital stock issued by, or equivalent interests in,
any Person, the holders of which are ordinarily, in the absence of any
contingency, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle E
of Title IV of ERISA.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
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Financial statements and other information required to be delivered by Borrower
to Lenders pursuant to clauses (i), (ii), (iii) and (xiii) of subsection 6.1
shall be prepared in accordance with GAAP as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3.
1.3 Other Definitional Provisions and Rules of Construction.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use herein of the word "include" or "including", when following any
general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not nonlimiting
language (such as "without limitation" or "but not limited to" or words of
similar import) is used with reference thereto, but rather shall be deemed to
refer to all other items or matters that fall within the broadest possible scope
of such general statement, term or matter.
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
A. Commitments. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Parent and Borrower
herein set forth, each Lender hereby severally agrees to make the Loans
described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii) and 2.1A(iv) and Swing
Line Lender hereby agrees to make the Loans described in subsection 2.1A(v).
(i) Term Loans A. Each Lender severally agrees to lend to Borrower
on the Closing Date an aggregate amount not exceeding its Pro Rata Share
of the aggregate amount of the Term Loans A Commitments to be used for the
purposes identified in subsection 2.5A. The amount of each Lender's Term
Loans A Commitment is set forth opposite its name on Schedule 2.1 annexed
hereto and the aggregate amount of the Term Loans A Commitments is
$10,000,000; provided that the Term Loans A Commitments of Lenders shall
be adjusted to give effect to any assignments of the Term Loans A
Commitments pursuant to subsection 10.1B. Each Lender's Term Loan A
Commitment shall expire immediately and without further action on December
31, 1996 if the Term Loans A are not made on or before that date. Borrower
may make one borrowing under
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the Term Loans A Commitments on the Closing Date. Amounts borrowed under
this subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed.
(ii) Tranche A Term Loans. Each Lender severally agrees to lend to
Borrower an aggregate amount not exceeding its Pro Rata Share of the
aggregate amount of the Tranche A Term Loan Commitments to be used for the
purposes identified in subsection 2.5A. The amount of each Lender's
Tranche A Term Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate amount of the Tranche A Term Loan
Commitments is $41,000,000; provided that the Tranche A Term Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Tranche A Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Tranche A Term Loan Commitment shall expire immediately and
without further action on January 12, 1997 if the Tranche A Term Loans are
not made on or before that date. Borrower may make one borrowing under the
Tranche A Term Loan Commitments on the Closing Date in an amount not
exceeding $8,000,000.00 and a second borrowing under the Tranche A Term
Loan Commitments on the earlier to occur of the Seller Note Maturity Date
and the Acquisition Reimbursement Date in an amount not exceeding
$33,000,000.00; provided that unless no drawing under the Acquisition
Letter of Credit has been made and the Acquisition Letter of Credit has
been returned to the Issuing Lender and cancelled on or before the
Acquisition Reimbursement Date, no Tranche A Term Loans shall be made
other than pursuant to subsection 3.3B for the purpose of reimbursing
drawings under the Acquisition Letter of Credit. Amounts borrowed under
this subsection 2.1A(ii) and subsequently repaid or prepaid may not be
reborrowed.
(iii) Tranche B Term Loans. Each Lender severally agrees to lend to
Borrower an aggregate amount not exceeding its Pro Rata Share of the
aggregate amount of the Tranche B Term Loan Commitments to be used for the
purposes identified in subsection 2.5A. The amount of each Lender's
Tranche B Term Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate amount of the Tranche B Term Loan
Commitments is $25,000,000; provided that the Tranche B Term Loan
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Tranche B Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Tranche B Term Loan Commitment shall expire immediately and
without further action on January 12, 1997 if the Tranche B Term Loans are
not made on or before that date. Borrower may make one borrowing under the
Tranche B Term Loan Commitments which borrowing shall be on the earlier to
occur of the Seller Notes Maturity Date and the Acquisition Reimbursement
Date; provided that, unless no drawing under the Acquisition Letter of
Credit has been made and the Acquisition Letter of Credit has been
returned to the Issuing Lender and cancelled on or before the Acquisition
Reimbursement Date, no Tranche B Term Loans shall be made other than
pursuant to subsection 3.3B for the purpose of reimbursing drawings under
the Acquisition Letter of Credit. Amounts borrowed under this subsection
2.1A(iii) and subsequently repaid or prepaid may not be reborrowed.
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(iv) Revolving Loans. Each Lender severally agrees, subject to the
limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Borrower from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
and the aggregate original amount of the Revolving Loan Commitments is
$20,000,000; provided that the Revolving Loan Commitments of Lenders shall
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and provided, further that the
amount of the Revolving Loan Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to subsection
2.4B(ii). Each Lender's Revolving Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that date;
provided that each Lender's Revolving Loan Commitment shall expire
immediately and without further action on January 12, 1997 if initial Term
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(iv) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments
shall be subject to the limitation that in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the lesser of
(1) the Revolving Loan Commitments then in effect and (2) the Borrowing
Base then in effect.
(v) Swing Line Loans. Swing Line Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum amount of
Swing Line Loans permitted to be outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to Borrower from time
to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date by making Swing Line Loans to
Borrower in an aggregate amount not exceeding the amount of the Swing Line
Loan Commitment to be used for the purposes identified in subsection 2.5B,
notwithstanding the fact that such Swing Line Loans, when aggregated with
Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's
Pro Rata Share of the Revolving Letter of Credit Usage then in effect, may
exceed Swing Line Lender's Revolving Loan Commitment. The original amount
of the Swing Line Loan Commitment is $5,000,000; provided that any
reduction of the Revolving Loan Commitments made pursuant to subsection
2.4B(ii) which reduces the aggregate Revolving Loan Commitments to an
amount less than the then current amount of the Swing Line Loan Commitment
shall result in an automatic corresponding reduction of the Swing Line
Loan Commitment to the amount of the Revolving Loan Commitments, as so
reduced, without any further action on the part of Borrower,
Administrative Agent or Swing Line Lender. The Swing
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Line Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all Swing Line Loans and all other amounts owed
hereunder with respect to the Swing Line Loans shall be paid in full no
later than that date; provided that the Swing Line Loan Commitment shall
expire immediately and without further action on January 12, 1997 if
initial Term Loans are not made on or before that date. Amounts borrowed
under this subsection 2.1A(v) may be repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment
shall be subject to the limitation that in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Borrower pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Borrower), no later than 11:00 A.M. (Dallas, Texas
time) on the first Business Day in advance of the proposed Funding Date, a
notice (which shall be deemed to be a Notice of Borrowing given by
Borrower) requesting Lenders to make Revolving Loans that are Base Rate
Loans on such Funding Date in an amount equal to the amount of such Swing
Line Loans (the "Refunded Swing Line Loans") outstanding on the date such
notice is given which Swing Line Lender requests Lenders to prepay.
Anything contained in this Agreement to the contrary notwithstanding, (i)
the proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing
Line Lender (and not to Borrower) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds of
a Revolving Loan made by Swing Line Lender, and such portion of the Swing
Line Loans deemed to be so paid shall no longer be outstanding as Swing
Line Loans and shall no longer be due under the Swing Line Note of Swing
Line Lender but shall instead constitute part of Swing Line Lender's
outstanding Revolving Loans and shall be due under the Revolving Note of
Swing Line Lender. Borrower hereby authorizes Administrative Agent and
Swing Line Lender to charge Borrower's accounts with Administrative Agent
and Swing Line Lender (up to the amount available in each such account) in
order to immediately pay Swing Line Lender the amount of the Refunded
Swing Line Loans to the extent the proceeds of such Revolving Loans made
by Lenders, including the Revolving Loan deemed to be made by Swing Line
Lender, are not sufficient to repay in full the Refunded Swing Line Loans.
If any portion of any such amount paid (or deemed to be paid) to Swing
Line Lender should be recovered by or on behalf of Borrower from Swing
Line Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the request
of Swing Line Lender as provided in the immediately preceding paragraph in
an amount sufficient
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to repay any amounts owed to Swing Line Lender in respect of any
outstanding Swing Line Loans or (b) the Revolving Loan Commitments are
terminated at a time when any Swing Line Loans are outstanding, each
Lender shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans in an amount equal to
its Pro Rata Share (calculated, in the case of the foregoing clause (b),
immediately prior to such termination of the Revolving Loan Commitments)
of the unpaid amount of such Swing Line Loans together with accrued
interest thereon. Upon one Business Day's notice from Swing Line Lender,
each Lender shall deliver to Swing Line Lender an amount equal to its
respective participation in same day funds at the Funding and Payment
Office. In order to further evidence such participation (and without
prejudice to the effectiveness of the participation provisions set forth
above), each Lender agrees to enter into a separate participation
agreement at the request of Swing Line Lender in form and substance
reasonably satisfactory to Swing Line Lender. In the event any Lender
fails to make available to Swing Line Lender the amount of such Lender's
participation as provided in this paragraph, Swing Line Lender shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the rate customarily used by Swing Line Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. In the event Swing Line Lender receives a payment of any
amount in which other Lenders have purchased participations as provided in
this paragraph, Swing Line Lender shall promptly distribute to each such
other Lender its Pro Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying
any Refunded Swing Line Loans pursuant to the second preceding paragraph
and each Lender's obligation to purchase a participation in any unpaid
Swing Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (a) any set-off, counter-claim, recoupment,
defense or other right which such Lender may have against Swing Line
Lender, Borrower or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event of
Default; (c) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing; provided
that such obligations of each Lender are subject to the condition that (X)
Swing Line Lender believed in good faith that all conditions under Section
4 to the making of the applicable Refunded Swing Line Loans or other
unpaid Swing Line Loans, as the case may be, were satisfied at the time
such Refunded Swing Line Loans or unpaid Swing Line Loans were made or (Y)
the satisfaction of any such condition not satisfied had been waived in
accordance with subsection 10.6 prior to or at the time such Refunded
Swing Line Loans or other unpaid Swing Line Loans were made.
B. Borrowing Mechanics. Term Loans A, Tranche A Term Loans, Tranche B Term
Loans or Revolving Loans made on any Funding Date (other than Revolving Loans
made
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pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(v) for
the purpose of repaying any Refunded Swing Line Loans, or Revolving Loans or
Term Loans, as the case may be, made pursuant to subsection 3.3B for the purpose
of reimbursing Issuing Lender for the amount of a drawing under a Letter of
Credit or an IRB Reimbursement Advance) shall be in an aggregate minimum amount
of $2,000,000 and integral multiples of $500,000 in excess of that amount;
provided that Term Loans A, Tranche A Term Loans or Tranche B Term Loans or
Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a
particular Interest Period shall be in an aggregate minimum amount of $2,000,000
and integral multiples of $500,000 in excess of that amount. Swing Line Loans
made on any Funding Date shall be in an aggregate minimum amount of $500,000 and
integral multiples of $500,000 in excess of that amount. Whenever Borrower
desires that Lenders make Term Loans or Revolving Loans it shall deliver to
Administrative Agent a Notice of Borrowing no later than 11:00 A.M. (Dallas,
Texas time) at least three Business Days in advance of the proposed Funding Date
(in the case of a Eurodollar Rate Loan) or at least one Business Day in advance
of the proposed Funding Date (in the case of a Base Rate Loan). Whenever
Borrower desires that Swing Line Lender make a Swing Line Loan, it shall deliver
to Administrative Agent a Notice of Borrowing no later than 11:00 A.M. (Dallas,
Texas time) on the proposed Funding Date. The Notice of Borrowing shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
and type of Loans requested, (iii) in the case of any Loans made on the Closing
Date, the Acquisition Reimbursement Date or at any time prior to February 1,
1997, that such Loans shall be Base Rate Loans, (iv) in the case of Revolving
Loans made on or after February 1, 1997, whether such Loans shall be Base Rate
Loans or Eurodollar Rate Loans, and (v) in the case of any Loans requested to be
made as Eurodollar Rate Loans, the initial Interest Period requested therefor.
Term Loans and Revolving Loans may be continued as or converted into Base Rate
Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In
lieu of delivering the above-described Notice of Borrowing, Borrower may give
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected Loans hereunder.
Borrower shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Borrower is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Borrower of the proceeds
of any Loans shall constitute a re-certification by Borrower, as of the
applicable Funding Date, as to the matters to which Borrower is required to
certify in the applicable Notice of Borrowing.
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Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Borrower shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing. Each Lender shall make
the amount of its Loan available to Administrative Agent not later than 2:00
P.M. (Dallas, Texas time) on the applicable Funding Date, and Swing Line Lender
shall make the amount of its Swing Line Loan available to Administrative Agent
not later than 2:00 P.M. (Dallas, Texas time) on the applicable Funding Date, in
each case in same day funds in Dollars, at the Funding and Payment Office.
Except as provided in subsection 2.1A(v) with respect to Revolving Loans used to
repay Refunded Swing Line Loans, or subsection 3.3B with respect to Revolving
Loans or Term Loans, as the case may be, used to reimburse Issuing Lender for
the amount of a drawing under a Letter of Credit or an IRB Reimbursement
Advance, upon satisfaction or waiver of the conditions precedent specified in
subsections 4.1 (in the case of Loans made on the Closing Date) and 4.2 (in the
case of all Loans), Administrative Agent shall make the proceeds of such Loans
available to Borrower on the applicable Funding Date by causing an amount of
same day funds in Dollars equal to the proceeds of all such Loans received by
Administrative Agent from Lenders or Swing Line Lender, as the case may be, to
be credited to the account of Borrower at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior
to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Borrower a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Borrower and Borrower shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
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subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Borrower may
have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
(i) Agent shall maintain, at its address referred to in subsection
10.8, a register for the recordation of the names and addresses of Lenders
and the Commitments and Loans of each Lender from time to time (the
"Register"). The Register shall be available for inspection by Borrower or
any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) Agent shall record in the Register the Term Loans A Commitment,
Tranche A Term Loan Commitment, Tranche B Term Loan Commitment and
Revolving Loan Commitment and the Term Loans A, Tranche A Term Loan,
Tranche B Term Loan and Revolving Loans from time to time of each Lender,
the Swing Line Loan Commitment and the Swing Line Loans from time to time
of Swing Line Lender, and each repayment or prepayment in respect of the
principal amount of the Term Loans A, Tranche A Term Loan, Tranche B Term
Loan or Revolving Loans of each Lender or the Swing Line Loans of Swing
Line Lender. Any such recordation shall be conclusive and binding on
Borrower and each Lender, absent manifest error; provided that failure to
make any such recordation, or any error in such recordation, shall not
affect any Lender's Commitments or Borrower's Obligations in respect of
any applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of the Term
Loans A, Tranche A Term Loan, Tranche B Term Loan and each Revolving Loan
made by it and each payment in respect thereof. Any such recordation shall
be conclusive and binding on Borrower, absent manifest error; provided
that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or Borrower's
Obligations in respect of any applicable Loans; and provided, further that
in the event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern.
(iv) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Lender shall
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<PAGE>
be conclusive and binding on any subsequent holder, assignee or transferee
of the corresponding Commitments or Loans.
(v) Borrower hereby designates NationsBank to serve as Borrower's
agent solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Borrower hereby agrees that, to the extent
NationsBank serves in such capacity, NationsBank and its officers,
directors, employees, agents and affiliates shall constitute Indemnitees
for all purposes under subsection 10.3.
E. Notes. Borrower shall execute and deliver on the Closing Date (i) to
each Lender (or to Administrative Agent for that Lender) (a) a Term Loans A Note
substantially in the form of Exhibit V-A annexed hereto to evidence that
Lender's Term Loans A and with other appropriate insertions, (b) a Tranche A
Term Note substantially in the form of Exhibit V-B annexed hereto to evidence
that Lender's Tranche A Term Loan, in the principal amount of that Lender's
Tranche A Term Loan Commitment and with other appropriate insertions, (c) a
Tranche B Term Note substantially in the form of Exhibit VI annexed hereto to
evidence that Lender's Tranche B Term Loan, in the principal amount of that
Lender's Tranche B Term Loan Commitment and with other appropriate insertions,
and (d) a Revolving Note substantially in the form of Exhibit VII annexed hereto
to evidence that Lender's Revolving Loans, in the principal amount of that
Lender's Revolving Loan Commitment and with other appropriate insertions, and
(ii) to Swing Line Lender (or to Administrative Agent for Swing Line Lender) a
Swing Line Note substantially in the form of Exhibit VIII annexed hereto to
evidence Swing Line Lender's Swing Line Loans, in the principal amount of the
Swing Line Loan Commitment and with other appropriate insertions.
Agent may deem and treat the payee of any Note as the owner thereof for
all purposes hereof unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Administrative Agent
as provided in subsection 10.1B(ii). Any request, authority or consent of any
person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, assignee or transferee of that Note or of any Note or
Notes issued in exchange therefor.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7,
each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate; provided that until February 1, 1997 Loans shall
bear interest only at a rate determined by reference to the Base Rate. Subject
to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on
the unpaid principal amount thereof from the date made through maturity (whether
by acceleration or otherwise) at a rate determined by reference to the Base
Rate. The applicable basis for determining the rate of interest with respect to
any Term Loan or any Revolving Loan shall be selected by Borrower initially at
the time a Notice of Borrowing is given with respect to such Loan pursuant to
sub-
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<PAGE>
section 2.1B, and the basis for determining the interest rate with respect to
any Term Loan or any Revolving Loan may be changed from time to time pursuant to
subsection 2.2D. If on any day a Term Loan or Revolving Loan is outstanding with
respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day that Loan shall bear
interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the Term
Loans A and Tranche A Term Loans shall bear interest through maturity as
follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
the Applicable Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin.
(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche B Term Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
2% per annum; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus 3.25% per annum.
(iii) Subject to the provisions of subsections 2.2E and 2.7, the
Revolving Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
the Applicable Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin.
(iv) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate plus 0.75% per annum.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Borrower may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Borrower's option, either a one, two, three or six month period; provided
that:
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(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in
the applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conver-sion/Continuation, each successive Interest Period shall
commence on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) 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, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Term Loans
A or Tranche A Term Loans shall extend beyond June 30, 2002, no Interest
Period with respect to any portion of the Tranche B Term Loans shall
extend beyond December 31, 2003, and no Interest Period with respect to
any portion of the Revolving Loans shall extend beyond the Revolving Loan
Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term
Loans A, Tranche A Term Loans or Tranche B Term Loans shall extend beyond
a date on which Borrower is required to make a scheduled payment of
principal of the Term Loans A, Tranche A Term Loans or Tranche B Term
Loans, as the case may be, unless the sum of (a) the aggregate principal
amount of Term Loans A, Tranche A Term Loans or Tranche B Term Loans, as
the case may be, that are Base Rate Loans plus (b) the aggregate principal
amount of Term Loans A, Tranche A Term Loans or Tranche B Term Loans, as
the case may be, that are Eurodollar Rate Loans with Interest Periods
expiring on or before such date equals or exceeds the principal amount
required to be paid on the Term Loans A, Tranche A Term Loans or Tranche B
Term Loans, as the case may be, on such date;
(vii) prior to the Permitted Securities Issuance Prepayment Date,
there shall be no more than seven Interest Periods outstanding at any time
and thereafter, there shall be no more than five Interest Periods
outstanding at any time; and
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(viii) in the event Borrower fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice
of Conver-sion/Continuation, Borrower shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Borrower shall have the option (i) to convert at any time all or any part
of its outstanding Term Loans A, Tranche A Term Loans, Tranche B Term Loans or
Revolving Loans equal to $2,000,000 and integral multiples of $500,000 in excess
of that amount from Loans bearing interest at a rate determined by reference to
one basis to Loans bearing interest at a rate determined by reference to an
alternative basis or (ii) upon the expiration of any Interest Period applicable
to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to
$2,000,000 and integral multiples of $500,000 in excess of that amount as a
Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan may only be
converted into a Base Rate Loan on the expiration date of an Interest Period
applicable thereto.
Borrower shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 11:00 A.M. (Dallas, Texas time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan) and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conver-sion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Borrower may give Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date. Upon receipt of
written or telephonic notice of any proposed conversion/continuation under this
subsection 2.2D, Administrative Agent shall promptly transmit such notice by
telefacsimile or telephone to each Lender.
Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf
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of Borrower or for otherwise acting in good faith under this subsection 2.2D,
and upon conversion or continuation of the applicable basis for determining the
interest rate with respect to any Loans in accordance with this Agreement
pursuant to any such telephonic notice Borrower shall have effected a conversion
or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conver-sion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Borrower shall be bound
to effect a conversion or continuation in accordance therewith.
E. Post-Maturity Interest. Any principal payments on the Loans not paid
when due and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due, in
each case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand at a rate which is 2% per annum in excess of the interest rate
otherwise payable under this Agreement with respect to the applicable Loans (or,
in the case of any such fees and other amounts, at a rate which is 2% per annum
in excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans. Payment or acceptance of the increased rates
of interest provided for in this subsection 2.2E is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Administrative Agent or
any Lender.
F. Computation of Interest. Interest on the Loans shall be computed (i) in
the case of Base Rate Loans, on the basis of a 365-day or 366 day year, as the
case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Borrower agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan
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Commitment Termination Date equal to the average of the daily excess of the
Revolving Loan Commitments over the sum of (i) the aggregate principal amount of
outstanding Revolving Loans (but not any outstanding Swing Line Loans) plus (ii)
the Revolving Letter of Credit Usage multiplied by 1/2 of 1% per annum, such
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year, commencing on March 31, 1997, and
on the Revolving Loan Commitment Termination Date.
B. Annual Administrative Fee. Borrower agrees to pay to Administrative
Agent an annual administrative fee payable in advance on February 15, 1997 and
on each anniversary thereof, in an amount equal to the greater of (x) 0.1%
multiplied by the sum of (i) the Revolving Loan Commitments, (ii) the
outstanding principal amount of Term Loans A, (iii) the Tranche A Term Loan
Exposure and (iv) the Tranche B Term Loan Exposure and (y) $50,000.
C. Other Fees. Borrower agrees to pay to Administrative Agent such other
fees in the amounts and at the times separately agreed upon between Borrower or
Parent and Administrative Agent.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments; Application of Proceeds of
Collateral and Payments Under Subsidiary Guaranty.
A. Scheduled Payments of Term Loans.
(i) Scheduled Payments of Term Loans A.
(a) Borrower shall make principal payments on the Term Loans A
in installments on the dates and in the amounts set forth below
until such time the Term Loans A are repaid in full:
==============================================================
Scheduled Repayment
Date of Term Loans A
==============================================================
--------------------------------------------------------------
June 30, 1997 $333,333
--------------------------------------------------------------
September 30, 1997 $333,333
--------------------------------------------------------------
December 31, 1997 $333,334
--------------------------------------------------------------
March 31, 1998 $375,000
--------------------------------------------------------------
June 30, 1998 $375,000
--------------------------------------------------------------
September 30, 1998 $375,000
--------------------------------------------------------------
December 31, 1998 $375,000
--------------------------------------------------------------
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==============================================================
Scheduled Repayment
Date of Term Loans A
==============================================================
March 31, 1999 $500,000
--------------------------------------------------------------
June 30, 1999 $500,000
--------------------------------------------------------------
September 30, 1999 $500,000
--------------------------------------------------------------
December 31, 1999 $500,000
--------------------------------------------------------------
March 31, 2000 $525,000
--------------------------------------------------------------
June 30, 2000 $525,000
--------------------------------------------------------------
September 30, 2000 $525,000
--------------------------------------------------------------
December 31, 2000 $525,000
--------------------------------------------------------------
March 31, 2001 $550,000
--------------------------------------------------------------
June 30, 2001 $550,000
--------------------------------------------------------------
September 30, 2001 $550,000
--------------------------------------------------------------
December 31, 2001 $550,000
--------------------------------------------------------------
March 31, 2002 $600,000
--------------------------------------------------------------
June 30, 2002 $600,000
==============================================================
; provided that the scheduled installments of principal of the Term
Loans A set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans A in accordance
with subsection 2.4B(iv); and provided, further that the Term Loans
A and all other amounts owed hereunder with respect to the Term
Loans A shall be paid in full no later than June 30, 2002, and the
final installment payable by Borrower in respect of the Term Loans A
on such date shall be in an amount, if such amount is different from
that specified above, sufficient to repay all amounts owing by
Borrower under this Agreement with respect to the Term Loans A.
(ii) Scheduled Payments of Tranche A Term Loans. Borrower shall make
principal payments on the Tranche A Term Loans in installments on the
dates and in the amounts set forth below until such time the Tranche A
Term Loans are repaid in full:
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=======================================================
Scheduled Repayment
Date of Tranche A Term Loans
=======================================================
-------------------------------------------------------
June 30, 1997 $ 917,000
-------------------------------------------------------
September 30, 1997 $1,292,000
-------------------------------------------------------
December 31, 1997 $1,041,000
-------------------------------------------------------
March 31, 1998 $1,437,500
-------------------------------------------------------
June 30, 1998 $1,437,500
-------------------------------------------------------
September 30, 1998 $1,437,500
-------------------------------------------------------
December 31, 1998 $1,437,500
-------------------------------------------------------
March 31, 1999 $2,062,500
-------------------------------------------------------
June 30, 1999 $2,062,500
-------------------------------------------------------
September 30, 1999 $2,062,500
-------------------------------------------------------
December 31, 1999 $2,062,500
-------------------------------------------------------
March 31, 2000 $2,162,500
-------------------------------------------------------
June 30, 2000 $2,162,500
-------------------------------------------------------
September 30, 2000 $2,162,500
-------------------------------------------------------
December 31, 2000 $2,162,500
-------------------------------------------------------
March 31, 2001 $2,262,500
-------------------------------------------------------
June 30, 2001 $2,262,500
-------------------------------------------------------
September 30, 2001 $2,262,500
-------------------------------------------------------
December 31, 2001 $2,262,500
-------------------------------------------------------
March 31, 2002 $3,025,000
-------------------------------------------------------
June 30, 2002 $3,025,000
=======================================================
; provided that the scheduled installments of principal of the
Tranche A Term Loans set forth above shall be reduced in connection
with any voluntary or mandatory prepayments of the Tranche A Term
Loans in accordance with subsection 2.4B(iv); and provided, further
that the Tranche A Term Loans and all other amounts owed hereunder
with respect to the Tranche A Term Loans shall be paid in full no
later than June 30, 2002, and the final installment payable by
Borrower in respect of the Tranche A Term Loans on such date shall
be in an
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amount, if such amount is different from that specified above,
sufficient to repay all amounts owing by Borrower under this
Agreement with respect to the Tranche A Term Loans.
(iii) Scheduled Payments of Tranche B Term Loans. Borrower shall
make principal payments on the Tranche B Term Loans in installments on the
dates and in the amounts set forth below:
=======================================================
Scheduled Repayment
Date of Tranche B Term Loans
=======================================================
-------------------------------------------------------
December 31, 1997 $ 250,000
-------------------------------------------------------
December 31, 1998 $ 250,000
-------------------------------------------------------
December 31, 1999 $ 250,000
-------------------------------------------------------
December 31, 2000 $ 250,000
-------------------------------------------------------
December 31, 2001 $ 250,000
-------------------------------------------------------
December 31, 2002 $ 8,000,000
-------------------------------------------------------
December 31, 2003 $15,750,000
=======================================================
; provided that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4B(iv); and provided, further that the
Tranche B Term Loans and all other amounts owed hereunder with respect to
the Tranche B Term Loans shall be paid in full no later than December 31,
2003, and the final installment payable by Borrower in respect of the
Tranche B Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts owing
by Borrower under this Agreement with respect to the Tranche B Term Loans.
B. Prepayments and Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Borrower may, upon written or telephonic
notice to Administrative Agent on or prior to 11:00 A.M. (Dallas, Texas
time) on the date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time prepay
any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of $500,000 in
excess of that amount. Borrower may, upon not less than one Business Day's
prior written or telephonic notice, in the case of Base Rate Loans, and
three Business Days' prior written or telephonic notice, in the case of
Eurodollar Rate Loans, in each case given to Administrative Agent by 11:00
A.M. (Dallas, Texas time) on the date required and, if given by telephone,
promptly confirmed in writing to Administrative
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Agent (which original written or telephonic notice Administrative Agent
will promptly transmit by telefacsimile or telephone to each Lender), at
any time and from time to time prepay any Term Loans or Revolving Loans on
any Business Day in whole or in part in an aggregate minimum amount of
$2,000,000 and integral multiples of $500,000 in excess of that amount;
provided, however, that a Eurodollar Rate Loan may only be prepaid on the
expiration of the Interest Period applicable thereto. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment
date specified therein. Any such voluntary prepayment shall be applied as
specified in subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Borrower
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit
by telefacsimile or telephone to each Lender), at any time and from time
to time terminate in whole or permanently reduce in part, without premium
or penalty, the Revolving Loan Commitments in an amount up to the amount
by which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; provided that any such partial reduction of the Revolving Loan
Commitments shall be in an aggregate minimum amount of $2,000,000 and
integral multiples of $500,000 in excess of that amount. Borrower's notice
to Administrative Agent shall designate the date (which shall be a
Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Borrower's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments of Loans. The Loans shall be prepaid in
the amounts and under the circumstances set forth below, all such
prepayments to be applied as set forth below or as more specifically
provided in subsection 2.4B(iv):
(a) Prepayments From Net Asset Sale Proceeds. No later than
the first Business Day following the date of receipt by Borrower or
any of its Subsidiaries of any Net Asset Sale Proceeds in respect of
any Asset Sale, Borrower shall prepay the Loans in an aggregate
amount equal to such Net Asset Sale Proceeds; provided that, except
with respect to an Asset Sale involving a sale and leaseback
transaction, to the extent such Net Asset Sale Proceeds will be used
within 180 days of such Asset Sale to purchase replacement assets
(as certified by Borrower to Administrative Agent in an Officer's
Certificate) no such payment or reduction shall be required unless
any of such Net Asset Sale Proceeds are not so used within 180 days,
in which case, Borrower shall, at the end of such 180th day, deliver
to the Administrative Agent an Officer's Certificate specifying the
amount of Net Asset Sale Proceeds not so used and shall prepay the
Loans in such amount on the first Business Day after the end of such
period.
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(b) Prepayments From Net Insurance/ Condemnation Proceeds. No
later than the first Business Day following the date of receipt by
Administrative Agent or by Borrower or any of its Subsidiaries of
any Net Insur-ance/Condemnation Proceeds that are required to be
applied to prepay the Loans pursuant to the provisions of subsection
6.4C, Borrower shall prepay the Loans in an aggregate amount equal
to the amount of such Net Insur-ance/Condemnation Proceeds.
(c) Prepayments Due to Reversion of Surplus Assets of Pension
Plans. On the date of return to Borrower or any of its Subsidiaries
of any surplus assets of any pension plan of Borrower or any of its
Subsidiaries, Borrower shall prepay the Loans in an aggregate amount
(such amount being the "Net Pension Proceeds") equal to 100% of such
returned surplus assets, net of transaction costs and expenses
incurred in obtaining such return, including incremental taxes
payable as a result thereof.
(d) Prepayments Upon Issuance of Debt or Equity Securities. On
the date of receipt by Borrower of the Net Securities Proceeds from
the issuance of any debt or equity Securities of Borrower after the
Closing Date (other than any Permitted Securities Issuance),
Borrower shall prepay the Loans in an aggregate amount equal to such
Net Securities Proceeds. In the event the Preferred Stock Redemption
is not consummated by June 30, 1997 and the PIDA Loan is funded,
Borrower shall on such date prepay Term Loans in an amount equal to
the gross proceeds of the PIDA Loan minus the face amount of any
Letter of Credit issued to support the PIDA Loan as contemplated by
the PIDA Commitment Letter annexed hereto as Schedule 7.2(vii).
(e) Prepayments Upon a Permitted Securities Issuance. On the
date of receipt by Parent or any of its Subsidiaries of the Net
Securities Proceeds from any Permitted Securities Issuance, Parent
shall immediately make a capital contribution of such Net Securities
Proceeds (in the case of a Permitted Securities Issuance
constituting equity Securities of Parent) and Borrower shall, in all
cases, apply such Net Securities Proceeds first to all obligations
of Borrower under the Bridge Notes, second, to the extent the
remaining portion of such Net Securities Proceeds exceeds
$69,000,000 (in the case of Senior Guaranteed Notes) or $59,000,000
(in the case of Subordinated Notes), to fund the Distribution
Transaction in an amount not to exceed $16,000,000, third, to the
extent of any remaining portion of such Net Securities Proceeds, to
prepay the Tranche A Term Loans and Tranche B Term Loans, and
fourth, to the extent of any remaining portion of such Net
Securities Proceeds, to repay Revolving Loans to the full extent
thereof.
(f) Prepayments From Consolidated Excess Cash Flow. In the
event that there shall be Consolidated Excess Cash Flow for any
Fiscal Year (commencing with the first Fiscal Year ending after the
Closing Date), Borrower shall, no later than 90 days after the end
of such Fiscal Year, prepay the Loans in an
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aggregate amount equal to (i) 75% of such Consolidated Excess Cash
Flow if the Leverage Ratio at such time (as most recently calculated
prior to making any prepayment required hereunder) is equal to or
greater than 3:1 or (ii) 50% of such Consolidated Excess Cash Flow
if the Leverage Ratio at such time (as most recently calculated
prior to making any prepayment required hereunder) is less than 3:1.
(g) Prepayments Due to Purchase Price Adjustment and Escrow
Funds. On the date of receipt by Borrower of any Purchase Price
Adjustment Payments pursuant to the Acquisition Documents, to the
extent such funds in the aggregate exceed $2,000,000, Borrower shall
apply such funds to the full extent thereof to repay Revolving
Loans. On the date of receipt by Borrower of any Escrow Funds
pursuant to the Acquisition Documents, Borrower shall apply such
funds, to the extent such funds are not owed to third party
claimants, to repay Term Loans.
(h) Calculations of Net Proceeds Amounts; Additional
Prepayments and Reductions Based on Subsequent Calculations.
Concurrently with any prepayment of the Loans pursuant to
subsections 2.4B(iii)(a)-(g), Borrower shall deliver to
Administrative Agent an Officers' Certificate demonstrating the
calculation of the amount (the "Net Proceeds Amount") of the
applicable Net Asset Sale Proceeds, Net Insurance/Condemnation
Proceeds, the applicable Net Pension Proceeds or Net Securities
Proceeds, or the applicable Consolidated Excess Cash Flow, as the
case may be, that gave rise to such prepayment and/or reduction. In
the event that Borrower shall subsequently determine that the actual
Net Proceeds Amount was greater than the amount set forth in such
Officers' Certificate, Borrower shall promptly make an additional
prepayment of the Loans in an amount equal to the amount of such
excess, and Borrower shall concurrently therewith deliver to
Administrative Agent an Officers' Certificate demonstrating the
derivation of the additional Net Proceeds Amount resulting in such
excess.
(i) Prepayments Due to Reductions or Restrictions of Revolving
Loan Commitments. Borrower shall from time to time prepay first the
Swing Line Loans and second the Revolving Loans to the extent
necessary so that the Total Utilization of Revolving Loan
Commitments shall not at any time exceed the lesser of (x) the
Revolving Loan Commitments then in effect and (y) the Borrowing Base
then in effect.
(iv) Application of Prepayments and Reductions of Revolving Loan
Commitments.
(a) Application of Voluntary Prepayments by Type of Loans and
Order of Maturity. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied as specified by Borrower in the applicable
notice of prepayment; provided that in the event Borrower fails to
specify the Loans to which any such prepayment shall be applied,
such prepayment shall be applied first to repay outstanding Swing
Line Loans to the full extent thereof, second to repay outstanding
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Revolving Loans to the full extent thereof, and third to repay
outstanding Term Loans to the full extent thereof. Any voluntary
prepayments of the Term Loans pursuant to subsection 2.4B(i) shall
be applied first to prepay the Tranche A Term Loans and the Tranche
B Term Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and to reduce the scheduled
installments of principal of the Tranche A Term Loans and Tranche B
Term Loans set forth in subsections 2.4A(ii) and 2.4A(iii) on a pro
rata basis and second to prepay Term Loans A and to reduce the
scheduled installments of Term Loans A set forth in subsection
2.4A(i) in inverse order or maturity.
(b) Application of Mandatory Prepayments by Type of Loans.
Except as otherwise set forth in subsection 2.4B(iii)(e) and (h),
any amount (the "Applied Amount") required to be applied as a
mandatory prepayment of the Loans pursuant to subsections
2.4B(iii)(a)-(g) shall be applied first to prepay the Tranche A Term
Loan and Tranche B Term Loans to the full extent thereof, second to
the extent of any remaining portion of the Applied Amount, to prepay
Term Loans A to the full extent thereof, third, to the extent of any
remaining portion of the Applied Amount, to prepay the Swing Line
Loans to the full extent thereof and to permanently reduce the
Revolving Loan Commitments by the amount of such prepayment and
fourth, to the extent of any remaining portion of the Applied
Amount, to prepay the Revolving Loans to the full extent thereof.
(c) Application of Mandatory Prepayments of Term Loans to Term
Loans A, Tranche A Term Loans and Tranche B Term Loans and the
Scheduled Installments of Principal Thereof.
(1) Any mandatory prepayments of the Term Loans pursuant
to subsection 2.4B(iii) shall initially be applied to prepay
the Tranche A Term Loans and the Tranche B Term Loans on a pro
rata basis (in accordance with the respective outstanding
principal amounts thereof) and to reduce the scheduled
installments of principal of the Tranche A Term Loans and the
Tranche B Term Loans set forth in subsections 2.4A(ii) and
2.4A(iii) on a pro rata basis and thereafter to prepay Term
Loans A and to reduce scheduled installments of principal on
Term Loans A set forth in subsection 2.4(i) on a pro rata
basis.
Notwithstanding the foregoing, any mandatory prepayment
of the Term Loans pursuant to subsection 2.4B(iii) which would
otherwise be applied to prepay the Tranche B Term Loans in
accordance with the foregoing (the "Tranche B Prepayment
Amount") shall be applied as follows:
At any time not less than three Business Days prior to
the anticipated receipt, or upon receipt by Borrower, of any
amount required to be applied as a mandatory prepayment under
subsection 2.4B(iii) (other
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than subsection 2.4B(iii)(e)), Borrower shall deliver written
notice to Administrative Agent (a "Prepayment Notice") setting
forth (A) the Tranche B Prepayment Amount, or, if unknown at
the time the Prepayment Notice is given, a good faith estimate
by Borrower of the Tranche B Prepayment Amount (such estimate
being the "Estimated Tranche B Prepayment Amount"), and (B)
the date of such prepayment in accordance with subsection
2.4B(iii) (the "Prepayment Date"). On the second Business Day
immediately preceding the Prepayment Date, Administrative
Agent shall give written notice to each Tranche B Lender (y)
stating the Tranche B Prepayment Amount (or the Estimated
Tranche B Prepayment Amount, as the case may be) and the
Prepayment Date and (z) stating that any Tranche B Lender may
elect to decline such prepayment (Tranche B Lenders electing
to so decline such prepayment are referred to in this
subsection as "Declining Tranche B Lenders" and the portion of
the Tranche B Prepayment Amount that the Declining Tranche B
Lenders have elected to decline a prepayment hereunder are
referred to in this subsection as "Declined Tranche B
Prepayment Amount") by delivering written notice of its
election to Administrative Agent no later than 11:00 A.M.
(Dallas, Texas time) on the Business Day immediately preceding
the Prepayment Date. If notice of the Tranche B Lender's
election to decline prepayment is not received by
Administrative Agent by such time, such Tranche B Lender will
be deemed to have accepted prepayment of the Tranche B Term
Loans. On the Business Day immediately preceding the
Prepayment Date, Administrative Agent shall determine the
amount of the Declined Tranche B Prepayment Amount and
distribute to Borrower and Lenders a written notice stating
the Declined Tranche B Prepayment Amount which will be applied
toward the prepayment of Tranche A Term Loans and Tranche B
Term Loans held by Tranche B Lenders other than the Declining
Tranche B Lenders ("Accepting Tranche B Lenders"). The
Declined Tranche B Prepayment Amount shall be applied toward
the Tranche A Term Loans and the Tranche B Term Loans of the
Accepting Tranche B Lenders on a pro rata basis in accordance
with the respective outstanding principal amounts thereof.
(2) Any mandatory prepayment applied to the Tranche A
Term Loans and the Tranche B Term Loans held by Accepting
Tranche B Lenders in accordance with the terms of this
subsection 2.4B(iv)(c) shall be applied on a pro rata basis
(in accordance with the respective outstanding principal
amounts thereof) to each scheduled installment of principal of
the Tranche A Term Loans or the Tranche B Term Loans, as the
case may be, set forth in subsection 2.4A(i) or 2.4A(ii),
respectively, that is unpaid at the time of such prepayment.
(d) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Considering Term Loans A, Tranche A Term
Loans, Tranche B Term
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Loans and Revolving Loans being prepaid separately, any prepayment
thereof shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans, in each case in
a manner which minimizes the amount of any payments required to be
made by Borrower pursuant to subsection 2.6D.
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrower of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 11:00 A.M. (Dallas, Texas time) on the
date due at the Funding and Payment Office for the account of Lenders;
funds received by Administrative Agent after that time on such due date
shall be deemed to have been paid by Borrower on the next succeeding
Business Day. Borrower hereby authorizes Administrative Agent to charge
its accounts with Administrative Agent in order to cause timely payment to
be made to Administrative Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in its
accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Except as permitted in subsection
2.4B(iv)(c), aggregate principal and interest payments in respect of Term
Loans and Revolving Loans shall be apportioned among all outstanding Loans
to which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Administrative Agent shall promptly distribute
to each Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request, its Pro Rata Share of all such payments received by
Administrative Agent and the commitment fees of such Lender when received
by Administrative Agent pursuant to subsection 2.3. Notwithstanding the
foregoing provisions of this subsection 2.4C(iii), if, pursuant to the
provisions of subsection 2.6C, any Notice of Conversion/Continuation is
withdrawn as to any Affected Lender or if any Affected Lender makes Base
Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans,
Administrative Agent shall give effect thereto in apportioning payments
received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may
be.
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(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Borrower hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
D. Application of Proceeds of Collateral and Payments Under Subsidiary
Guaranty.
(i) Application of Proceeds of Collateral. Except as otherwise
provided in subsection 2.4B(iii), all proceeds received by Administrative
Agent in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral under any Collateral Document may,
in the discretion of Administrative Agent, be held by Administrative Agent
as Collateral for, and/or (then or at any time thereafter) applied in full
or in part by Administrative Agent against, the applicable Secured
Obligations (as defined in such Collateral Document) in the following
order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation
to Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, and all amounts for
which Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments received
by Administrative Agent under either Guaranty shall be applied promptly
from time to time by Administrative Agent in the following order of
priority:
(a) To the payment of the reasonable costs and expenses of any
collection or other realization under such Guaranty, including
reasonable
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compensation to Administrative Agent and its agents and counsel, and
all reasonable expenses, liabilities and advances made or incurred
by Administrative Agent in connection therewith, all in accordance
with the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to
the payment to Parent or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
2.5 Use of Proceeds.
A. Term Loans. On the Closing Date, up to $8,000,000.00 in proceeds of the
Tranche A Term Loans, together with the proceeds of the Term Loans A and up to
$4,000,000 in proceeds of the initial Revolving Loans (the "Acquisition
Revolving Loans") and the proceeds of the Bridge Financing described in
subsection 4.1D, shall be applied by Borrower to fund the Acquisition Financing
Requirements. If the Acquisition Letter of Credit is no longer outstanding and
no drawings have been made thereunder, on the Seller Notes Maturity Date, the
remaining proceeds of the Term Loans may be immediately utilized to satisfy the
obligations under the Seller Notes, and, to the extent the Seller Notes are not
so satisfied, then on the Acquisition Reimbursement Date, the remaining proceeds
of the Term Loans may be immediately utilized to pay the reimbursement
obligations under the Acquisition Letter of Credit.
B. Revolving Loans; Swing Line Loans. The proceeds of the Acquisition
Revolving Loans shall be applied by Borrower as provided in subsection 2.5A. The
proceeds of any other Revolving Loans and any Swing Line Loans shall be applied
by Borrower for general corporate purposes, which may include the making of
intercompany loans to any of Borrower's Subsidiaries, in accordance with
subsection 7.1(iv) and to consummate the Preferred Stock Redemption in
accordance with subsection 7.5.
C. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Borrower or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
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2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable after
12:00 Noon (Dallas, Texas time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Borrower and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Borrower and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Borrower and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice
of Conver-sion/Continuation given by Borrower with respect to the Loans in
respect of which such determination was made shall be deemed to be rescinded by
Borrower.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Borrower and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring, in each case, after the date of this
Agreement which materially and adversely affect the London interbank market or
the position of such Lender in that market, then, and in any such event, such
Lender shall be an "Affected Lender" and it shall on that day give notice (by
telefacsimile or by telephone confirmed in writing) to Borrower and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (a) the obligation of
the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate
Loans shall be suspended until such notice shall be withdrawn by the Affected
Lender, (b) to the extent such determination by the Affected Lender relates to a
Eurodollar Rate Loan then being requested by Borrower pursuant to a Notice of
Borrowing or a Notice of Conver-sion/Continuation, the Affected Lender shall
make such Loan as (or convert such Loan to, as the case may be) a Base Rate
Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans
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(the "Affected Loans") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Borrower
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
Borrower shall have the option, subject to the provisions of subsection 2.6D, to
rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all
Lenders by giving notice (by telefacsimile or by telephone confirmed in writing)
to Administrative Agent of such rescission on the date on which the Affected
Lender gives notice of its determination as described above (which notice of
rescission Administrative Agent shall promptly transmit to each other Lender).
Except as provided in the immediately preceding sentence, nothing in this
subsection 2.6C shall affect the obligation of any Lender other than an Affected
Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate
Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds but
excluding, in any case, loss of anticipated profits) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a borrowing
of any Eurodollar Rate Loan does not occur on a date specified therefor in a
Notice of Borrowing or a telephonic request for borrowing, or a conversion to or
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Conver-sion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including without limitation
any prepayment pursuant to subsection 2.4B(i)) or other principal payment or any
conversion of any of its Eurodollar Rate Loans occurs on a date prior to the
last day of an Interest Period applicable to that Loan, (iii) if any prepayment
of any of its Eurodollar Rate Loans is not made on any date specified in a
notice of prepayment given by Borrower, (iv) as a consequence of any other
default by Borrower in the repayment of its Eurodollar Rate Loans when required
by the terms of this Agreement, or (v) as a consequence of any assignment of the
Commitments, Loans, Letters of Credit, the IRB Reimbursement Agreement or
participations therein by NationsBank at any time during the first ninety (90)
days after the Closing Date.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of
all amounts payable to a Lender under this subsection 2.6 and under subsection
2.7A shall be made as though that Lender had actually funded each of its
relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such
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Eurodollar Rate Loan and having a maturity and a principal amount comparable to
the relevant Interest Period and through the transfer of such Eurodollar deposit
from an offshore office of that Lender to a domestic office of that Lender in
the United States of America; provided, however, that each Lender may fund each
of its Eurodollar Rate Loans in any manner it sees fit and the foregoing
assumptions shall be utilized only for the purposes of calculating amounts
payable under this subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, (i)
Borrower may not elect to have a Loan be made or maintained as, or converted to,
a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conver-sion/Continuation given by Borrower with
respect to a requested borrowing or conver-sion/continuation that has not yet
occurred shall be deemed to be rescinded by Borrower.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other
than any such reserve or other requirements with respect to Eurodollar
Rate Loans that are reflected in the definition of Adjusted Eurodollar
Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office)
causing it to have increased costs in connection with its participation in
the London interbank market;
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and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Borrower shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Borrower (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. Subject to the provisions of the
following clause (ii), all sums payable by Borrower under this Agreement
and the other Loan Documents shall (except to the extent required by law)
be paid free and clear of, and without any deduction or withholding on
account of, any Tax (other than a Tax on the overall net income of any
Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United
States of America or any other jurisdiction from or to which a payment is
made by or on behalf of Borrower or by any federation or organization of
which the United States of America or any such jurisdiction is a member at
the time of payment.
(ii) Grossing-up of Payments. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Borrower to Administrative Agent
or any Lender under any of the Loan Documents:
(a) Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as
Borrower becomes aware of it;
(b) Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability
to pay is imposed on Borrower) for its own account or (if that
liability is imposed on Administrative Agent or such Lender, as the
case may be) on behalf of and in the name of Administrative Agent or
such Lender;
(c) the sum payable by Borrower in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the making
of that deduction, withholding or payment, Administrative Agent or
such Lender, as the case may be, receives on the due date a net sum
equal to what it would have received had no such deduction,
withholding or payment been required or made; and
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(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required
by clause (b) above to pay, Borrower shall deliver to Administrative
Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to
the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to or
on behalf of any Lender under clause (b) or (c) above except to the extent
that any change after the date hereof (in the case of each Lender listed
on the signature pages hereof) or after the date of the Assignment
Agreement pursuant to which such Lender became a Lender (in the case of
each other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate of
such deduction, withholding or payment from that in effect at the date of
this Agreement or at the date of such Assignment Agreement, as the case
may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Borrower, on or prior to the Closing Date (in
the case of each Lender listed on the signature pages hereof) or on
or prior to the date of the Assignment Agreement pursuant to which
it becomes a Lender (in the case of each other Lender), and at such
other times as may be necessary in the determination of Borrower or
Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue Service
Form 1001 or 4224 (or any successor forms), properly completed and
duly executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or
the regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of principal,
interest, fees or other amounts payable under any of the Loan
Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and
cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (1) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service Form
W-8 (or any successor form), properly completed and duly executed by
such Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to any payments to such Lender of interest payable
under any of the Loan Documents.
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(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby
agrees, from time to time after the initial delivery by such Lender
of such forms, certificates or other evidence, whenever a lapse in
time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, that
such Lender shall promptly (1) deliver to Administrative Agent for
transmission to Borrower two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and
two original copies of Internal Revenue Service Form W-8, as the
case may be, properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not
subject to deduction or withholding of United States federal income
tax with respect to payments to such Lender under the Loan Documents
or (2) notify Administrative Agent and Borrower of its inability to
deliver any such forms, certificates or other evidence.
(c) Borrower shall not be required to pay any additional
amount to or on behalf of any Non-US Lender under clause (b) or (c)
of subsection 2.7B(ii) if such Lender shall have failed to satisfy
the requirements of clause (a) or (b)(1) of this subsection
2.7B(iii) or if the representations set forth in clauses (a) or (b)
of this subsection 2.7B(iii) made by any Lender are not true;
provided that if such Lender shall have satisfied the requirements
of subsection 2.7B(iii)(a) on the Closing Date (in the case of each
Lender listed on the signature pages hereof) or on the date of the
Assignment Agreement pursuant to which it became a Lender (in the
case of each other Lender), nothing in this subsection 2.7B(iii)(c)
shall relieve Borrower of its obligation to pay any additional
amounts pursuant to clause (c) of subsection 2.7B(ii) in the event
that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender
is no longer properly entitled to deliver forms, certificates or
other evidence at a subsequent date establishing the fact that such
Lender is not subject to withholding as described in subsection
2.7B(iii)(a).
(d) If any Lender shall become aware that it is entitled to
receive a refund in respect of Taxes or other taxes as to which it
has been indemnified by Borrower pursuant to this Section 2.7
(including any Taxes applicable to any additional amounts payable
under this Section), it shall promptly notify Borrower of the
availability of such refund and shall, within 30 days after receipt
of a request by Borrower, apply for such refund at the expense of
Borrower. If any Lender receives a refund in respect of any Taxes or
other taxes as to which it has been indemnified by Borrower pursuant
to this Section (including any Taxes applicable to any additional
amounts payable under this Section), it shall promptly notify
Borrower of such refund and shall, within 30 days after receipt of a
request by Borrower (or promptly upon receipt, if Borrower has
requested application for such refund pursuant hereto), repay such
refund (including any interest actually
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received from the taxing authority with respect thereto) to Borrower
(to the extent of amounts that have been paid by Borrower under this
subsection 2.7B with respect to such refund), net of all
out-of-pocket expenses of such Lender and taxes imposed with respect
to such refund; provided that Borrower, upon the request of such
Lender, agrees to return such refund (plus penalties, interest or
other charges) to such Lender in the event such Lender is required
to repay such refund. Nothing contained in this subsection (e) shall
require any Lender to make available any tax returns (or any other
information relating to its taxes that it deems confidential).
(e) Any Lender claiming any additional amounts payable
pursuant to this Section 2.7, shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any
certificate or document requested by the Borrower if the making of
such a filing or change would avoid the need for or reduce the
amount of any such additional amounts that may thereafter accrue and
would not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender, and Borrower shall pay all
reasonable costs associated therewith.
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or Letters of Credit or the IRB Reimbursement
Agreement or participations therein or other obligations hereunder with respect
to the Loans or the Letters of Credit or the IRB Reimbursement Agreement to a
level below that which such Lender or such controlling corporation could have
achieved but for such adoption, effectiveness, phase-in, applicability, change
or compliance (taking into consideration the policies of such Lender or such
controlling corporation with regard to capital adequacy), then from time to
time, within five Business Days after receipt by Borrower from such Lender of
the statement referred to in the next sentence, Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such Lender
shall deliver to Borrower (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
2.8 Obligation of Lenders and Issuing Lender to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event
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or the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender or Issuing Lender to receive
payments under subsection 2.7 or subsection 3.6, it will, to the extent not
inconsistent with the internal policies of such Lender or Issuing Lender and any
applicable legal or regulatory restrictions, use reasonable efforts (i) to make,
issue, fund or maintain the Commitments of such Lender or the affected Loans or
Letters of Credit of such Lender or Issuing Lender through another lending or
letter of credit office of such Lender or Issuing Lender, or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an Affected
Lender would cease to exist or the additional amounts which would otherwise be
required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7
or subsection 3.6 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters of Credit through such other
lending or letter of credit office or in accordance with such other measures, as
the case may be, would not otherwise materially adversely affect such
Commitments or Loans or Letters of Credit or the interests of such Lender or
Issuing Lender; provided that such Lender or Issuing Lender will not be
obligated to utilize such other lending or letter of credit office pursuant to
this subsection 2.8 unless Borrower agrees to pay all incremental expenses
incurred by such Lender or Issuing Lender as a result of utilizing such other
lending or letter of credit office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Borrower pursuant
to this subsection 2.8 (setting forth in reasonable detail the basis for
requesting such amount) submitted by such Lender or Issuing Lender to Borrower
(with a copy to Administrative Agent) shall be conclusive absent manifest error.
Section 3. LETTERS OF CREDIT; IRB REIMBURSEMENT AGREEMENT
3.1 Issuance of Letters of Credit, Execution of IRB Reimbursement Agreement
and Lenders' Purchase of Participations Therein.
A. Revolving Letters of Credit; Acquisition Letter of Credit; and IRB
Reimburse- ment Agreement.
1. Revolving Letters of Credit. In addition to Borrower requesting
that Lenders make Loans pursuant to subsection 2.1A, Borrower may request,
in accordance with the provisions of this subsection 3.1, from time to
time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date, that Issuing Lender issue
Revolving Letters of Credit for the account of Borrower for the purposes
specified in the definition of Revolving Letter of Credit. Subject to the
terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrower herein set forth, Issuing
Lender shall issue Revolving Letters of Credit in accordance with the
provisions of this subsection 3.1; provided that Borrower shall not
request that Issuing Lender issue and Issuing Lender shall not issue:
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(i) any Revolving Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving Loan Commitments
(including the Maximum Exposure Under IRB Reimbursement Agreement),
would exceed the lesser of (1) the Revolving Loan Commitments then
in effect and (2) the Borrowing Base then in effect;
(ii) any Revolving Letter of Credit if, after giving effect to
such issuance, the Revolving Letter of Credit Usage would exceed
$3,000,000;
(iii) any Revolving Letter of Credit having an expiration date
(a) later than the earlier of (x) the Revolving Loan Commitment
Termination Date and (y) the date which is one year from the date of
issuance of such Revolving Letter of Credit; provided that the
immediately preceding clause (y) shall not prevent Issuing Lender
from agreeing that a Revolving Letter of Credit will automatically
be extended for one or more successive periods not to exceed one
year each unless Issuing Lender elects not to extend for any such
additional period; and provided, further that Issuing Lender shall
elect not to extend such Revolving Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing
(and has not been waived in accordance with subsection 10.6) at the
time Issuing Lender must elect whether or not to allow such
extension or (b) that is otherwise unacceptable to Issuing Lender in
its reasonable discretion; or
(iv) any Revolving Letter of Credit denominated in a currency
other than Dollars.
2. Acquisition Letter of Credit. In addition to Borrower requesting
that Lenders make Loans pursuant to subsection 2.1A and that Issuing
Lender issue Revolving Letters of Credit pursuant to subsection 3.1A.1,
Borrower may request, in accordance with the provisions of this subsection
3.1A.2, that Issuing Lender issue the Acquisition Letter of Credit for the
account of Borrower for the purposes specified in the definition of
Acquisition Letter of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, Issuing Lender shall issue the Acquisition
Letter of Credit in accordance with the provisions of this subsection 3.1;
provided that (i) the maximum aggregate amount which is or at any time may
become available for drawing under the Acquisition Letter of Credit shall
not exceed $58,000,000 and (ii) the Acquisition Letter of Credit shall
have an expiration date no later than January 8, 1997.
3. IRB Reimbursement Agreement. Borrower may request, in accordance
with the provisions of this subsection 3.1A.3, that Issuing Lender enter
into the IRB Reimbursement Agreement for the account of Borrower and its
Subsidiaries. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrower set forth
herein, Issuing Lender shall make IRB Reimbursement Advances in accordance
with the provisions of the IRB Reimbursement Agreement.
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B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Borrower desires the issuance of a
Letter of Credit, it shall deliver to Administrative Agent a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit III
annexed hereto no later than 11:00 A.M. (Dallas, Texas time) at least five
Business Days (in the case of Revolving Letters of Credit), or one
Business Day (in the case of the Acquisition Letter of Credit), or in each
case such shorter period as may be agreed to by Issuing Lender in any
particular instance, in advance of the proposed date of issuance. The
Notice of Issuance of Letter of Credit shall specify (a) the proposed date
of issuance (which shall be a Business Day), (b) whether the Letter of
Credit is to be a Revolving Letter of Credit or Acquisition Letter of
Credit, (c) the face amount of the Letter of Credit, (d) the expiration
date of the Letter of Credit, (e) the name and address of the beneficiary,
and (f) in the case of a Revolving Letter of Credit, either the verbatim
text of the proposed Revolving Letter of Credit or the proposed terms and
conditions thereof, including a precise description of any documents to be
presented by the beneficiary which, if presented by the beneficiary prior
to the expiration date of the Revolving Letter of Credit, would require
Issuing Lender to make payment under the Revolving Letter of Credit;
provided that Issuing Lender, in its reasonable discretion, may require
changes in the text of the proposed Revolving Letter of Credit or any such
documents; and provided, further that no Revolving Letter of Credit shall
require payment against a conforming draft to be made thereunder on the
same business day (under the laws of the jurisdiction in which the office
of Issuing Lender to which such draft is required to be presented is
located) that such draft is presented if such presentation is made after
10:00 A.M. (in the time zone of such office of Issuing Lender) on such
business day.
Borrower shall notify Issuing Lender prior to the issuance of any
Letter of Credit in the event that any of the matters to which Borrower is
required to certify in the applicable Notice of Issuance of Letter of
Credit is no longer true and correct as of the proposed date of issuance
of such Letter of Credit, and upon the issuance of any Letter of Credit,
Borrower shall be deemed to have re-certified, as of the date of such
issuance, as to the matters to which Borrower is required to certify in
the applicable Notice of Issuance of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, Issuing Lender shall issue the requested Letter of Credit in
accordance with Issuing Lender's standard operating procedures.
(iii) Execution of IRB Reimbursement Agreement. Upon satisfaction or
waiver (in accordance with Section 10.6) of the conditions set forth in
subsection 4.1, Issuing Lender shall enter into IRB Reimbursement
Agreement. Each Lender agrees that, unless otherwise notified by Issuing
Lender, the IRB Reimbursement Agreement shall be executed and delivered by
Issuing Lender on the Closing Date.
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(iv) Notification to Lenders. Upon the issuance of any Letter of
Credit Issuing Lender shall promptly notify Administrative Agent and each
other Lender of such issuance, which notice shall be accompanied by a copy
of such Letter of Credit and identify the amount of such Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
C. Lenders' Purchase of Participations.
(i) Letters of Credit. Immediately upon the issuance of each Letter
of Credit, each Lender shall be deemed to, and hereby agrees to, have
irrevocably purchased from Issuing Lender a participation in such Letter
of Credit and any drawings honored thereunder in an amount equal to such
Lender's Pro Rata Share of the maximum amount which is or at any time may
become available to be drawn thereunder (assuming, for purposes of
determining such Pro Rata Share with respect to the Acquisition Letter of
Credit, that the Acquisition Letter of Credit is comprised of up to
$33,000,000.00 of Tranche A Term Loans and $25,000,000 of Tranche B Term
Loans).
(ii) IRB Reimbursement Agreement. Immediately upon the execution of
the IRB Reimbursement Agreement, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from Issuing Lender a
participation in the IRB Reimbursement Agreement (including any IRB
Reimbursement Advances thereunder) in an amount equal to such Lender's Pro
Rata Share of the Maximum Exposure Under IRB Reimbursement Agreement
3.2 Letter of Credit Fees; IRB Reimbursement Account Fees.
A. Letter of Credit Fees. Borrower agrees to pay the following amounts
with respect to Letters of Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to Issuing Lender for its own account, equal to 0.25% per
annum of the daily amount available to be drawn under such Letter of
Credit and (b) a letter of credit fee, payable to Administrative Agent for
the account of Lenders, equal to (A) the product of (x) the Applicable
Margin for Revolving Loans made as Eurodollar Rate Loans and (y) the
available amount to be drawn under any Revolving Letter of Credit and (B)
3% per annum of the available amount to be drawn under the Acquisition
Letter of Credit, each such fronting fee or letter of credit fee to be
payable in arrears on and to (but excluding) each March 31, June 30,
September 30 and December 31 of each year commencing on March 31, 1997 and
in the case of such fees with respect to the Acquisition Letter of Credit,
on January 8, 1997, and, in each case, computed on the basis of a 360-day
year for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clauses (i) above), documentary and
processing charges payable directly to Issuing
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Lender for its own account in accordance with Issuing Lender's standard
schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clauses (i) and (ii) of this
subsection 3.2A, the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by Administrative Agent of any amount
described in clause (i)(b) of this subsection 3.2A, Administrative Agent shall
distribute to each Lender its Pro Rata Share of such amount (determined in
accordance with the parenthetical in subsection 3.1C in the case of the
Acquisition Letter of Credit).
B. IRB Reimbursement Agreement Fees. Borrower agrees to pay the following
amounts with respect to the IRB Reimbursement Agreement:
(i) with respect to the IRB Reimbursement Agreement, (a) a fronting
fee, payable directly to Issuing Lender for its own account, equal to
0.25% per annum of the Maximum Exposure Under IRB Reimbursement Agreement
and (b) an IRB Reimbursement Advance fee, payable to Administrative Agent
for the account of Lenders, equal to the product of (x) the Applicable
Margin for Revolving Loans made as Eurodollar Rate Loans and (y) the
Maximum Exposure Under IRB Reimbursement Agreement, each such fronting fee
or IRB Reimbursement Advance fee to be payable in arrears on and to (but
excluding) each March 31, June 30, September 30 and December 31 of each
year commencing on March 31, 1997 and, in each case, computed on the basis
of a 360-day year for the actual number of days elapsed; and
(ii) with respect to the IRB Reimbursement Agreement and each IRB
Reimbursement Advance (without duplication of the fees payable under
clause (i) above), documentary and processing charges payable directly to
Issuing Lender for its own account in accordance with Issuing Lender's
standard schedule for such charges in effect at the time of such payment
(treating, for these purposes, the execution of the IRB Reimbursement
Agreement as the issuance of a Letter of Credit and each IRB Reimbursement
Advance as a draw under a Letter of Credit).
For purposes of calculating any fees payable under clauses (i) and (ii) of this
subsection 3.2B, the daily Maximum Exposure Under IRB Reimbursement Agreement
shall be determined as of the close of business on any date of determination.
Promptly upon receipt by Administrative Agent of any amount described in clause
(i) of this subsection 3.2B, Administrative Agent shall distribute to each
Lender its Pro Rata Share of such amount.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit and the
IRB Reimbursement Agreement.
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit
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with reasonable care so as to ascertain whether they appear on their face to be
in accordance with the terms and conditions of such Letter of Credit.
B. Reimbursement by Borrower of Amounts Paid Under Letters of Credit and
the IRB Reimbursement Agreement. In the event that either (x) Issuing Lender has
determined to honor a drawing under a Letter of Credit issued by it or (y)
Issuing Lender makes any IRB Reimbursement Advance under the IRB Reimbursement
Agreement, Issuing Lender shall immediately notify Borrower, and Borrower shall
reimburse Issuing Lender on or before the Business Day immediately following the
date on which such drawing is honored or such IRB Reimbursement Advance is made,
as applicable (the "Reimbursement Date"), in an amount in Dollars and in same
day funds equal to the amount of such honored drawing or such IRB Reimbursement
Advance; provided that, anything contained in this Agreement to the contrary
notwithstanding, (i) unless Borrower shall have notified Administrative Agent
and Issuing Lender prior to 10:00 A.M. (Dallas, Texas time) on the date such
drawing is honored or IRB Reimbursement Advance is made that Borrower intends to
reimburse Issuing Lender for the amount of such honored drawing or IRB
Reimbursement Advance with funds other than the proceeds of Revolving Loans (or
in the case of the Acquisition Letter of Credit, the Term Loans), Borrower shall
be deemed to have given a timely Notice of Borrowing to Administrative Agent
requesting Lenders to make Revolving Loans (or in the case of the Acquisition
Letter of Credit, Term Loans) that are Base Rate Loans on the Reimbursement Date
in an amount in Dollars equal to the amount of such honored drawing or IRB
Reimbursement Advance and (ii) subject to satisfaction or waiver of the
conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement
Date, make Revolving Loans (or in the case of the Acquisition Letter of Credit,
Term Loans) that are Base Rate Loans in the amount of such honored drawing or
IRB Reimbursement Advance, the proceeds of which shall be applied directly by
Administrative Agent to reimburse Issuing Lender for the amount of such honored
drawing or IRB Reimbursement Advance; and provided, further that if for any
reason proceeds of Revolving Loans (or in the case of the Acquisition Letter of
Credit, the Term Loans) are not received by Issuing Lender on the Reimbursement
Date in an amount equal to the amount of such honored drawing or IRB
Reimbursement Advance, Borrower shall reimburse Issuing Lender, on demand, in an
amount in same day funds equal to the excess of the amount of such honored
drawing or IRB Reimbursement Advance over the aggregate amount of such Loans, if
any, which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Loans on the terms and conditions
set forth in this Agreement, and Borrower shall retain any and all rights it may
have against any Lender resulting from the failure of such Lender to make such
Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit
or the IRB Reimbursement Agreement.
(i) Payment by Lenders. In the event that Borrower shall fail for
any reason to reimburse Issuing Lender as provided in subsection 3.3B in
an amount equal to the amount of any drawing honored by Issuing Lender
under a Letter of Credit issued by it or under the IRB Reimbursement
Agreement, as applicable, Issuing Lender shall promptly notify each other
Lender of the unreimbursed amount of such honored drawing or IRB
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Reimbursement Advance and of such other Lender's respective participation
therein based on such Lender's Pro Rata Share (determined in accordance
with the parenthetical in subsection 3.1C in the case of the Acquisition
Letter of Credit). Each Lender shall make available to Issuing Lender an
amount equal to its respective participation, in Dollars and in same day
funds, at the office of Issuing Lender specified in such notice, not later
than 2:00 P.M. (Dallas, Texas time) on the first business day (under the
laws of the jurisdiction in which such office of Issuing Lender is
located) after the date notified by Issuing Lender. In the event that any
Lender fails to make available to Issuing Lender on such business day the
amount of such Lender's participation in such Letter of Credit or the IRB
Reimbursement Agreement, as applicable, as provided in this subsection
3.3C, Issuing Lender shall be entitled to recover such amount on demand
from such Lender together with interest thereon at the rate customarily
used by Issuing Lender for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. Nothing in this subsection
3.3C shall be deemed to prejudice the right of any Lender to recover from
Issuing Lender any amounts made available by such Lender to Issuing Lender
pursuant to this subsection 3.3C in the event that it is determined by the
final judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit or the IRB Reimbursement Agreement by
Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of Issuing
Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Borrower. In the event Issuing Lender shall have been reimbursed by other
Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by Issuing Lender under a Letter of Credit issued by it,
or under the IRB Reimbursement Agreement, as applicable, Issuing Lender
shall distribute to each other Lender which has paid all amounts payable
by it under subsection 3.3C(i) with respect to such honored drawing such
other Lender's Pro Rata Share of all payments subsequently received by
Issuing Lender from Borrower in reimbursement of such honored drawing or
IRB Reimbursement Advance when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit and the IRB Reimburse-
ment Agreement.
(i) Payment of Interest by Borrower. Borrower agrees to pay to
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, and with respect to IRB Reimbursement Advances,
interest on the amount paid by Issuing Lender in respect of each such
honored drawing or IRB Reimbursement Advance from the date such drawing is
honored or IRB Reimbursement Advance is made to but excluding the date
such amount is reimbursed by Borrower (including any such reimbursement
out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a
rate equal to (a) for the period from the date such drawing is honored or
IRB Reimbursement Advance is made to but excluding the Reimbursement Date,
the rate then
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in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with
respect to Revolving Loans that are Base Rate Loans. Interest payable
pursuant to this subsection 3.3D(i) shall be computed on the basis of a
365-day year for the actual number of days elapsed in the period during
which it accrues and shall be payable on demand or, if no demand is made,
on the date on which the related drawing under a Letter of Credit or IRB
Reimbursement Advance is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
upon receipt by Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, or with respect to an IRB Reimbursement Advance, (a)
Issuing Lender shall distribute to each other Lender, out of the interest
received by Issuing Lender in respect of the period from the date such
drawing is honored or such IRB Reimbursement is made to but excluding the
date on which Issuing Lender is reimbursed for the amount of such drawing
or IRB Reimbursement Advance (including any such reimbursement out of the
proceeds of Revolving Loans or Term Loans, as the case may be, pursuant to
subsection 3.3B), the amount that such other Lender would have been
entitled to receive either (x) in respect of the letter of credit fee that
would have been payable in respect of such Letter of Credit for such
period pursuant to subsection 3.2 if no drawing had been honored under
such Letter of Credit, or (y) in respect of the IRB Reimbursement
Agreement fee that would have been payable for such period pursuant to
subsection 3.2 if no IRB Reimbursement Advance had been made, as
applicable, and (b) in the event Issuing Lender shall have been reimbursed
by other Lenders pursuant to subsection 3.3C(i) for all or any portion of
such honored drawing, or IRB Reimbursement Advance, Issuing Lender shall
distribute to each other Lender which has paid all amounts payable by it
under subsection 3.3C(i) with respect to such honored drawing or IRB
Reimbursement Advance such other Lender's Pro Rata Share of any interest
received by Issuing Lender in respect of that portion of such honored
drawing or IRB Reimbursement Advance so reimbursed by other Lenders for
the period from the date on which Issuing Lender was so reimbursed by
other Lenders to but excluding the date on which such portion of such
honored drawing or IRB Reimbursement Advance is reimbursed by Borrower.
Any such distribution shall be made to a Lender at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request.
3.4 Obligations Absolute.
The obligation of Borrower to reimburse Issuing Lender for drawings
honored under Letters of Credit and IRB Reimbursement Advances and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, any of the following circumstances:
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(i) any lack of validity or enforceability of any Letter of Credit
or the IRB Reimbursement Agreement;
(ii) the existence of any claim, set-off, defense or other right
which Borrower or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting) or any beneficiary of the IRB Reimbursement
Agreement, Issuing Lender or other Lender or any other Person or, in the
case of a Lender, against Borrower, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower or one
of its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft or other document presented under any Letter of
Credit or with respect to the IRB Reimbursement Agreement proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not comply with the
terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by Issuing Lender under the applicable
Letter of Credit or with respect to the IRB Reimbursement Agreement shall not
have constituted gross negligence or willful misconduct of Issuing Lender under
the circumstances in question.
3.5 Indemnification; Nature of Issuing Lender's Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Borrower hereby agrees to protect, indemnify, pay and save
harmless Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by Issuing
Lender, other than, subject to the following
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clause (ii), the wrongful dishonor by Issuing Lender of a proper demand for
payment made under any Letter of Credit issued by it, (ii) the failure of
Issuing Lender to honor a drawing under any such Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts") or (iii) the execution, delivery
and performance of the IRB Reimbursement Agreement, in any case, other than as a
result of the gross negligence or willful misconduct of Issuing Lender.
B. Nature of Issuing Lender's Duties. As between Borrower and Issuing
Lender, Borrower assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, Issuing Lender shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) failure of the beneficiary of any such Letter of Credit to
comply fully with any conditions required in order to draw upon such Letter of
Credit; (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) errors in interpretation of technical terms; (vi)
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of Issuing Lender, including
without limitation any Governmental Acts, and none of the above shall affect or
impair, or prevent the vesting of, any of Issuing Lender's rights or powers
hereunder, except, in any case, as a result of the gross negligence or willful
misconduct of the Issuing Lender. As between Borrower and Issuing Lender,
Borrower assumes all risks of the acts and omissions of the beneficiaries of the
IRB Reimbursement Agreement.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by Issuing Lender under or in connection with the Letters of
Credit issued by it, the IRB Reimbursement Agreement or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence or willful misconduct, shall not put Issuing Lender under any
resulting liability to Borrower.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Borrower shall retain any and all rights it may have against Issuing Lender for
any liability arising solely out of the gross negligence or willful misconduct
of Issuing Lender, as determined by a final judgment of a court of competent
jurisdiction.
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3.6 Increased Costs and Taxes Relating to Letters of Credit.
Subject to the provisions of subsection 2.7B (which shall be controlling
with respect to the matters covered thereby), in the event that Issuing Lender
or Lender shall determine (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto) that any law, treaty
or governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by Issuing Lender or
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
(i) subjects Issuing Lender or Lender (or its applicable lending or
letter of credit office) to any additional Tax (other than any Tax on the
overall net income of Issuing Lender or Lender) with respect to the
issuing or maintaining of any Letters of Credit or the purchasing or
maintaining of any participations therein or any other obligations under
this Section 3, whether directly or by such being imposed on or suffered
by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by Issuing Lender
or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3, any Letter
of Credit or any participation therein or the IRB Reimbursement Agreement;
and the result of any of the foregoing is (x) to increase the cost to Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or purchasing its obligations under the IRB Reimbursement Agreement or
(y) to reduce any amount received or receivable by Issuing Lender or Lender (or
its applicable lending or letter of credit office) with respect thereto; then,
in any case, Borrower shall promptly pay to Issuing Lender or Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts as may be necessary to compensate Issuing Lender or Lender for
any such increased cost or reduction in amounts received or receivable
hereunder. Issuing Lender or Lender, as the case may be, shall deliver to
Borrower a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
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Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Term Loans, Initial Revolving Loans, Swing Line Loans and
Acquisi- tion Letter of Credit.
The obligations of Lenders to make any Term Loans and any Revolving Loans
and Swing Line Loans to be made on the Closing Date, to issue the Acquisition
Letter of Credit and to enter into the IRB Reimbursement Agreement on the
Closing Date are, in addition to the conditions precedent specified in
subsections 4.2 and 4.3, as the case may be, subject to prior or concurrent
satisfaction of the following conditions:
A. Loan Party Documents. On or before the Closing Date, Parent shall, and
shall cause each other Loan Party to, deliver to Lenders (or to Administrative
Agent for Lenders with sufficient originally executed copies, where appropriate,
for each Lender and its counsel) the following with respect to Parent or such
Loan Party, as the case may be, each, unless otherwise noted, dated the Closing
Date:
(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation and each other
state in which such Person is qualified as a foreign corporation to do
business and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Loan
Documents and Related Agreements to which it is a party, certified as of
the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person is
a party;
(vi) Correct copies of all Related Agreements entered into on or
prior to the Closing Date including all exhibits and schedules thereto;
and
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(vii) Such other documents as Administrative Agent may reasonably
request.
B. No Material Adverse Effect. There shall have occurred no Material
Adverse Effect (in the reasonable opinion of Administrative Agent) since
September 30, 1995 in the case of Borrower and Custom Foods Products, Inc. and
since December 31, 1995 in the case of Quality Foods, L.P., QF Acquisition and
QF Management.
C. Corporate and Capital Structure, Ownership, Management, Etc.
(i) Corporate Structure. The corporate organizational structure of
Parent and its Subsidiaries, both before and after giving effect to the
Acquisition and the Restructuring, shall be as set forth on Schedule 4.1C
annexed hereto.
(ii) Capital Structure and Ownership. The capital structure and
ownership of Parent and Borrower, both before and after giving effect to
the Acquisition and the Restructuring, shall be as set forth on Schedule
4.1C annexed hereto.
(iii) Management; Employment Contracts. The management structure of
Parent and Borrower after giving effect to the Acquisition and the
Restructuring shall be as set forth on Schedule 4.1C annexed hereto, and
Administrative Agent shall have received copies of, and shall be satisfied
with the form and substance of (1) any and all employment contracts with
and senior management of Parent, Borrower and its Subsidiaries, (2) any
and all shareholders agreement among any of the shareholders of Parent and
(3) any stock option plans and similar arrangements provided by Parent to
any Person.
D. Proceeds of Bridge Financing.
(i) Bridge Financing. Borrower and its Subsidiaries shall have
entered into the Bridge Financing Documents to which it is a party and the
Borrower shall have received an gross aggregate principal amount of not
less than $25,000,000 under the Bridge Financing.
(ii) Use of Proceeds by Borrower. Borrower shall have provided
evidence satisfactory to Administrative Agent that the proceeds of the
Bridge Financing have been irrevocably committed, prior to the application
of the proceeds of any Term Loans and any Revolving Loans made on the
Closing Date or the issuance of the Acquisition Letter of Credit, to the
payment of a portion of the Acquisition Financing Requirements.
E. Matters Relating to Existing Indebtedness and Senior Guaranteed Notes.
(i) Termination of Certain Existing Indebtedness and Related Liens;
Existing Letters of Credit. On the Closing Date, Borrower and its
Subsidiaries shall have (a) repaid in full all Indebtedness set forth on
Schedule 4.1E (the aggregate principal amount of which Indebtedness shall
not exceed $36,500,000), (b) terminated any commitments
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to lend or make other extensions of credit thereunder, (c) delivered to
Administrative Agent all documents or instruments necessary to release all
Liens securing Indebtedness or other obligations of Borrower and its
Subsidiaries thereunder, and (d) made arrangements satisfactory to
Administrative Agent with respect to the cancellation of any letters of
credit outstanding thereunder or the issuance of Letters of Credit to
support the obligations of Borrower and its Subsidiaries with respect
thereto.
(ii) Consent. Borrower shall have obtained all such consents with
respect to the IRB Trust Indenture as may be required to permit the
consummation of the Acquisition and the Restructuring, the related
financings (including the incurrence of the Obligations hereunder) and the
other transactions contemplated by the Loan Documents and the Related
Agreements. The terms and conditions of such consents shall be in form and
substance satisfactory to Administrative Agent. Borrower shall have
delivered to Administrative Agent a fully executed or conformed copy of
the IRB Trust Indenture.
(iii) Existing Indebtedness to Remain Outstanding. Administrative
Agent shall have received an Officers' Certificate of Borrower stating
that, after giving effect to the transactions described in this subsection
4.1E, the Indebtedness of Loan Parties (other than Indebtedness under the
Loan Documents, the Bridge Financing Documents and the Seller Notes) shall
consist solely of Indebtedness and Capital Leases (in such outstanding
principal amounts) described in Schedule 7.1 annexed hereto.
(iv) Description of Senior Guaranteed Notes. On or before the
Closing Date, Lenders shall have received from Borrower a draft of the
"Description of the Notes" section of the Preliminary Offering Memorandum
relating to the Senior Guaranteed Notes, the terms and conditions of which
shall be reasonably satisfactory to Administrative Agent and Requisite
Lenders.
F. Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Borrower shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Acquisition and the Restructuring,
the other transactions contemplated by the Loan Documents and the Related
Agreements, and the continued operation of the business conducted by Quality
Foods, L.P. in substantially the same manner as conducted prior to the
consummation of the Acquisition and the Restructuring, and each of the foregoing
shall be in full force and effect, in each case other than those the failure to
obtain or maintain which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. All applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose adverse
conditions on the Acquisition or the Restructuring or the financing thereof. No
action, request for stay, petition for review or rehearing, reconsideration, or
appeal with respect to any of the foregoing shall be pending, and the time for
any applicable agency to take action to set aside its consent on its own motion
shall have expired.
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G. Consummation of Acquisition and Restructuring.
(i) All conditions to the Acquisition and the Restructuring,
including those set forth in the Acquisition Agreement, shall have been
satisfied or the fulfillment of any such conditions shall have been waived
with the consent of Administrative Agent;
(ii) the Acquisition shall have become effective in accordance with
the terms of the Acquisition Agreement;
(iii) the Restructuring shall have become effective in accordance
with applicable law;
(iv) the Seller Notes shall have been issued to each of the Sellers
and the aggregate cash consideration (including the Seller Notes) paid to
the Sellers in connection with the Acquisition shall not exceed
$63,000,000;
(v) Transaction Costs shall not exceed $9,000,000, and
Administrative Agent shall have received evidence to its satisfaction to
such effect; and
(vi) Agent shall have received an Officers' Certificate of Borrower
to the effect set forth in clauses (i)-(v) above and stating that Borrower
will proceed to consummate the Acquisition and the Restructuring
immediately upon the making of the initial Loans or the issuance of the
Acquisition Letter of Credit.
H. Closing Date Mortgages; Closing Date Mortgage Policies; Etc.
Administrative Agent shall have received from Borrower and each applicable
Subsidiary Guarantor:
(i) Closing Date Mortgages. Fully executed and notarized Mortgages
(each a "Closing Date Mortgage" and, collectively, the "Closing Date
Mortgages"), in proper form for recording in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed in
Part A of Schedule 4.1H annexed hereto (each a "Closing Date Mortgaged
Property" and, collectively, the "Closing Date Mortgaged Properties");
(ii) Opinions of Local Counsel. An opinion of counsel (which counsel
shall be reasonably satisfactory to Administrative Agent) in each state in
which a Closing Date Mortgaged Property is located with respect to the
enforceability of the form(s) of Closing Date Mortgages to be recorded in
such state and such other matters as Administrative Agent may reasonably
request, in each case in form and substance reasonably satisfactory to
Administrative Agent;
(iii) Landlord Consents and Estoppels; Recorded Leasehold Interests.
In the case of each Real Property Asset listed on Part B of Schedule 4.1H,
a Landlord Consent and Estoppel with respect thereto;
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(iv) Title Insurance. (a) ALTA mortgagee title insurance policies or
unconditional commitments therefor (the "Closing Date Mortgage Policies")
issued by the Title Company with respect to the Closing Date Mortgaged
Properties listed (and marked with an asterisk) in Part A of Schedule 4.1H
annexed hereto, in amounts not less than the respective amounts designated
therein with respect to any particular Closing Date Mortgaged Properties,
insuring fee simple title to, or a valid leasehold interest in, each such
Closing Date Mortgaged Property vested in such Loan Party and assuring
Administrative Agent that the applicable Closing Date Mortgages create
valid and enforceable First Priority mortgage Liens on the respective
Closing Date Mortgaged Properties encumbered thereby, subject only to a
standard survey exception, which Closing Date Mortgage Policies (1) shall
include an endorsement for mechanics' liens, for future advances under
this Agreement and for any other matters reasonably requested by
Administrative Agent and (2) shall provide for affirmative insurance and
such reinsurance as Administrative Agent may reasonably request, all of
the foregoing in form and substance reasonably satisfactory to
Administrative Agent; and (b) evidence satisfactory to Administrative
Agent that such Loan Party has (i) delivered to the Title Company all
certificates and affidavits required by the Title Company in connection
with the issuance of the Closing Date Mortgage Policies and (ii) paid to
the Title Company or to the appropriate governmental authorities all
expenses and premiums of the Title Company in connection with the issuance
of the Closing Date Mortgage Policies and all recording and stamp taxes
(including mortgage recording and intangible taxes) payable in connection
with recording the Closing Date Mortgages in the appropriate real estate
records;
(v) Title Reports. With respect to each Closing Date Mortgaged
Property listed (and marked with an asterisk) in Part A of Schedule 4.1H
annexed hereto, a title report issued by the Title Company with respect
thereto, dated not more than 30 days prior to the Closing Date and
satisfactory in form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all
recorded documents listed as exceptions to title or otherwise referred to
in the Closing Date Mortgage Policies or in the title reports delivered
pursuant to subsection 4.1H(v);
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to whether (1) any Closing Date Mortgaged Property
is a Flood Hazard Property and (2) the community in which any such Flood
Hazard Property is located is participating in the National Flood
Insurance Program, (b) if there are any such Flood Hazard Properties, such
Loan Party's written acknowledgement of receipt of written notification
from Administrative Agent (1) as to the existence of each such Flood
Hazard Property and (2) as to whether the community in which each such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, and (c) in the event any such Flood Hazard Property is
located in a community that participates in the National Flood Insurance
Program, evidence that Borrower has obtained flood insurance in respect of
such Flood Hazard Property to the extent required under the applicable
regulations of the Board of Governors of the Federal Reserve System; and
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(viii) Environmental Indemnity . An environmental indemnity
agreement, satisfactory in form and substance to Administrative Agent and
its counsel, with respect to the indemnification of Administrative Agent
and Lenders for any liabilities that may be imposed on or incurred by any
of them as a result of any Hazardous Materials Activity.
I. Security Interests in Personal and Mixed Property. To the extent not
otherwise satisfied pursuant to subsection 4.1H, Administrative Agent shall have
received evidence satisfactory to it that Parent, Borrower and Subsidiary
Guarantors shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii), (iv)
and (v) below) that may be necessary or, in the opinion of Administrative Agent,
desirable in order to create in favor of Administrative Agent, for the benefit
of Lenders, a valid and (upon such filing and recording) perfected First
Priority security interest in the entire personal and mixed property Collateral.
Such actions shall include, without limitation, the following:
(i) Schedules to Collateral Documents. Delivery to Administrative
Agent of accurate and complete schedules to all of the applicable
Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to Administrative
Agent of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Administrative Agent) representing
all capital stock pledged pursuant to the Parent Pledge Agreement,
Borrower Pledge Agreement and the Subsidiary Pledge Agreements and (b) all
promissory notes or other instruments (duly endorsed, where appropriate,
in a manner satisfactory to Administrative Agent) evidencing any
Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery to
Administrative Agent of (a) the results of a recent search, by a Person
satisfactory to Administrative Agent, of all effective UCC financing
statements and fixture filings and all judgment and tax lien filings which
may have been made with respect to any personal or mixed property of any
Loan Party, together with copies of all such filings disclosed by such
search, and (b) UCC termination statements duly executed by all applicable
Persons for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement).
(iv) UCC Financing Statements and Fixture Filings. Delivery to
Administrative Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Administrative Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents;
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(v) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all
cover sheets or other documents or instruments required to be filed with
the PTO in order to create or perfect Liens in respect of any IP
Collateral;
(vi) Opinions of Local Counsel. Delivery to Administrative Agent of
an opinion of counsel (which counsel shall be reasonably satisfactory to
Administrative Agent) under the laws of each jurisdiction in which any
Loan Party or any personal or mixed property Collateral is located with
respect to the creation and perfection of the security interests in favor
of Administrative Agent in such Collateral and such other matters governed
by the laws of such jurisdiction regarding such security interests as
Administrative Agent may reasonably request, in each case in form and
substance reasonably satisfactory to Administrative Agent.
J. Real Estate Appraisals. Administrative Agent shall have received
appraisals from one or more independent real estate appraisers satisfactory to
Administrative Agent, in form, scope and substance satisfactory to
Administrative Agent and satisfying the requirements of any applicable laws and
regulations, concerning any Closing Date Mortgaged Properties (as defined in
subsection 4.1H), in each case to the extent required under such laws and
regulations as determined by Administrative Agent in its discretion.
K. Environmental Reports. Administrative Agent shall have received reports
and other information, in form, scope and substance satisfactory to
Administrative Agent, regarding environmental matters relating to the
Facilities, which reports shall include (i) a Phase I environmental assessment
for each of the Facilities listed in Schedule 4.1K annexed hereto (collectively,
the "Phase I Report") which (a) conforms to the ASTM Standard Practice for
Environmental Site Assessments: Phase I Environmental Site Assessment Process E
1527 and (b) was conducted by one or more environmental consulting firms
reasonably satisfactory to Administrative Agent, and (ii) a compliance audit
setting forth an assessment of Borrower's, its Subsidiaries' and such
Facilities' current and past compliance with Environmental Laws.
L. Financial Statements; Pro Forma Balance Sheet. On or before the Closing
Date, Lenders shall have received from Borrower the following (the "Financial
Statements"):
(i) the consolidated balance sheets of Borrower and its Subsidiaries
as at September 30, 1994, 1995 and 1996, and the related consolidated
statements of income and cash flows of Borrower and its Subsidiaries for
the fiscal years then ended, accompanied, in the case of the financial
statements for the fiscal years ended September 30, 1994 and September 30,
1995, by an opinion of Borrower's accountants, and accompanied, in the
case of the financial statements for the fiscal year ended September 30,
1996, by a form of opinion of Borrower's accountants, together with a
letter from Borrower's accountants with respect thereto, and the
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at October 31, 1996, together with selected consolidated
statements of income, stockholders' equity and cash flow for the one month
period then ended, duly certified by the chief financial officer of
Borrower that such financial statements fairly present (subject, in the
case of such balance sheet as at
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October 31, 1996 and such statements of income and cash flows for the one
month then ended, to normal year-end audit adjustments) the consolidated
financial condition of Borrower and its Subsidiaries as at such dates and
the consolidated results of the operation of Borrower and its Subsidiaries
for the periods ended on such dates and that all such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the
periods involved;
(ii) the consolidated balance sheets of Quality Foods, L.P. and its
Subsidiaries as at December 31, 1993, 1994 and 1995, and the related
statements of income and cash flows of Quality Foods, L.P. and its
Subsidiaries for the fiscal years then ended, accompanied by an opinion of
Quality Foods, L.P.'s accountants; the consolidated balance sheet of
Quality Foods, L.P. and its Subsidiaries as at September 30, 1995 and
1996, and the related consolidated statements of income and cash flows of
Quality Foods, L.P. and its Subsidiaries for the nine months then ended,
duly certified by the chief financial officer of Quality Foods, L.P. that
such financial statements fairly present (subject, in the case of such
balance sheet as at September 30, 1996 and such statements of income and
cash flows for the nine months then ended, to normal year-end audit
adjustments) the consolidated financial condition of Quality Foods, L.P.
and its Subsidiaries as at such dates and the consolidated results of the
operations of Quality Foods, L.P. and its Subsidiaries for the periods
ended on such dates and that all such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved;
(iii) pro forma financial statements of Borrower and its
Subsidiaries as of September 30, 1996, giving effect to the Acquisition,
the Restructuring and the other transactions contemplated hereby and
reflecting estimated purchase price accounting adjustments, prepared by
Borrower, and substantially in compliance with Article 11 of Regulation
S-X of the Securities and Exchange Commission (assuming such pro forma
financial statements were furnished in connection with a public offering),
which pro forma financial statements shall be accompanied by a certificate
of the chief financial officer of Borrower to the effect that, based on
his discussion with Borrower's accountants, such pro forma financial
statements are substantially in compliance with such Article 11; and
(iv) together with each of the interim financial statements referred
to in subdivision (ii) above, an independent accountant's review report
signed by Quality Foods, L.P.'s accountants to the effect that they have
conducted a limited review with respect to such interim financial
statements in accordance with Statement on Auditing Standards No. 71.
M. Solvency Assurances. On the Closing Date, Administrative Agent and
Lenders shall have received (i) a letter from Houlihan, Lokey, Howard & Zukin,
Inc. dated the Closing Date and addressed to Administrative Agent and Lenders,
in form and substance satisfactory to Administrative Agent and with appropriate
attachments, and (ii) a Financial Condition Certificate dated the Closing Date,
substantially in the form of Exhibit XV annexed hereto and with appropriate
attachments, in each case demonstrating that, after giving effect to the
consummation
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of the Acquisition and the Restructuring, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements,
Parent, Borrower and each Subsidiary will be Solvent.
N. Evidence of Insurance. Administrative Agent shall have received a
certificate from Borrower's insurance broker or other evidence satisfactory to
it that all insurance required to be maintained pursuant to subsection 6.4 is in
full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.
O. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of O'Sullivan Graev & Karabell, LLP, counsel for Loan
Parties, and Falk & Sharp, counsel for Custom Foods, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated as of the
Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit X-A and Exhibit X-B annexed hereto and as to such other
matters as Administrative Agent acting on behalf of Lenders may reasonably
request and (ii) evidence satisfactory to Administrative Agent that Borrower has
requested such counsel to deliver such opinions to Lenders.
P. Opinions of Administrative Agent's Counsel. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Administrative Agent, dated as of the Closing
Date, substantially in the form of Exhibit XI annexed hereto and as to such
other matters as Administrative Agent acting on behalf of Lenders may reasonably
request.
Q. Opinions of Counsel Delivered Under Related Agreements. Administrative
Agent and its counsel shall have received copies of each of the opinions of
counsel delivered to the parties under the Related Agreements delivered on or
prior to the Closing Date, together with a letter from each such counsel (to the
extent not inconsistent with such counsel's established internal policies)
authorizing Lenders to rely upon such opinion to the same extent as though it
were addressed to Lenders.
R. Fees. Borrower shall have paid to Administrative Agent, for
distribution (as appropriate) to Administrative Agent and Lenders, the fees
payable on the Closing Date referred to in subsection 2.3.
S. Representations and Warranties; Performance of Agreements. Borrower
shall have delivered to Administrative Agent an Officers' Certificate, in form
and substance satisfactory to Administrative Agent, to the effect that the
representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date) and that Parent and Borrower shall have
performed in all material respects all agreements and satisfied all conditions
which this
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Agreement provides shall be performed or satisfied by it on or before the
Closing Date except as otherwise disclosed to and agreed to in writing by
Administrative Agent.
T. Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Administrative Agent and such counsel, and Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent may reasonably
request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Agent shall have received before that Funding Date, in accordance with
the provisions of subsection 2.1B, an originally executed Notice of Borrowing,
in each case signed by the chief executive officer, the chief financial officer
or the treasurer of Borrower or by any executive officer of Borrower designated
by any of the above-described officers on behalf of Borrower in a writing
delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date; and
(iv) The making of the Loans requested on such Funding Date shall
not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of
the Federal Reserve System.
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4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder is subject to the following
conditions precedent:
A. On or before the date of issuance of the initial Revolving Letter of
Credit pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of Borrower or by any executive officer of Borrower
designated by any of the above-described officers on behalf of Borrower in a
writing delivered to Administrative Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of the Acquisition Letter of Credit (in
addition to the satisfaction of all conditions precedent described in subsection
4.1), all conditions precedent described in subsection 4.2B shall be satisfied
to the same extent as if the issuance of the Letter of Credit were the making of
a Loan and the date of issuance of the Letter of Credit were a Funding Date.
Section 5. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lender to issue Letters of Credit and to enter into the
IRB Reimbursement Agreement, and to induce other Lenders to purchase
participations in the Letters of Credit and the IRB Reimbursement Agreement,
each of Parent and Borrower, jointly and severally, represents and warrants to
each Lender, on the date of this Agreement, on each Funding Date and on the date
of issuance of each Letter of Credit, that the following statements are true,
correct and complete:
5.1 Organization, Powers, Qualification, Good Standing, Business, Subsidiaries
and Restructuring.
A. Organization and Powers. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and Related Agreements to which it
is a party and to carry out the transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to
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carry out its business and operations, except in jurisdictions where the failure
to be so qualified or in good standing has not had and will not have a Material
Adverse Effect.
C. Conduct of Business. Parent and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.12.
D. Subsidiaries. All of the Subsidiaries of Borrower are wholly owned and
identified in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be
supplemented from time to time pursuant to the provisions of subsection
6.1(xvi). The capital stock of each of the Subsidiaries of Borrower identified
in Schedule 5.1 annexed hereto (as so supplemented) is duly authorized, validly
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Each of the Subsidiaries of Borrower identified in Schedule 5.1
annexed hereto (as so supplemented) is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation set forth therein (which jurisdiction shall be in the United
States), has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
hereto (as so supplemented) correctly sets forth the ownership interest of
Borrower and each of its Subsidiaries in each of the Subsidiaries of Borrower
identified therein.
E. Restructuring. The Restructuring has been consummated as of the Closing
Date in accordance with the terms thereof.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents and the Related Agreements have been duly authorized by all
necessary corporate action on the part of each Loan Party that is a party
thereto.
B. No Conflict. The execution, delivery and performance by Loan Parties of
the Loan Documents and the Related Agreements to which they are parties and the
consummation of the transactions contemplated by the Loan Documents and such
Related Agreements do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Parent or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Parent
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Parent or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any material Contractual Obligation of Parent or
any of its Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of Parent or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Administrative Agent on behalf of Lenders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
material Contractual Obligation of Parent or any of its Subsidiaries,
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except for such approvals or consents that are (i) listed on Schedule 5.2B and
(ii) that will be obtained on or before the Closing Date or where the failure to
obtain such approvals or consents has not had and would not be reasonably likely
to have a Material Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by Loan
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body, except for such registrations, consents, approvals, notices and other
actions that are (i) listed on Schedule 5.2C, all of which have been obtained or
made on or prior to the Closing Date and are in full force and effect or (ii)
are required exclusively in connection with the Acquisition and the
Restructuring, the failure to obtain of which has not and had and would not be
reasonably likely to have a Material Adverse Effect.
D. Binding Obligation. Each of the Loan Documents and Related Agreements
has been duly executed and delivered by each Loan Party that is a party thereto
and is the legally valid and binding obligation of such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
E. Valid Issuance of Senior Guaranteed Notes, the Subordinated Notes and
the Bridge Notes. Borrower has the corporate power and authority to issue the
Senior Guaranteed Notes or Subordinated Notes, as applicable, and the Bridge
Notes. The Senior Guaranteed Notes or Subordinated Notes, as applicable, and the
Bridge Notes when issued and paid for, will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability. The
Senior Guaranteed Notes or the Subordinated Notes, as applicable, and the Bridge
Notes when issued and sold, will either (a) have been registered or qualified
under applicable federal and state securities laws or (b) be exempt therefrom.
5.3 Financial Condition.
Borrower has heretofore delivered to Lenders, at Lenders' request, the
Financial Statements. The Financial Statements (other than pro forma financial
statements) were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated and, where
applicable, consolidating basis) of the entities described in such Financial
Statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated and, where applicable, consolidating basis) of the
entities described therein for each of the periods then ended, subject, in the
case of any unaudited Financial Statements, to changes resulting from audit and
normal year-end adjustments. The pro forma financial statements included in the
Financial Statements present fairly the information shown therein, have been
properly compiled on the pro forma basis described therein, and in Borrower's
opinion, the
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assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions or circumstances
referred to herein. Parent and its Subsidiaries do not (and will not following
the funding of the initial Loans) have any Contingent Obligation, contingent
liability or liability for taxes, long-term lease or unusual forward or
long-term commitment that is not reflected in the foregoing financial statements
or the notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Parent or any of its Subsidiaries.
5.4 No Material Adverse Change; No Restricted Junior Payments.
Since September 30, 1995, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither Parent nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5 and as
set forth in Schedule 5.4.
5.5 Title to Properties; Liens; Real Property.
A. Title to Properties; Liens. Subject to Permitted Liens, Parent and its
Subsidiaries have (i) good, sufficient and legal title to (in the case of fee
interests in real property), (ii) valid leasehold interests in (in the case of
leasehold interests in real or personal property), or (iii) good title to (in
the case of all other personal property), all of their respective properties and
assets reflected in the financial statements referred to in subsection 5.3 or in
the most recent financial statements delivered pursuant to subsection 6.1, in
each case except for assets disposed of since the date of such financial
statements in the ordinary course of business or as otherwise permitted under
subsection 7.7. Except as permitted by this Agreement, all such properties and
assets are free and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 5.5 annexed hereto
contains a true, accurate and complete list of (i) all owned Real Property
Assets and (ii) all leases, subleases or assignments of leases (together with
all amendments, modifications, supplements, renewals or extensions of any
thereof) affecting each Real Property Asset of any Loan Party, regardless of
whether such Loan Party is the landlord or tenant (whether directly or as an
assignee or successor in interest) under such lease, sublease or assignment.
Except as specified in Schedule 5.5 annexed hereto, each agreement listed in
clause (ii) of the immediately preceding sentence is in full force and effect
and neither Parent nor Borrower has any knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of each applicable Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles.
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5.6 Litigation; Adverse Facts.
Except as set forth in Schedule 5.6 annexed hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (including any Environmental Claims) that are pending or, to the
knowledge of Borrower or Parent, threatened against or affecting Parent or any
of its Subsidiaries or any property of Parent or any of its Subsidiaries and
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. Neither Parent nor any of its Subsidiaries (i) is
in violation of any applicable laws (including Environmental Laws) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, or (ii) is subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all tax returns and
reports of Parent and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes due and payable and all assessments, fees and
other governmental charges upon Parent and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Neither Parent nor Borrower
knows of any proposed tax assessment against Parent or any of its Subsidiaries
which is not being actively contested by Parent or such Subsidiary in good faith
and by appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been
made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.
A. Neither Parent nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences of such default or
defaults, if any, would not have a Material Adverse Effect.
B. Schedule 5.8 contains a true, correct and complete list of all the
Material Contracts in effect on the Closing Date. All such Material Contracts
are in full force and effect and no material defaults currently exist
thereunder, and except where the consequences of such default or defaults, if
any, would not reasonably be likely to have a Material Adverse Effect.
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5.9 Governmental Regulation.
Neither Parent nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
A. Neither Parent nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than 25%
of the value of the assets (either of Borrower only or of Borrower and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Borrower and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 Employee Benefit Plans.
A. Parent, each of its Subsidiaries and each of their respective ERISA
Affiliates are in material compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their material obligations under each Employee Benefit Plan. Each Employee
Benefit Plan which is intended to qualify under Section 401(a) of the Internal
Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code or except as set forth in Schedule 5.11 annexed hereto, no Employee
Benefit Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of Parent, any of its
Subsidiaries or any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the amount
of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA),
individually or in the aggregate for all Pension Plans (excluding for purposes
of such computation any Pension Plans with respect to which assets exceed
benefit liabilities), does not exceed $500,000.
E. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Parent, its
Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete
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withdrawal from all Multiemployer Plans, based on information available pursuant
to Section 4221(e) of ERISA, does not exceed $500,000.
5.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect to
this Agreement, and Parent and Borrower hereby, jointly and severally, indemnify
Lenders against, and agrees that it will hold Lenders harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.13 Environmental Protection.
Except as set forth in Schedule 5.13 annexed hereto:
(i) neither Parent nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to
(a) any Environmental Law, (b) any Environmental Claim, or (c) any
Hazardous Materials Activity;
(ii) neither Parent nor any of its Subsidiaries has received any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss.
9604) or any comparable state law;
(iii) there are and, to Parent's and Borrower's knowledge, have been
no conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim against
Parent or any of its Subsidiaries;
(iv) for at least three years prior to the Closing Date, each of
Borrower and its Subsidiaries has maintained an environmental management
system for its operations that demonstrates a commitment to environmental
compliance and includes procedures for (a) preparing and updating
appropriate written compliance manuals covering pertinent regulatory
areas, (b) tracking changes in applicable Environmental Laws and modifying
operations to comply with new requirements thereunder and (c) training
employees to comply with applicable environmental requirements and
updating such training as necessary; and
(v) compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of giving
rise to a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the contrary, no event or
condition has occurred or is occurring with respect to Parent or any of its
Subsidiaries relating to any
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Environmental Law, any Release of Hazardous Materials, or any Hazardous
Materials Activity (including those set forth in Schedule 5.13 annexed hereto)
which individually or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect.
5.14 Employee Matters.
There is no strike or work stoppage in existence or threatened involving
Parent or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.15 Solvency.
Each Loan Party is, and the Loan Parties taken as a whole are, and upon
the incurrence of any Loans by such Loan Party on any date on which this
representation is made each Loan Party and the Loan Parties taken as a whole
will be, Solvent. Without limiting the foregoing, each Loan Party and the Loan
Parties taken as a whole will be Solvent on the Closing Date after giving effect
to the Acquisition, the Restructuring and the borrowings made in connection
therewith.
5.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and delivery
of the Collateral Documents by Loan Parties, together with (i) the actions taken
on or prior to the date hereof pursuant to subsections 4.1H, 4.1I, 6.8 and 6.9
and (ii) the delivery to Administrative Agent of any Pledged Collateral not
delivered to Administrative Agent at the time of execution and delivery of the
applicable Collateral Document (all of which Pledged Collateral has been so
delivered) are effective to create in favor of Administrative Agent for the
benefit of Lenders, as security for the respective Secured Obligations (as
defined in the applicable Collateral Document in respect of any Collateral), a
valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than the filing of any UCC financing
statements delivered to Administrative Agent for filing (but not yet filed) and
the periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent.
B. Governmental Authorizations. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge or grant by any Loan Party of the
Liens purported to be created in favor of Administrative Agent pursuant to any
of the Collateral Documents or (ii) the exercise by Administrative Agent of any
rights or remedies in respect of any Collateral (whether specifically granted or
created pursuant to any of the Collateral Documents or created or provided for
by applicable law), except for filings or recordings contemplated by subsection
5.16A and except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of
securities.
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C. Absence of Third-Party Filings. Except such as may have been filed in
favor of Administrative Agent as contemplated by subsection 5.16A and except as
set forth in Schedule 5.16C, (i) no effective UCC financing statement, fixture
filing or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office (other than with respect
to Permitted Liens) and (ii) no effective filing covering all or any part of the
IP Collateral is on file in the PTO.
D. Margin Regulations. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to
Administrative Agent by or on behalf of any Loan Party with respect to any of
the Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects.
5.17 Related Agreements.
A. Delivery of Related Agreements. Borrower has delivered to Lenders
complete and correct copies of each effective Related Agreement and of all
exhibits and schedules thereto.
B. Warranties of Borrower. Subject to the qualifications set forth
therein, each of the representations and warranties given by Borrower to Sellers
in the Acquisition Agreement is true and correct in all material respects as of
the date hereof and will be true and correct in all material respects as of the
Closing Date.
C. Survival. Notwithstanding anything in the Acquisition Agreement to the
contrary, the representations and warranties of Borrower set forth in
subsections 5.17B shall, solely for purposes of this Agreement, survive the
Closing Date for the benefit of Lenders.
5.18 Disclosure.
No representation or warranty of Parent or any of its Subsidiaries
contained in any Loan Document or Related Agreement or in any other document,
certificate or written statement furnished to Lenders by or on behalf of Parent
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to Parent or Borrower, in the case of
any document not furnished by it) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made and that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect. Any projections and
pro forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by Parent and its Subsidiaries to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may
materially differ from the projected results.
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Section 6. PARENT'S AND BORROWER'S AFFIRMATIVE COVENANTS
Parent and Borrower, jointly and severally, covenant and agree that, so
long as any of the Commitments hereunder shall remain in effect and until
payment in full of all of the Loans and other Obligations and the cancellation
or expiration of all Letters of Credit and the termination of the IRB
Reimbursement Agreement, unless Requisite Lenders shall otherwise give prior
written consent, Parent shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
Parent will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Borrower will deliver to Administrative Agent and Lenders:
(i) Monthly Financials: as soon as available and in any event within
30 days after the end of each month ending after the Closing Date, (a) the
consolidated and consolidating balance sheets of Parent and its
Subsidiaries as at the end of such month and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Parent and its Subsidiaries for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month,
setting forth in each case in comparative form the corresponding figures
for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the Financial Plan for the current Fiscal Year,
to the extent prepared on a monthly basis, all in reasonable detail and
certified by the chief financial officer of Parent and Borrower that they
fairly present, in all material respects, the financial condition of
Parent and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments, (b) a
narrative report describing the operations of Parent and its Subsidiaries
in the form prepared for presentation to senior management for such month
and for the period from the beginning of the then current Fiscal Year to
the end of such month and (c) reports on the meat spread and production
quantity for such month for each of the Operating Subsidiaries;
(ii) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each Fiscal Quarter, (a) the consolidated
and consolidating balance sheets of Parent and its Subsidiaries as at the
end of such Fiscal Quarter and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Parent 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, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the Financial Plan for the current Fiscal Year,
all in reasonable detail and certified by the chief financial officer of
Parent and Borrower that they fairly present, in all material respects,
the financial
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condition of Parent and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a narrative report describing the operations of
Parent and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter;
(iii) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating balance sheets of Parent and its Subsidiaries as at the end
of such Fiscal Year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Parent and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year
and the corresponding figures from the Financial Plan for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Parent and Borrower that they
fairly present, in all material respects, the financial condition of
Parent and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Parent and its Subsidiaries
in the form prepared for presentation to senior management for such Fiscal
Year, and (c) in the case of such consolidated financial statements, a
report thereon of Deloitte & Touche LLP or other independent certified
public accountants of recognized national standing selected by Parent and
satisfactory to Administrative Agent, which report shall be unqualified,
shall express no doubts about the ability of Parent and its Subsidiaries
to continue as a going concern, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Parent and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(iv) Officers' and Compliance Certificates: together with each
delivery of financial statements of Parent and its Subsidiaries pursuant
to subdivisions (i), (ii) and (iii) above, (a) an Officers' Certificate of
Parent and Borrower stating that the signers have reviewed the terms of
this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Parent and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officers' Certificate, of any condition or event that constitutes
an Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action each of Parent and Borrower has taken,
is taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at
the end of the
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applicable accounting periods with the restrictions contained in Section
7, in each case to the extent compliance with such restrictions is
required to be tested at the end of the applicable accounting period;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Parent and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1
will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions
had no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, consolidated financial statements of Parent and its
Subsidiaries for (y) the current Fiscal Year to the effective date of such
change and (z) the two full Fiscal Years immediately preceding the Fiscal
Year in which such change is made, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, a written statement of the chief accounting officer or chief
financial officer of Parent and Borrower setting forth the differences
(including without limitation any differences that would affect any
calculations relating to the financial covenants set forth in subsection
7.6) which would have resulted if such financial statements had been
prepared without giving effect to such change;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Parent and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the relevant terms of
this Agreement and the other Loan Documents as they relate to accounting
matters and (b) stating whether, in connection with their audit
examination, anything came to their attention that caused them to believe
that Parent of Borrower failed to comply with the terms, covenants,
provisions or conditions of this Agreement insofar as they relate to
financial and accounting matters, although their audit was not directed
primarily toward obtaining knowledge of such noncompliance; provided that
such accountants shall not be liable by reason of any failure to obtain
knowledge of any failure to comply that would not be disclosed in the
course of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Parent or Borrower by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Parent and its Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted
by such accountants to management in connection with their annual audit;
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(viii) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Parent to its
security holders or by any Subsidiary of Parent to its security holders
other than Parent or another Subsidiary of Parent, (b) all regular and
periodic reports and all registration statements (other than on Form S-8
or a similar form) and prospectuses, if any, filed by Parent or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally
by Parent or any of its Subsidiaries to the public concerning material
developments in the business of Parent or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon, and in any event two
days after, any officer of Parent or Borrower obtaining knowledge (a) of
any condition or event that constitutes an Event of Default or Potential
Event of Default, or becoming aware that any Lender has given any notice
(other than to Administrative Agent) or taken any other action with
respect to a claimed Event of Default or Potential Event of Default, (b)
that any Person has given any notice to Parent or any of its Subsidiaries
or taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 8.2, (c) of any condition
or event that would be required to be disclosed in a current report filed
by Parent or Borrower with the Securities and Exchange Commission on Form
8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof)
if Parent or Borrower were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period
of existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition,
and what action each of Parent and Borrower has taken, is taking and
proposes to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon, and in any event
within two days after, any officer of Parent or Borrower obtaining
knowledge of (X) the institution of any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Parent or any of its Subsidiaries or any
property of Parent or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by Parent or Borrower
to Lenders or (Y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
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written notice thereof together with such other information as may be
reasonably available to Parent or Borrower to enable Lenders and their
counsel to evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action Parent, any of its Subsidiaries or any of
their respective ERISA Affiliates has taken, is taking or proposes to take
with respect thereto and, when known, any action taken or threatened by
the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto, and, on the date any records, documents or other
information must be furnished to the PBGC with respect to any Pension Plan
pursuant to Section 4010 of ERISA, a copy of such records, documents and
information;
(xii) ERISA Notices: promptly and in any event within two Business
Days after receipt thereof by Parent or any ERISA Affiliate, copies of
each notice from the PBGC stating its intention to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan;
promptly upon receipt thereof by Parent or any ERISA Affiliate, a copy of
the annual actuarial valuation report for each Plan the funded current
liability percentage (as defined in Section 302(d)(8) of ERISA) of which
is less than 90% or the unfunded current liability of which exceeds
$250,000; promptly and in any event within five Business Days after
receipt thereof by Parent or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, copies of each notice concerning (1) the imposition of
Withdrawal Liability by any such Multi-employer Plan, (2) the
reorganization or termination, within the meaning of Title IV of ERISA, of
any such Multiemployer Plan or (3) the amount of liability incurred, or
that may be incurred, by Parent or any ERISA Affiliate in connection with
any event described in clause (1) or (2);
(xiii) Financial Plans: as soon as practicable and in any event no
later than 45 days after the beginning of each Fiscal Year, a consolidated
and consolidating plan and financial forecast for such Fiscal Year and the
next two Fiscal Years thereafter (the "Financial Plan" for such Fiscal
Years), including without limitation (a) forecasted consolidated and
consolidating balance sheets and forecasted consolidated and consolidating
statements of income and cash flows of Parent and its Subsidiaries for
each such Fiscal Year, together with pro forma Compliance Certificates for
each such Fiscal Year and an explanation of the assumptions on which such
forecasts are based, (b) forecasted consolidated and consolidating
statements of income and cash flows of Parent and its Subsidiaries for
each month of the first such Fiscal Year, together with an explanation of
the assumptions on which such forecasts are based, (c) the amount of
forecasted unallocated overhead for each such Fiscal Year, and (d) such
other information and projections as any Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Parent and its Subsidiaries and all
material insurance coverage planned to be maintained by Parent and its
Subsidiaries in the immediately succeeding Fiscal Year;
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(xv) Board of Directors: with reasonable promptness, written notice
of any change in the Board of Directors of Parent;
(xvi) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Parent, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Parent and
(b) all of the data required to be set forth in Schedule 5.1 annexed
hereto with respect to all Subsidiaries of Parent (it being understood
that such written notice shall be deemed to supplement Schedule 5.1
annexed hereto for all purposes of this Agreement;
(xvii) UCC Search Report: As promptly as practicable after the date
of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.1I(iv) or 6.8A, copies
of completed UCC searches evidencing the proper filing, recording and
indexing of all such UCC financing statement and listing all other
effective financing statements that name such Loan Party as debtor,
together with copies of all such other financing statements not previously
delivered to Administrative Agent by or on behalf of Parent or such Loan
Party;
(xviii) Borrowing Base Certificate: (a) within fifteen days after
the last day of any fiscal month and, in addition, as often as Parent may
elect, a Borrowing Base Certificate demonstrating the Borrowing Base as of
the last day of such fiscal month and certified by the chief financial
officer of Borrower and (b) upon written reasonable request of
Administrative Agent or at the option of Borrower, a Borrowing Base
Certificate certified by the chief financial officer or controller of
Borrower and calculated as of the date requested by Administrative Agent
in such request or selected by Borrower, as the case may be;
(xix) Creditor Reports: promptly after the furnishing thereof,
copies of any statement or report furnished to any other holder of the
Securities of Parent or of any of its Subsidiaries pursuant to the terms
of any indenture, loan or credit or similar agreement and not otherwise
required to be furnished to the Lenders pursuant to any other clause of
this subsection 6.1;
(xx) Agreement Notices: promptly upon receipt thereof, copies of all
notices, requests and other documents received by Parent or any of its
Subsidiaries under or pursuant to any Related Agreement or any notice of a
breach, default or termination of a Material Contract or indenture, loan
or credit or similar agreement and, from time to time upon request by
Administrative Agent, such information and reports regarding the Related
Documents and the Material Contracts as Administrative Agent may
reasonably request;
(xxi) Revenue Agent Reports: within 10 days after receipt, copies of
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the federal income tax
liability of the affiliated group (within the meaning
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of Section 1504(a)(1) of the Internal Revenue Code) of which Parent or
Borrower is a member aggregating $500,000 or more;
(xxii) Environmental Conditions: promptly after the assertion or
occurrence thereof, notice of any Environmental Claim against or of any
noncompliance by Parent or any of its Subsidiaries with any Environmental
Law that could reasonably be expected to have a Material Adverse Effect;
and
(xxiii) Other Information: with reasonable promptness, such other
information and data with respect to Parent or any of its Subsidiaries
as from time to time may be reasonably requested by any Lender.
6.2 Corporate Existence, etc.
Parent will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect its corporate existence and all
rights, permits, licenses, approvals, privileges and franchises material to its
business; provided, however that neither Parent nor any of its Subsidiaries
shall be required to preserve any such right, permit, license, approval,
privilege or franchise if the Board of Directors of Parent or such Subsidiary
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of Parent or such Subsidiary, as the case may be, and
that the loss thereof is not disadvantageous in any material respect to Parent,
such Subsidiary or Lenders; provided further, that Parent and its Subsidiaries
may consummate any merger of consolidation permitted under subsection 7.7.
6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Parent will, and will cause each of its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, so long as (1) such reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor and (2) in the case of a charge or claim
which has or may become a Lien against any of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such charge or claim.
B. Parent will not, nor will it permit any of its Subsidiaries to, file or
consent to the filing of any consolidated income tax return with any Person
(other than Parent or any of its Subsidiaries).
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6.4 Maintenance of Properties; Insurance; Application of Net Insurance/
Condemnation Proceeds.
A. Maintenance of Properties. Parent will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Parent and its Subsidiaries (including,
without limitation, all Intellectual Property) and from time to time will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
B. Insurance. Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Borrower and its Subsidiaries in accordance
with past practices, with such deductibles, covering such risks and otherwise on
such terms and conditions as shall be customary for corporations similarly
situated in the industry. Without limiting the generality of the foregoing,
Borrower will maintain or cause to be maintained (i) flood insurance with
respect to each Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, in each case in compliance
with any applicable regulations of the Board of Governors of the Federal Reserve
System, and (ii) replacement value casualty insurance on the Collateral under
such policies of insurance, and (iii) key man life insurance covering, Richard
Griffith and, within 60 days after the Closing Date key man life insurance
covering Robert Gioia and David Cohen, in each case with such insurance
companies, in such amounts, with such deductibles, and covering such terms and
risks as are at all times satisfactory to Administrative Agent in its
commercially reasonable judgment. Each such policy of insurance shall (a) name
Administrative Agent for the benefit of Lenders as an additional insured
thereunder as its interests may appear and (b) in the case of each business
interruption and casualty insurance policy, contain a loss payable clause or
endorsement, satisfactory in form and substance to Administrative Agent, that
names Administrative Agent for the benefit of Lenders as the loss payee
thereunder for any covered loss in excess of $50,000 and provides for at least
30 days prior written notice to Administrative Agent of any modification or
cancellation of such policy.
C. Application of Net Insurance/Condemnation Proceeds.
(i) Business Interruption Insurance. Upon receipt by Borrower or any
of its Subsidiaries of any business interruption insurance proceeds
constituting Net Insurance/Condemnation Proceeds, (a) so long as no Event
of Default or Potential Event of Default shall have occurred and be
continuing, Borrower or such Subsidiary may retain and apply such Net
Insurance/Condemnation Proceeds for working capital purposes, and (b) if
an Event of Default or Potential Event of Default shall have occurred and
be continuing, Borrower shall apply an amount equal to such Net
Insurance/Condemnation Proceeds to prepay the Loans as provided in
subsection 2.4B(iii)(b);
(ii) Casualty Insurance/Condemnation Proceeds. Upon receipt by
Borrower or any of its Subsidiaries of any Net Insurance/Condemnation
Proceeds other than from
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business interruption insurance, (a) so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing, Borrower
shall, or shall cause one or more of its Subsidiaries to, promptly and
diligently apply such Net Insurance/Condemnation Proceeds to pay or
reimburse the costs of repairing, restoring or replacing the assets in
respect of which such Net Insurance/Condemnation Proceeds were received
or, to the extent not so applied, to prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) as provided in subsection
2.4B(iii)(b), and (b) if an Event of Default or Potential Event of Default
shall have occurred and be continuing, Borrower shall apply an amount
equal to such Net Insurance/Condemnation Proceeds to prepay the Loans as
provided in subsection 2.4B(iii)(b).
(iii) Net Insurance/Condemnation Proceeds Received by Administrative
Agent. Upon receipt by Administrative Agent of any Net
Insurance/Condemnation Proceeds as loss payee, (a) if the aggregate amount
of Net Insurance/Condemnation Proceeds received (and reasonably expected
to be received) by Administrative Agent in respect of any covered loss
exceeds $1,500,000, or if and to the extent Borrower would have been
required to apply such Net Insurance/Condemnation Proceeds (if it had
received them directly) to prepay the Loans and/or reduce the Revolving
Loan Commitments, Administrative Agent shall, and Borrower hereby
authorizes Administrative Agent to, apply such Net Insurance/Condemnation
Proceeds to prepay the Loans as provided in subsection 2.4B(iii)(b), and
(b) to the extent the foregoing clause (a) does not apply and (1) the
aggregate amount of such Net Insurance/Condemnation Proceeds received (and
reasonably expected to be received) by Administrative Agent in respect of
any covered loss does not exceed $500,000, Administrative Agent shall
deliver such Net Insurance/Condemnation Proceeds to Borrower, and Borrower
shall, or shall cause one or more of its Subsidiaries to, promptly apply
such Net Insurance/Condemnation Proceeds to the costs of repairing,
restoring, or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received, and (2) if the aggregate
amount of Net Insurance/Condemnation Proceeds received (and reasonably
expected to be received) by Administrative Agent in respect of any covered
loss exceeds $500,000, Administrative Agent shall hold such Net
Insurance/Condemnation Proceeds pursuant to the terms of the Collateral
Account Agreement and, so long as Borrower or any of its Subsidiaries
proceeds diligently to repair, restore or replace the assets of Borrower
or such Subsidiary in respect of which such Net Insur-ance/Condemnation
Proceeds were received, Administrative Agent shall from time to time
disburse to Borrower or such Subsidiary from the Collateral Account, to
the extent of any such Net Insurance/Condemnation Proceeds remaining
therein in respect of the applicable covered loss, amounts necessary to
pay the cost of such repair, restoration or replacement after the receipt
by Administrative Agent of invoices or other documentation reasonably
satisfactory to Administrative Agent relating to the amount of costs so
incurred and the work performed (including, if required by Administrative
Agent, lien releases and architects' certificates); provided, however that
if at any time Administrative Agent reasonably determines (A) that
Borrower or such Subsidiary is not proceeding diligently with such repair,
restoration or replacement or (B) that such repair, restoration or
replacement cannot be completed with the Net Insurance/Condemnation
Proceeds then held by Administrative Agent for such purpose,
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together with funds otherwise available to Borrower for such purpose,
Administrative Agent shall, and Borrower hereby authorizes Administrative
Agent to, apply such Net Insurance/ Condemnation Proceeds to prepay the
Loans as provided in subsection 2.4B(iii)(b).
6.5 Inspection Rights; Audits of Inventory and Accounts Receivable; Lender
Meeting.
A. Inspection Rights. Parent shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of Parent or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting books and records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants
(provided that Parent may, if it so chooses, be present at or participate in any
such discussion), all upon reasonable notice and at such reasonable times during
normal business hours and as often as may reasonably be requested.
B. Audits of Inventory and Accounts Receivable. Parent shall, and shall
cause each of its Subsidiaries to, permit any authorized representatives
designated by Administrative Agent to conduct one audit of all Inventory and
Accounts Receivable of Loan Parties during each twelve-month period after the
Closing Date and such additional audits as Administrative Agent or Requisite
Lenders may reasonably request, each such audit to be substantially similar in
scope and substance to the audit of Inventory and accounts receivable referred
to in subsection 6.17, all upon reasonable notice and at such reasonable times
during normal business hours as may reasonably be requested.
C. Lender Meeting. Borrower will, upon the request of Administrative Agent
or Requisite Lenders, participate in a meeting of Administrative Agent and
Lenders once during each Fiscal Year to be held at Borrower's corporate offices
(or at such other location as may be agreed to by Borrower and Administrative
Agent) at such time as may be agreed to by Borrower and Administrative Agent.
6.6 Compliance with Laws, etc.
Parent shall comply, and shall cause each of its Subsidiaries and all
other Persons on or occupying any Facilities to comply, in all material
respects, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all ERISA and Environmental
Laws).
6.7 Environmental Review and Investigation, Disclosure, Etc.; Parent's and
Borrower's Actions Regarding Hazardous Materials Activities, Environmental
Claims and Violations of Environmental Laws.
A. Environmental Review and Investigation. Parent and Borrower each agrees
that Administrative Agent may, from time to time and in its reasonable
discretion, (i) retain, at Borrower's expense, an independent professional
consultant to review any environmental audits,
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investigations, analyses and reports relating to Hazardous Materials prepared by
or for Borrower and (ii) in the event (a) Administrative Agent reasonably
believes that Parent or Borrower has breached any representation, warranty or
covenant contained in subsection 5.6, 5.13, 6.6 or 6.7 or that there has been a
material violation of Environmental Laws at any Facility or by Parent or any of
its Subsidiaries at any other location or (b) an Event of Default has occurred
and is continuing, conduct its own investigation of any Facility. For purposes
of conducting such a review and/or investigation, each of Parent and Borrower
hereby grants to Administrative Agent and its agents, employees, consultants and
contractors the right to enter into or onto any Facilities currently owned,
leased, operated or used by Parent or any of its Subsidiaries and to perform
such tests on such property (including taking samples of soil, groundwater and
suspected asbestos-containing materials) as are reasonably necessary in
connection therewith. Any such investigation of any Facility shall be conducted,
unless otherwise agreed to by Borrower and Administrative Agent, during normal
business hours and, to the extent reasonably practicable, shall be conducted so
as not to interfere with the ongoing operations at such Facility or to cause any
damage or loss to any property at such Facility. Parent, Borrower and
Administrative Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Administrative Agent pursuant to this
subsection 6.7A will be obtained and shall be used by Administrative Agent and
Lenders for the purposes of Lenders' internal credit decisions, to monitor and
police the Loans and to protect Lenders' security interests, if any, created by
the Loan Documents. Administrative Agent agrees to deliver a copy of any such
report to Borrower with the understanding that each of Parent and Borrower
acknowledges and agrees that neither Administrative Agent nor any Lender makes
any representation or warranty with respect to such report and by delivering
such report to Borrower, neither Administrative Agent nor any Lender is
requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
B. Environmental Disclosure. Borrower will deliver to Administrative Agent
and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Parent or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility which,
individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect or with respect to any Environmental Claims
which, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly
upon the occurrence thereof, written notice describing in reasonable
detail (a) any Release required to be reported to any federal, state or
local governmental or regulatory agency under any applicable Environmental
Laws, (b) any remedial action taken by Borrower or any other Person in
response to (1) any Hazardous Materials Activities the existence of which
has a reasonable possibility of resulting in one or more Environmental
Claims having, individually or in the aggregate, a Material Adverse
Effect, or (2) any Environmental Claims that, individually or in the
aggregate, have a reasonable possibility of resulting in
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a Material Adverse Effect, and (c) Parent's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any
Facility that could cause such Facility or any part thereof to be subject
to any material restrictions on the ownership, occupancy, transferability
or use thereof under any Environmental Laws.
(iii) Written Communications Regarding Environmental Claims,
Releases, Etc. As soon as practicable following the sending or receipt
thereof by Parent or any of its Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims that,
individually or in the aggregate, have a reasonable possibility of giving
rise to a Material Adverse Effect, (b) any Release required to be reported
to any federal, state or local governmental or regulatory agency, and (c)
any request for information from any governmental agency that suggests
such agency is investigating whether Parent or any of its Subsidiaries may
be potentially responsible for any Hazardous Materials Activity.
(iv) Notice of Certain Proposed Actions Having Environmental Impact.
Prompt written notice describing in reasonable detail (a) any proposed
acquisition of stock, assets, or property by Parent or any of its
Subsidiaries that could reasonably be expected to (1) expose Parent or any
of its Subsidiaries to, or result in, Environmental Claims that could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (2) affect the ability of Parent or any of its
Subsidiaries to maintain in full force and effect all material
Governmental Authorizations required under any Environmental Laws for
their respective operations and (b) any proposed action to be taken by
Parent or any of its Subsidiaries to modify current operations in a manner
that could reasonably be expected to subject Parent or any of its
Subsidiaries to any additional obligations or requirements under any
Environmental Laws that could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably requested
by Administrative Agent in relation to any matters disclosed pursuant to
this subsection 6.7.
C. Parent's and Borrower's Actions Regarding Hazardous Materials
Activities, Environmental Claims and Violations of Environmental Laws.
(i) Remedial Actions Relating to Hazardous Materials Activities.
Parent shall promptly undertake, and shall cause each of its Subsidiaries
promptly to undertake, any and all investigations, studies, sampling,
testing, abatement, cleanup, removal, remediation or other response
actions necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity on, under or about any Facility that is in violation of
any Environmental Laws or that presents a material risk of giving rise to
an Environmental Claim. In the event Parent or any of its Subsidiaries
undertakes any such action with respect to any Hazardous Materials, Parent
or such Subsidiary shall conduct and complete such action in compliance
with all applicable Environmental Laws and in accordance with the
policies, orders and directives of all federal, state and local
governmental authorities
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except when, and only to the extent that, Parent's or such Subsidiary's
liability with respect to such Hazardous Materials Activity is being
contested in good faith by Parent or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations of
Environmental Laws. Parent shall promptly take, and shall cause each of
its Subsidiaries promptly to take, any and all actions necessary to (i)
cure any violation of applicable Environmental Laws by Parent or its
Subsidiaries and (ii) make an appropriate response to any Environmental
Claim against Parent or any of its Subsidiaries and discharge any
obligations it may have to any Person thereunder.
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries.
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Subsidiary of Borrower after
the date hereof, Borrower will promptly notify Administrative Agent of that fact
and cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and a Subsidiary Pledge Agreement, a
Subsidiary Security Agreement, a Subsidiary Trademark Security Agreement and a
Subsidiary Patent Security Agreement and to take all such further actions and
execute all such further documents and instruments (including actions, documents
and instruments comparable to those described in subsection 4.1I) as may be
necessary or, in the opinion of Administrative Agent, desirable to create in
favor of Administrative Agent, for the benefit of Lenders, a valid and perfected
First Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Borrower shall
deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority of
each of such jurisdictions, each to be dated a recent date prior to their
delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the fact that the attached resolutions of the Board of Directors of such
Subsidiary approving and authorizing the execution, delivery and performance of
such Loan Documents are in full force and effect and have not been modified or
amended and (b) the incumbency and signatures of the officers of such Subsidiary
executing such Loan Documents, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Administrative Agent and its
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Loan Documents, (c) the enforceability of such Loan Documents against such
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Subsidiary, (d) such other matters (including matters relating to the creation
and perfection of Liens in any Collateral pursuant to such Loan Documents) as
Administrative Agent may reasonably request, all of the foregoing to be
satisfactory in form and substance to Administrative Agent and its counsel.
6.9 Conforming Leasehold Interests; Matters Relating to Additional Real
Property Collateral.
A. Conforming Leasehold Interests. If Borrower or any of its Subsidiaries
acquires any Leasehold Property, Borrower shall, or shall cause such Subsidiary
to, use its best efforts (without requiring Borrower or such Subsidiary to
relinquish any material rights or incur any material obligations or to expend
more than a nominal amount of money over and above the reimbursement, if
required, of the landlord's out-of-pocket costs, including attorneys fees) to
cause such Leasehold Property to be a Conforming Leasehold Interest.
B. Additional Mortgages, Etc. From and after the Closing Date, in the
event that (i) Borrower or any Subsidiary Guarantor acquires any fee interest in
real property or any Material Leasehold Property, or Administrative Agent
determines in its sole discretion to place a Mortgage on any Real Property Asset
owned on the Closing Date by Parent or any of its Subsidiaries if a Mortgage was
not placed in any such Real Property Asset as of the Closing Date, or (ii) at
the time any Person becomes a Subsidiary Guarantor, such Person owns or holds
any fee interest in real property or any Material Leasehold Property, in either
case excluding any such Real Property Asset the encumbrancing of which requires
the consent of any applicable lessor or (in the case of clause (ii) above)
then-existing senior lienholder, where Borrower and its Subsidiaries are unable
to obtain such lessor's or senior lienholder's consent (any such non-excluded
Real Property Asset described in the foregoing clause (i) or (ii) being an
"Additional Mortgaged Property"), Borrower or such Subsidiary Guarantor shall
deliver to Administrative Agent, as soon as practicable after such Person
acquires such Additional Mortgaged Property the following:
(i) Additional Mortgage. A fully executed and notarized Mortgage (an
"Additional Mortgage"), in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the interest of such
Loan Party in such Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to such
Loan Party, in form and substance satisfactory to Administrative Agent and
its counsel, as to the due authorization, execution and delivery by such
Loan Party of such Additional Mortgage and such other matters as
Administrative Agent may reasonably request, and (b) if required by
Administrative Agent, an opinion of counsel (which counsel shall be
reasonably satisfactory to Administrative Agent) in the state in which
such Additional Mortgaged Property is located with respect to the
enforceability of the form of Additional Mortgage to be recorded in such
state and such other matters (including without limitation any matters
governed by the laws of such state regarding personal property security
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interests in respect of any Collateral) as Administrative Agent may
reasonably request, in each case in form and substance reasonably
satisfactory to Administrative Agent;
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest. In
the case of any Additional Mortgaged Property consisting of a Leasehold
Property, (a) a Landlord Consent and Estoppel and (b) evidence that such
Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent, an
ALTA mortgagee title insurance policy or an unconditional commitment
therefor (an "Additional Mortgage Policy") issued by the Title Company
with respect to such Additional Mortgaged Property, in an amount
satisfactory to Administrative Agent, insuring fee simple title to, or a
valid leasehold interest in, such Additional Mortgaged Property vested in
such Loan Party and assuring Administrative Agent that such Additional
Mortgage creates a valid and enforceable First Priority mortgage Lien on
such Additional Mortgaged Property, subject only to a standard survey
exception, which Additional Mortgage Policy (1) shall include an
endorsement for mechanics' liens, for future advances under this Agreement
and for any other matters reasonably requested by Administrative Agent and
(2) shall provide for affirmative insurance and such reinsurance as
Administrative Agent may reasonably request, all of the foregoing in form
and substance reasonably satisfactory to Administrative Agent; and (b)
evidence satisfactory to Administrative Agent that such Loan Party
has (i) delivered to the Title Company all certificates and affidavits
required by the Title Company in connection with the issuance of the
Additional Mortgage Policy and (ii) paid to the Title Company or to the
appropriate governmental authorities all expenses and premiums of the
Title Company in connection with the issuance of the Additional Mortgage
Policy and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Additional
Mortgage in the appropriate real estate records;
(v) Title Report. If no Additional Mortgage Policy is required with
respect to such Additional Mortgaged Property, a title report issued by
the Title Company with respect thereto, dated not more than 30 days prior
to the date such Additional Mortgage is to be recorded and satisfactory in
form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all
recorded documents listed as exceptions to title or otherwise referred to
in the Additional Mortgage Policy or title report delivered pursuant to
clause (v) or (vi) above;
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property
is a Flood Hazard Property and (2) if so, whether the community in which
such Flood Hazard Property is located is participating in the National
Flood Insurance Program, (b) if such Additional Mortgaged Property is a
Flood Hazard Property, such Loan Party's written acknowledgement of
receipt of written notification from Administrative Agent (1) that such
Additional Mortgaged Property is a
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Flood Hazard Property and (2) as to whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, and (c) in the event such Additional Mortgaged Property
is a Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, evidence that
Borrower has obtained flood insurance in respect of such Flood Hazard
Property to the extent required under the applicable regulations of the
Board of Governors of the Federal Reserve System; and
(viii) Environmental Audit. If required by Administrative Agent,
reports and other information, in form, scope and substance satisfactory
to Administrative Agent and prepared by environmental consultants
satisfactory to Administrative Agent, concerning any environmental hazards
or liabilities to which Parent or any of its Subsidiaries may be subject
with respect to such Additional Mortgaged Property.
C. Real Estate Appraisals. Parent shall, and shall cause each of its
Subsidiaries to, permit an independent real estate appraiser satisfactory to
Administrative Agent, upon reasonable notice, to visit and inspect any
Additional Mortgaged Property for the purpose of preparing an appraisal of such
Additional Mortgaged Property satisfying the requirements of any applicable laws
and regulations (in each case to the extent required under such laws and
regulations as determined by Administrative Agent in its discretion).
6.10 Interest Rate Protection.
Unless and until the Permitted Securities Issuance Prepayment Date, at all
times after the date which is 60 days after the Closing Date, Borrower shall
maintain in effect one or more Interest Rate Agreements with respect to the
Loans, in an aggregate notional principal amount of not less than 50% of the
aggregate principal amount of the Term Loans then outstanding, which Interest
Rate Agreements shall have the effect of establishing a maximum interest rate of
not more than 3.00% above the Adjusted Eurodollar Rate at the time such Interest
Rate Agreement is entered into with respect to such notional principal amount,
each such Interest Rate Agreement to be in form and substance satisfactory to
Administrative Agent and with a term of not less than three years.
6.11 Deposit Accounts.
At any time there are Revolving Loans outstanding, Parent shall not permit
the aggregate amount on deposit in all Deposit Accounts of Parent and its
Subsidiaries (other than Deposit Accounts maintained with Administrative Agent)
at any time to exceed $3,000,000.
6.12 Determination of Borrowing Base.
A. Borrower shall deliver a Borrowing Base Certificate to Administrative
Agent sufficiently in advance of the Closing Date to permit Administrative Agent
to determine the Borrowing Base to be in effect on the Closing Date and
thereafter, shall deliver Borrowing Base Certificates on a monthly basis
pursuant to subsection 6.1(xviii); each such Borrowing Base
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Certificate to be dated as of the last day of the applicable reporting period.
Promptly following its receipt of each such Borrowing Base Certificate,
Administrative Agent shall determine, or, as the case may be, redetermine the
Borrowing Base in accordance with the definition thereof, using the information
contained in such Borrowing Base Certificate, and shall notify Borrower of the
Borrowing Base so determined or so redetermined. Each such Borrowing Base so
determined or redetermined by Administrative Agent shall remain in effect until
notice of a redetermined Borrowing Base shall have been given by Administrative
Agent in accordance with the provisions of this subsection 6.12.
B. Each of the Accounts Receivable shown on each Borrowing Base
Certificate shall conform to the requirements set forth in the definition of
Eligible Receivables.
C. All Inventory shown on each Borrowing Base Certificate shall conform to
the requirements of the definition of Eligible Inventory, shall be the Operating
Subsidiaries' exclusive property and shall be valued at the lower of cost or
market value.
D. Borrower agrees to furnish to Administrative Agent any information
which it may reasonably request regarding the determination and calculation of
the Borrowing Base including, without limitation, correct and complete copies of
any material invoices, underlying agreements, instruments or other documents and
the identity of all obligors.
E. The Administrative Agent may, at any time that it in good faith
believes that the Total Utilization of the Revolving Loan Commitments exceeds
the Borrowing Base reflected in the most recent Borrowing Base Certificate
delivered by Borrower, require Borrower to, and Borrower may at any time elect
to, submit an updated Borrowing Base Certificate and/or reevaluate the value of
any item included in the Borrowing Base in accordance with the definition of
such item as set forth in subsection 1.1, including, without limitation, the
creditworthiness of any obligor relating to any item included in the Borrowing
Base. The Administrative Agent may determine, as a result of any such
reevaluation, to reduce the amount which such item contributes to the Borrowing
Base or exclude such item from the Borrowing Base, which determination shall,
absent manifest error, be final, binding and conclusive upon all parties hereto.
If the Administrative Agent determines that the Borrowing Base shall be reduced
pursuant to this subsection 6.12, the Administrative Agent shall give written
notice to Borrower and Lenders which states the amount of such reduction and the
nature of the action taken by the Administrative Agent, which reduction shall be
effective on the third Business Day following receipt of such notice by
Borrower.
F. Borrower shall promptly notify the Administrative Agent in writing of
any material information which Borrower receives or otherwise gain knowledge of
relating to any item included in the Borrowing Base which materially and
adversely affects the value of such item or would cause such item to be excluded
in whole or in part from the Borrowing Base.
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6.13 Keeping of Books.
Parent shall keep, and cause each of its Subsidiaries to keep, proper
books of record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of Parent and each such
Subsidiary in accordance with GAAP in effect from time to time.
6.14 Compliance with Terms of Leaseholds.
Borrower shall make all payments and otherwise perform all obligations in
respect of all leases of real property to which Borrower or any of its
Subsidiaries is a party, keep such leases in full force and effect and not allow
such leases to lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, notify Administrative Agent of any default by any party
with respect to such leases and cooperate with Administrative Agent in all
respects to cure any such default, and cause each of its Subsidiaries to do so
except, in any case, where the failure to do so, either individually or in the
aggregate, could not be reasonably likely to have a Material Adverse Effect.
6.15 Performance of Related Agreements.
Borrower shall perform and observe all of the material terms and
provisions of each Related Agreement to be performed or observed by it, maintain
each such Related Agreement in full force and effect, enforce such Related
Agreement in accordance with its terms, take all such action to such end as may
be from time to time reasonably requested by Requisite Lenders and, upon request
of Requisite Lenders, make to each other party to each such Related Agreement
such demands and requests for information and reports or for action as Borrower
is entitled to make under such Related Agreement, and cause each of its
Subsidiaries to do so.
6.16 Performance of Material Contracts.
Borrower shall perform and observe all the material terms and provisions
of each Material Contract to be performed or observed by it, maintain each such
Material Contract in full force and effect, enforce each such Material Contract
in accordance with its terms, take all such action to such end as may be from
time to time reasonably requested by Requisite Lenders and, upon request of
Requisite Lenders, make to each other party to each such Material Contract such
demands and requests for information and reports or for action as Borrower is
entitled to make under such Material Contract, and cause each of its
Subsidiaries to do so except, in any case, where the failure to do so, either
individually or in the aggregate, could not be reasonably likely to have a
Material Adverse Effect.
6.17 Audit of Inventory and Accounts Receivable.
Borrower shall assist Administrative Agent (or an independent auditor
satisfactory to Administrative Agent) in completing audits of the Inventory,
accounts receivable and payables of Borrower and its Subsidiaries during the
30-day period after the Closing Date, which audits
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will be provided to each Lender. Borrower will negotiate in good faith with
Administrative Agent (and Administrative Agent shall consult with Lenders with
respect thereto) to revise the definitions of "Eligible Accounts Receivable" and
"Eligible Inventory" to reflect the results of such audits.
Section 7. NEGATIVE COVENANTS
Parent and Borrower, jointly and severally, covenant and agree that, so
long as any of the Commitments hereunder shall remain in effect and until
payment in full of all of the Loans and other Obligations and the cancellation
or expiration of all Letters of Credit and the termination of the IRB
Reimbursement Agreement, unless Requisite Lenders shall otherwise give prior
written consent, each of Parent and Borrower shall perform, and shall cause each
of its Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume, guaranty, or suffer to exist or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Borrower may become and remain liable with respect to the
Obligations;
(ii) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases in an aggregate
principal amount not to exceed $2,000,000;
(iv) Borrower may become and remain liable with respect to
Indebtedness to any of its Subsidiaries, and any Subsidiary of Borrower
may become and remain liable with respect to Indebtedness to Borrower or
any other Subsidiary of Borrower; provided that (a) all such intercompany
Indebtedness shall be evidenced by promissory notes and pledged to
Administrative Agent pursuant to the Borrower Pledge Agreement or the
applicable Subsidiary Pledge Agreement, as the case may be, (b) all such
intercompany Indebtedness owed by Borrower to any of its Subsidiaries
shall be subordinated on terms acceptable to Requisite Lenders in right of
payment to the payment in full of the Obligations pursuant to the terms of
the applicable promissory notes or an intercompany subordination
agreement, and (c) any payment by any Subsidiary of Borrower under any
guaranty of the Obligations shall result in a pro tanto reduction of the
amount of any intercompany Indebtedness owed by such Subsidiary to
Borrower or to any of its Subsidiaries for whose benefit such payment is
made;
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(v) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness existing on the date hereof and described in
Schedule 7.1 annexed hereto;
(vi) Borrower and its Subsidiaries may remain liable with respect to
the IRB Debt pursuant to the IRB Trust Indenture in an aggregate principal
amount not to exceed $4,400,000;
(vii) Borrower may become and remain liable with respect to
Indebtedness incurred pursuant to any Permitted Securities Issuance;
provided that (1) Administrative Agent shall have received a fully
executed or conformed copy of each material agreement entered into in
connection therewith, and each such agreement shall be in full force and
effect, (2) that all Net Securities Proceeds from the issuance of any
Permitted Securities Issuance shall be applied in such manner as set forth
in subsection 2.4B(iii)(e);
(viii) after the earlier of the Permitted Securities Issuance
Prepayment Date and six months following the Closing Date, Borrower and
its Subsidiaries may become and remain liable with respect to other
unsecured Indebtedness in an aggregate principal amount not to exceed
$2,000,000 at any time outstanding;
(ix) QF Acquisition may become and remain liable with respect to the
PIDA Loan and PIDC Loan in an aggregate principal amount not to exceed, in
each case, $1,750,000 at any time outstanding;
(x) Borrower and its Subsidiaries may become and remain liable with
respect to secured purchase money or other similar Indebtedness in an
aggregate amount not to exceed $2,000,000 at any time; provided that at
least 80% of the purchase price of such assets was provided by the
proceeds of such purchase money Indebtedness;
(xi) Borrower may become and remain liable with respect to
Indebtedness evidenced by the Bridge Financing Documents and the Seller
Notes; and
(xii) Borrower and its Subsidiaries may become and remain liable
after the Permitted Securities Issuance Prepayment Date with respect to
Additional Subordinated Notes in an aggregate principal amount not to
exceed $10,000,000.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Parent shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Parent or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or sign or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, or sign or permit to exist any security
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agreement authorizing any secured party thereunder to file such financing
statement or similar notice, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens existing on the date hereof described in Schedule 7.2
annexed hereto; and
(iv) purchase money Liens upon or in real property or equipment
acquired or held by Borrower or any of its Subsidiaries in the ordinary
course of business to secure the purchase price of such property or
equipment or to secure Indebtedness incurred solely for the purpose of
financing the acquisition, construction or improvement of any such
property or equipment to be subject to such Liens, or Liens existing on
any such property or equipment at the time of acquisition (other than any
such Liens created in contemplation of such acquisition that do not secure
the purchase price), or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount; provided, however, that no such
Lien shall extend to or cover any property other than the property or
equipment being acquired, constructed or improved, and no such extension,
renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or replaced; and
provided further that the aggregate principal amount of the Indebtedness
secured by Liens permitted by this clause (iv) shall not exceed the amount
permitted under subsection 7.1(x) at any time outstanding;
(v) Liens arising in connection with Capitalized Leases permitted
under subsection 7.1(iii), provided that no such Lien shall extend to or
cover any assets other than the assets subject to such Capitalized Leases;
(vi) the replacement, extension or renewal of any Lien permitted by
clauses (i), (iii), (v) and (vii) of this subsection 7.2A upon or in the
same property theretofore subject thereto or the replacement, extension or
renewal (without increase in the amount or change in any direct or
contingent obligor) of the Indebtedness secured thereby; and
(vii) Liens arising in connection with PIDA Loans permitted under
subsection 7.1(ix), provided that such Liens shall be (1) subordinated to
all Obligations hereunder in respect of any IRB Reimbursement Advance, (2)
limited to the extent set forth in the PIDA Commitment Letter annexed
hereto as Schedule 7.2(vii), and (3) otherwise be in form and substance
reasonably satisfactory to Requisite Lenders.
B. Equitable Lien in Favor of Lenders. If Parent or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness
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<PAGE>
shall be so secured; provided that, notwithstanding the foregoing, this covenant
shall not be construed as a consent by Requisite Lenders to the creation or
assumption of any such Lien not permitted by the provisions of subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, neither Parent nor any
of its Subsidiaries shall enter into any agreement (other than the Senior
Guaranteed Note Documents, the Subordinated Note Documents or the Bridge
Financing Documents) prohibiting the creation or assumption of any Lien upon any
of its properties or assets, whether now owned or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Borrower or Other
Subsidiaries. Except as provided herein, or in any Senior Guaranteed Note
Document, Subordinated Note Document or Bridge Financing Document, Parent will
not, and will not permit any of its Subsidiaries to, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary of Borrower to (i) pay dividends or
make any other distributions on any of such Subsidiary's capital stock owned by
Borrower or any other Subsidiary of Borrower, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to Borrower or any other Subsidiary of
Borrower, (iii) make loans or advances to Borrower or any other Subsidiary of
Borrower, or (iv) transfer any of its property or assets to Borrower or any
other Subsidiary of Borrower, other than encumbrances and restrictions arising
under (i) applicable law, (ii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of Borrower or any of its
Subsidiaries, and (iii) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of Borrower or any of its
Subsidiaries.
7.3 Investments; Joint Ventures.
Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Subject to subsection 8.15, Parent and its Subsidiaries may make
and own Investments in Cash Equivalents;
(ii) Borrower and its Subsidiaries may own and make equity
Investments in any Subsidiary of Borrower;
(iii) Borrower and its Subsidiaries may make intercompany loans to
the extent permitted under subsection 7.1(iv);
(iv) Borrower and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsection 7.8;
(v) Borrower and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date and described in Schedule
7.3 annexed hereto;
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<PAGE>
(vi) Borrower may consummate the Acquisition;
(vii) Borrower and its Subsidiaries may make loans and advances to
employees in the ordinary course of the business of Borrower and its
Subsidiaries as presently conducted in an aggregate principal amount not
to exceed $500,000 at any time outstanding; provided that any such loans
shall be evidenced by a promissory note and pledged to Administrative
Agent pursuant to the Borrower Pledge Agreement or applicable Subsidiary
Pledge Agreement, as the case may be;
(viii) Borrower may make loans to employees for the purpose of
selling equity securities of Borrower to such employees in an aggregate
principal amount not to exceed $500,000 at anytime outstanding; provided
that such loans shall be evidenced by a promissory note and pledged to
Administrative Agent pursuant to the Borrower Pledge Agreement;
(ix) Borrower and its Subsidiaries may make Investments consisting
of Contingent Obligations to the extent permitted under subsection 7.4;
(x) Borrower and its Subsidiaries may make and own other Investments
to the extent permitted under subsection 7.7; and
(xi) Parent may make Investments consisting of repurchases of equity
Securities of Parent to the extent permitted under subsection 7.5.
7.4 Contingent Obligations.
Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Borrower's Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary Guaranty;
(ii) Borrower may become and remain liable with respect to
Contingent Obligations in respect of the Acquisition Letter of Credit and
the IRB Reimbursement Agreement, and Borrower and its Subsidiaries may
become and remain liable with respect to Contingent Obligations in respect
of Revolving Letters of Credit in an aggregate amount not to exceed at any
time $3,000,000;
(iii) Borrower may become and remain liable with respect to
Contingent Obligations under Hedge Agreements required under subsection
6.10;
(iv) Borrower and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred pursuant to the
Acquisition Agreement or in connection with Asset Sales or other sales of
assets;
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<PAGE>
(v) Borrower may become and remain liable with respect to Contingent
Obligations under guarantees in the ordinary course of business of the
obligations of suppliers, customers, franchisees and licensees of Borrower
and its Subsidiaries;
(vi) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations existing on the Closing Date and
described in Schedule 7.4 annexed hereto;
(vii) Subsidiary Guarantors may become and remain liable with
respect to Contingent Obligations arising under (a) guaranties of the
Senior Guaranteed Notes as set forth in the Senior Guaranteed Note
Documents, (b) subordinated guaranties of the Subordinated Notes as set
forth in the Subordinated Note Documents, (c) subordinated guaranties of
the Bridge Notes as set forth in the Bridge Financing Documents and (d)
subordinated guaranties of any Additional Subordinated Notes as set forth
in any Additional Subordinated Note Documents; and
(viii) Borrower and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations that are expressly
subordinated by their terms to the Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Borrower in respect of
all such Contingent Obligations shall at no time exceed $2,000,000.
7.5 Restricted Junior Payments.
Parent shall not, and shall not permit Borrower or any of its other
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that (i) Borrower may make
Restricted Junior Payments to make cash interest payments to the holders of the
Senior Guaranteed Notes and Subordinated Notes, in accordance with the terms of,
and only to the extent required by, the Senior Guaranteed Note Documents or the
Subordinated Note Documents, (ii) Borrower may make regularly scheduled payments
of principal and interest in respect of the Bridge Financing in accordance with
the terms of and subject to the subordination provisions contained in, the
Bridge Financing Documents, and Borrower may prepay all Indebtedness evidenced
by the Bridge Notes with Net Securities Proceeds from a Permitted Securities
Issuance, (iii) Parent may consummate the Distribution Transaction to the extent
permitted under subsection 2.4B(iii)(e); provided that in no event shall the
amount of the Distribution Transaction made in accordance with this clause
(iii), together with the amount of the liquidation preference of any Preferred
Distribution Stock issued in accordance with clause (vii) of this subsection
7.5, exceed $16,000,000; (iv) if proceeds of the PIDA Loan are actually received
by Borrower, Borrower may at any time on or prior to June 30, 1997 consummate
the Preferred Stock Redemption for an aggregate amount not to exceed the lesser
of (x) $1,225,000 and (y) the gross proceeds of the PIDA Loan plus $225,000 less
the face amount of any Letter of Credit supporting the PIDA Loan, (v) so long as
no Event of Default or Potential Event of Default shall have occurred and be
continuing or shall be caused thereby, Borrower may make Restricted Junior
Payments to Parent to enable Parent to make Restricted Junior Payments to First
Atlantic Capital, Ltd. pursuant to the terms of the Management
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Consulting Agreement in effect on the Closing Date in an aggregate amount not to
exceed $600,000 plus reasonable out of pocket expenses in any Fiscal Year,
provided that notwithstanding any Event of Default or Potential Event of
Default, fees otherwise payable under the Management Consulting Agreement may
accrue but shall not be payable until such time as such Potential Event of
Default or Event of Default is cured or is waived, at which time all such
accrued fees shall be payable, and (vi) so long as no Event of Default or
Potential Event of Default has occurred and is continuing or shall be caused
thereby, Borrower may make Restricted Junior Payments to Parent to enable Parent
to repurchase equity investments of management investors pursuant to the
Stockholders Agreement; provided that the amount of Restricted Junior Payments
pursuant to this clause (vi) shall not exceed (x) prior to the Permitted
Securities Issuance Prepayment Date, $500,000 during any Fiscal Year and (y)
after the Permitted Securities Issuance Prepayment Date, in any Fiscal Year, an
amount equal to that portion of Consolidated Excess Cash Flow for the
immediately preceding Fiscal Year not required to prepay Loans pursuant to
subsection 2.4B(iii)(f) so long as, immediately after giving effect to any such
Restricted Junior Payment, Borrower shall have not less than $5,000,000 of
availability under the Revolving Loan Commitments (giving effect to the
Borrowing Base as of the date of determination), and (vii) so long as no Event
of Default or Potential Event of Default has occurred or is continuing or shall
be caused thereby, Parent may declare and make a distribution on the Class A
(Voting and Nonvoting) Common Stock of the Preferred Distribution Stock;
provided that in no event shall the amount of liquidation preference of any
Preferred Distribution Stock issued in accordance with this clause (vii),
together with the amount of the Distribution Transaction made in accordance with
clause (iii) of this subsection 7.5, exceed $16,000,000.
7.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. Parent shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for any
four-Fiscal Quarter period ending on or about any of the dates set forth below
(or in the case of any period prior to December 31, 1997, the period from
January 1, 1997 through such date) to be less than the correlative ratio
indicated (either prior to the Permitted Securities Issuance Prepayment Date or
after the Permitted Securities Issuance Prepayment Date):
====================================================================
Prior to Permitted After Permitted
Securities Issuance Securities Issuance
Approximate Date Prepayment Date Prepayment Date
====================================================================
March 31, 1997 1.45:1.00 1.15:1.00
--------------------------------------------------------------------
June 30, 1997 1.85:100 1.40:1.00
--------------------------------------------------------------------
September 30, 1997 2.00:1.00 1.55:1.00
--------------------------------------------------------------------
December 31, 1997 2.00:1.00 1.55:1.00
--------------------------------------------------------------------
March 31, 1998 2.00:1.00 1.55:1.00
--------------------------------------------------------------------
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====================================================================
Prior to Permitted After Permitted
Securities Issuance Securities Issuance
Approximate Date Prepayment Date Prepayment Date
====================================================================
June 30, 1998 2.00:1.00 1.55:1.00
--------------------------------------------------------------------
September 30, 1998 2.00:1.00 1.55:1.00
--------------------------------------------------------------------
December 31, 1998 2.25:1.00 1.70:1.00
--------------------------------------------------------------------
March 31, 1999 2.25:1.00 1.70:1.00
--------------------------------------------------------------------
June 30, 1999 2.25:1.00 1.70:1.00
--------------------------------------------------------------------
September 30, 1999 2.25:1.00 1.70:1.00
--------------------------------------------------------------------
December 31, 1999 2.60:1.00 1.90:1.00
--------------------------------------------------------------------
March 31, 2000 2.60:1.00 1.90:1.00
--------------------------------------------------------------------
June 30, 2000 2.60:1.00 1.90:1.00
--------------------------------------------------------------------
September 30, 2000 2.60:1.00 1.90:1.00
--------------------------------------------------------------------
December 31, 2000 3.00:1.00 2.00:1.00
--------------------------------------------------------------------
March 31, 2001 3.00:1.00 2.00:1.00
--------------------------------------------------------------------
June 30, 2001 3.00:1.00 2.00:1.00
--------------------------------------------------------------------
September 30, 2001 3.00:1.00 2.00:1.00
--------------------------------------------------------------------
December 31, 2001
and each Fiscal Quar-
ter's end thereafter 3.50:1.00 2.00:1.00
====================================================================
B. Minimum Fixed Charge Coverage Ratio. Parent shall not permit the ratio
of (i) Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures to
(ii) Consolidated Fixed Charges for any four-Fiscal Quarter period ending on or
about any of the dates set forth below (or, in the case of any period ending
prior to December 31, 1997, the period from January 1, 1997 through such date)
to be less than the correlative ratio indicated (either prior to the Permitted
Securities Issuance Prepayment Date or after the Permitted Securities Issuance
Prepayment Date):
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====================================================================
Prior to Permitted After Permitted
Securities Issuance Securities Issuance
Approximate Date Prepayment Date Prepayment Date
====================================================================
March 31, 1997 N/A N/A
--------------------------------------------------------------------
June 30, 1997 1.00:100 1.00:1.00
--------------------------------------------------------------------
September 30, 1997 1.05:1.00 1.05:1.00
--------------------------------------------------------------------
December 31, 1997 1.05:1.00 1.10:1.00
--------------------------------------------------------------------
March 31, 1998 1.05:1.00 1.10:1.00
--------------------------------------------------------------------
June 30, 1998 1.05:1.00 1.10:1.00
--------------------------------------------------------------------
September 30, 1998 1.05:1.00 1.10:1.00
--------------------------------------------------------------------
December 31, 1998 1.10:1.00 1.20:1.00
--------------------------------------------------------------------
March 31, 1999 1.10:1.00 1.20:1.00
--------------------------------------------------------------------
June 30, 1999 1.10:1.00 1.20:1.00
--------------------------------------------------------------------
September 30, 1999 1.10:1.00 1.20:1.00
--------------------------------------------------------------------
December 31, 1999 1.10:1.00 1.30:1.00
--------------------------------------------------------------------
March 31, 2000 1.10:1.00 1.30:1.00
--------------------------------------------------------------------
June 30, 2000 1.10:1.00 1.30:1.00
--------------------------------------------------------------------
September 30, 2000 1.10:1.00 1.30:1.00
--------------------------------------------------------------------
December 31, 2000 1.10:1.00 1.40:1.00
--------------------------------------------------------------------
March 31, 2001 1.10:1.00 1.40:1.00
--------------------------------------------------------------------
June 30, 2001 1.10:1.00 1.40:1.00
--------------------------------------------------------------------
September 30, 2001 1.10:1.00 1.40:1.00
--------------------------------------------------------------------
December 31, 2001
and each Fiscal Quar- 1.10:1.00 1.40:1.00
ter's end thereafter
====================================================================
C. Maximum Leverage Ratio. Parent shall not permit the ratio of (i)
Consolidated Total Debt as of the last day of any Fiscal Quarter ending on or
about any of the dates set forth below to (ii) Consolidated Adjusted EBITDA for
the four Fiscal Quarter period ending on such date (the "Leverage Ratio") to
exceed the correlative ratio indicated (either prior to the Permitted Securities
Issuance Prepayment Date or after the Permitted Securities Issuance Prepayment
Date):
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====================================================================
Prior to Permitted After Permitted
Securities Issuance Securities Issuance
Approximate Date Prepayment Date Prepayment Date
====================================================================
December 31, 1997 4.625:1.00 5.75:1.00
--------------------------------------------------------------------
March 31, 1998 4.625:1.00 5.75:1.00
--------------------------------------------------------------------
June 30, 1998 4.625:1.00 5.75:1.00
--------------------------------------------------------------------
September 30, 1998 4.625:1.00 5.75:1.00
--------------------------------------------------------------------
December 31, 1998 4.10:1.00 5.00:1.00
--------------------------------------------------------------------
March 31, 1999 4.10:1.00 5.00:1.00
--------------------------------------------------------------------
June 30, 1999 4.10:1.00 5.00:1.00
--------------------------------------------------------------------
September 30, 1999 4.10:1.00 5.00:1.00
--------------------------------------------------------------------
December 31, 1999 3.30:1.00 4.25:1.00
--------------------------------------------------------------------
March 31, 2000 3.30:1.00 4.25:1.00
--------------------------------------------------------------------
June 30, 2000 3.30:1.00 4.25:1.00
--------------------------------------------------------------------
September 30, 2000 3.30:1.00 4.25:1.00
--------------------------------------------------------------------
December 31, 2000 3.00:1.00 3.50:1.00
--------------------------------------------------------------------
March 31, 2001 3.00:1.00 3.50:1.00
--------------------------------------------------------------------
June 30, 2001 3.00:1.00 3.50:1.00
--------------------------------------------------------------------
September 30, 2001 3.00:1.00 3.50:1.00
--------------------------------------------------------------------
December 31, 2001
and each Fiscal Quar- 3.00:1.00 3.00:1.00
ter's end thereafter
====================================================================
D. Minimum Consolidated Adjusted EBITDA. Parent shall not permit
Consolidated Adjusted EBITDA for any period commencing on January 1, 1997 and
ending at the end of the Fiscal Quarter ending on or about the date set forth
below to be less than the correlative amount indicated:
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=========================================================
Minimum Consolidated
Approximate Date Adjusted EBITDA
=========================================================
March 31, 1997 $ 4,300,000
---------------------------------------------------------
June 30, 1997 $10,000,000
---------------------------------------------------------
September 30, 1997 $18,600,000
=========================================================
E. Minimum Consolidated Adjusted Net Worth. Parent shall not permit
Consolidated Adjusted Net Worth at the end of any Fiscal Quarter to be less than
the sum of (x) the Consolidated Net Worth at the Closing Date plus (y) 50% of
the Consolidated Adjusted Net Income for the period commencing on the Closing
Date and ending on the last day of such Fiscal Quarter minus (z) the aggregate
amount of Restricted Junior Payments actually made pursuant to clause (iii),
(iv) and (vii) of subsection 7.5.
For purposes of this subsection 7.6 the covenant measurement dates have been
determined based on the assumption that the Borrower's Fiscal Quarters end on
March 31, June 30, September 30 and December 31 of each year. In the event that
the Fiscal Quarters end on other dates, the foregoing covenant measurement dates
shall be adjusted, so that any change in the ratios shall occur as of the last
day of the applicable Fiscal Quarter.
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
Parent shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Parent or any of its Subsidiaries,
or enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any Person or
any division or line of business of any Person, except:
(i) Borrower may be merged into Parent and any Subsidiary of
Borrower may be merged with or into any Subsidiary Guarantor, or be
liquidated, wound up or dissolved, or all or any part of its business,
property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to any
Subsidiary Guarantor; provided that, in the case of such a merger, such
Subsidiary Guarantor shall be the continuing or surviving corporation;
(ii) Borrower and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iii) Borrower and its Subsidiaries may dispose of obsolete, worn
out or surplus property in the ordinary course of business;
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(iv) Borrower and its Subsidiaries may sell or otherwise dispose of
assets for cash in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof;
(v) subject to subsection 7.11 Borrower and its Subsidiaries may
make Asset Sales of assets having a fair market value not in excess of
$2,000,000; provided that (x) the consideration received for such assets
shall be in an amount at least equal to the fair market value thereof; (y)
the sole consideration received shall be cash; and (z) the proceeds of
such Asset Sales shall be applied as required by subsection 2.4B(iii)(a);
(vi) Borrower and its Subsidiaries may consummate the Acquisition
and the Restructuring; and
(vii) Borrower and its Subsidiaries may make acquisitions in an
aggregate amount not to exceed (x) $10,000,000 if the aggregate principal
amount of Term Loans outstanding equals or exceeds $15,000,000, (y)
$25,000,000 in the aggregate if the aggregate principal amount of Term
Loans outstanding equals or exceeds $5,000,000 but is less than
$15,000,000 and (z) $35,000,000 in the aggregate if the aggregate
principal amount of Term Loans outstanding is, less than $5,000,000;
provided that with respect to acquisitions made pursuant to this
subsection 7.7(vii): (i) any newly acquired or created Subsidiary of
Borrower or any of its Subsidiaries shall be a wholly owned Subsidiary
thereof; (ii) immediately before and after giving effect thereto, no
Potential Event of Default or Event of Default shall have occurred and be
continuing or would result therefrom; (iii) any business acquired or
invested in pursuant to this subsection 7.7(vii) shall be in the same line
of business as the business of Borrower or any of its Subsidiaries; and
(iv) Borrower shall comply with the requirements of subsection 6.8; (v)
after giving effect to such acquisition, Borrower shall be in compliance
on a pro forma basis with all of the covenants set forth in subsection
7.6; (vi) after giving effect to such acquisition, Borrower shall have not
less than $5,000,000 of availability under the Revolving Loan Commitments;
and (vii) no default shall be caused by such acquisition under any
Material Contract of Parent or any of its Subsidiaries.
7.8 Consolidated Capital Expenditures.
Parent shall not permit its Subsidiaries to, make or incur Consolidated
Capital Expenditures (x) prior to the Permitted Securities Issuance Prepayment
Date, in Fiscal Year 1997, in an aggregate amount in excess of $4,000,000, and
in any Fiscal Year thereafter in excess of $3,000,000 and (y) from and after the
Permitted Securities Issuance Prepayment Date, in any Fiscal Year, in an
aggregate amount in excess of $5,000,000; provided that the maximum Consolidated
Capital Expenditures for any Fiscal Year shall be increased by the lesser of (i)
an amount equal to 100% of the excess, if any, of the maximum Consolidated
Capital Expenditures for the previous Fiscal Year (without giving effect to any
adjustments pursuant to this proviso) over the actual amount of Consolidated
Capital Expenditures for such previous Fiscal Year and (ii) for Fiscal Year
1998, $1,500,000 and, for each Fiscal Year thereafter, $1,000,000.
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7.9 Sale or Discount of Receivables.
Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
7.10 Transactions with Shareholders and Affiliates.
Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Parent or with any Affiliate of Parent or of any
such holder, on terms that are less favorable to Parent or that Subsidiary, as
the case may be, than those that would be obtained at that time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) any transaction between Borrower and any of its
Subsidiaries or among any of its Subsidiaries, (ii) reasonable and customary
fees paid to members of the Boards of Directors of Parent and its Subsidiaries
or (iii) fees and expenses payable to First Atlantic Capital, Ltd. pursuant to
the Management Consulting Agreement to the extent permitted under subsection
7.5.
7.11 Disposal of Subsidiary Stock.
Parent shall not (except with respect to Liens granted pursuant to the
Loan Documents):
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, or permit any of its Subsidiaries
to issue any shares of capital stock or other equity Securities, except
sales or issuances to qualify directors if and only to the extent required
by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Parent, another Subsidiary of Parent, or to
qualify directors if required by applicable law.
7.12 Conduct of Business.
From and after the Closing Date, Parent shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the businesses
engaged in by Parent and its Subsidiaries on the Closing Date and similar or
related businesses and (ii) such other lines of business as may be consented to
by Requisite Lenders.
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7.13 Amendments or Waivers of Certain Related Agreements; Amendments of
Documents Relating to Bridge Financing and Permitted Securities Issuance;
Designation of "Designated Senior Indebtedness".
A. Amendments or Waivers of Certain Related Agreements. Neither Parent nor
any of its Subsidiaries will agree to any material amendment to, or waive any of
its material rights under, any Related Agreement which amendment or waiver could
be materially adverse to the Lenders (other than any Related Agreement
evidencing or governing any Bridge Financing or Permitted Securities Issuance,
which shall be subject to subsection 7.13B) after the Closing Date without in
each case obtaining the prior written consent of Requisite Lenders to such
amendment or waiver.
B. Amendments of Documents Relating to Bridge Financing and Permitted
Securities Issuance. Parent shall not, and shall not permit any of its
Subsidiaries to, amend or otherwise change the terms of any Bridge Financing
Documents or any agreements or documents entered into or issued in connection
with any Permitted Securities Issuance in any material respect, or make any
payment consistent with any material amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on the
Indebtedness evidenced thereby, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change in any material
respect any event of default or condition to an event of default with respect
thereto (other than to eliminate any such event of default or increase any grace
period related thereto), change the redemption, prepayment or defeasance
provisions thereof, change the subordination provisions thereof (or of any
guaranty thereof), or change any collateral therefor (other than to release such
collateral), or if the effect of such amendment or change, together with all
other amendments or changes made, is to increase materially the obligations of
the obligor thereunder or to confer any additional rights on the holders of the
Bridge Financing or the Permitted Securities Issuance, as the case may be, (or a
trustee or other representative on their behalf) which could reasonably be
expected to be adverse to Parent, Borrower, any Lenders or Issuing Lender.
C. Designation of "Designated Senior Indebtedness". Neither Parent nor any
Subsidiary thereof shall designate any Indebtedness as "Designated Senior
Indebtedness" (as defined in the Bridge Note Documents or any other document
entered into in connection with any Permitted Securities Issuance) for purposes
of the Bridge Notes or any Permitted Securities Issuance, without the prior
written consent of Requisite Lenders.
7.14 Fiscal Year
Parent and Borrower shall not change its Fiscal Year-end from the date
determined by Borrower as set forth in the definition of Fiscal Year.
7.15 Charter Amendments.
Parent shall not amend, nor permit any of its Subsidiaries to amend, its
certificate of incorporation or bylaws in a manner adverse to the Lenders.
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7.16 Amendment, Etc. of Material Contracts.
Parent shall not cancel or terminate any Material Contract or consent to
or accept any cancellation or termination thereof, amend or otherwise modify any
Material Contract or give any consent, waiver or approval thereunder, waive any
default under or breach of any Material Contract, agree in any manner to any
other amendment, modification or change of any term or condition of any Material
Contract without the prior written consent of Administrative Agent.
7.17 Partnerships, Etc.
Parent shall not become a general partner in any general or limited
partnership or joint venture, or permit any of its Subsidiaries to do so.
7.18 Speculative Transactions.
Parent shall not engage, or permit any of its Subsidiaries to engage, in
any transaction involving commodity options or futures contracts or any similar
speculative transactions except for Hedge Agreements permitted under Section
7.4(iii).
Section 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
8.1 Failure to Make Payments When Due.
Failure by Borrower to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Borrower to pay
when due any amount payable to Issuing Lender in reimbursement of any drawing
under a Letter of Credit or any IRB Reimbursement Advance; or failure by
Borrower to pay any interest on any Loan or any fee or any other amount due
under this Agreement within three Business Days after the date due; or
8.2 Default in Other Agreements.
(i) Failure of Parent or any of its Subsidiaries to pay when due any
principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Contingent Obligations in an individual principal amount of $500,000 or
more or with an aggregate principal amount of $1,000,000 or more, in each case
beyond the end of any grace period provided therefor; or (ii) breach or default
by Parent or any of its Subsidiaries with respect to any other material term of
(a) one or more items of Indebtedness or Contingent Obligations in the
individual or aggregate principal amounts referred to in clause (i) above or (b)
any loan agreement, mortgage, indenture or other agreement relating to such
item(s) of Indebtedness or Contingent Obligation(s), if the effect of such
breach or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent
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Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse of
time, both, or otherwise); or
8.3 Breach of Certain Covenants.
Failure of Parent or Borrower to perform or comply with any term or
condition contained in subsection 2.5 or 6.1(ix)(a) or 6.2 or Section 7 of this
Agreement; or
8.4 Breach of Warranty.
Any representation, warranty, certification or other statement made by
Parent or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Parent or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made or deemed made; or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) a Responsible Officer becomes aware of such default and (ii) receipt by
Borrower and such Loan Party of notice from Administrative Agent or any Lender
of such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Parent or any of its Material Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Parent or any of its Material Subsidiaries under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Parent or any of its
Material Subsidiaries, or over all or substantially all of its property, shall
have been entered; or there shall have occurred the involuntary appointment of
an interim receiver, trustee or other custodian of Parent or any of its Material
Subsidiaries for all or substantially all of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of Parent or any of its Material Subsidiaries,
and any such event described in this clause (ii) shall continue for 60 days
unless dismissed, bonded or discharged; or
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8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Parent or any of its Material Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or
substantially of its property; or Parent or any of its Material Subsidiaries
shall make any assignment for the benefit of creditors; or (ii) Parent or any of
its Material Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due; or
the Board of Directors of Parent or any of its Material Subsidiaries (or any
committee thereof) shall adopt any resolution or otherwise authorize any action
to approve any of the actions referred to in clause (i) above or this clause
(ii); or
8.8 Judgments, Attachments, etc.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $500,000 or (ii) in
the aggregate at any time an amount in excess of $1,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Parent or
any of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any
event later than five days prior to the date of any proposed sale thereunder);
or any non-monetary judgment or order shall be rendered against Parent or any of
its Subsidiaries that could be reasonably likely to have a Material Adverse
Effect, and there shall be any period of 10 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
8.9 Dissolution.
Any order, judgment or decree shall be entered against Parent or any of
its Subsidiaries decreeing the dissolution or split up of Parent or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Parent, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $100,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $100,000; or
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8.11 Material Adverse Effect.
Any event or change shall occur that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect; or
8.12 Change in Control.
There shall occur a Change of Control; or
8.13 Invalidity of Guarantees; Failure of Security; Repudiation of Obligations.
At any time after the execution and delivery thereof, (i) any Guaranty for
any reason, other than the satisfaction in full of all Obligations, shall cease
to be in full force and effect (other than in accordance with its terms) or
shall be declared to be null and void, (ii) any Collateral Document shall cease
to be in full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof, the satisfaction in
full of the Obligations or any other termination of such Collateral Document in
accordance with the terms hereof or thereof) or shall be declared null and void,
or Administrative Agent shall not have or shall cease to have a valid and
perfected First Priority Lien (subject only to Permitted Liens) in any material
Collateral purported to be covered thereby, in each case for any reason other
than the failure of Administrative Agent or any Lender to take any action within
its control, or (iii) any Loan Party shall contest the validity or
enforceability of any Loan Document in writing or deny in writing that it has
any further liability, including without limitation with respect to future
advances by Lenders, under any Loan Document to which it is a party; or
8.14 Action Relating to Certain Indebtedness.
Any event shall occur which, under the terms of the Senior Guaranteed Note
Documents, the Bridge Note Documents, the Subordinated Note Documents, or the
Seller Notes shall require Borrower or any of its Subsidiaries to purchase,
redeem or otherwise acquire, or offer to purchase, redeem or otherwise acquire,
all or any portion of the Senior Guaranteed Notes, the Bridge Note Documents,
the Subordinated Note Documents, or the Seller Notes, or Parent or any of its
Subsidiaries shall for any other reason purchase, redeem or otherwise acquire,
or offer to purchase, redeem or otherwise acquire, or make any other payments in
respect of, all or any portion of the Senior Guaranteed Notes, the Bridge Note
Documents, the Subordinated Note Documents, or the Seller Notes except to the
extent expressly permitted by subsection 7.5; or
8.15 Conduct of Business By Parent and Borrower.
Parent or Borrower shall (i) engage in any business other than (x)
entering into and performing its obligations under and in accordance with the
Loan Documents and Related Agreements to which it is a party or (y) as required
by law, or (ii) own any assets other than (a) the capital stock of its
Subsidiaries and (b) in the case of Parent only, Cash and Cash Equivalents as
may be reasonably necessary for the purpose of paying its general operating
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expenses; or Parent shall cease to own 100% of the outstanding stock of
Borrower; or Borrower shall cease to own 100% of the outstanding stock of its
Subsidiaries.
8.16 Preferred Distribution Stock.
The Preferred Distribution Stock is sold or otherwise transferred,
directly or indirectly, by holders of the Class A (Voting and Nonvoting) Common
Stock to Persons not consented to in writing by Administrative Agent (after
consultation with Lenders), which consent shall not be unreasonably withheld.
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), (c) the Maximum Exposure Under IRB
Reimbursement Agreement and (d) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Borrower,
and the obligation of each Lender to make any Loan, the obligation of Issuing
Lender to issue any Letter of Credit hereunder shall thereupon terminate, and
(ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Borrower, declare all
or any portion of the amounts described in clauses (a) through (d) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Issuing Lender to
issue any Letter of Credit hereunder shall thereupon terminate; provided that
the foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(v).
Any amounts described in clause (b) above, when received by Administrative
Agent, shall be held by Administrative Agent pursuant to the terms of the
Collateral Account Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph, if
at any time within 60 days after an acceleration of the Loans pursuant to clause
(ii) of such paragraph Borrower shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than
non-payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Borrower, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and
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are not intended, directly or indirectly, to benefit Borrower, and such
provisions shall not at any time be construed so as to grant Borrower the right
to require Lenders to rescind or annul any acceleration hereunder or to preclude
Administrative Agent or Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.
Section 9. ADMINISTRATIVE AGENT
9.1 Appointment.
A. Appointment of Administrative Agent. NationsBank is hereby appointed
Administrative Agent hereunder and under the other Loan Documents and each
Lender hereby authorizes Administrative Agent to act as its agent in accordance
with the terms of this Agreement and the other Loan Documents. Administrative
Agent agrees to act upon the express conditions contained in this Agreement and
the other Loan Documents, as applicable. The provisions of this Section 9 are
solely for the benefit of Administrative Agent and Lenders and neither Parent
nor Borrower shall have any rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this Agreement,
Administrative Agent shall act solely as an agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for Parent or any of its Subsidiaries.
B. Appointment of Supplemental Collateral Administrative Agents. It is the
purpose of this Agreement and the other Loan Documents that there shall be no
violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as agent or trustee in
such jurisdiction. It is recognized that in case of litigation under this
Agreement or any of the other Loan Documents, and in particular in case of the
enforcement of any of the Loan Documents, or in case Administrative Agent deems
that by reason of any present or future law of any jurisdiction it may not
exercise any of the rights, powers or remedies granted herein or in any of the
other Loan Documents or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that Administrative Agent
appoint an additional individual or institution as a separate trustee,
co-trustee, collateral agent or collateral co-agent (any such additional
individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
Agents").
In the event that Administrative Agent appoints a Supplemental Collateral
Agent with respect to any Collateral, (i) each and every right, power, privilege
or duty expressed or intended by this Agreement or any of the other Loan
Documents to be exercised by or vested in or conveyed to Administrative Agent
with respect to such Collateral shall be exercisable by and vest in such
Supplemental Collateral Agent to the extent, and only to the extent, necessary
to enable such Supplemental Collateral Agent to exercise such rights, powers and
privileges with respect to such Collateral and to perform such duties with
respect to such Collateral, and every covenant and obligation contained in the
Loan Documents and necessary to the exercise or performance
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thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as
the context may require.
Should any instrument in writing from Parent or any other Loan Party be
required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Parent shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments promptly
upon request by Administrative Agent. In case any Supplemental Collateral Agent,
or a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be exercised
by Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
9.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes
Administrative Agent to take such action on such Lender's behalf and to exercise
such powers, rights and remedies hereunder and under the other Loan Documents as
are specifically delegated or granted to Administrative Agent by the terms
hereof and thereof, together with such powers, rights and remedies as are
reasonably incidental thereto. Without limiting the foregoing, each Lender
hereby authorizes Administrative Agent to (i) enter into the IRB Reimbursement
Agreement on the Closing Date and (ii) upon expiration of the PNC Letter of
Credit, to issue one or more replacement letters of credit with terms and
conditions substantially similar to the terms of the PNC Letter of Credit
(annexed hereto as Schedule 9.2), so long as such replacement letter of credit
does not have terms that extend beyond the Revolving Loan Commitment Termination
Date. Administrative Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents.
Administrative Agent may exercise such powers, rights and remedies and perform
such duties by or through its agents or employees. Administrative Agent shall
not have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon Administrative Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as expressly
set forth herein or therein.
B. No Responsibility for Certain Matters. Administrative Agent shall not
be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Administrative Agent to Lenders or by
or on behalf of Parent or Borrower to Administrative Agent or any Lender in
connection with the Loan
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Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Borrower or any other Person liable for the
payment of any Obligations, nor shall Administrative Agent be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Loan
Documents or as to the use of the proceeds of the Loans or the use of the
Letters of Credit or as to the existence or possible existence of any Event of
Default or Potential Event of Default. Anything contained in this Agreement to
the contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans or the Revolving
Letter of Credit Usage or the component amounts thereof.
C. Exculpatory Provisions. Neither Administrative Agent nor any of its
officers, directors, employees or agents shall be liable to Lenders for any
action taken or omitted by Administrative Agent under or in connection with any
of the Loan Documents except to the extent caused by Administrative Agent's
gross negligence or willful misconduct. Administrative Agent shall be entitled
to refrain from any act or the taking of any action (including the failure to
take an action) in connection with this Agreement or any of the other Loan
Documents or from the exercise of any power, discretion or authority vested in
it hereunder or thereunder unless and until Administrative Agent shall have
received instructions in respect thereof from Requisite Lenders (or such other
Lenders as may be required to give such instructions under subsection 10.6) and,
upon receipt of such instructions from Requisite Lenders (or such other Lenders,
as the case may be), Administrative Agent shall be entitled to act or (where so
instructed) refrain from acting, or to exercise such power, discretion or
authority, in accordance with such instructions. Without prejudice to the
generality of the foregoing, (i) Administrative Agent shall be entitled to rely,
and shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Parent and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against Administrative Agent as a result of Administrative
Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agent Entitled to Act as Lender. The agency hereby created shall in no
way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Administrative Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit and the IRB Reimbursement Agreement, Administrative Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include Administrative Agent in its
individual capacity. Administrative Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any of its Affiliates as
if it were not performing the duties specified herein, and may accept fees and
other
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consideration from Borrower for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Parent and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and the execution of the IRB Reimbursement Agreement
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Parent and its Subsidiaries. Administrative Agent shall not
have any duty or responsibility, either initially or on a continuing basis, to
make any such investigation or any such appraisal on behalf of Lenders or to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any time
or times thereafter, and Administrative Agent shall not have any responsibility
with respect to the accuracy of or the completeness of any information provided
to Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent, to the extent that Administrative Agent shall
not have been reimbursed by Borrower or Parent, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against Administrative Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as Administrative Agent in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Administrative Agent's gross negligence or willful misconduct. If any
indemnity furnished to Administrative Agent for any purpose shall, in the
opinion of Administrative Agent, be insufficient or become impaired,
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
9.5 Successor Agent and Swing Line Lender.
A. Successor Agent. Administrative Agent may resign at any time by giving
30 days' prior written notice thereof to Lenders and Borrower, and
Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Borrower and
Administrative Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to Borrower, to appoint a successor Administrative
Agent. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Administrative Agent and
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the retiring or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring or removed
Administrative Agent's resignation or removal hereunder 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.
B. Successor Swing Line Lender. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of NationsBank or its successor as Swing Line Lender, and
any successor Administrative Agent appointed pursuant to subsection 9.5A shall,
upon its acceptance of such appointment, become the successor Swing Line Lender
for all purposes hereunder. In such event (i) Borrower shall prepay any
outstanding Swing Line Loans made by the retiring or removed Administrative
Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the
retiring or removed Administrative Agent and Swing Line Lender shall surrender
the Swing Line Note held by it to Borrower for cancellation, and (iii) Borrower
shall issue a new Swing Line Note to the successor Administrative Agent and
Swing Line Lender substantially in the form of Exhibit VIII annexed hereto, in
the principal amount of the Swing Line Loan Commitment then in effect and with
other appropriate insertions.
9.6 Collateral Documents and Guaranties.
Each Lender hereby further authorizes Administrative Agent, on behalf of
and for the benefit of Lenders, to enter into each Collateral Document
(including, without limitation, the MELF Intercreditor Agreement) as secured
party and to be the agent for and representative of Lenders under each Guaranty,
and each Lender agrees to be bound by the terms of each Collateral Document and
Guaranty; provided that Administrative Agent shall not (i) enter into or consent
to any material amendment, modification, termination or waiver of any provision
contained in any Collateral Document or Guaranty or (ii) release any Collateral
(except as otherwise expressly permitted or required pursuant to the terms of
this Agreement or the applicable Collateral Document), in each case without the
prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6,
all Lenders); provided further, however, that, without further written consent
or authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release
any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital
stock of such Subsidiary Guarantor is sold to any Person (other than an
Affiliate of Borrower) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the contrary notwithstanding, Parent,
Borrower, Administrative Agent and each Lender hereby agree that (X) no Lender
shall have any right individually to realize upon any of the Collateral under
any Collateral Document or to enforce any Guaranty, it being understood and
agreed that all powers, rights and remedies under the Collateral Documents and
the Guaranties may be exercised solely by Administrative Agent for the benefit
of Lenders in accordance with the terms thereof, and (Y) in the event of a
foreclosure by Administrative Agent on any of the Collateral pursuant to a
public or private sale, Administrative Agent or any Lender may be the
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purchaser of any or all of such Collateral at any such sale and Administrative
Agent, as agent for and representative of Lenders (but not any Lender or Lenders
in its or their respective individual capacities unless Requisite Lenders shall
otherwise agree in writing) shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Obligations
as a credit on account of the purchase price for any collateral payable by
Administrative Agent at such sale.
9.7 Arranging Agent, Syndication Agent and Documentation Agent.
The rights, privileges and benefits of the foregoing provisions of this
Section 9 shall extend to NCMI in its capacity as Arranging Agent and
Syndication Agent and Fleet National Bank, as Documentation Agent. After the
Closing Date, none of Arranging Agent, Syndication Agent or Documentation Agent
shall have any obligations or duties to any Loan Party, Administrative Agent or
any Lender.
Section 10. MISCELLANEOUS
10.1 Assignments and Participations in Loans, Letters of Credit and IRB
Reimbursement Agreement.
A. General. Subject to subsection 10.1B, each Lender shall have the right
at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any Person in, all or any part of its Commitments or any
Loan or Loans made by it or its Letters of Credit or the IRB Reimbursement
Agreement, or participations therein or any other interest herein or in any
other Obligations owed to it; provided that no such sale, assignment, transfer
or participation shall, without the consent of Borrower, require Borrower to
file a registration statement with the Securities and Exchange Commission or
apply to qualify such sale, assignment, transfer or participation under the
securities laws of any state; provided, further that no such sale, assignment or
transfer described in clause (i) above shall be effective unless and until an
Assignment Agreement effecting such sale, assignment or transfer shall have been
accepted by Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii); provided, further that no such sale, assignment, transfer
or participation of the Acquisition Letter of Credit or any participation
therein may be made separately from a sale, assignment, transfer or
participation of a corresponding interest in the Term Loans and the Commitments
relating thereto of Administrative Agent by effecting such sale, assignment,
transfer or participation; provided, further that no such sale, assignment,
transfer or participation of any Letter of Credit, the IRB Reimbursement
Agreement or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided, further that,
anything contained herein to the contrary notwithstanding, the Swing Line Loan
Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Administrative Agent and Swing Line Lender to the extent
contemplated by subsection 9.5. Except as otherwise provided in this subsection
10.1, no Lender shall, as between Borrower
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and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitments or the Loans or the Letters of Credit or the IRB
Reimbursement Agreement or participations therein, or the other Obligations owed
to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
of Credit, the IRB Reimbursement Agreement or participation therein, or
other Obligation may (a) be assigned in any amount to another Lender, or
to an Affiliate of the assigning Lender or another Lender, with the giving
of notice to Borrower and Administrative Agent or (b) be assigned in an
aggregate amount of not less than $5,000,000 (or such lesser amount as
shall constitute the aggregate amount of the Commitments, Loans, the
Letters of Credit, the IRB Reimbursement Agreement and participations
therein, and other Obligations of the assigning Lender) to any other
Eligible Assignee with the consent of Borrower and Administrative Agent
(which consent of Borrower and Administrative Agent shall not be
unreasonably withheld or delayed and which consent of Borrower shall not
be required at any time that an Event of Default has occurred and is
continuing); provided that any such assignment in accordance with either
clause (a) or (b) above shall effect a pro rata assignment (based on the
respective principal amounts thereof then outstanding or in effect) of
each of (1) the Term Loans A Commitment and/or the Term Loans A of the
assigning Lender, (2) the Tranche A Term Loan Commitment and/or the
Tranche A Term Loan of the assigning Lender and (3) the Revolving Loan
Commitment and the Revolving Loans of the assigning Lender. To the extent
of any such assignment in accordance with either clause (a) or (b) above,
the assigning Lender shall be relieved of its obligations with respect to
its Commitments, Loans, Letters of Credit, the IRB Reimbursement Agreement
or participations therein, or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the Register, an
Assignment Agreement, together with a processing and recordation fee of
$3,500 and such forms, certificates or other evidence, if any, with
respect to United States federal income tax withholding matters as the
assignee under such Assignment Agreement may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such
execution, delivery, acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(z) the assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights (other than any rights which survive the
termination of this Agreement under subsection 10.9B) and be released from
its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be
a party hereto; provided that, anything contained in any of the Loan
Documents to the contrary notwithstanding, with respect to any outstanding
Letters of Credit and the IRB
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Reimbursement Agreement, Issuing Lender shall continue to have all rights
and obligations of an Issuing Lender thereunder until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder) and the termination of the IRB Reimbursement Agreement
and the reimbursement of any IRB Reimbursement Advances. The Commitments
hereunder shall be modified to reflect the Commitment of such assignee and
any remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the assigning
Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and to the assigning Lender, substantially in the
form of Exhibit V, Exhibit VI or Exhibit VII annexed hereto, as the case
may be, with appropriate insertions, to reflect the new Commitments and/or
outstanding Term Loans A, Tranche A Term Loans and/or Tranche B Term
Loans, as the case may be, of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
Upon its receipt of an Assignment Agreement executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee,
together with the processing and recordation fee referred to in subsection
10.1B(i) and any forms, certificates or other evidence with respect to
United States federal income tax withholding matters that such assignee
may be required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a), Administrative Agent shall, if Administrative Agent and
Borrower have consented to the assignment evidenced thereby (in each case
to the extent such consent is required pursuant to subsection 10.1B(i)),
(a) accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof to
Borrower. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
and all amounts payable by Borrower hereunder (including without limitation
amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall
be determined as if such Lender had not sold such participation. Borrower and
each Lender hereby acknowledge and agree that, solely for purposes of
subsections 10.4 and 10.5, (a) any participation will give rise to a direct
obligation of Borrower to the participant and (b) the participant shall be
considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and
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its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve Bank; provided that (i) no
Lender shall, as between Borrower and such Lender, be relieved of any of its
obligations hereunder as a result of any such assignment and pledge and (ii) in
no event shall such Federal Reserve Bank be considered to be a "Lender" or be
entitled to require the assigning Lender to take or omit to take any action
hereunder.
E. Information. Each Lender may furnish any information concerning Parent
and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.19.
F. Representations of Lenders. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 Expenses.
Whether or not the transactions contemplated hereby shall be consummated,
Parent and Borrower, jointly and severally, agree to pay promptly (i) all the
actual and reasonable costs and expenses of preparation of the Loan Documents
and any consents, amendments, waivers or other modifications thereto; (ii) all
the costs of furnishing all opinions by counsel for Parent and Borrower
(including without limitation any opinions requested by Lenders as to any legal
matters arising hereunder) and of Parent's and Borrower's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental,
insurance and solvency requirements; (iii) the reasonable fees, expenses and
disbursements of counsel to Administrative Agent (including allocated costs of
internal counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and any consents, amendments, waivers or
other modifications thereto and any other documents or matters requested by
Parent or Borrower; (iv) all the actual costs and reasonable expenses of
creating and perfecting Liens in favor of Administrative Agent on behalf of
Lenders pursuant to any Collateral Document, including without limitation filing
and recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums, and reasonable fees, expenses and disbursements of
counsel to Administrative Agent and of counsel providing any opinions that
Administrative Agent or Requisite Lenders may request in respect of the
Collateral Documents or the Liens created pursuant thereto; (v) all the actual
costs and reasonable expenses (including without limitation the reasonable fees,
expenses and disbursements
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of any auditors, accountants or appraisers and any environmental or other
consultants, advisors and agents employed or retained by Administrative Agent or
its counsel) of obtaining and reviewing any appraisals provided for under
subsection 4.1J or 6.9C, any environmental audits or reports provided for under
subsection 4.1K or 6.9B(ix) and any audits or reports provided for under
subsection 6.5B or 6.17 with respect to Inventory and Accounts Receivable of the
Operating Subsidiaries; (vi) the custody or preservation of any of the
Collateral; (vii) all other actual and reasonable costs and expenses incurred by
Administrative Agent in connection with the syndication of the Commitments and
the negotiation, preparation and execution of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and the
transactions contemplated thereby; and (viii) after the occurrence of an Event
of Default, all costs and expenses, including reasonable attorneys' fees
(including allocated costs of internal counsel) and costs of settlement,
incurred by Administrative Agent and Lenders in enforcing any Obligations of or
in collecting any payments due from any Loan Party hereunder or under the other
Loan Documents by reason of such Event of Default (including, without
limitation, in connection with the sale of, collection from, or other
realization upon any of the Collateral or the enforcement of any Guaranty) or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated, Parent
and Borrower, jointly and severally, agree to defend (subject to Indemnitees'
selection of counsel), indemnify, pay and hold harmless Administrative Agent and
Lenders, and the officers, directors, employees, agents and affiliates of
Administrative Agent and Lenders (collectively called the "Indemnitees"), from
and against any and all Indemnified Liabilities (as hereinafter defined);
provided that neither Parent nor Borrower shall have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including Environmental Claims),
costs (including the costs of any investigation, study, sampling, testing,
abatement, cleanup, removal, remediation or other response action necessary to
remove, remediate, clean up or abate any Hazardous Materials Activity), expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted
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against any such Indemnitee, in any manner relating to or arising out of (i)
this Agreement or the other Loan Documents or the Related Agreements or the
transactions contemplated hereby or thereby (including Lenders' agreement to
make the Loans hereunder or the use or intended use of the proceeds thereof or
the issuance of Letters of Credit hereunder or the use or intended use of any
thereof, or the execution of the IRB Reimbursement Agreement or the use thereof,
or any enforcement of any of the Loan Documents (including any sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of any Guaranty), (ii) the statements contained in the commitment
letter delivered by any Lender to Borrower with respect thereto, or (iii) any
Environmental Claim or any Hazardous Materials Activity relating to or arising
from, directly or indirectly, any past or present activity, operation, land
ownership, or practice of Parent or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Parent and Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.
10.4 Set-Off; Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Borrower at any time or
from time to time, without notice to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of Borrower against and
on account of the obligations and liabilities of Borrower to that Lender under
this Agreement, the Letters of Credit and participations therein and the other
Loan Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Borrower hereby further grants to
Administrative Agent and each Lender a security interest in all deposits and
accounts maintained with Administrative Agent or such Lender as security for the
Obligations.
10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall, whether
by voluntary payment (other than a voluntary prepayment of Loans made and
applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the
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Loan Documents or otherwise, or as adequate protection of a deposit treated as
cash collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of the Letters of Credit and the IRB Reimbursement Agreement, fees and
other amounts then due and owing to that Lender hereunder or under the other
Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which
is greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Administrative Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by
all Lenders in proportion to the Aggregate Amounts Due to them; provided that if
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of Borrower or otherwise, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Borrower expressly consents to the foregoing arrangement and agrees that any
holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies owing
by Borrower to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision of this
Agreement or of the Notes, and no consent to any departure by Parent or Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; increases the maximum amount
of Letters of Credit; increases the Maximum Exposure Under IRB Reimbursement
Agreement; changes in any manner the definition of "Class" or the definition of
"Pro Rata Share" or the definition of "Requisite Class Lenders" or the
definition of "Requisite Lenders"; changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or concurrence of
all Lenders; postpones the date or reduces the amount of any scheduled payment
(but not prepayment) of principal of any of the Loans; postpones the date on
which any interest or any fees are payable; decreases the interest rate borne by
any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any
fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; changes in any manner the
obligations of Lenders relating to the IRB Reimbursement Agreement; releases any
Lien granted in favor of Administrative Agent with respect to all or
substantially all of the Collateral; releases Parent from its obligations under
the Parent Guaranty or releases all or substantially all of the Subsidiary
Guarantors from their
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obligations under the Subsidiary Guaranty other than in accordance with the
terms of the Loan Documents; or changes in any manner the provisions contained
in subsection 8.1 or this subsection 10.6 shall be effective only if evidenced
by a writing signed by or on behalf of all Lenders. In addition, (i) any
amendment, modification, termination or waiver of any of the provisions
contained in Section 4 shall be effective only if evidenced by a writing signed
by or on behalf of Administrative Agent and Requisite Lenders, (ii) no
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender which is the
holder of that Note, (iii) no amendment, modification, termination or waiver of
any provision of subsection 2.1A(v) or of any other provision of this Agreement
relating to the Swing Line Loan Commitment or the Swing Line Loans shall be
effective without the written concurrence of Swing Line Lender, (iv) no
amendment, modification, termination or waiver of any provision of Section 9 or
of any other provision of this Agreement which, by its terms, expressly requires
the approval or concurrence of Administrative Agent shall be effective without
the written concurrence of Administrative Agent, and (v) no amendment,
modification, termination or waiver of any provision of subsection 2.4 which has
the effect of changing any interim scheduled payments, voluntary or mandatory
prepayments, or Commitment reductions applicable to either Class (the "Affected
Class") in a manner that disproportionately disadvantages such Class relative to
the other Class shall be effective without the written concurrence of Requisite
Class Lenders of the Affected Class (it being understood and agreed that any
amendment, modification, termination or waiver of any such provision which only
postpones or reduces any interim scheduled payment, voluntary or mandatory
prepayment, or Commitment reduction from those set forth in subsection 2.4 with
respect to one Class but not the other Class shall be deemed to
disproportionately disadvantage such one Class but not to disproportionately
disadvantage such other Class for purposes of this clause (v)). Administrative
Agent may, but shall have no obligation to, with the concurrence of any Lender,
execute amendments, modifications, waivers or consents on behalf of that Lender.
Any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No notice to or demand on Parent or
Borrower in any case shall entitle Parent or Borrower to any other or further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Parent, on Parent and, if signed by Borrower, on Borrower.
If any changes in accounting principles from those used in the preparation
of the Financial Statements referred to in subsection 5.3 occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the Accounting Principles Board
of the American Institute of Certified Public Accountants (or successors thereto
or agencies with similar functions) result in a change in the method of
calculation of financial covenants, standards or terms found in Sections 1, 6
and 7 hereof, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating Parent and its Subsidiaries' financial
condition shall be the same after such changes as if such changes had not been
made.
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10.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent shall not
be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Parent, Borrower and Administrative Agent, such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto and (ii) as to each other party, such other address as
shall be designated by such party in a written notice delivered to
Administrative Agent.
10.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder and the execution of the IRB
Reimbursement Agreement.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Parent and Borrower, as applicable, set forth in
subsections 2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of
Lenders set forth in subsections 9.2C, 9.4 and 10.5 shall survive the payment of
the Loans, the cancellation or expiration of the Letters of Credit and the
reimbursement of any amounts drawn thereunder, the termination of the IRB
Reimbursement Agreement and the reimbursement of any IRB Reimbursement Amount,
and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
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<PAGE>
10.11 Marshalling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any obligation
to marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
10.12 Severability.
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE
155
<PAGE>
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither Parent's
nor Borrower's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Parent or Borrower without the prior written consent of
all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PARENT OR BORROWER ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, EACH OF PARENT AND BORROWER, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO PARENT OR BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER PARENT AND BORROWER IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST PARENT AND
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND
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ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
10.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
10.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Borrower that in any event
a Lender may make disclosures to Affiliates of such Lender or disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participations therein or disclosures required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall notify Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall
157
<PAGE>
any Lender be obligated or required to return any materials furnished by Parent,
Borrower or any of its Subsidiaries.
10.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Borrower and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
10.21 Maximum Amount.
A. It is the intention of Loan Parties and Lenders to conform strictly to
the usury and similar laws relating to interest from time to time in force, and
all agreements between Loan Parties and Lenders, whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so
that in no contingency or event whatsoever, whether by acceleration of maturity
hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate
to Lenders or to Administrative Agent on behalf of Lenders as interest hereunder
or under the other Loan Documents or in any other security agreement given to
secure the Obligations, or in any other document evidencing, securing or
pertaining to the indebtedness evidenced hereby or thereby, exceed the maximum
amount permissible under applicable usury or such other laws (the "Maximum
Amount"). If under any circumstances whatsoever fulfillment of any provision
hereof, or any of the other Loan Documents, at the time performance of such
provision shall be due, shall involve exceeding the Maximum Amount, then, ipso
facto, the obligation to be fulfilled shall be reduced to the Maximum Amount.
For the purposes of calculating the actual amount of interest paid and/or
payable hereunder, in respect of laws pertaining to usury or such other laws,
all sums paid or agreed to be paid to the holder hereof for the use, forbearance
or detention of the indebtedness of Borrower evidenced hereby, outstanding from
time to time shall, to the extent permitted by applicable law, be amortized,
pro-rated, allocated and spread from the date of disbursement of the proceeds of
the Loans until payment in full of all of such indebtedness, so that the actual
rate of interest on account of such indebtedness is uniform through the
term hereof. The terms and provisions of this subsection shall control and
supersede every other provision of all agreements between Borrower,
Administrative Agent and the Lenders.
B. If under any circumstances Lenders shall ever receive an amount which
would exceed the Maximum Amount, such amount shall be deemed a payment in
reduction of the principal amount of the Loans and shall be treated as a
voluntary prepayment under subsection 2.4B(i), and shall be so applied in
accordance with subsection 2.4B(iv) hereof, or if such excessive interest
exceeds the unpaid balance of the Loans and any other indebtedness of
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Borrower in favor of Lenders, the excess shall be deemed to have been a payment
made by mistake and shall be refunded to Borrower.
[Remainder of page intentionally left blank]
159
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
CFP HOLDINGS, INC.
By: ______________________________________
Eric W. Ek
Vice President and
Chief Financial Officer
Notice Address:
CFP Holdings, Inc.
1117 West Olympic Boulevard
Montebello, California 90640
Attention: Eric Ek
Fax No.: 213-727-0412
PARENT:
CFP GROUP, INC.
By: ______________________________________
Eric W. Ek
Vice President and
Chief Financial Officer
Notice Address:
CFP Group, Inc.
1117 West Olympic Boulevard
Montebello, California 90640
Attention: Eric Ek
Fax No.: 213-727-0412
S-1
<PAGE>
LENDERS:
NATIONSBANK OF TEXAS, N.A.,
individually and as Administrative Agent
By: ______________________________________
Barry Bobrow
Authorized Signatory
Notice Address:
NationsBank of Texas, N.A.
13th Floor
901 Main Street
Dallas, Texas 75201
Attention: Joyce Gilbert
Fax No.: 214-508-2118
and to:
NationsBank, N.A.
Suite 4100
444 South Flower Street
Los Angeles, California 90071
Attention: Charles McDonell
Fax No.: 213-624-5812
S-2
<PAGE>
NATIONSBANC CAPITAL MARKETS INC,
as Arranging Agent and Syndication Agent
By: ______________________________________
Barry Bobrow
Director
Notice Address:
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: Barry Bobrow
Fax No: 704-388-0612
S-3
<PAGE>
HELLER FINANCIAL, INC.
By: ______________________________________
Name:
Title:
Notice Address:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: Portfolio Manager
Fax No.: 312-441-7367
S-4
<PAGE>
FLEET NATIONAL BANK,
individually and as Documentation Agent
By: ______________________________________
Andy Sassine
Vice President
Notice Address:
Fleet National Bank
One Federal Street
Mail Code: MA OF DO3C
Boston, Massachusetts 02110
Attention: Andy Sassine
Fax No.: 617-346-4806
S-5
<PAGE>
EXECUTION
================================================================================
CREDIT AGREEMENT
DATED AS OF DECEMBER 30, 1996
AMONG
CFP HOLDINGS, INC.,
as Borrower,
CFP GROUP, INC.,
as Parent,
THE LENDERS LISTED HEREIN,
as Lenders,
and
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent,
and
NATIONSBANC CAPITAL MARKETS, INC.,
as Arranging Agent
and
Syndication Agent,
and
FLEET NATIONAL BANK,
as Documentation Agent
================================================================================
<PAGE>
CFP GROUP, INC.
CFP HOLDINGS, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
Section 1. DEFINITIONS.............................................. 2
1.1 Certain Defined Terms.................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement.............................. 43
1.3 Other Definitional Provisions and Rules of Construction.. 43
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS............... 43
2.1 Commitments; Making of Loans; the Register; Notes........ 43
2.2 Interest on the Loans.................................... 52
2.3 Fees..................................................... 56
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral and Payments Under
Subsidiary Guaranty...................................... 57
2.5 Use of Proceeds.......................................... 68
2.6 Special Provisions Governing Eurodollar Rate Loans....... 69
2.7 Increased Costs; Taxes; Capital Adequacy................. 71
2.8 Obligation of Lenders and Issuing Lender to Mitigate..... 76
Section 3. LETTERS OF CREDIT; IRB REIMBURSEMENT AGREEMENT........... 77
3.1 Issuance of Letters of Credit, Execution of IRB
Reimbursement Agreement and Lenders' Purchase of
Participations Therein................................... 77
3.2 Letter of Credit Fees.................................... 80
3.3 Drawings and Reimbursement of Amounts Paid Under Letters
of Credit and the IRB Reimbursement Agreement............ 81
3.4 Obligations Absolute..................................... 84
3.5 Indemnification; Nature of Issuing Lender's Duties....... 85
3.6 Increased Costs and Taxes Relating to Letters of Credit.. 87
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT................ 88
4.1 Conditions to Term Loans, Initial Revolving Loans, Swing
Line Loans and Acquisition Letter of Credit.............. 88
4.2 Conditions to All Loans.................................. 97
4.3 Conditions to Letters of Credit.......................... 98
(i)
<PAGE>
Page
----
Section 5. BORROWER'S REPRESENTATIONS AND WARRANTIES................ 99
5.1 Organization, Powers, Qualification, Good Standing,
Business, Subsidiaries and Restructuring................. 99
5.2 Authorization of Borrowing, etc..........................100
5.3 Financial Condition......................................101
5.4 No Material Adverse Change; No Restricted Junior
Payments.................................................101
5.5 Title to Properties; Liens; Real Property................102
5.6 Litigation; Adverse Facts................................102
5.7 Payment of Taxes.........................................103
5.8 Performance of Agreements; Materially Adverse Agreements;
Material Contracts.......................................103
5.9 Governmental Regulation..................................103
5.10 Securities Activities....................................103
5.11 Employee Benefit Plans...................................104
5.12 Certain Fees.............................................104
5.13 Environmental Protection.................................105
5.14 Employee Matters.........................................105
5.15 Solvency.................................................106
5.16 Matters Relating to Collateral...........................106
5.17 Related Agreements.......................................107
5.18 Disclosure...............................................107
Section 6. PARENT'S AND BORROWER'S AFFIRMATIVE COVENANTS............108
6.1 Financial Statements and Other Reports...................108
6.2 Corporate Existence, etc.................................114
6.3 Payment of Taxes and Claims; Tax Consolidation...........114
6.4 Maintenance of Properties; Insurance; Application of Net
Insurance/Condemnation Proceeds..........................115
6.5 Inspection Rights; Audits of Inventory and Accounts
Receivable; Lender Meeting...............................117
6.6 Compliance with Laws, etc................................118
6.7 Environmental Review and Investigation, Disclosure, Etc.;
Parent's and Borrower's Actions Regarding Hazardous
Materials Activities, Environmental Claims and Violations
of Environmental Laws....................................118
6.8 Execution of Subsidiary Guaranty and Personal Property
Collateral Documents by Certain Subsidiaries and Future
Subsidiaries.............................................120
6.9 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral......................121
6.10 Interest Rate Protection.................................124
6.11 Deposit Accounts.........................................124
6.12 Determination of Borrowing Base..........................124
6.13 Keeping of Books.........................................125
6.14 Compliance with Terms of Leaseholds......................125
(ii)
<PAGE>
Page
----
6.15 Performance of Related Agreements........................126
6.16 Performance of Material Contracts........................126
6.17 Audit of Inventory and Accounts Receivable...............126
Section 7. NEGATIVE COVENANTS.......................................126
7.1 Indebtedness.............................................127
7.2 Liens and Related Matters................................128
7.3 Investments; Joint Ventures..............................130
7.4 Contingent Obligations...................................131
7.5 Restricted Junior Payments...............................132
7.6 Financial Covenants......................................133
7.7 Restriction on Fundamental Changes; Asset Sales and
Acquisitions.............................................137
7.8 Consolidated Capital Expenditures........................138
7.9 Sale or Discount of Receivables..........................139
7.10 Transactions with Shareholders and Affiliates............139
7.11 Disposal of Subsidiary Stock.............................139
7.12 Conduct of Business......................................140
7.13 Amendments or Waivers of Certain Related Agreements;
Amendments of Documents Relating to Bridge Financing and
Permitted Securities Issuance; Designation of "Designated
Senior Indebtedness".....................................140
7.14 Fiscal Year..............................................141
7.15 Charter Amendments.......................................141
7.16 Amendment, Etc. of Material Contracts....................141
7.17 Partnerships, Etc........................................141
7.18 Speculative Transactions.................................141
Section 8. EVENTS OF DEFAULT........................................141
8.1 Failure to Make Payments When Due........................141
8.2 Default in Other Agreements..............................142
8.3 Breach of Certain Covenants..............................142
8.4 Breach of Warranty.......................................142
8.5 Other Defaults Under Loan Documents......................142
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.....142
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.......143
8.8 Judgments, Attachments, etc..............................143
8.9 Dissolution..............................................144
8.10 Employee Benefit Plans...................................144
8.11 Material Adverse Effect..................................144
8.12 Change in Control........................................144
8.13 Invalidity of Guarantees; Failure of Security; Repudiation
of Obligations...........................................144
8.14 Action Relating to Certain Indebtedness..................145
8.15 Conduct of Business By Parent and Borrower...............145
8.16 Preferred Distribution Stock.............................145
(iii)
<PAGE>
Page
----
Section 9. ADMINISTRATIVE AGENT.....................................146
9.1 Appointment..............................................146
9.2 Powers and Duties; General Immunity......................147
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness............................149
9.4 Right to Indemnity.......................................150
9.5 Successor Agent and Swing Line Lender....................150
9.6 Collateral Documents and Guaranties......................151
9.7 Arranging Agent, Syndication Agent and Documentation
Agent....................................................151
Section 10. MISCELLANEOUS............................................152
10.1 Assignments and Participations in Loans, Letters of Credit
and IRB Reimbursement Agreement..........................152
10.2 Expenses.................................................155
10.3 Indemnity................................................156
10.4 Set-Off; Security Interest in Deposit Accounts...........157
10.5 Ratable Sharing..........................................157
10.6 Amendments and Waivers...................................158
10.7 Independence of Covenants................................160
10.8 Notices..................................................160
10.9 Survival of Representations, Warranties and Agreements...160
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative....160
10.11 Marshalling; Payments Set Aside..........................161
10.12 Severability.............................................161
10.13 Obligations Several; Independent Nature of Lenders'
Rights...................................................161
10.14 Headings.................................................161
10.15 Applicable Law...........................................162
10.16 Successors and Assigns...................................162
10.17 Consent to Jurisdiction and Service of Process...........162
10.18 Waiver of Jury Trial.....................................163
10.19 Confidentiality..........................................163
10.20 Counterparts; Effectiveness..............................164
10.21 Maximum Amount...........................................164
Signature pages S-1
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF ACQUISITION LETTER OF CREDIT
V-A FORM OF TERM LOAN A NOTE
V-B FORM OF TRANCHE A TERM NOTE
VI FORM OF TRANCHE B TERM NOTE
VII FORM OF REVOLVING NOTE
VIII FORM OF SWING LINE NOTE
IX FORM OF COMPLIANCE CERTIFICATE
X-A FORM OF OPINION OF O'SULLIVAN GRAEV & KARABELL, LLP
X-B FORM OF OPINION OF FALK & SHARP
XI FORM OF OPINION OF O'MELVENY & MYERS LLP
XII FORM OF ASSIGNMENT AGREEMENT
XIII-A FORM OF LANDLORD CONSENT AND ESTOPPEL (CALIFORNIA
AND KENTUCKY)
XIII-B FORM OF LANDLORD CONSENT AND ESTOPPEL (WAREHOUSE)
XIV FORM OF CERTIFICATE RE NON-BANK STATUS
XV FORM OF FINANCIAL CONDITION CERTIFICATE
XVI FORM OF COLLATERAL ACCOUNT AGREEMENT
XVII FORM OF BORROWER PLEDGE AGREEMENT
XVIII FORM OF BORROWER SECURITY AGREEMENT
XIX FORM OF SUBSIDIARY GUARANTY
XX FORM OF SUBSIDIARY PLEDGE AGREEMENT
XXI FORM OF SUBSIDIARY SECURITY AGREEMENT
XXII FORM OF SUBSIDIARY PATENT SECURITY AGREEMENT
XXIII FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT
XXIV FORM OF PARENT GUARANTY
XXV FORM OF PARENT PLEDGE AGREEMENT
XXVI FORM OF PARENT SECURITY AGREEMENT
XXVII FORM OF MORTGAGE
XXVIII FORM OF BORROWING BASE CERTIFICATE
XXIX FORM OF IRB REIMBURSEMENT AGREEMENT
XXX FORM OF MELF INTERCREDITOR AGREEMENT
(v)
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1C CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT
4.1E INDEBTEDNESS REPAID AT CLOSING
4.1H CLOSING DATE MORTGAGED PROPERTIES AND CERTAIN LEASEHOLD INTERESTS
4.1K FACILITIES REQUIRING ENVIRONMENTAL REPORTS
5.1 SUBSIDIARIES OF BORROWER
5.2B THIRD PARTY CONSENTS
5.2C GOVERNMENTAL CONSENTS
5.4 CERTAIN RESTRICTED JUNIOR PAYMENTS
5.5 REAL PROPERTY
5.6 LITIGATION
5.8 MATERIAL CONTRACTS
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
5.13 ENVIRONMENTAL MATTERS
5.16C PERMITTED UCC FILINGS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.2(vii)PIDA COMMITMENT LETTER
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
9.2 TERMS OF PNC BANK LETTER OF CREDIT
(vi)
<PAGE>
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT dated as
of December 31, 1996, among QUALITY FOODS,
L.P., a Delaware limited partnership (the
"Partnership"), all the partners of the
Partnership as listed on Schedule I hereto
(The "Partners"), all the stockholders of QF
Acquisition Corp., a Delaware corporation
and a general partner of the Partnership
("QFAC") and QF Management Corp., a Delaware
corporation ("QFMC") and a general partner
of the Partnership, as listed on Schedule II
hereto (the "Stockholders"), DAVID COHEN
("Cohen"), ROSS B. KENZIE ("Kenzie"), DANA
D. MESSINA ("Messina"; and, together with
Cohen, Kenzie and the Stockholders listed on
Schedule III hereto, the "Indemnifying
Sellers") and CFP HOLDINGS, INC., a Delaware
corporation (the "Buyer").
The Partnership is engaged in the business (the "Business") of
manufacturing, marketing and selling sliced meat products, emulsified beef,
ground beef patties and meatballs. The Sellers, respectively, own all of the
issued and outstanding capital stock of QFAC (the "QFAC Shares") and QMAC (the
"QMAC Shares"; and, together with the QFAC Shares, collectively, the "Shares")
and all the Limited Partnership Interests. Simultaneously with the consummation
of the transactions contemplated hereby, pursuant to the Exchange Agreement,
certain Sellers whose beneficial owners are also management employees of the
Partnership will be exchanging a portion of certain limited partnership
interests in the Partnership (the "Rollover Interests") for capital stock of New
CFP Holdings with an aggregate value of $1,500,000. The Buyer desires to
purchase from the Sellers all the Shares and the Limited Partnership Interests,
and the Sellers are willing to sell, transfer, convey and deliver the Shares and
the Limited Partnership Interests to the Buyer, upon the terms and subject to
the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
benefits to be derived from this Agreement and the representations, warranties,
covenants, agreements and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. PURCHASE AND SALE OF SECURITIES.
On and subject to the terms and conditions of this Agreement, at the
Closing, the Buyer shall purchase from each of the Sellers, and each of the
Sellers shall sell, transfer, assign, convey and deliver to the Buyer, all of
such Seller's right, title and interest in and to all of the Shares and Limited
Partnership Interests held by such Seller for the consideration described in
Section 2 hereof.
SECTION 2. CONSIDERATION. In consideration of the transfer and sale
of the Shares and the Limited Partnership Interests by the Sellers to the Buyer,
the Buyer shall:
(a) transfer the Initial Cash Payment (payable at the Closing
in immediately available funds by wire transfer to each Seller to an account of
such Seller specified in writing to the Buyer no later than three Business Days
prior to the Closing) to and among the Sellers in the amount set forth opposite
each such Seller's name on Schedule IV hereto;
(b) issue the Seller Notes in the form attached hereto as
Exhibit D in the aggregate principal amount of the Seller Note Amount, payable
at the Closing to and among the Sellers in the amount set forth opposite each
such Seller's name on Schedule IV hereto;
(c) deposit the Escrow Amount, payable at the Closing with the
Escrow Agent by wire transfer to an account specified by the Escrow Agent; and
(d) pay the Additional Cash Payment, if any, payable in
accordance with the provisions of Section 3 and/or Section 10 hereof and
pursuant to the Escrow Agreement.
SECTION 3. ADJUSTMENT OF AGGREGATE CONSIDERATION.
3.1. Delivery of Closing Date Balance Sheet, Etc. As promptly as
practicable but in no event later than 60 days after the Closing Date, the Buyer
shall deliver to the Sellers' Representative a balance sheet of each of the
General Partners and the Partnership and a pro forma combined balance sheet of
the General Partners and the Partnership, in each case as at the Closing Date
(collectively, the "Closing Date Balance Sheet"), all of which shall be prepared
in accordance with generally accepted accounting principles consistently applied
("GAAP") by Deloitte & Touche (the "Buyer's Accountants"), the public
accountants of the Buyer, and shall fairly present the financial position of the
General Partners and the Partnership at the Closing Date; provided, however,
that to the extent any Seller Expenses are deducted from Adjusted Enterprise
Value (or included in Closing Funded Debt deducted from Adjusted Enterprise
Value) to determine the Initial Cash Payment, such Seller Expenses shall
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not be taken into account in the calculation of Closing Working Capital. The
costs of preparing the Closing Date Balance Sheet shall be borne by the Buyer.
3.2. Determination of Closing Working Capital. Simultaneously with
the delivery of the Closing Date Balance Sheet pursuant to Section 3.1 hereof,
the Buyer shall furnish to the Sellers' Representative a notice (the "Notice")
setting forth the Closing Working Capital, which notice shall include such
information indicating how the Closing Working Capital was calculated, together
with copies of the General Partners' and Partnership's (as applicable) work
papers relating to the preparation of the Closing Date Balance Sheet and the
calculation of Closing Working Capital. The Closing Working Capital set forth in
the Notice shall be final and binding upon the parties unless the Sellers'
Representative gives written notice to the Buyer of his objection thereto (the
"Notice of Objection") within 20 days following delivery of the Notice. Any such
Notice of Objection shall state the Sellers' Representative's determination of
the Closing Working Capital in reasonable detail. The Buyer and the Sellers'
Representative shall attempt to resolve in good faith any differences they may
have with respect to any matter specified in any Notice of Objection and reach a
written agreement (the "Settlement") with respect to the Closing Working Capital
within ten days following delivery of any Notice of Objection. If the Buyer and
the Sellers' Representative are unable to reach a Settlement within such ten-day
period, the matters specified in the Notice of Objection shall be referred for
determination as promptly as practicable to a nationally recognized accounting
firm mutually selected by the Buyer and the Sellers' Representative within three
Business Days after the expiration of such ten-day period, or, if the Sellers'
Representative and the Buyer cannot so agree within such three-Business Day
period, such firm shall be selected by lot from among the "Big 6" independent
certified public accounting firms in the United States, other than the Buyer's
Accountants and the Sellers' Accountants (the "Accountants"). The Accountants'
determination (the "Final Determination") shall be (i) in writing, (ii)
delivered to the Buyer and the Sellers' Representative and (iii) conclusive and
binding upon the parties. The fees and expenses of the Accountants shall be
borne equally by the Buyer and the Sellers.
3.3. Adjustments; Payments. (a) Upon the final determination of the
Closing Working Capital pursuant to Section 3.2 hereof, the Aggregate
Consideration shall be adjusted (the aggregate amount of such adjustment being
referred to herein as the "Price Adjustment") as follows: (i) upward, on a
dollar-for-dollar basis, to the extent Closing Working Capital exceeds Estimated
Closing Working Capital and (ii) downward, on a dollar-for-dollar basis, to the
extent Estimated Closing Working Capital exceeds Closing Working Capital.
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(b) In the event of a Price Adjustment upward, the Buyer shall pay
to the Sellers' Representative (for distribution to and among the Sellers pro
rata based on each Seller's Proportionate Percentage) the amount by which
Closing Working Capital exceeds Estimated Closing Working Capital.
(c) In the event of a Price Adjustment downward, each Seller shall
pay the Buyer such Seller's Proportionate Percentage of the amount by which
Estimated Closing Working Capital exceeds Closing Working Capital.
(d) The Price Adjustment, if any, shall be payable within five (5)
days after (i) expiration of the 20-day period following delivery of the Notice,
if no Notice of Objection shall have been delivered during such 20-day period,
(ii) expiration of the 10-day period following delivery of a Notice of
Objection, provided the Buyer and the Sellers' Representative shall have reached
a Settlement within such 10-day period or (iii) the Final Determination, as the
case may be.
(e) Notwithstanding anything contained herein to the contrary, the
Aggregate Consideration shall in no event exceed the Maximum Consideration.
(f) In the event of a Price Adjustment downward, at the Buyer's
option and in its sole discretion, (i) if the Buyer shall not have received the
payments required pursuant to Section 3.3(d) above or (ii) in lieu of payment
directly from the Sellers (provided the Buyer shall have so notified the
Sellers' Representative no less than two Business Days prior to the Final
Settlement Date), the Buyer shall be entitled to instruct the Escrow Agent to
pay to the Buyer out of the Escrow Amount the amount of the Price Adjustment,
provided the Buyer shall deliver to the Sellers' Representative not later than
two Business Days in advance of so instructing the Escrow Agent a copy of the
Buyer's payment instructions to the Escrow Agent.
SECTION 4. CLOSING OF THE TRANSACTION.
4.1. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of O'Sullivan
Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112 on the
later of December 30, 1996, or such other time and place as soon as practicable
following satisfaction of the conditions set forth in Section 9 as the parties
may mutually determine (the "Closing Date").
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4.2. Deliveries at Closing. At the Closing:
(a) There shall be delivered to the Buyer, the General Partners and
the Sellers the opinions, certificates and other documents provided to be
delivered under Section 9 hereof.
(b) The Sellers shall deliver to the Buyer for cancellation
certificates representing all the outstanding Shares and Limited Partnership
Interests.
(c) The Buyer shall deliver or cause to be delivered to the Sellers
the Initial Cash Payment and the Seller Notes in consideration for the Shares
and the Limited Partnership Interests.
(d) The Buyer shall deposit the Escrow Amount with the Escrow Agent.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of
the Sellers represents and warrants severally (as to himself or itself and not
as to any other Seller) to the Buyer as follows:
5.1. Authority. Each Seller that is not a natural person is a
corporation or partnership (as the case may be) duly organized, validly existing
and in good standing under the Laws of the jurisdiction in which it was
organized. The execution, delivery and performance of this Agreement and the
Related Documents to which each Seller is a party, and the consummation of the
Sale, have been duly authorized by all necessary corporate or partnership (as
the case may be) action on the part of such Seller. Such Seller has full legal
right, capacity, power and authority to enter into and perform his or its
respective obligations under this Agreement and the Related Documents to which
such Seller is a party, and this Agreement has been, and each Related Document
to which such Seller is a party, when executed and delivered by such Seller as
contemplated hereby, will be, duly and validly executed and delivered by such
Seller and this Agreement is, and the Related Documents to which such Seller is
a party, when executed and delivered by the parties thereto, will be, the valid
and binding obligation of such Seller, enforceable against such Seller in
accordance with its respective terms, except as enforceability thereof may be
limited by any applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity.
5.2. Noncontravention. Except as set forth on Schedule 5.2 hereto,
neither the execution, delivery and performance by such Seller of this Agreement
or any Related Document to which such Seller is a party, nor the consummation of
the Sale, will (i) result in any violation of, or cause a default (with or
without notice or lapse of time, or both) under, or give
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rise to a right of termination, cancellation or acceleration of any obligations
contained in or the loss of any material benefit under any term, condition or
provision of any Formation Document or Contract to which such Seller is a party,
or by which such Seller or any of his or its properties may be bound or (ii)
violate any Law applicable to such Seller or any of his or its properties, that
in the case of either clause (i) or (ii) would prevent the consummation of the
Sale or result in an Encumbrance on or against any assets, rights or properties
of such Seller or on or against any securities of either General Partner or the
Partnership held by such Seller (or that such Seller has the right to acquire)
or give rise to any claim against such Seller or have any Material Adverse
Effect on such Seller.
5.3. Consents; Litigation. (a) Except as contemplated by this
Agreement or as set forth on Schedule 5.3 hereto, no material Permit,
authorization, consent or approval of or by, or any material notification of or
filing with, any Person (governmental or private) is required in connection with
the execution, delivery and performance by such Seller of this Agreement and any
other Related Document to which such Seller is a party or the consummation by
such Seller of the Sale.
(b) There are no (i) Proceedings pending or, to the knowledge of
each Seller, threatened against such Seller, whether at law or in equity, or
before or by any Governmental Entity or arbitrator or (ii) Orders of any
Governmental Entity or arbitrator against such Seller that, if adversely
determined, would prevent consummation by such Seller of the Sale.
5.4. Title to the Shares and Limited Partnership Interests. Each
Seller is the lawful owner, of record and beneficially, of those Limited
Partnership Interests and Shares (as applicable) set forth opposite his or its
name on Schedule I and Schedule II hereto (as applicable) and at the Closing
will have good and marketable title to such Shares and Limited Partnership
Interests (as applicable), free and clear of any Encumbrances whatsoever and
with no restriction on the voting rights and other incidents of record and
beneficial ownership pertaining thereto. Except for this Agreement or as set
forth on Schedule 5.4 hereto, there are no agreements or understandings between
such Seller and any other Seller or any other Person with respect to the
acquisition, disposition or voting of or any other matters pertaining to any of
the capital stock of either General Partner or any equity interests of the
Partnership. Such Seller acquired his or its Shares and Limited Partnership
Interests (as applicable) in one or more transactions exempt from registration
under the Securities Act and in compliance with applicable state securities
laws.
5.5. Bankruptcy, Etc. Such Seller is not involved in any proceeding
by or against such Seller as a debtor in any court under Title 11 of the United
States Bankruptcy Code or any other
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insolvency or debtors' relief act, whether state or Federal, or for the
appointment of a trustee, receiver, liquidator, assignee, sequestrator or other
similar official of such Seller or of a substantial part of such Seller's
property.
5.6. Taxes. Except as set forth on Schedule 5.6 hereto, no Seller
has been notified by the Internal Revenue Service or any other taxing authority
that any issues have been raised (and are currently pending) by the Internal
Revenue Service or any other taxing authority in connection with any Tax Return
of such Seller with respect to either General Partner or the Partnership.
5.7. Related Party Transactions. Except for ordinary compensation to
regular employees of either General Partner or the Partnership, such Seller is
not now, and has not been during the last four fiscal years, (i) a party to any
transaction with either General Partner or the Partnership or any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from, or otherwise
requiring payments to, any such Person, or (ii) the direct or indirect owner of
an interest in any corporation, firm, association or business entity that is a
present or potential competitor, supplier or customer of either General Partner
or the Partnership (other than non-affiliated holdings in publicly-held
companies), nor does any such Person receive income from any source other than
either General Partner or the Partnership that relates to the Business or the
business of, or should properly accrue to, either General Partner or the
Partnership.
5.8. Disclosure. No representation or warranty made by such Seller
in Section 5 or elsewhere in this Agreement or in any Related Document to which
such Seller is a party or in any document, statement, financial statement,
certificate, schedule or exhibit prepared and furnished, or to be prepared and
furnished, by or on behalf of any such Seller delivered pursuant to this
Agreement or any Related Document to which such Seller is a party or in any
certificate otherwise delivered by or on behalf of such Seller in connection
with the Sale, when taken together, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances under
which they were furnished, and to the actual knowledge of such Seller, there is
no previous or current event, fact or condition that presently has or will have
a Material Adverse Effect with respect to either General Partner or the
Partnership that has not been set forth in this Agreement or in the Schedules
hereto.
5.9. Limitations. Except for the representations and warranties of
the Sellers contained in this Agreement or in any Schedule, Exhibit, certificate
or other instrument delivered
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pursuant hereto or to any Related Document to which such Seller is a party or in
any certificate otherwise delivered by or on behalf of such Seller in connection
with the Sale, no Seller makes any representation or warranty.
5.10. Investment Intent. (a) Each Seller is acquiring the Seller
Notes being issued to such Seller hereunder for such Seller's own account, for
investment and not with a view to the distribution thereof, nor with any present
intention of distributing the same, other than the possible distribution to a
limited number of equity holders of any such Seller.
(b) Such Seller understands that the Seller Notes have not been
registered or qualified under the Securities Act or any applicable state
securities laws, by reason of their issuance in a transaction exempt from the
registration or qualification requirements of the Securities Act and such laws,
and that the Seller Notes must be held indefinitely.
(c) Such Seller (i) has been furnished with or has had access to the
information such Seller has requested from the Buyer, (ii) has had an
opportunity to discuss with management of the Buyer the business and financial
affairs of the Buyer and its Affiliates and (iii) has generally such knowledge
and experience in business and financial matters and with respect to investments
in securities of privately held companies so as to enable such Seller to
understand and evaluate the risks of and form an investment decision with
respect to such Seller's investment in the Seller Notes.
(d) Such Seller is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated pursuant to the Securities Act.
(e) Such Seller is a resident of the State set forth opposite such
Seller's name on Schedule 5.10 hereto.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF EACH GENERAL PARTNER
AND THE PARTNERSHIP. Except where the context otherwise requires, each reference
in this Section 6 to the General Partner shall be deemed to include each General
Partner and each reference to the General Partner or the Partnership shall be
deemed to include reference to each Subsidiary of each General Partner or the
Partnership. The General Partner and the Partnership hereby represent and
warrant to the Buyer as follows:
6.1. Organization; Good Standing; Qualification and Power. The
General Partner is a corporation and the Partnership is a limited partnership,
in each case duly organized, validly existing and in good standing under the
Laws of the State of Delaware. Each of the General Partner and the Partnership
has all requisite power and authority to own, lease and operate its
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properties and to carry on its business as now being conducted, to enter into
this Agreement and the Related Documents to which it is a party, to perform its
obligations hereunder and thereunder and to permit the consummation of the
Transaction, and, except as set forth on Schedule 6.1 hereto, is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify would not result
in a Material Adverse Effect on the General Partner or the Partnership, as the
case may be. The jurisdictions in which the General Partner or the Partnership
is qualified as a foreign entity are set forth on Schedule 6.1 hereto. Except as
set forth on Schedule 6.1 hereto, the Business has not in the last four years
been operated using any name other than "Quality Foods, L.P." True and complete
copies of the Formation Documents of each of the General Partner and the
Partnership, in each case as amended to the date hereof, have been delivered to
the Buyer.
6.2. Equity Investments. Except for its interest in the Partnership
in the case of the General Partner, neither the General Partner nor the
Partnership currently has any Subsidiaries, nor does it currently own any
capital stock or other proprietary interest, directly or indirectly, in any
Person.
6.3. Equity Ownership. The authorized capital stock of QFAC consists
of 5,000 shares of Class A Common Stock, 5,000 shares of Class B Common Stock
and 10,000 shares of Preferred Stock, $.01 par value, of which, as of the date
hereof and immediately prior to the Closing, 1,960 shares of Class A Common
Stock are and will be outstanding and 140 shares of Class B Common Stock are and
will be outstanding. The authorized capital stock of QFMC consists of 1,000
shares of Class A Common Stock and 1,000 shares of Class B Common Stock, of
which, as of the date hereof and immediately prior to the Closing, 90 shares of
Class A Common Stock are and will be outstanding and 10 shares of Class B Common
Stock are and will be outstanding. All of such shares are validly issued, fully
paid and non-assessable. Schedule 6.3 hereto lists each partner of the
Partnership and the amount and type of interest in the Partnership held by such
partner. Except as set forth on Schedule 6.3 hereto, there are no securities of
the General Partner or the Partnership presently outstanding, and on the Closing
Date there will not be any outstanding securities of the General Partner or the
Partnership, that are convertible into, exchangeable for, or carry the right to
acquire, equity securities of the General Partner or the Partnership, or
subscriptions, warrants, options, calls, puts, convertible securities,
registration or other rights, arrangements or commitments obligating the General
Partner or the Partnership to issue, sell, register, purchase or redeem any of
its equity securities or any ownership interest or rights therein. Except as set
forth on Schedule 6.3 hereto, there are
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no voting trusts or other agreements or understandings to which either the
General Partner or the Partnership is bound with respect to the voting of the
securities of the General Partner or the Partnership. There are no stock
appreciation rights, phantom stock rights or similar rights or arrangements
outstanding with respect to either the General Partner or the Partnership.
6.4. Authority; Noncontravention; Consents. (a) The execution,
delivery and performance of this Agreement and the Related Documents to which
the General Partner or the Partnership is a party and the consummation of the
Sale have been duly authorized by all necessary corporate or partnership (as the
case may be) action on the part of the General Partner or the Partnership (as
the case may be); and this Agreement has been, and the Related Documents, when
executed and delivered by the General Partner and the Partnership (as
applicable) will be, duly and validly executed and delivered by the General
Partner and the Partnership (as applicable) and this Agreement is, and the
Related Documents, when executed and delivered by the parties thereto will be,
the valid and binding obligations of the General Partner and the Partnership (as
applicable), enforceable against the General Partner or the Partnership (as the
case may be) in accordance with their respective terms, except as enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other laws affecting creditors' rights generally or by general principles of
equity.
(b) Except as set forth on Schedule 6.4 hereto, neither the
execution, delivery and performance of this Agreement and the Related Documents
to which the General Partner or the Partnership is a party, nor the consummation
of the Transaction will (i) result in any violation of, or cause a default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation contained in or the
loss of any material benefit, or result in the creation of any Encumbrance upon
any of the properties or assets of the General Partner or the Partnership, under
any term, condition or provision of (x) the Formation Documents of the General
Partner or the Partnership or (y) any material Contract to which the General
Partner or the Partnership is a party or by which its properties or assets are
bound, (ii) result in any investigatory, remedial or reporting obligation under
any Environmental and Safety Requirement or other applicable Law or (iii)
violate any Law applicable to the General Partner or the Partnership or any of
their respective properties.
(c) Except as set forth on Schedule 6.4 hereto, no consent,
approval, Order or authorization of, registration, declaration or filing with,
or notification to any Governmental Entity or any other third party is required
in connection with the execution, delivery and performance by the General
Partner or the Partnership of this Agreement and the Related Documents to
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which the General Partner or the Partnership is a party or the consummation of
the Transaction.
6.5. Financial Statements. (a) The General Partner
has previously delivered to the Buyer true and correct copies of
the following financial statements (collectively, the "Financial
Statements"):
(i) the audited balance sheet of the Partnership as of
December 31, 1993, December 31, 1994 and December 31, 1995, and the
related statements of operations, partners' equity or partners'
capital (as the case may be) and cash flows, and the footnotes and
schedules thereto, for each of the fiscal periods then ended;
(ii) the unaudited balance sheet of the General Partner as of
December 31, 1995 and the related statement of income for the 12
months then ended;
(iii) the unaudited balance sheet of each of the General
Partner as of September 30, 1996 and the Partnership as of October
5, 1996 (each, the "Latest Balance Sheet" and each such date being
the "Latest Balance Sheet Date"), and the related statement of
income with respect to the General Partner for the nine-month period
then ended and the statements of operations, partners' equity or
partners' capital and cash flows for the 40-week period then ended,
as applicable; and
(iv) the unaudited balance sheet of the Partnership as of
October 7, 1995 and October 5, 1996, and the related statements of
operations, partners' equity or partners' capital and cash flows for
each of the 12-month periods then ended.
(b) Except as set forth on Schedule 6.5 hereto, the Financial
Statements of the Partnership (i) are in accordance with the books and records
of the Partnership, (ii) fairly present, in all material respects, the financial
condition of the Partnership as at the respective dates indicated and the
results of operations, partners' capital and cash flows of the Partnership for
the respective periods indicated and (iii) have been prepared in accordance with
GAAP throughout the periods covered thereby except, with respect to the
unaudited Financial Statements, for the absence of footnotes and except as such
unaudited Financial Statements may be subject to year-end adjustments.
(c) The Financial Statements relating to the General Partner are
correct in all material respects.
(d) The books and records of the General Partner and the Partnership
have been established and maintained in
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accordance with sound business and accounting practices, are materially correct
and, taken as a whole, fairly and accurately present the financial condition of
the General Partner and the Partnership.
6.6. Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.6 hereto, neither the General Partner nor the Partnership has any
material Liability, except for (i) Liabilities reflected or reserved against in
the Liabilities section of the Latest Balance Sheet and (ii) Liabilities that
have arisen since the date of the Latest Balance Sheet in the ordinary course of
business (none of which arise from any breach of contract, breach of warranty,
tort, infringement, violation of Law or any action, suit or Proceeding
(including any Liability under any Environmental and Safety Requirement)). There
were no loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) that were not adequately provided for on the Latest Balance Sheet.
Except as set forth on Schedule 6.6 hereto, neither the General Partner nor the
Partnership has, either expressly or by operation of Law, assumed or undertaken
any Liability of any other Person, including, without limitation, any obligation
for corrective or remedial action relating to Environmental and Safety
Requirements.
6.7. Absence of Changes. Since the Latest Balance Sheet Date, (a)
there has not been any Material Adverse Change with respect to the General
Partner, the Partnership or the Business and (b) except as set forth on Schedule
6.7 hereto, the Business has been operated in the ordinary course, consistent
with past practice, and:
(i) no fee, interest, dividend, distribution, redemption, royalty or
any other payment of any kind has been made by the General Partner or the
Partnership to any stockholder or partner or any Affiliate of any of the
foregoing, other than the payment in the ordinary course to stockholders who are
employees of the Business of their current salary;
(ii) neither the General Partner nor the Partnership has made any
contributions to any Employee Plan except in the ordinary course of business,
consistent with past practice;
(iii) neither the General Partner nor the Partnership has
accelerated, terminated, modified or canceled, and neither the General Partner
nor the Partnership has received written notice of any acceleration,
termination, modification or cancellation by any third party of, any Contract
(or series of related Contracts) involving more than $25,000 (other than any
purchase order or other Contract relating to the purchase or sale of products or
services which by its terms contemplates performance in full within 60 days
after the date thereof) to
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which it is a party or by which it is bound and, to the Knowledge of the General
Partner and the Partnership, no party intends to take any such action;
(iv) neither the General Partner nor the Partnership has experienced
any material damage, destruction or loss (whether or not covered by insurance)
to any of its assets or property;
(v) neither the General Partner nor the Partnership has incurred any
Funded Debt, or any increase in the amount payable by such Person, under any
credit or loan agreement to which such Person is a party;
(vi) neither the General Partner nor the Partnership has taken any
action that would violate any of the negative covenants set forth in Section 8.2
of this Agreement if said Section 8.2 were in effect on the Latest Balance Sheet
Date; and
(vii) there has been no agreement, understanding or authorization,
whether in writing or otherwise, for either the General Partner or the
Partnership to take any of the actions specified in items (i) through (vi)
above, except in connection with the consummation of the transactions expressly
contemplated by this Agreement.
6.8. Tax Matters. Except as set forth on Schedule 6.8 hereto, each
of the General Partner, the Partnership, each predecessor of the foregoing and
each other Person included in any consolidated or combined tax return and part
of an affiliated group, within the meaning of Section 1504 of the Code, of which
the General Partner is or has been a member, (a) has timely paid in full all
Taxes, including those shown to be due on each of the Tax Returns, required to
be paid by it through the date hereof and on the Closing Date will have timely
paid in full all Taxes required to be paid by it on or before such date and (b)
has filed or caused to be filed in a timely manner (within any applicable
extension periods) all Tax Returns required to be filed by it with appropriate
Governmental Entities in all jurisdictions in which the Tax Returns are required
to be filed, and all such Tax Returns accurately set forth the income,
deductions and expenses of such Person during the applicable period. Except as
set forth on Schedule 6.8 hereto, no Tax liens have been filed against the
General Partner or the Partnership and neither the General Partner nor the
Partnership has been notified by the Internal Revenue Service or any other
taxing authority that any issues have been raised (and are currently pending) by
the Internal Revenue Service or any other taxing authority in connection with
any Tax Return filed by it, and no waivers of statutes of limitation have been
given or requested by the General Partner or the Partnership. There are no
pending Tax audits of any Tax Returns relating to the General Partner, the
Partnership or any predecessor of the foregoing. No unresolved deficiencies or
additions to Taxes have been proposed, asserted
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or assessed against the General Partner, the Partnership or any predecessor of
the foregoing or any member of any affiliated or combined group of which the
General Partner or the Partnership or any predecessor of the foregoing was or is
a member. Each of the General Partner and the Partnership has established (in
the case of the Partnership but not the General Partner, in accordance with
GAAP) reserves on its Latest Balance Sheet that are adequate for all Taxes not
yet due and payable for all periods ending on the date of the Latest Balance
Sheet, and neither the General Partner nor the Partnership has incurred any Tax
liability from its Latest Balance Sheet Date through the date hereof, other than
Taxes incurred in the ordinary course of business. The General Partner has not
made an election to be treated as a "consenting corporation" under Section
341(f) of the Code and the General Partner is not, nor has it ever been, a
"personal holding company" within the meaning of Section 542 of the Code. As of
the Closing Date, the fair market value of the Partnership's "United States real
property interests" (as such term is defined in Section 897 of the Code) is less
than 50% of the fair market value of all of the Partnership's assets that are
used or held for use in a trade or business. Except as set forth on Schedule 6.8
hereto, the General Partner and the Partnership have, and each of their
respective predecessors has, complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, sales and use Taxes, and amounts required by Law to be
withheld and paid from the wages or salaries of employees), and neither the
General Partner nor the Partnership or any predecessor of any of the foregoing
is, or has ever been, liable for any Taxes for failure to comply with such Laws.
Neither the General Partner nor the Partnership or any predecessor of any of the
foregoing is, nor has it ever been, a party to any Tax sharing agreement.
Neither the General Partner nor the Partnership has agreed to or is required to,
and neither Person will be obligated to, based on any actions taken before the
Closing Date, make any adjustments to its existing tax accounting method by
reason of Section 481 of the Code, or due to a determination by representatives
or advisors of such Person that any existing method of accounting is not
permissible or appropriate. The Internal Revenue Service has not proposed any
such adjustments or changes in any such accounting method. There is no Contract
covering any Person that individually or collectively could, as a result of the
transactions contemplated hereby or otherwise, give rise to the payment of any
amount being non-deductible by the General Partner or the Partnership by reason
of Section 280(G) of the Code. The Partnership has not made, and will not make,
except with the prior written consent of the Buyer, an election pursuant to
Section 754 of the Code. The General Partner has not changed its taxable year
since its inception.
6.9. Title to Properties. (a) Except as set forth on Schedule 6.9
hereto, each of the General Partner and the Partnership has, and upon
consummation of the Roll-up QFAC will
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have, good (and, in the case of the Owned Real Property, marketable) title, free
and clear of all Encumbrances (other than Permitted Encumbrances), to all of the
assets, rights, interests and other properties, real, personal and mixed,
tangible and intangible, owned by such Person (collectively the "Assets"),
including but not limited to, all assets reflected on the Latest Balance Sheet
and the Intellectual Property Rights referred to in Section 6.11.
(b) Except as set forth on Schedule 6.9(b) hereto, the facilities,
machinery, equipment and other tangible assets of the General Partner and the
Partnership are generally in good condition and repair, fit for their particular
purpose, and are adequate for the conduct of the General Partner's and the
Partnership's business, subject to normal maintenance and ordinary wear and
tear. The General Partner and the Partnership own or lease under valid leases
all facilities, machinery, equipment and other assets (real, personal and mixed,
tangible and intangible) necessary for the conduct of the Business as conducted
as of the date hereof.
(c) The General Partner has previously delivered to the Buyer a true
and complete listing of the fixed assets included in the Assets that,
individually, have a value in excess of $1,000. Schedule 6.9(c) hereto specifies
the locations of the Assets. At all times during which the General Partner or
the Partnership owned the Assets, none of the Assets were located (or, in the
case of the vehicles, garaged) at any place other than the places set forth on
Schedule 6.9(c) hereto, except for (i) periods in which the Assets were in
transit to the General Partner or the Partnership (as the case may be) in the
ordinary course of business and (ii) periods in which the Assets were being
repaired off premises in the ordinary course of business.
(d) Schedule 6.9(d) hereto contains a list of all real property (the
"Real Property") currently owned (the "Owned Real Property") or currently leased
(the "Leased Real Property") by the General Partner or the Partnership,
indicating in each case the owner or, as applicable, the lessee and the lessor
thereof. With respect to real property owned or leased by the General Partner or
the Partnership, except as set forth on Schedule 6.9(d) hereto:
(i) such Person is the owner and holder of all the leasehold
estates purported to be granted by each lease;
(ii) each lease is in full force and effect and constitutes a
valid and binding obligation of such Person;
(iii) no Person other than such Person has any right of use or
occupancy of any portion of the Real Property;
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(iv) no portion of the Real Property is subject to any pending
condemnation Proceeding by any public or quasi-public authority and,
to the Knowledge of the General Partner and the Partnership, there
is no threatened condemnation Proceeding with respect thereto;
(v) to the Knowledge of the General Partner and the
Partnership, the physical condition of the Real Property is
sufficient to permit the continued conduct of the Business as
presently conducted;
(vi) upon consummation of the Roll-up, QFAC will be the owner
and holder of all the leasehold estates purported to be granted by
each relating to the Leased Real Property and, subject to obtaining
the consents with respect to such leases set forth on Schedule 6.4
hereto, each such lease will be in full force and effect and
constitute a valid and binding obligation of the General Partner;
(vii) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special
assessment has been received by the General Partner or the
Partnership and, to the Knowledge of the General Partner and the
Partnership, there is no threatened special assessment pertaining to
any of the Real Property; and
(viii) with respect to the Leased Real Property, there has
been no correspondence or, to the Knowledge of the General Partner
and the Partnership, discussions with the landlord concerning
renewal terms for those leases scheduled to expire within 12 months
of the date of this Agreement.
The General Partner has delivered to the Buyer true and complete copies of all
leases referred to on Schedule 6.9(d) hereto.
(e) Except as set forth on Schedule 6.9(e) hereto, neither the
General Partner nor the Partnership owns or operates any vehicles, boats,
aircraft, apartments or other recreational or residential properties or
facilities for executive, administrative or sales purposes. Neither the General
Partner nor the Partnership owns or pays for any social club memberships,
whether or not for the benefit of the Business and/or its executives.
6.10. Inventory. Except as set forth on Schedule 6.10 hereto, none
of the inventory of the General Partner and the Partnership includes any items
that are below standard quality, or of a quality or quantity not usable or
salable in the normal course of business, the aggregate value of which has not
been written down on the books of account of the General Partner or the
Partnership, as the case may be, to realizable market value
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or with respect to which adequate reserves have not been provided in accordance
with GAAP.
6.11. Intellectual Property. Except in each case as set forth on
Schedule 6.11 hereto:
(a) the Partnership has, and upon consummation of the Roll-up QFAC
will have, the exclusive right to use, sell, license, dispose of, bring actions
for the infringement of, all Intellectual Property Rights necessary or required
for the conduct of the Business as currently conducted, and such rights to use,
sell, license, dispose of and bring actions are, and will be, sufficient for
such conduct of the Business;
(b) there are no royalties, honoraria, fees or other payments
payable by the General Partner or the Partnership to any Person by reason of the
ownership, use, license, sale or disposition of the Intellectual Property
Rights;
(c) no activity, service or procedure currently or proposed to be
conducted by the General Partner or the Partnership violates or will violate any
Contract of the General Partner or the Partnership with any third party or
infringe any Intellectual Property Right of any other party;
(d) since January 1, 1993, neither the General Partner nor the
Partnership has received from any third party any notice, charge, claim or other
assertion that the General Partner or the Partnership is infringing any
Intellectual Property Right of any third party or has committed any acts of
unfair competition, and no such claim is impliedly threatened by an offer to
license from a third party under a claim of use;
(e) neither the General Partner nor the Partnership has sent to any
third party in the past four years nor otherwise communicated to another Person
any notice, charge, claim or other assertion of infringement by or
misappropriation of any Intellectual Property Right of the General Partner or
the Partnership by such other Person or any acts of unfair competition by such
other Person, nor is any such infringement, misappropriation or unfair
competition occurring or, to the Knowledge of the General Partner and the
Partnership, threatened;
(f) to the Knowledge of the General Partner and the Partnership, no
patent, formulation, invention, device, application or principle nor any
statute, law, rule, regulation, standard or code relating to any Intellectual
Property Right, exists or is pending or proposed that would have a Material
Adverse Effect on the Business as presently conducted.
Schedule 6.11 hereto contains a true and complete list of all applications,
filings and other formal actions made or taken pursuant to Federal, state, local
and foreign Laws by the General
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Partner or the Partnership to perfect or protect its interest in the
Intellectual Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights and copyright applications.
6.12. Agreements; No Defaults; Etc. Except as set forth on Schedule
6.12 hereto, neither the General Partner nor the Partnership is a party to any:
(a) Contract involving aggregate consideration in excess of $25,000
per annum for the employment of any officer, individual employee or other Person
on a full-time, part-time, consulting or other basis (other than oral contracts
terminable at will by the General Partner or the Partnership, as the case may
be, without any obligation to pay any severance in excess of the general
severance policies described on Schedule 6.17 hereto);
(b) Contract with any Affiliate;
(c) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any asset or group
of assets of such Person;
(d) Contract relating to any guarantee of any obligation for
borrowed money or otherwise;
(e) Contract with respect to the lending or investing of funds;
(f) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or confidential
information; provided, however, neither the General Partner nor the Partnership
shall have any obligation to disclose the identity of any Person that subsequent
to March 1, 1996 and prior to the date hereof expressed an interest in acquiring
the Business;
(g) Contract or group of related Contracts with the same party
(excluding purchase orders entered into in the ordinary course of business that
are to be completed within three months of entering into such purchase orders)
for the purchase or sale of products or services under which the undelivered
balance of such products and services has a selling price in excess of $50,000;
(h) Contract that prohibits it from freely engaging in business
anywhere in the world;
(i) Contract relating to the manufacturing, purchase, distribution,
marketing or sales of its or any other Person's products;
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(j) factoring arrangement or other agreement involving the sale of
such Person's accounts receivable to a third party at a discount; or
(k) other Contract (i) that is not terminable by either party
without penalty upon not more than 30 days' advance notice and involves
aggregate consideration in excess of $10,000; (ii) that involves aggregate
consideration in excess of $25,000 (excluding in the case of each of clauses (i)
and (ii) above any purchase order or other Contract relating to the purchase or
sale of products or services that by its terms contemplates performance in full
within 60 days after the date thereof); or (iii) material to the Business not
entered into in the ordinary course of business.
Except as set forth on Schedule 6.12 hereto, the General Partner or the
Partnership (as applicable) is not in breach or default or, to the Knowledge of
the General Partner and the Partnership, alleged to be in breach or default in
any material respect under any Contract listed on Schedule 6.12 hereto, and
there exists no event, condition or occurrence which, after notice or lapse of
time, or both, would constitute such a default by the General Partner or the
Partnership (as applicable) of any of the foregoing. The General Partner has
provided to the Buyer true and complete copies of all documents listed on
Schedule 6.12 hereto and true and correct descriptions of all material terms of
any oral Contracts listed Schedule 6.12 hereto.
6.13. Litigation, Etc. Except as set forth on Schedule 6.13 hereto,
there are no (a) Proceedings pending or, to the Knowledge of the General Partner
and the Partnership, threatened against the General Partner or the Partnership,
whether at law or in equity, or before or by any Governmental Entity or
arbitrator or (b) Orders of any Governmental Entity or arbitrator against the
General Partner or the Partnership. Except as set forth on Schedule 6.13 hereto,
neither the General Partner nor the Partnership is bound by any Order relating
to the Business. The General Partner has delivered to the Buyer true and correct
copies of the documents listed on Schedule 6.13 hereto and of such other
documents relating to such matters referred to on Schedule 6.13 hereto as the
Buyer shall have requested.
6.14. Compliance; Governmental Authorizations. Except as set forth
on Schedule 6.14 hereto, the business of the General Partner and the Business
have not been, and are not being, conducted in violation in any material respect
of any Law, or Permit, including, without limitation, Environmental and Safety
Requirements and all Laws respecting labor, employment and employment practices,
terms and conditions of employment and wage and hours. To the Knowledge of the
General Partner and the Partnership, no investigation or review by any
Governmental Entity with respect to the Business is pending or threatened, nor
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has any Governmental Entity notified the General Partner or the Partnership of
its intention to conduct the same. Except as set forth on Schedule 6.14 hereto,
(a) the General Partner and the Partnership have, and upon consummation of the
Roll-up QFAC will have, all Permits necessary for the conduct of their
respective businesses (including the Business), including those required under
any Environmental and Safety Requirements, (b) such Permits are in full force
and effect and (c) no violations are or have been recorded in respect of any
such Permits. Schedule 6.14 hereto contains a true and complete list of all
material Permits under which the General Partner, the Partnership or the
Business is operating or bound, and the General Partner has furnished to the
Buyer true and complete copies thereof.
6.15. Insurance. Schedule 6.15 hereto lists each insurance policy
maintained by the General Partner or the Partnership with respect to their
respective properties, assets and businesses (including the Business). Except as
set forth on Schedule 6.15 hereto, all of such insurance policies are in full
force and effect and are of a type, in such amounts and insure the General
Partner or the Partnership (as the case may be) against such losses and risks as
are adequate for the conduct of the General Partner's and the Partnership's
businesses as currently conducted; all premiums due and payable with respect to
such policies have been paid and are not subject to adjustment; and neither the
General Partner nor the Partnership is in default with respect to its
obligations under any of such insurance policies, has received any notification
of cancellation of any of such insurance policies or has any claim outstanding
that could reasonably be expected to cause a material increase in the insurance
rates. To the Knowledge of the General Partner and the Partnership, no facts or
circumstances exist that would relieve the insurer under any such policy of its
obligation to satisfy in full any claim thereunder. Neither the General Partner
nor the Partnership has received any notice that (i) any of such policies has
been or will be canceled or terminated or will not be renewed on substantially
the same terms as are now in effect or (ii) the premium on any of such policies
will be materially increased on the renewal thereof.
6.16. Labor Relations; Employees. (a) Except as set forth on
Schedule 6.16 hereto, (i) neither the General Partner nor the Partnership is
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
any such employee to date or amounts required to be reimbursed to any such
employee; (ii) there is no unfair labor practice complaint against the General
Partner or the Partnership pending before the National Labor Relations Board or
any other Governmental Entity; (iii) there is no labor strike, material labor
dispute, work slowdown or stoppage actually pending or, to the Knowledge of the
General Partner and the Partnership, threatened against or involving the General
Partner or the Partnership; (iv) no labor
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union currently represents the employees of the General Partner or the
Partnership; (v) no officer or senior executive employee has informed the
General Partner or the Partnership that such employee will or is reasonably
likely to terminate his or her employment or engagement with the General Partner
or the Partnership; (vi) neither the General Partner nor the Partnership is a
party to or bound by any collective bargaining agreement, union contract or
similar agreement; and (vii) upon termination of the employment of any employee
of the General Partner or the Partnership by the General Partner or the
Partnership (as the case may be) prior to the Closing, neither the Buyer nor the
General Partner or the Partnership will, by reason of any action taken or
omitted to be taken prior to the Closing, be liable to any such employee for
severance pay or any other payments.
(b) No valid claim has been asserted by any third party against the
General Partner or the Partnership, the Business or any of the Designated
Persons (as hereinafter defined) with respect to (i) the employment by, or
association with such Person of any of the present officers or employees of or
consultants to such Person (said officers, employees and/or consultants being
hereinafter collectively referred to as the "Designated Persons") or (ii) the
use in connection with the business of the General Partner or the Partnership by
any of the Designated Persons of any information that such Person or any of the
Designated Persons is prohibited from using, in each case under any agreements,
arrangements or other set of facts, including, without limitation, any such
agreement or arrangement between any of the Designated Persons, or any legal or
equitable considerations applicable to, among other things, unfair competition,
trade secrets or proprietary information.
6.17. ERISA Compliance. (a) Set forth on Schedule 6.17 hereto is a
true and complete list of all Employee Plans. Except as set forth on Schedule
6.17 hereto, all Employee Plans have been operated and administered in
compliance in all material respects with ERISA, the Code and other applicable
Law.
(b) Except as set forth on Schedule 6.17 hereto:
(i) each Employee Plan, if intended to be "qualified" within
the meaning of Section 401(a) of the Code, has been determined by
the Internal Revenue Service to be so qualified and, to the
Knowledge of the General Partner and the Partnership, nothing has
occurred that has affected or could reasonably be expected to affect
adversely such qualification or exemption;
(ii) neither the General Partner or the Partnership nor any of
their respective ERISA Affiliates, nor, to the Knowledge of the
General Partner and the Partnership, any other "disqualified person"
or "party in interest" (as such terms are defined in Section 4975 of
the
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Code and Section 3(14) of ERISA, respectively) with respect to an
Employee Plan has breached the fiduciary rules of ERISA or engaged
in a prohibited transaction that could subject the General Partner
or the Partnership to any tax or penalty imposed under Section 4975
of the Code or Section 502(i), (j) or (l) of ERISA;
(iii) all required or declared contributions (or premium
payments) to (or in respect of) all Employee Plans have been
properly made when due, and each of the General Partner and the
Partnership (as applicable) has timely deposited all amounts
withheld from employees for pension, welfare or other benefits into
the appropriate trusts or accounts;
(iv) no Proceedings (other than routine claims for benefits)
are pending or, to the Knowledge of the General Partner and the
Partnership, threatened with respect to or involving any Employee
Plan;
(v) except as may be required under Laws of general
application and except as set forth in paragraph (a) of Schedule
6.17 hereto, none of the Employee Plans obligates the General
Partner or the Partnership to provide any employee or former
employee, or their spouses, family members or beneficiaries, any
post-employment or post-retirement health or life insurance,
accident or other "welfare-type" benefits;
(vi) each Employee Plan that is a "group health plan" within
the meaning of Section 5000 of the Code has been maintained in
compliance with Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA and no tax payable on account of Section 4980B of
the Code has been or is expected to be incurred;
(vii) neither the General Partner or the Partnership nor any
of their respective ERISA Affiliates is or has ever maintained or
been obligated to contribute to a "multiple employer plan" (as
defined in Section 413 of the Code), a "multiemployer plan" (as
defined in Section 3(37) of ERISA) or a "defined benefit pension
plan" (as defined in Section 3(35) of ERISA); and
(viii) except as set forth on Schedule 6.8 hereto all
reporting and disclosure obligations imposed under ERISA and the
Code have been satisfied with respect to each Employee Plan.
(c) The General Partner has provided the Buyer with true and
complete copies of all documents pursuant to which each Employee Plan is
maintained and administered, the two most recent annual reports (Form 5500 and
attachments) and financial
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statements therefor, all governmental rulings, determinations, and opinions (and
pending requests therefor), and the most recent valuation of the present and
future obligations under each Employee Plan that provides post-retirement or
post-employment health and life insurance, accident, or other "welfare-type"
benefits, if any. The foregoing documents accurately reflect all material terms
of each of the Plans.
6.18. Environmental Matters. (a) Except as set forth on Schedule
6.18(a) hereto, neither the General Partner or the Partnership nor, to their
Knowledge, any of their respective past owned or leased real properties or
operations are subject to any Proceeding, Order or other Contract arising under
Environmental and Safety Requirements, nor has any investigation been commenced
or, to the Knowledge of the General Partner and the Partnership, is any
Proceeding threatened against the General Partner or the Partnership under any
Environmental and Safety Requirement.
(b) Except as set forth on Schedule 6.18(b) hereto, neither the
General Partner nor the Partnership has received any written notice, report or
other information regarding any actual or alleged violation of any Environmental
and Safety Requirement, or any Liabilities, including any investigatory,
remedial or corrective obligations under any Environmental and Safety
Requirement.
(c) Schedule 6.18(c) hereto sets forth a complete and accurate list
of all real property previously owned, leased or operated by the General Partner
or the Partnership or any legal predecessor of such Person.
(d) Except as set forth on Schedule 6.18(d) hereto, none of the
following exists, nor has ever existed, at any of the Real Property or any other
real property previously owned or operated by the General Partner or the
Partnership or any legal predecessor of such Person: (i) underground storage
tanks; (ii) asbestos-containing material in any form or condition; (iii)
materials or equipment containing polychlorinated biphenyls; or (iv) landfills,
surface impoundments, disposal areas or contaminated areas.
(e) Except as set forth on Schedule 6.18(e) hereto, neither the
General Partner nor the Partnership has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or released any
substance, or owned or operated any real property (and no such real property is
contaminated by any such substance) in a manner that has given or is reasonably
likely to give rise to any Liability pursuant to CERCLA, SWDA or any other
Environmental and Safety Requirement, including any Liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damage, attorney fees or any investigative, corrective or remedial
obligations.
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(f) Except as set forth on Schedule 6.18(f) hereto, no existing
facts, events or conditions relating to the past or present real properties or
operations of the General Partner, the Partnership or the Business will prevent
continued compliance by the General Partner, the Partnership or the Business
with any Environmental and Safety Requirement, give rise to any investigatory,
remedial or corrective obligation pursuant to any Environmental and Safety
Requirement or any other Liability pursuant to any Environmental and Safety
Requirement.
(g) The General Partner has provided the Buyer with correct and
complete copies of all reports and studies conducted by or on behalf of, or in
the possession or control of, the General Partner or the Partnership with
respect to the Business or any of the real property owned or leased by any such
Person or any predecessor of such Person and, to the Knowledge of the General
Partner and the Partnership, there are no other environmental reports or studies
with respect thereto.
6.19. Brokers. Except as set forth on Schedule 6.19 hereto, neither
the General Partner or the Partnership nor any of their respective officers,
directors, stockholders, partners or employees has employed any broker or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated by this Agreement and the
Related Documents.
6.20. Suppliers and Vendors. Since January 1, 1996, no supplier or
vendor of either the General Partner or the Partnership that is material to the
business of the General Partner or the Partnership has canceled or otherwise
terminated, or, to the Knowledge of the General Partner and the Partnership,
threatened to cancel or otherwise terminate, its relationship with any such
Person or has decreased, limited or otherwise modified or, to the Knowledge of
the General Partner and the Partnership, threatened to modify, the services,
supplies or materials it provides to the General Partner or the Partnership, and
the General Partner and the Partnership have no reason to believe that
consummation of the Transaction will materially adversely affect the
relationship of the General Partner or the Partnership with any such supplier or
vendor.
6.21. Customers. The business relationship among the General
Partner, the Partnership and the customers of the Business is generally good and
no disagreements or problems exist between the General Partner or the
Partnership and any of the "top-ten" customers (based on revenues as of
September 30, 1996) of the Partnership or otherwise that, individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect. Except
as set forth on Schedule 6.21 hereto, neither the General Partner nor the
Partnership has any reason to believe that any customer's termination of, or
material reduction in, its business with the General Partner or the Partnership
since
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January 1, 1996, either individually or in the aggregate would have an adverse
effect on the business, operations or prospects of the General Partner, the
Partnership or the Business. Neither the General Partner nor the Partnership has
received any notice or, to the Knowledge of the General Partner and the
Partnership, otherwise has any reason to believe that any customer intends to
terminate or materially reduce its business with such Person.
6.22. Accounts and Notes Receivable. Except as set forth on Schedule
6.22 hereto, all the accounts receivable and notes receivable owing to the
General Partner or the Partnership as of the date hereof constitute, and as of
the Closing Date will constitute, valid and enforceable claims arising from bona
fide transactions in the ordinary course of business, and there are no claims,
refusals to pay or other rights of set-off against any thereof. Except as set
forth on Schedule 6.22 hereto, as of the date hereof there is, and as of the
Closing Date there will be, (a) no account debtor or note debtor delinquent in
its payment by more than 90 days; (b) no account debtor or note debtor that has
refused or, to the Knowledge of the General Partner or the Partnership,
threatened to refuse to pay its obligations for any reason; (c) to the Knowledge
of the General Partner and the Partnership, no account debtor or note debtor
that is insolvent or bankrupt; and (d) no account receivable or note receivable
pledged to any third party by the General Partner or the Partnership.
6.23. Accounts and Notes Payable. Set forth on Schedule 6.23 hereto
is a true and complete list of each account or note payable of the General
Partner or the Partnership past due (including the time and amount past due) as
of the Latest Balance Sheet Date. All accounts payable and notes payable by the
General Partner or the Partnership to third parties as of the date hereof arose,
and as of the Closing Date will have arisen, in the ordinary course of business,
and, except as set forth on Schedule 6.23 hereto, there is, and as of the
Closing Date there will be, no such account payable or note payable delinquent
in its payment. For purposes of this Section 6.23, an account payable shall
include all invoiced amounts, whether or not posted on the internal accounts of
the General Partner or the Partnership, and as of the end of any fiscal period
shall be deemed to have been paid only to the extent bank overdraft protection
applies to any check delivered in payment thereof or any such check has actually
been paid by the General Partner's or the Partnership's bank (as applicable).
6.24. Related Party Transactions. (a) Neither the General Partner
nor the Partnership, nor, to the Knowledge of such Persons, any of their
respective officers, employees, agents or any other Person acting on behalf of
the General Partner or the Partnership has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to
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any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any government
(domestic or foreign) or other Person who was, is, or may be in a position to
help or hinder the Business (or assist in connection with any actual or proposed
transaction) that (i) is in violation of any Law or could reasonably be expected
to subject the General Partner or the Partnership or any of their respective
Affiliates to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, could reasonably be
expected to constitute a Material Adverse Effect, or (iii) if not continued in
the future, could reasonably be expected to constitute a Material Adverse
Effect.
(b) Except for ordinary compensation to regular employees of the
General Partner or the Partnership, no General Partner, officer or director (or
nominee for election as a director) of either the General Partner or the
Partnership is now, or has been during the last four fiscal years, (i) a party
to any transaction with the General Partner or the Partnership or any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from, or otherwise
requiring payments to, any such Person, or (ii) the direct or indirect owner of
an interest in any corporation, firm, association or business entity that is a
present or potential competitor, supplier or customer of the General Partner or
the Partnership (other than non-affiliated holdings in publicly-held companies),
nor does any such Person receive income from any source other than the General
Partner or the Partnership that relates to the Business or the business of, or
should properly accrue to, the General Partner or the Partnership.
6.25. Warranties of Products; Product Liability; Regulatory
Compliance. (a) Except to the extent written down on the books of account of the
General Partner or the Partnership or reserved against thereon, all products
produced, manufactured, sold, distributed, used, delivered or held in inventory
by the General Partner or the Partnership (including, without limitation, all
documentation furnished in connection therewith) conform in all respects with
all customary and reasonable standards for products of such type, all applicable
contractual commitments and all express and implied warranties, and neither the
General Partner nor the Partnership has any Liability for replacement thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the Latest Balance Sheet (rather than in any notes
thereto). No product produced, manufactured, sold, distributed, used or
delivered by the General Partner or the Partnership is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale, except to the extent a true and correct copy thereof is attached hereto
as Schedule 6.25(a). Copies of the standard terms and conditions of sale for
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each of the General Partner and the Partnership (containing applicable guaranty,
warranty and indemnity provisions) have been delivered to the Buyer.
(b) Except as set forth on Schedule 6.25(b) hereto, within the last
four years, no Governmental Entity regulating the business of the General
Partner or the Partnership has commenced, or threatened to commence, any
Proceeding relating to such business and neither the General Partner nor the
Partnership has been responsible for, subject to, become aware or otherwise been
notified of, and does not now have any Liability (and, to the Knowledge of the
General Partner and the Partnership, there is no Basis for any present or future
Proceeding, charge, complaint or demand against it giving rise to any Liability)
arising out of any injury to any individual or property as a result of or in
connection with any product produced, manufactured, sold, distributed, used or
delivered by such Person.
6.26. Directors and Officers; Banks Accounts; Powers of Attorney.
Schedule 6.26 hereto contains a correct and complete list of (a) the names of
all of the current directors and officers of the General Partner; (b) the name
of each bank in which the General Partner or the Partnership has an account or
safe deposit box and the names of all persons authorized to draw thereon or to
have access thereto; and (c) the names of all persons holding powers of attorney
from the General Partner or the Partnership.
6.27. Certain Agreements. Except as set forth on Schedule 6.27
hereto, neither the execution and delivery of this Agreement, nor the
consummation of the Transaction will (a) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of the General
Partner or the Partnership from any such Person under any Employee Plan or
otherwise; (b) increase any benefits otherwise payable under any Employee Plan
or otherwise; or (c) except for the payment of the Management Fees that has been
negotiated by the Partnership and the recipients of such fees, result in the
acceleration of the time of payment or vesting of any such benefits.
6.28. Disclosure. No representation or warranty made by either
General Partner or the Partnership in this Agreement or in any Related Document
to which the General Partner or the Partnership is a party or in any document,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished, or to be prepared and furnished, by or on behalf of any such Person
delivered pursuant to this Agreement or any Related Document to which the
General Partner or the Partnership is a party or in any certificate otherwise
delivered by or on behalf of such party in connection with the Transaction, when
taken together, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
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statements contained herein and therein not misleading in light of the
circumstances under which they were furnished, and to the actual knowledge
(within the meaning of clause (i) of the definition of "Knowledge" set forth in
Section 13.15 hereof) of the General Partner and the Partnership, there is no
previous or current event, fact or condition that presently has or will have a
Material Adverse Effect that has not been set forth in this Agreement or in the
Schedules hereto.
6.29. Limitations. Except for the representations and warranties of
the General Partner and the Partnership contained in this Agreement or in any
Schedule, Exhibit, certificate or other instrument delivered pursuant hereto or
to any Related Document to which such Person is a party or in any certificate
otherwise delivered by or on behalf of such party in connection with the
Transaction, neither General Partner nor the Partnership makes any
representation or warranty. NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ARE APPLICABLE
TO ANY OF THE GOODS OR EQUIPMENT OF THE GENERAL PARTNER OR THE PARTNERSHIP.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Sellers as follows:
7.1. Authority. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to enter into this Agreement, and each Related
Document to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the Sale, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to so qualify would not result in a Material
Adverse Effect on the Buyer; the execution, delivery and performance by the
Buyer of this Agreement and each Related Document to which it is a party and the
consummation of the Sale have been duly authorized by all necessary action on
the part of the Buyer; and this Agreement and each Related Document to which it
is a party has been duly executed and delivered by the Buyer and constitutes the
valid and legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions, except as enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors' rights generally or by general principles of equity.
7.2. Noncontravention; Consents. (a) Except as set forth on Schedule
7.2 hereto, neither the execution, delivery and performance by the Buyer of this
Agreement or any Related Document to which the Buyer is a party, nor the
consummation of the Sale will (i) result in any violation of, or cause a default
(with or without notice or lapse of time or both) under, or give
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rise to a right of termination, cancellation or acceleration of any obligations
contained in or the loss of any material benefit under any term, condition or
provision of any Formation Document or Contract to which the Buyer is a party,
or by which the Buyer of any of its properties may be bound or (ii) violate any
Law applicable to the Buyer or any of its properties, that in the case of either
clause (i) or (ii) would prevent the consummation of the Sale or result in an
Encumbrance on or against any assets, rights or properties of the Buyer or give
rise to any claim against the Buyer or have any Material Adverse Effect on the
Buyer.
(b) Except for notification under the HSR Act, any notice that may
be required under applicable Federal and/or state securities laws (which, if
required, shall be filed on a timely basis as may be so required) and except as
set forth on Schedule 7.2 hereto, no material permit, authorization, consent or
approval of or by, or any material notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by the Buyer of this Agreement and each Related Document to
which it is a party or the consummation by the Buyer of the Sale.
7.3. Brokers' Fees. Except as set forth on Schedule 7.3 hereto, the
Buyer has not, nor has any stockholder or employee of such Person, employed any
broker or finder or incurred any Liability for any brokerage fees, commissions
or finders' fees in connection with the Sale.
7.4. Financing. The Buyer has received commitment letters
(collectively, the "Commitment Letters") from NationsBanc Capital Markets, Inc.
and NationsBridge, L.L.C. (collectively, the "Lenders") with respect to the
financing of the transactions contemplated by this Agreement. The Buyer has no
reason to believe that it will not receive the financing necessary to consummate
the transactions contemplated by this Agreement substantially in accordance with
the terms of such commitment letters, true and complete copies of which have
been delivered to the General Partner.
7.5. Inaccuracies. No representation or warranty of the Buyer
contained in this Agreement, any Related Document to which the Buyer is a party
or in any document, statement, financial statement, certificate, schedule or
exhibit prepared and furnished or to be prepared and furnished by or on behalf
of the Buyer delivered pursuant to this Agreement, any Related Document to which
the Buyer is a party or in any certificate otherwise delivered by or on behalf
of the Buyer in connection with the Transaction, when taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
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7.6. Investment Intent. The Buyer is acquiring the Shares and the
Limited Partnership Interests hereunder for the Buyer's own account, for
investment and not with a view to the distribution thereof, nor with any present
intention of distributing the same.
SECTION 8. PRE-CLOSING COVENANTS.
8.1. Affirmative Covenants of the General Partners, the Partnership
and the Sellers. From and after the date of this Agreement until the Closing or
the earlier termination of this Agreement pursuant to Section 12 (the
"Transition Period"), except as otherwise consented to in writing by the Buyer,
each of the Stockholders and the General Partners shall use their best efforts
to cause each of the General Partners and the Partnership to, and, for purposes
of Section 8.1(c), each Seller shall:
(a) conduct its operations in material compliance with all
applicable Laws and according to the ordinary and usual course of business
consistent with past practice (including the collection of receivables, the
payment of payables and the maintenance of inventory levels and supplies) and
use best efforts to preserve intact its business organization, keep available
the services of officers and employees, and maintain satisfactory relationships
with suppliers, customers and others having business relationships with it;
(b) maintain its assets in customary repair, order and condition,
maintain insurance reasonably comparable to that in effect on the Latest Balance
Sheet Date, replace in accordance with past practice inoperable, worn out or
obsolete assets with modern assets of comparable quality and, in the event of a
casualty, loss or damage to any of such assets or properties prior to the
Closing Date for which it is insured or the condemnation of any assets or
properties, either repair or replace such assets or property or, if the Buyer
agrees, cause it to retain such insurance or condemnation proceeds;
(c) promptly after acquiring knowledge thereof, inform the Buyer in
writing of any material variances from the representations and warranties
contained in Section 5 or 6;
(d) permit representatives of the Buyer and the Lenders to have full
access to the books, records, property, facilities, customers, suppliers, sales
representatives, consultants, key employees and independent accountants of the
General Partners and the Partnership in connection with the due diligence review
of the General Partners and the Partnership during normal business hours upon
reasonable prior notice (it being understood that such investigation shall in no
way affect or otherwise obviate or diminish any representations or warranties of
the Sellers, the General Partners or the
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Partnership or any condition to the obligations of the Buyer, in each case as
set forth herein);
(e) the Partnership shall comply with the terms of the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA") with regard to
each of the Real Properties located in New Jersey. QFAC shall, prior to the
Closing, furnish to the Buyer, in form reasonably satisfactory to the Buyer,
either: (i) a letter or letters from the New Jersey Department of Environmental
Protection ("NJDEP") stating that each of the Real Properties located in New
Jersey is exempt from the application of ISRA; (ii) one or more negative
declarations issued by NJDEP pursuant to ISRA regarding each of the Real
Properties located in New Jersey; or (iii) a NJDEP-approved plan to remediate
any contamination on-site as may be required under ISRA, in accordance with
which the Partnership shall, in cooperation with and at the request of the
Buyer, undertake the remediation;
(f) cause the Sellers' Accountants to consult with the Buyer and its
representatives, including, without limitation, the Buyer's Accountants, in the
determination of Estimated Closing Working Capital and permit representatives of
the Buyer, including, without limitation, the Buyer's Accountants, to have free
access to the books and records of the General Partners and the Partnership for
such purpose; and
(g) at the Buyer's request, cause the General Partner to make
available appropriate officers to discuss the status of negotiations relating to
the new Labor Agreement with Teamsters Local Union No. 676 covering employees of
the Partnership.
8.2. Negative Covenants of the General Partners and the Partnership.
During the Transition Period, without the prior written consent of the Buyer,
except as set forth on Schedule 8.2 hereto or as expressly contemplated by this
Agreement or any Related Document (including, without limitation, the transfer
of the Rollover Interests pursuant to the Exchange Agreement), each of the
Stockholders and General Partners shall use their best efforts to cause each
General Partner and the Partnership not to:
(a) sell, lease, transfer or dispose of any of the assets of the
Business, either General Partner or the Partnership, tangible or intangible,
other than inventory in the ordinary course of business consistent with past
practice;
(b) enter into any Contract (or series of related Contracts)
requiring expenditures in excess of $50,000 (other than any purchase order
relating to the purchase or sale of products that by its terms contemplates
performance in full within 60 days after the date thereof);
(c) except for capital expenditures relating to the Partnership's
Tabor Road facility not to exceed $100,000, permit
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capital expenditures and commitments therefor to exceed, in the aggregate,
$50,000;
(d) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable
other than in the ordinary course of business;
(e) enter into any employment contract or collective bargaining
agreement, written or oral, or modify the terms of any existing such contract or
agreement, in each case other than any such contract that may be terminated
without penalty by either General Partner or the Partnership (as the case may
be) on not more than thirty (30) days' prior notice and would not obligate
either General Partner or the Partnership (as the case may be) to make severance
payments in excess of the payments made pursuant to the general severance policy
of such Person described in Schedule 6.17 hereto;
(f) grant any increase in the base compensation of any officer or
employee other than in the ordinary course of business consistent with past
practice;
(g) adopt, amend, modify or terminate any bonus, profit-sharing,
incentive, severance or other plan, Contract or commitment for the benefit of
any officer or employee;
(h) enter into any transaction with any officer, employee or
Affiliate (or any director, officer or employee of such Affiliate), other than
ordinary course employment arrangements entered into in accordance with past
practice;
(i) in any manner take or cause to be taken any action which is
designed, intended or is reasonably anticipated to have the effect of
discouraging customers, employees, suppliers, lessors, and other associates from
maintaining substantially the same business relationships after the date of this
Agreement as were maintained prior to the date of this Agreement;
(j) intentionally take any action that would require disclosure
under Section 8.6;
(k) pay any dividend or make any redemption or distribution in
respect of any ownership interest; or
(l) settle or compromise any claim made by any third party against
either General Partner or the Partnership involving in excess of $10,000.
8.3. Pennsylvania Environmental Matters. (a) The General Partners
and the Partnership shall take such actions as may reasonably be required to
ensure that upon the Closing, the Buyer and its Affiliates shall be entitled to
the rights and
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benefits of the Partnership pursuant to Section 15 of the Purchase and Sale
Agreement dated August 18, 1994 between MPK Business Trust and the Partnership,
the Consent Order referred to in Section 8.4 below (the "Greenfield Agreement")
and the Guaranty dated August 2, 1994 by Campbell Soup Company
("Campbell") in favor of the Partnership.
(b) The Sellers shall be obligated either to seek a No Further
Action Letter or to cause all contamination in the Subject Area to achieve or
comply with the Cleanup Objective. The Environmental Escrow Amount shall be
released upon the sooner to occur of either of the following (the "Section 8.3
Resolutions"): (i) the Pennsylvania Department of Environmental Protection or
its successor agency ("PADEP") shall have provided a No Further Action Letter
regarding the Subject Area, or (ii) the Sellers shall have caused all
contamination in the Subject Area to achieve or comply with the Cleanup
Objectives. The date upon which the Section 8.3 Resolution shall have occurred
is hereinafter referred to as the "Section 8.3 Resolution Date". The Sellers may
choose to conduct the required activities themselves or through an agent or
another party such as Campbell; provided, however, the obligations of the
Sellers in this Section 8.3 are not dependent on whether Campbell agrees to do
so.
(c) The parties agree to cooperate to effectuate the provisions of
Section 8.3(b). In particular, if and to the extent the Sellers perform the work
in question rather than Campbell (pursuant to the Greenfield Agreement), the
Buyer shall have the right to:
(i) receive an indemnity for any harm caused by the site work by
the Sellers or anyone acting on behalf of the Sellers, and
other customary access-agreement provisions;
(ii) prior review and reasonable opportunity to comment on proposed
communications to the Commonwealth;
(iii) monitor meetings and other conversations with the
Commonwealth, except that the Buyer shall not communicate any
position to the Commonwealth that the Buyer has reason to
believe may conflict with the Sellers' interests or position,
without prior notice to, and opportunity to comment by, the
Sellers' Representative;
(iv) monitor the work and take split samples; and
(v) require that the work be done at times and in ways that would
not unreasonably interfere with its operations at the
facility.
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(d) For purposes of this Section 8.3, the following terms shall have
the meanings set forth below:
(i) No Further Action Letter means a written communication
from an appropriate official at PADEP expressing PADEP's
determination that based on sampling data and other information then
known to PADEP, PADEP considers the matter closed, in the sense that
no further investigation, monitoring, remediation, or other action
will be required by PADEP in connection with contamination in the
Subject Area, except that:
(A) a No Further Action Letter may include an express
reservation by PADEP of the right to require additional action
if and to the extent that the sampling data on which PADEP
relied is subsequently discovered to have understated the
presence of the contamination; and
(B) the No Further Action Letter requirement may in the
alternative be satisfied by an enforceable agreement in which
PADEP covenants not to require further action on the part of
the Buyer regarding the Subject Area, and in which the Sellers
(or their designee) agree to perform such work as PADEP may
require.
(ii) Cleanup Objectives means all soil and water action levels of
general application published by the Commonwealth of Pennsylvania that
define what type and degree of remediation will satisfy Commonwealth of
Pennsylvania standards and that apply at the time the remediation is
conducted (to the extent any such standards then exist).
(iii) Subject Area means any contaminated soil and groundwater in
the vicinity of either (A) ENSR sampling locations A1 through A8,
currently believed to have been contaminated by releases from a
3,000-gallon underground storage tank ("UST") previously located at the
northeast end of the Annex building or from the Annex building itself or
both, or (B) ENSR sampling location MW-9, currently believed to have been
contaminated by releases from a pair of closed 12,000 USTs under the
Process building or a 12,000-gallon active UST to the west of the Process
building or both. The Subject Area includes such contamination as far as
it may be found to extend, whether on or off the property of the Sellers,
except that it shall not include (1) Gas Hut Contamination or (2)
contamination originating from a source not on the property.
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(iv) Gas Hut Contamination means contaminated soil and groundwater
that Campbell is required to remediate pursuant to the Consent referred to
in Section 8.4.
(e) Promptly (but in no event more than three Business Days)
following the Section 8.3 Resolution Date (but not before the Initial Escrow
Termination Date shall have occurred), the Buyer and the Sellers' Representative
shall jointly instruct the Escrow Agent to pay to the Sellers' Representative
the Environmental Escrow Amount (together with the interest accrued thereon),
less any amounts paid out of the Environmental Escrow Amount to the Buyer for
remediation costs incurred by the Buyer pursuant to this Section 8.3.
(f) Notwithstanding anything to the contrary herein, the provisions
of this Section 8.3 shall not preclude the application of Section 10.1(c)
hereof.
8.4. Consents. Each party shall use its best efforts, and the other
parties shall cooperate with such efforts, to obtain any consents and approvals
of, or effect the notification of or filing with, each Person or authority
(including, without limitation, in the case of the General Partners and the
Partnership, the notification of the Commonwealth of Pennsylvania pursuant to
the Consent Order dated May 25, 1995 among the MPK Business Trust, the
Partnership and the Commonwealth of Pennsylvania Department of Environmental
Resources), whether private or governmental, whose consent or approval is
required in order to permit the consummation of the Transaction. In addition to,
and not in limitation of the foregoing, the General Partners and the Partnership
shall take such actions as are necessary to transfer the Shares and the Limited
Partnership Interests and to assign, transfer, grant and convey all right, title
and interest in the business of the General Partners and the Partnership,
including, without limitation, all grants of inspection, Permits, material
agreements and such other assets as the Buyer shall reasonably request.
8.5. Efforts to Consummate. Subject to the terms and conditions
herein provided, the parties shall do or cause to be done all such reasonable
acts and things as may be necessary, proper or advisable, consistent with the
terms and conditions of this Agreement and all applicable Laws and regulations,
to consummate and make effective the transactions contemplated hereby
(including, without limitation, the closing under the credit facility with
NationsBank of Texas, N.A.) as soon as reasonably practicable. The Buyer shall,
at the request of QFAC or the Partnership, provide such financial information
regarding the Buyer or its Affiliates as is reasonably required in connection
with obtaining third party consents required to effect the transactions
contemplated by this Agreement. In furtherance, and not in limitation of the
foregoing, the General Partners, the Partnership and the Sellers shall cooperate
with the Buyer so
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that the Buyer may obtain such debt and/or equity financing from the Lenders
consistent with the terms of the Commitment Letters and shall provide any
information or other assistance the Buyer or the Lenders may reasonably request
in connection with the Buyer's obtaining such financing. At the request of the
Buyer, senior management employees of the Business shall take such actions as
are reasonably requested by the Buyer to assist the Buyer in obtaining requisite
financing for the transactions contemplated hereby, including, without
limitation, participation in presentations (and travel in connection therewith)
to potential financing sources. Nothing contained in this Section 8.5 shall be
construed as requiring any of the Stockholders, Partners or the Partnership to
obtain the financing necessary in order to consummate the transactions
contemplated by this Agreement.
8.6. Notice of Prospective Breach. Each party shall immediately
notify the other parties in writing upon the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would be reasonably likely to
cause (i) any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing as if such representation and warranty
were made at such time or (ii) any material failure of any party hereto, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
8.7. Public Announcements. Except as may be required to comply with
applicable Law, no party shall make or cause to be made any press release or
similar public announcement or communication (including any announcement to such
party's employees) concerning the execution or performance of this Agreement
unless specifically approved in advance and in writing by QFAC and the Buyer.
Each Party agrees that any public announcement required by applicable law shall
only be made after reasonable notice to the Buyer (in the case of notice by any
Stockholder, Partner or the Partnership) or to QFAC (in the case of notice by
the Buyer).
8.8. Exclusivity; Disposition of Securities. (a) During the
Transition Period, none of the Partners, Stockholders or the Partnership, nor
any of their respective officers, directors, agents or Affiliates (collectively,
the "Bound Persons") will, directly or indirectly, without the prior written
consent of the Buyer, (i) enter into any written or oral agreement or
understanding with any person or entity (other than the Buyer) regarding Another
Transaction (as hereinafter defined); (ii) enter into or continue any
negotiations or discussions with any Person (other than the Buyer) regarding the
possibility of Another Transaction; or (iii) except as otherwise
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required by law, court order or similar compulsion, provide any nonpublic
financial or other confidential or proprietary information regarding the
business of either General Partner or the Partnership, including any materials
containing the Buyer's proposal and any other financial information, projections
or proposals regarding the business of either General Partner or the
Partnership) to any Person (other than to the Buyer or its representatives) who
any Bound Person knows, or has reason to believe, would have any interest in
participating in Another Transaction. As used herein, the term "Another
Transaction" means the sale (whether by sale of stock, merger, consolidation or
other disposition) of all or any part of the Business, either General Partner or
the Partnership or any material portion of any of such Person's assets or
capital stock. Any Person who becomes aware of any such proposal, offer, inquiry
or contact with respect to Another Transaction shall notify the Buyer
immediately. Each of the General Partners, the Partnership, other Partners and
Stockholders hereby represents that such party is not bound to negotiate Another
Transaction with any other Person and that such party's execution of this
Agreement does not violate any agreement relating to Another Transaction to
which such party is bound.
(b) During the Transition Period, each Seller shall, as to such
Person, (i) refrain from transferring, selling or assigning to any Person (other
than the Buyer), or agreeing in any manner to transfer, sell or assign to any
Person (other than the Buyer), or pledge, encumber, deposit in a voting trust or
grant a proxy with respect to any securities of either General Partner or the
Partnership presently or hereafter owned or controlled by such Person; (ii)
refrain from soliciting or entering into any agreement or arrangement with any
Person (other than the Buyer) with respect to any transfer, sale or assignment
of any securities of either General Partner or the Partnership; and (iii) vote
the securities currently or hereafter owned or controlled by such Person in
favor of the transactions contemplated hereby; provided, however, that nothing
herein contained shall prevent any Partner from transferring the Rollover
Interests pursuant to the Exchange Agreement.
(c) The parties recognize and acknowledge that a breach of this
Section 8.8 will cause irreparable and material loss and damage to the Buyer as
to which the Buyer will not have an adequate remedy at law or in damages.
Accordingly, each of the parties acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy for any such
breach.
8.9. Confidentiality. (a) Neither the Partnership nor any Partner or
Stockholder will release, publish, reveal or disclose, directly or indirectly,
any confidential or proprietary information relating to the Buyer or any of its
Affiliates, except (i) to any directors, officers, employees, financial
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advisors, legal counsel, independent certified public accountants or other
agents, advisors or representatives of the Partnership or any Stockholder or
Partner as shall require access thereto for the purposes of the transactions
contemplated by this Agreement and (ii) with the prior written consent of the
Buyer and then only to the extent specified in such consent. If the transactions
contemplated by this Agreement are not consummated, the parties will return to
the Buyer all documents, instruments, work papers and other materials provided
to the Partnership, any Partner or Stockholder or any of their respective agents
or representatives relating to the Buyer or any of its Affiliates.
(b) The Buyer will not release, publish, reveal or disclose,
directly or indirectly, any confidential or proprietary information relating to
either General Partner or the Partnership or any of their respective Affiliates
except (i) to any directors, officers, employees, financial advisors, financing
sources legal counsel, independent certified public accountants and the
respective advisors of the foregoing Persons, or other agents, advisors or
representatives of the Buyer and its Affiliates as shall require access thereto
for the purposes of the transactions contemplated by this Agreement and (ii)
with the prior written consent of either General Partner or the Partnership and
then only to the extent specified in such consent. If the transactions
contemplated by this Agreement are not consummated, the parties will return to
the Partnership all documents, instruments, work papers and other materials
provided to the Buyer or its Affiliates or any of their respective agents or
representatives relating to either General Partner or the Partnership or any of
their respective Affiliates.
(c) The restrictions on disclosure of information contained in this
Section 8.9 do not extend to any item of information that:
(i) is now or hereafter becomes, through no act or failure to act on
the part of the receiving party that constitutes a breach of this Section
8.9 generally known or available to the public;
(ii) is known to the receiving party at the time of disclosure of
such information;
(iii) is hereafter furnished to the receiving party by a third party
who, to the knowledge of the receiving party is not under any obligation
of confidentiality to the Buyer, without restriction on disclosure;
(iv) is made public by the disclosing party;
(v) is disclosed with the written approval of the disclosing party;
and
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(vi) is required to be disclosed by law, court order, or similar
compulsion or in connection with any legal proceeding involving the
disclosing party and the receiving party, provided that such disclosure
shall be limited to the extent so required and the receiving party shall
give the disclosing party notice of its intent to so disclose such
information and cooperate with the disclosing party in seeking suitable
confidentiality protections.
8.10. Seller's Representative. The Sellers agree among themselves as
follows:
(a) Appoint. Each Seller, for himself or itself and his or its
personal representatives and other successors, hereby constitutes and appoints
Strategic Investments & Holdings, Inc. as his or its agent (the "Sellers'
Representative"), with full power and authority in the name of and for and on
behalf of the Sellers, to take all action required or permitted under this
Agreement and any Related Document to which a Seller is a party (including,
without limitation, the giving and receiving of all accountings, reports,
notices, waivers and consents). In the event of the dissolution or resignation
of Strategic Investments & Holdings, Inc. or any successor Sellers'
Representative, the Sellers shall promptly appoint a substitute and shall advise
the Buyer thereof. The authority conferred under this Section 8.10 is an agency
coupled with an interest and all authority conferred hereby is irrevocable and
not subject to termination by the Sellers or by operation of law, whether by the
death or incapacity of any Seller, the termination of any trust or estate or the
occurrence of any other event. If any Seller should die or become incapacitated,
if any trust or estate should terminate or if any other such event should occur,
any action taken by the Sellers' Representative pursuant to this Section 8.10
shall be as valid as if such death or incapacity, termination or other event had
not occurred, regardless of whether or not the Sellers' Representative or the
Buyer shall have received notice of such death, incapacity, termination or other
event.
(b) Reliance by Representative. The Sellers' Representative shall be
entitled to rely, and shall be fully protected in relying, upon any statements
furnished to it by any Seller or any other evidence deemed by the Sellers'
Representative to be reasonably reliable, and the Sellers' Representative shall
be entitled to act on the advice of counsel selected by it. The Sellers'
Representative shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall have received such advice or
concurrence of the Sellers as it deems appropriate or it shall have been
expressly indemnified to its satisfaction by the Sellers severally according to
their respective Proportionate Percentages against any and all Liability and
expense that the Sellers' Representative may incur by reason of taking or
continuing to take any such action. The Sellers' Representative
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shall in all cases be fully protected in acting, or refraining from acting,
under this Agreement in accordance with a request of Sellers whose aggregate
Proportionate Percentages equal or exceed 51%, and such request, and any action
taken or failure to act pursuant thereto, shall be binding upon all of the
Sellers.
(c) Expenses of Representative. The Sellers' Representative shall be
entitled to retain counsel and to incur such expenses (including litigation
expenses) as the Sellers' Representative deems to be necessary or appropriate in
connection with its performance of its obligations under this Agreement. All
such fees and expenses (including reasonable attorneys' fees) incurred by the
Sellers' Representative (whether prior to or after the Closing) shall be borne
by the Sellers severally according to their respective Proportionate
Percentages.
(d) Indemnification. The Sellers hereby agree severally to indemnify
the Sellers' Representative (in its capacity as such) ratably according to their
respective Proportionate Percentages against, and to hold the Sellers'
Representative (in its capacity as such) harmless from, any and all Liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of whatever kind which may at any time be imposed
upon, incurred by or asserted against the Sellers' Representative in such
capacity in any way relating to or arising out of its action or failure to take
action pursuant to this Agreement or in connection herewith or therewith in such
capacity; provided, however, that no Seller shall be liable for the payment of
any portion of such Liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Sellers' Representative.
The agreements in this paragraph shall survive the closing of the transactions
contemplated by this Agreement.
(e) No Personal Liability. Except for liability to the Sellers
resulting solely from its gross negligence or willful misconduct, the Sellers'
Representative shall have no personal liability to any Person including, but not
limited to, the Buyer, as a result of its status as the Sellers' Representative.
(f) Authority Regarding Letter of Credit. The parties hereto
acknowledge and agree that the Sellers' Representative is hereby authorized on
behalf of the Sellers to issue the drawing certificate pursuant to the standby
letter of credit securing payment and performance of the Seller Notes.
8.11. Employee Matters. The Buyer shall continue employment of
substantially all of the non-union employees of the Partnership for at least 60
days following the Closing Date under terms and conditions (including pay and
all employee benefits) comparable to those generally provided to the non-union
employees
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of the Partnership prior to the Closing as disclosed to the Buyer on Schedule
6.17 hereto. In addition, the Buyer shall assume the Labor Agreement between the
Partnership and Teamsters Local Union No. 676 and shall assume all of the
Partnership's obligations thereunder, effective as of the Closing.
SECTION 9. CONDITIONS.
9.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereby are
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Approvals. All authorizations, consents, Orders or approvals of,
or declarations or filings with, or expiration of waiting periods imposed by,
any Governmental Entity necessary for the consummation of the Transaction shall
have been obtained or made, including, without limitation, under the HSR Act.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the Transaction shall be in effect.
(c) Litigation; Statutes. No action shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated, issued or
deemed applicable to the Transaction by any Governmental Entity that would (i)
make the consummation of the Transaction illegal or substantially delay the
consummation of any material aspect of the transactions contemplated hereby, or
(ii) render any party unable to consummate the transactions contemplated hereby.
(d) The Escrow Agreement. The Escrow Agreement shall have been duly
executed and delivered by all parties thereto and shall be in full force and
effect.
9.2. Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing are subject to the satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Sellers, the General Partners and the Partnership set forth in
this Agreement shall in each case be true and correct in all material respects
(except with respect to any such representation or warranty that contains an
express materiality limitation, in which case such representation or warranty
shall be true and correct in all respects) as of the Closing Date as though then
made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties, and the
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Buyer shall have received a certificate signed by the Chief Executive Officer of
each General Partner (in the case of the representations and warranties of the
General Partners and the Partnership) and each Seller (in the case of the
representations and warranties of such Sellers) to such effect.
(b) Performance of Obligations. Each party other than the Buyer
shall have performed in all material respects their respective obligations and
covenants required to be performed by them under this Agreement as of the
Closing Date, and the Buyer shall have received a certificate signed by the
Chief Executive Officer of each General Partner (in the case of the obligations
to be performed by the General Partners and the Partnership) and each Seller (in
the case of the obligations to be performed by the Sellers) to such effect.
(c) Authorization. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by each
General Partner, the Partnership and each Seller and the consummation of the
Transaction, including, without limitation, the requisite corporate and
partnership approvals, shall have been duly and validly taken, and each such
party shall have full power and right to consummate the Transaction (if
applicable) on the terms provided herein.
(d) Opinions of Counsel to the General Partners, the Partnership and
the Sellers. The Buyer shall have received an opinion dated the Closing Date of
respective counsel to the General Partners, the Partnership and the Sellers, in
each case in form and substance reasonably satisfactory to the Buyer and its
counsel.
(e) Consents and Approvals. The Buyer shall have received duly
executed copies of all consents and approvals, in form and substance reasonably
satisfactory to the Buyer and its counsel, that are required (i) for
consummation of the Transaction, (ii) in order to permit the transfer,
conveyance or assignment of, or to prevent a breach of or a default under or a
termination of, any Contract or Permit or (iii) at the request of the Buyer in
order to terminate any transaction with an Affiliate.
(f) Corporate Resolutions. The Buyer shall have received certified
copies of the resolutions of each General Partner's board of directors and, to
the extent required, the Sellers, approving this Agreement, all other agreements
and documents contemplated hereby and the consummation of the Sale and, to the
extent applicable, the Transaction.
(g) Absence of Material Adverse Change. Since the date of this
Agreement, there shall have been no Material Adverse Change in the business of
either General Partner or the Partnership.
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(h) Officer's Certificate. Each General Partner shall have delivered
an Officer's Certificate dated as of the Closing Date to the Buyer certifying
(i) that attached thereto is a true and complete copy of such General Partner's
Certificate of Incorporation and all amendments thereto; (ii) that attached
thereto is a true and complete copy of such General Partner's By-laws as in
effect on the date of such certification; and (iii) as to the incumbency and
genuineness of the signature of each officer of such General Partner executing
this Agreement or any of the other documents contemplated hereby.
(i) Directors. The persons listed on Schedule 9.2(i) hereto shall
have resigned as directors of each General Partner.
(j) Financing. The Buyer shall have obtained the financing required
to consummate the Transaction on terms acceptable to the Buyer and consistent
with the Commitment Letters provided to the Buyer prior to its execution of this
Agreement.
(k) Title Policies. QFAC shall have delivered to the Buyer an ALTA
owner's policy of title insurance with respect to each parcel of Owned Real
Property, in form and substance reasonably acceptable to the Buyer and showing
no exceptions other than Permitted Encumbrances.
(l) Key Person Insurance. QFAC shall have obtained (at the expense
of the Buyer) a key person insurance policy insuring against the death or
permanent disability of each of Robert D. Gioia and David Cohen, each such
policy (a) to name the Buyer as the sole beneficiary thereof and (b) to be in an
amount and in form and substance reasonably acceptable to the Buyer.
(m) Seller Expenses. All Seller Expenses shall be reflected in
Closing Funded Debt or shall have been paid directly by the Sellers and QFAC
shall have delivered to the Buyer a correct and complete schedule of all Seller
Expenses (the "Schedule of Expenses"), accompanied by a certificate signed by
the chief executive officer and the chief financial officer of QFAC as to the
accuracy thereof and (to the extent applicable) payment in full of the Seller
Expenses.
(n) Good Standing Certificates. Each General Partner and the
Partnership shall have delivered certificates as to the good standing (including
the tax good standing) of each such Person in each jurisdiction where organized
and where qualified to do business as a foreign entity.
(o) Employment Agreements. The Employment Agreements shall have been
duly executed and delivered by all parties thereto and shall be in full force
and effect.
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(p) Funded Debt Certification. QFAC shall have delivered to the
Buyer a correct and complete schedule of Funded Debt as of the Closing Date,
accompanied by an itemized certificate signed by the chief executive officer and
the chief financial officer of QFAC as to the accuracy thereof, accompanied by
evidence, in form, scope and substance satisfactory to the Buyer, that such
Funded Debt as is requested by the Buyer shall have been repaid in connection
with the transactions contemplated hereby and all Encumbrances relating to such
repaid Funded Debt shall have been terminated (together with delivery to the
Buyer of all appropriate pay-off letters, releases, termination statements,
etc.).
(q) Solvency Opinion. The Buyer shall have received the solvency
opinion from Houlihan, Lokey, Howard & Zukin, Inc. dated the Closing Date.
(r) The Exchange Agreement. The Exchange Agreement shall be in full
force and effect and all the conditions to the exchange of the Rollover
Interests in accordance with the terms thereof shall have been satisfied.
(s) Accounts and Notes Payable Aging Schedule. The General Partners
shall have delivered to the Buyer a correct and complete aging schedule
reflecting accounts and trade notes payable of the General Partners and the
Partnership as of a date that is not more than five (5) days prior to the
Closing Date accompanied by a certificate signed by the chief executive officer
and the chief financial officer of each General Partner as to the accuracy
thereof.
(t) Union Agreement. The Buyer shall be reasonably satisfied with
the status of the renegotiation of the Labor Agreement referred to in Section
8.1(g) hereof.
(u) Penns Grove. The Buyer shall have received satisfactory evidence
that the Partnership shall have caused the refrigerant referred to in the
Termination Agreement dated as of August 1, 1996 between BDMC, Inc. and the
Partnership to have been removed in compliance with applicable Environmental and
Safety Requirements.
9.3. Conditions to Obligations of the Sellers. The respective
obligations of the Stockholders to consummate the transactions to be performed
by them in connection with the Closing are subject to the satisfaction of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in Section 7 shall in each case be true and
correct in all material respects (except with respect to any such representation
or warranty that contains an express materiality limitation, in which case such
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representation or warranty shall be true and correct in all respects) as of the
Closing Date as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties, and the General
Partners and the Sellers' Representative shall have received a certificate
signed by an authorized officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer. The Buyer shall have
performed in all material respects its obligations and covenants required to be
performed by it under this Agreement prior to or as of the Closing Date, and the
General Partners and the Sellers' Representative shall have received a
certificate signed by an authorized officer of the Buyer to such effect.
(c) Authorization. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by the
Buyer and the consummation by the Buyer of the Transaction, including, without
limitation, the requisite corporate approvals, shall have been duly and validly
taken by the Buyer and the Buyer shall have full power and right to consummate
the transactions contemplated hereby on the terms provided herein.
(d) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity that are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Buyer, and the
consummation by the Buyer of the Transaction shall have been obtained or made.
(e) Opinion of Counsel to the Buyer. The Sellers' Representative
shall have received an opinion dated the Closing Date of O'Sullivan Graev &
Karabell, LLP, counsel to the Buyer, in form and substance reasonably
satisfactory to the Sellers and their counsel.
(f) Consents and Approvals. QFAC shall have received duly executed
copies of all consents and approvals, in form and substance reasonably
satisfactory to QFAC, that are required of the Buyer for consummation of the
Transaction.
(g) Employment Agreement. The Employment Agreements shall have been
duly executed and delivered by all parties thereto and shall be in full force
and effect.
(h) Escrow Agreement. The Escrow Agreement shall have been duly
executed and delivered by all parties thereto and shall be in full force and
effect.
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(i) Corporate Resolutions. The Sellers shall have received certified
copies of the resolutions of the Buyer's board of directors and stockholders, if
necessary, approving this Agreement, all other agreements and documents
contemplated hereby and the consummation of the Transaction.
(j) Officer's Certificate. The Buyer shall have delivered an
Officer's Certificate dated as of the Closing Date to the Sellers certifying (i)
that attached thereto is a true and complete copy of the Buyer Certificate of
Incorporation and all amendments thereto; (ii) that attached thereto is a true
and complete copy of the Buyer's By-laws as in effect on the date of such
certification; and (iii) as to the incumbency and genuineness of the signature
of each officer of the Buyer executing this Agreement or any of the other
documents contemplated hereby.
(k) Solvency Opinion. QFAC shall have received a copy of the
solvency opinion from Houlihan, Lokey, Howard & Zukin, Inc. dated the Closing
Date.
SECTION 10. INDEMNIFICATION.
10.1. By the Sellers in Favor of the Buyer. Subject to the
limitations set forth in Section 10.3 and Section 10.7 hereof (but only to the
extent said limitations are by the terms of Section 10.3 and Section 10.7
expressly applicable to this Section 10.1), the Sellers, the Indemnifying
Sellers and their respective heirs, estates and assigns (the "Seller Group")
shall, jointly and severally, indemnify and hold harmless the Buyer and its
Affiliates, successors and assigns, and the respective officers and directors of
each of the foregoing (the "Buyer Group"), for any and all Losses the Buyer
Group actually sustains or incurs as a result of:
(a) the untruth, inaccuracy or breach of any representation or
warranty of either General Partner, the Partnership or, subject to the proviso
set forth following Section 10.1(e) below, any of the Sellers contained in this
Agreement, any Related Document or in any Schedule or Exhibit hereto or thereto
or in any certificate delivered in connection herewith or therewith at or before
the Closing; or
(b) the breach of any agreement or covenant of either General
Partner, the Partnership or, subject to the proviso set forth following Section
10.1(e) below, any of the Sellers contained in this Agreement, any Related
Document or in any Schedule or Exhibit hereto or thereto or any certificate
delivered in connection herewith or therewith at or before the Closing; or
(c) notwithstanding (and without regard to, or reduction for) any
representation, warranty or disclosure made in
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this Agreement, any Related Document or in any Schedule or Exhibit hereto or
thereto or in any certificate delivered in connection herewith or therewith, any
Loss arising from either (i) noncompliance with any Environmental and Safety
Requirement (including, without limitation, common law bases for liability) to
the extent any such Loss results from or arises out of events, facts or
circumstances occurring or existing on or prior to the Closing or (ii) any Third
Party Claim arising out of actual or alleged Hazardous Materials contamination
existing prior to the Closing at any property owned or operated at any time by
the General Partner or the Partnership or any legal predecessor thereof (it
being understood that no Person entitled to indemnification for a Loss pursuant
to this paragraph shall be entitled to duplicate recovery for such Loss pursuant
to Section 10.1(a)); or
(d) notwithstanding (and without regard to, or reduction for) any
representation, warranty or disclosure made in this Agreement, any Related
Document or in any Schedule or Exhibit hereto or thereto or in any certificate
delivered in connection herewith or therewith, any Loss with respect to Taxes
for all periods ending on or prior to the Closing Date, including any Taxes
arising as a result of the consummation of all of the transactions described in
this Agreement (except for Taxes described in Section 11.1(b) and except to the
extent the Loss is generated by the refinancing, payment or assumption of any
debt of the Partnership other than by the payment or assumption of such debt by
QFAC) (it being understood that no Person entitled to indemnification for a Loss
pursuant to this paragraph shall be entitled to duplicate recovery for such Loss
pursuant to Section 10.1(a)); or
(e) notwithstanding (and without regard to, or reduction for) any
representation, warranty or disclosure made in this Agreement, any Related
Document or in any Schedule or Exhibit hereto or thereto or in any certificate
delivered in connection herewith or therewith, any Loss arising out of any claim
relating to (i) the injury claim of Helen Kane, Pedro Oquendo or Jeffrey A.
Himmelblau or (ii) Jersey Matters (it being understood that no Person entitled
to indemnification for a Loss pursuant to this paragraph shall be entitled to
duplicate recovery for such Loss pursuant to Section 10.1(a));
provided, however, that in the case of any breach of the representations and
warranties of the Sellers set forth in Section 5 hereof or in any Related
Document or the covenants of the Sellers set forth in Sections 8.6, 8.7, 8.8 and
8.9 hereof, the Seller Group's indemnification obligations shall be several only
as to such breaching party and not joint or joint and several.
10.2. By the Buyer in Favor of the Sellers. The Buyer shall
indemnify and hold harmless the Seller Group for any and
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all Losses the Seller Group actually sustains or incurs as a result of:
(a) the untruth, inaccuracy or breach of any representation or
warranty of the Buyer contained in this Agreement, any Related Document or in
any Schedule or Exhibit hereto or thereto or in any certificate delivered in
connection herewith or therewith at or before the Closing; or
(b) the breach of any agreement or covenant of the Buyer contained
in this Agreement, any Related Document or in any Schedule or Exhibit hereto or
thereto or any certificate delivered in connection herewith or therewith at or
before the Closing; or
(c) the Buyer's operation of the Business following the Closing, to
the extent such Losses incurred do not result from any act or omission of any
member of the Seller Group prior to the Closing.
10.3. Limitations on Seller Group Indemnification. (a) If the
Closing occurs, the Buyer Group shall have no right to be indemnified pursuant
to Sections 10.1(a), 10.1(c) or 10.1(d) unless and until the Buyer Group shall
have incurred on a cumulative basis since the Closing Date aggregate Losses in
an amount exceeding $500,000 (the "Basket Amount"), in which event the right to
be indemnified shall apply only to the extent such Losses exceed the Basket
Amount; provided, however, that notwithstanding anything to the contrary
contained herein, (i) in the case of Losses resulting from willful breaches and
Losses relating to matters covered by Section 8.3 and Taxes relating to the Tax
Returns prepared by the Sellers pursuant to the procedures set forth in Section
11.2, there shall be no Basket Amount and the right to be indemnified shall
apply to the first dollar of such Losses and (ii) in the case of any Losses
relating to Jersey Matters, the Basket Amount shall be deemed to be the lesser
of $250,000 and the difference between (x) $500,000 and (y) the sum of claims
made against the Basket Amount. The Seller Group shall have no obligation under
Section 10.1(a) or Section 10.1(b) to indemnify the Buyer Group for Losses in
excess, in the aggregate, of $7,000,000; provided, however, that the obligation
of the Seller Group to indemnify the Buyer Group for Losses relating to breaches
of the representations and warranties in Sections 5.1, 5.4, 6.1, 6.3, 6.4, 6.8,
6.9(a), 6.17, 6.18 and 6.19, willful breaches and indemnification pursuant to
Sections 8.3, 10.1(c), (d) or (e), 10.3(b) or 11.2 hereof shall not be limited
in amount; provided further, however, that no Seller shall have any obligation
to indemnify the Buyer Group for Losses in excess of the after-tax proceeds
received by such Seller under this Agreement (taking into account the tax
benefit actually realized by such Seller with respect to any payment required to
be made by such Seller pursuant to Section 10 of this Agreement, provided in no
event shall the taking into account of such tax
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benefit result in any Seller having any indemnification obligation in excess of
the aggregate gross proceeds received by such Seller).
(b) In order to guarantee the performance of the Sellers' indemnity
obligations under this Agreement, and without expanding such obligations in any
way whatsoever beyond such obligations expressly set forth in this Agreement,
each of the Indemnifying Sellers hereby acknowledges and confirms his joint and
several indemnification obligations for himself and for the Seller of which such
Indemnifying Seller is a beneficial owner; provided, however, that (i) no
Indemnifying Seller listed in Part A of Schedule III shall have any obligation
to indemnify the Buyer Group for Losses in excess of the after-tax proceeds
received by such Indemnifying Seller (taking into account the tax benefit
actually realized by such Indemnifying Seller with respect to any payment
required to be made by such Indemnifying Seller or, to the extent applicable,
the Seller of which such Indemnifying Seller is a beneficial owner pursuant to
Section 10 of this Agreement, provided in no event shall the taking into account
of such tax benefit result in any such Indemnifying Seller having any
indemnification obligation in excess of the aggregate gross proceeds received by
such Person) and (ii) no Indemnifying Seller listed in Part B of Schedule III
shall have any obligation to indemnify the Buyer Group for Losses in excess of
the after-tax proceeds received by the Seller of which such Indemnifying Seller
is a beneficial owner (taking into account the tax benefit actually realized by
such Seller or Indemnifying Seller with respect to any payment required to be
made by such Seller or such Indemnifying Seller pursuant to Section 10 of this
Agreement, provided in no event shall the taking into account of such tax
benefit result in any Person having any indemnification obligation in excess of
the aggregate gross proceeds received by the Seller of which such Person is a
beneficial owner).
10.4. Limitations on Buyer Group Indemnification. The Seller Group
shall have no right to be indemnified pursuant to Section 10.2(a) (other than
for willful breaches) unless and until the Seller Group shall have incurred on a
cumulative basis since the Closing Date aggregate Losses in an amount exceeding
$500,000, in which event the right to be indemnified shall apply only to the
extent such Losses exceed such amount; provided, however, the Buyer Group shall
have no obligation to indemnify the Seller Group for Losses for an aggregate
amount in excess of $7,000,000, except for Losses relating to willful breaches
or Losses pursuant to Section 10.2(c), in which case the obligation of the Buyer
Group to indemnify the Seller Group shall not be limited in amount.
10.5. Assertion of Claims. No claim shall be brought under Section
10 unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date, give the Indemnifying Persons (a) written notice of
the existence of any
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such claim, specifying in good faith the nature and basis of such claim and the
amount thereof, to the extent known or (b) written notice pursuant to Section
10.6 of any third party claim, the existence of which might give rise to such a
claim. Upon the giving of such written notice as aforesaid, the Indemnified
Persons, or any of them, shall have the right to indemnification under this
Section 10 subsequent to the Survival Date for the enforcement of their rights
under Section 10.
10.6. Notice and Defense of Third Party Claims. The obligations and
liabilities of an Indemnifying Person with respect to Losses resulting from the
assertion of liability by third parties, including, without limitation,
Governmental Entities, (each, a "Third Party Claim") shall be subject to the
following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim and the amount thereof to the extent known; provided, however, that
no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced by the delay. Such notice shall be accompanied by copies of all
relevant documentation with respect to such Third Party Claim, including, but
not limited to, any summons, complaint or other pleading which may have been
served, any written demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third Party Claim, then the Indemnifying Persons shall have
the right to assume the defense of any Third Party Claim, which may include,
without limitation, remediation of environmental contamination by the
Indemnifying Persons, at their own expense and by their own counsel, which
counsel shall be reasonably satisfactory to the Indemnified Persons; provided,
however, that the Indemnifying Persons shall not have the right to assume the
defense of any Third Party Claim, notwithstanding the giving of such written
acknowledgment, if (i) the Indemnified Persons shall have been advised by
counsel that there are one or more legal or equitable defenses available to them
which are different from or in addition to those available to the Indemnifying
Persons, and, in the reasonable opinion of the Indemnified Persons and their
counsel, counsel for the Indemnifying Persons could not adequately represent the
interests of the Indemnified Persons because such interests could be in conflict
with those of the Indemnifying Persons, (ii) such action or proceeding involves,
or could have a material effect on, any material matter beyond the
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scope of the indemnification obligation of the Indemnifying Persons or (iii) the
Indemnifying Persons shall not have assumed the defense of the Third Party Claim
in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to the first sentence of
Section 10.6(b) above is not applicable), the Indemnifying Persons shall not be
responsible for any legal or other defense costs subsequently incurred by the
Indemnified Persons in connection with the defense thereof. If the Indemnifying
Persons do not exercise their right to assume the defense of a Third Party Claim
by giving the written acknowledgement referred to in Section 10.6(b), or are
otherwise restricted from so assuming by the proviso to the first sentence of
Section 10.6(b), the Indemnifying Persons shall nevertheless be entitled to
participate in such defense with their own counsel and at their own expense; and
in any such case, the Indemnified Persons shall assume the defense of the Third
Party Claim, with counsel which shall be reasonably satisfactory to the
Indemnifying Persons (provided the Indemnifying Persons shall only be obligated
to pay the fees and expenses of one counsel for the Indemnified Persons as a
group), and shall act reasonably and in accordance with their good faith
business judgment and shall not effect any settlement without the consent of the
Indemnifying Persons, which consent shall not unreasonably be withheld or
delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, they shall not make any settlement of any claims
without the prior written consent of the Indemnified Persons, which consent
shall not be unreasonably withheld.
10.6A. Notice and Resolution of Environmental Indemnity Claims. The
obligations and liabilities of an Indemnifying Person with respect to Losses
subject to Section 10.1(c) or arising from a breach of Section 6.18, but in
either case not arising from a Third Party Claim, shall be subject to the
following terms and conditions:
(a) For such a Loss (an "Environmental Loss") to be a Loss eligible
for indemnification under Section 10.1(a) or 10.1(c), prior to incurring any
costs or expenses for which indemnification is to be sought, the Buyer shall
provide the Sellers' Representative with a notice (an "Environmental Loss
Notice"), which notice shall include documentation showing in reasonable detail
the basis for the Buyer's assertion that the proposed action and the costs and
expenses anticipated to be incurred are a Loss and an opportunity to agree to
undertake directly the action for which such costs or expenses are to be
incurred ("Remedial Action"). The Buyer shall provide, and cause its
representatives to provide, the Sellers' Representative and the Sellers'
authorized representatives access to and the
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opportunity to review studies, records, sampling data, cost estimates and other
related documents utilized by the Buyer in connection with establishing the
Environmental Loss. Unless the Sellers' Representative delivers written notice
to the Buyer prior to the 30th day following the Sellers' Representative receipt
of the Environmental Loss Notice disputing its liability to perform the Remedial
Action or otherwise indemnify the Buyer with respect to all or any part of the
Environmental Claim, which notice shall specify in reasonable detail the basis
therefor, the Sellers shall be deemed to have agreed to indemnify the Buyer in
respect of such Environmental Loss. If the Sellers' Representative so disputes
the liability of the Sellers to perform the Remedial Action or otherwise
indemnify the Buyer in respect of all or any part of an Environmental Loss, the
Buyer and the Sellers' Representative shall use reasonable efforts to resolve in
good faith their differences and any resolution by them shall be reduced to
writing and signed by a duly authorized officer of the Buyer and the Sellers'
Representative and shall be final, binding and conclusive. Notwithstanding the
notice requirements of this Section 10.6A, the Buyer shall not be required to
comply with the above requirements of this Section 10.6A(a) to the extent that
the Buyer determines in good faith that so complying would be inconsistent with
timely prevention or abatement, in each case of an imminent and substantial
endangerment from an environmental condition or release or threatened release of
Hazardous Materials.
(b) In the event the Sellers agree to undertake the Remedial Action
directly, (i) the Sellers' obligation under 10.1(a) may be satisfied upon (A)
the receipt of a No Further Action Letter as defined in Section 8.3(d) from the
appropriate regulatory authority, or (B) when the Sellers cause any
contamination that is the subject of the Remedial Action to achieve or comply
with the soil and water action levels of general application published by the
applicable regulatory authority that define what type and degree of remediation
will satisfy the regulatory authority and that apply at the time the remediation
is conducted, to the extent any such standard then exists; and (ii) the Sellers
obligation under Section 10.1(c)(i) shall be satisfied upon achieving compliance
with applicable Environmental and Safety Requirements.
(c) If, after 10 Business Days following the Buyer's receipt of the
Sellers' Representative's response to the Environmental Loss Notice (or such
other period as the Sellers' Representative and the Buyer agree), any
Environmental Loss or part thereof remains in dispute, the Environmental Loss
shall be submitted for final resolution to the Environmental Panel, consisting
of one representative chosen by each of the Sellers' Representative and the
Buyer and a third party chosen by the representative of the Sellers'
Representative and the Buyer (the "Environmental Panel"). Each party agrees to
execute, if requested by the members of the Environmental Panel, a reasonable
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engagement letter in form and substance satisfactory to such members.
Representatives on the Environmental Panel shall be competent in real property
transactions and the impact that adverse environmental conditions may have on
the value and/or use of real property. All fees and expenses relating to the
work, if any, to be performed by the Environmental Panel shall be shared equally
by the Sellers and the Buyer. The Environmental Panel shall act as an arbitrator
to determine, based solely on presentations by the Buyer and the Sellers'
Representative and their respective representatives, and not by independent
review, the Environmental Loss, or part thereof, in dispute. The Buyer, the
Sellers and the Sellers' Representative, and their respective representatives,
shall cooperate fully with the Environmental Panel. The Buyer and the Sellers'
Representative shall provide, and shall cause their representatives to provide,
the Environmental Panel and its representatives such assistance and access to
the relevant site or property that is the basis of the claim, and any studies,
reports, sampling data, cost estimates and other documents as the Environmental
Panel shall reasonably request. The Environmental Panel's determination shall be
based upon majority vote, shall be made within 30 days of its selection, or at
such other time as the Buyer, the Sellers' Representative and the Environmental
Panel may mutually agree, shall be set forth in a written statement delivered to
the Buyer and the Sellers' Representative and shall be final, binding and
conclusive on the Buyer and the Sellers.
(d) Upon the payment to the Buyer (or any member of the Group) for
any Loss arising out of an Environmental Claim, the Sellers shall be subrogated
to all rights and causes of action the Buyer (or any member of the Buyer Group)
may have against any third party to the extent of such Loss.
10.7. Survival of Representations and Warranties. Subject to the
further provisions of this Section 10.7, the representations and warranties of
the Sellers, the General Partners and the Partnership contained in Sections 5
and 6 and the representations and warranties of the Buyer contained in Section 7
shall survive the Closing until 30 days following the Buyer's receipt of the
audited consolidated financial statements of the Buyer for the fiscal year ended
December 31, 1997; provided, however, that (a) the representations and
warranties contained in Sections 5.1, 5.4, 6.1, 6.3, 6.4, 6.9(a) and 6.19 shall
survive the Closing and remain in full force and effect without time limit; (b)
the representations and warranties contained in Sections 6.8 and 6.17 shall
survive the Closing until the expiration of the statute of limitations, if any,
applicable to the matters set forth therein; and (c) the representations and
warranties contained in Section 6.18 shall survive until the fifth anniversary
of the Closing Date, except with respect to (i) matters covered in Section 8.3,
in which case such representations and warranties shall survive until the later
of (A) the fifth anniversary of the Closing Date and (B) the
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Section 8.3 Resolution Date or (ii) Jersey Matters, in which case such
representations and warranties shall survive until the tenth anniversary of the
Closing Date. The covenants and other agreements of the parties contained in
this Agreement shall survive the Closing until they are otherwise terminated,
whether by their terms or as a matter of applicable law; provided, however, that
the Seller Group shall have no indemnification obligation pursuant to Section
10.1(c) following the fifth anniversary of the Closing Date, except to the
extent a Loss relates to (x) the matters covered in Section 8.3, in which case
such indemnification obligation shall survive until the later of (1) the fifth
anniversary of the Closing Date and (2) the Section 8.3 Resolution Date or (y)
Jersey Matters, in which case such indemnification obligation shall continue
until the tenth anniversary of the Closing Date. For convenience of reference,
the date upon which any representation, warranty, covenant or other agreement
contained herein shall terminate, if any, is referred to herein as the "Survival
Date."
10.8. No Third Party Reliance. Anything contained herein to the
contrary notwithstanding, the representations and warranties of the Sellers, the
General Partners and the Partnership contained in this Agreement (including,
without limitation, the Schedules, Exhibits and attachments hereto) (a) are
being given as an inducement to the Buyer to enter into this Agreement and the
other Related Documents to which it is a party (and each of such Persons
acknowledges that the Buyer has expressly relied thereon) and (b) are solely for
the benefit of the Buyer. Accordingly, no third party or anyone acting on behalf
of any thereof other than the Indemnified Persons, and each of them, shall be a
third party or other beneficiary of such representations and warranties and no
such third party shall have any rights of contribution with respect to such
representations or warranties or any matter subject to or resulting in
indemnification under this Section 10, or otherwise.
10.9. Distribution of Escrow Amount.
(a) Upon resolution of any claim under this Section 10 by the
rendering of a final arbitration decision or final, non-appealable judgment in
any litigation, if it is determined that any member of the Buyer Group is
entitled to indemnity hereunder, the Buyer shall be authorized to instruct the
Escrow Agent to pay to such Indemnified Person(s) identified in such
instructions an amount of the Escrow Amount equal to the amount of any claim so
resolved, along with a pro rata portion of any interest earned thereon as
provided pursuant to the terms of the Escrow Agreement. Upon resolution of any
claim other than by the rendering of a final arbitration decision or by the
rendering of a final, non-appealable judgment in any litigation, if it is
determined that any member of the Buyer Group is entitled to indemnity
hereunder, the Buyer and the Sellers' Representative shall promptly jointly
instruct the Escrow Agent to pay to such
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Indemnified Person(s) identified in such instructions an amount of the Escrow
Amount equal to the amount of any claim so resolved, along with a pro rata
portion of any interest earned thereon as provided pursuant to the terms of the
Escrow Agreement.
(b) Notwithstanding anything to the contrary contained herein, any
indemnification obligation on the part of the Seller Group shall first be
satisfied out of the Escrow Amount.
(c) Promptly (but in no event more than three Business Days)
following the Initial Escrow Termination Date, the Buyer and the Sellers'
Representative shall jointly instruct the Escrow Agent to pay to the Sellers'
Representative (for distribution to and among the Sellers on a pro rata basis
based on each Seller's Proportionate Percentage) the Initial Escrow Payout
Amount; provided, however, that if on the Initial Escrow Termination Date, any
claim that has been made in good faith by the Buyer Group is then pending, an
amount equal to the aggregate dollar amount of all such claims (plus the
interest accrued thereon) shall be retained by the Escrow Agent (and the balance
of the Initial Escrow Payout Amount shall be paid to the Sellers' Representative
for distribution to the Sellers pro rata based on their respective Proportionate
Percentages) until each such claim is resolved, whereupon the Buyer and the
Sellers' Representative shall promptly jointly instruct the Escrow Agent to pay
the Initial Escrow Payout Amount (or, if less, the amount of the claim(s) so
resolved) to the Sellers' Representative (for distribution to the Sellers pro
rata based on their respective Proportionate Percentages).
(d) Promptly (but in no event more than three Business Days)
following the Intermediate Escrow Termination Date, the Buyer and the Sellers'
Representative shall jointly instruct the Escrow Agent to pay to the Sellers'
Representative (for distribution to and among the Sellers on a pro rata basis
based on each Seller's Proportionate Percentage) the Intermediate Escrow Payout
Amount, less any portion of the Environmental Escrow Amount then remaining (plus
the interest accrued thereon); provided, however, that if on the Intermediate
Escrow Termination Date, any claim that has been made in good faith by the Buyer
Group is then pending, an amount equal to the aggregate dollar amount of all
such claims (plus the interest accrued thereon) shall be retained by the Escrow
Agent (and the balance of the Intermediate Escrow Payout Amount shall be paid to
the Sellers' Representative for distribution to the Sellers pro rata based on
their respective Proportionate Percentages) until each such claim is resolved,
whereupon the Buyer and the Sellers' Representative shall promptly jointly
instruct the Escrow Agent to pay the Intermediate Escrow Payout Amount (or, if
less, the amount of the claim(s) so resolved) to the Sellers' Representative
(for distribution to the Sellers pro rata based on their respective
Proportionate Percentages).
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(e) Promptly (but in no event more than three Business Days)
following the Final Escrow Termination Date, the Buyer and the Sellers'
Representative shall jointly instruct the Escrow Agent to pay to the Sellers'
Representative (for distribution to and among the Sellers pro rata based on each
Seller's Proportionate Percentage) the Escrow Amount (plus the interest accrued
thereon) remaining on the Final Escrow Termination Date, less any portion of the
Environmental Escrow Amount then remaining (plus the interest accrued thereon);
provided, however, that if on the Final Escrow Termination Date, any claim that
has been made in good faith by the Buyer Group is then pending, an amount equal
to the aggregate dollar amount of all such claims (plus the interest accrued
thereon) shall be retained by the Escrow Agent (and the balance of the Escrow
Amount shall be paid to the Sellers' Representative for distribution to the
Sellers pro rata based on their respective Proportionate Percentages) until each
such claim is resolved, whereupon the Buyer and the Sellers' Representative
shall promptly jointly instruct the Escrow Agent to pay the Final Escrow Payout
amount (or, if less, the amount of the claim(s) so resolved) to the Sellers'
Representative (for distribution to the Sellers pro rata based on their
respective Proportionate Percentages).
10.10. Remedies Exclusive. The remedies provided for in this Section
10 shall be the exclusive remedies of the Indemnified Persons available under
contract, tort or any other legal theory available to the parties hereto in
connection with any claim, demand, Loss or Liability arising under this
Agreement or in connection with the transactions contemplated hereby; provided,
however, that nothing in this Section 10.10 shall be construed to limit in any
way the rights and benefits of, or the remedies available to, any party to this
Agreement under or in respect of any other instrument or agreement to which such
Person may be a party or for fraud.
SECTION 11. ADDITIONAL AGREEMENTS.
11.1. Expenses. (a) Each of the parties shall bear its own fees and
expenses incurred in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, in the event this Agreement is terminated because
of a breach of any representation, warranty or covenant, the non-breaching party
may include its transaction expenses in any action against the breaching party
for damages arising out of such breach.
(b) All sales, use, transfer, stamp, excise, recording, franchise
and other similar Taxes arising or imposed as a result of the transactions
contemplated hereby and by the Related Documents shall be borne by the Buyer.
11.2. Tax-Related Matters.
(a) Tax Returns of the General Partners.
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(i) The Sellers shall cause to be prepared (at the Sellers'
expense) all Federal income Tax Returns of the General Partners covering
periods ending on or before the Closing Date, and all other Tax Returns
due after the Closing Date and covering periods ending on or before the
Closing Date. Such returns shall be prepared on a basis consistent with
the past practice of each General Partner in filing its Federal income Tax
Returns so long as such practices are in accordance with applicable law
and regulations. Such returns shall treat the purchase transactions that
are the subject of this Agreement as a sale or exchange of the Limited
Partnership Interests in the Partnership, and as a sale of all of the
stock of QFAC and QFMC. The Sellers' Representative shall provide the
Buyer with a draft of such returns at least 60 days prior to the due date
for filing (taking into account any extensions for which requests have
been properly prepared by the Sellers' Representative and provided to the
Buyer at least 45 days prior to their due date, along with any funds
necessary to assure that such extensions will not give rise to penalties)
and if such draft is not presented to the Buyer within such time period,
the Buyer shall be entitled to prepare and file such returns and the
Sellers will remain obligated to provide the Buyer with funds sufficient
to pay all Taxes shown to be due on such returns. The Buyer shall provide
the Sellers' Representative with written comments on such draft tax
returns within 30 days of receipt of the draft. If the Buyer fails to
notify the Sellers' Representative within 30 days of its receipt of any
draft of any disagreement therewith, such draft shall be deemed approved.
If the Buyer timely notifies the Sellers' Representative of an objection
to a draft return, the Sellers' Representative and the Buyer shall in good
faith attempt to resolve any disputes regarding such draft return no later
than 30 days before the due date for filing such return. If the Buyer and
the Sellers' Representative are unable to resolve any such dispute, the
disputed matter(s) shall be referred for determination as promptly as
practicable to the Accountants. The Accountants shall make a determination
no later than seven (7) days before the due date for filing such return,
which determination shall be binding on the parties. Notwithstanding
anything contained herein to the contrary, the treatment of any item on a
Federal Income Tax Return of either General Partner shall be in accordance
with the treatment proposed by the Sellers' Representative (and any such
dispute will not be referred to the Accountants) if the treatment of such
items (i) is not inconsistent with the past practices of each General
Partner, (ii) reflects the form of the Transactions as described above and
is consistent with the Allocation and the provisions of paragraph (d)(iv),
and (iii) the Sellers' Representative delivers an opinion of counsel,
reasonably acceptable to the Buyer stating that the treatment proposed by
the Sellers'
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Representative (a) has a realistic possibility of being sustained on its
merits as defined in Section 10.34 of Circular 230 of the Internal Revenue
Service, (b) will not result in the imposition of penalties on the Buyer,
either General Partner or the Partnership (unless the Sellers add a
deposit to the Escrow Amount or post a bond sufficient to pay any such
penalties plus interest) and (c) is in accordance with applicable Law. If
the Buyer and the Sellers' Representative are unable to agree on whether
the conditions stated in provisions (i) and (ii) of the preceding sentence
have been fulfilled, then such disputed matter(s) shall be referred for
determination to the Accountants as described above. The Buyer shall cause
the General Partners to execute and file the Tax Return as finally agreed
to by the Sellers' Representative and the Buyer, provided in the opinion
of counsel or determined by the Accountants, as the case may be, and to
pay all Taxes shown to be due thereon, subject, however, to the obligation
of the Sellers, in order to enable the Buyer to pay such Taxes, to deliver
to the Sellers' Representative in immediately available funds an amount
sufficient to pay all such Taxes due and payable and to cause the Sellers'
Representative, not later than 48 hours before the due date thereof, to
cause to be delivered all such funds to the Buyer.
(ii) The Buyer shall prepare and file in a timely fashion all
Tax Returns, reports and forms for periods ending after the Closing Date
but including a period prior to the Closing Date, and shall, subject to
the Sellers' obligation in clause (i) above to deliver funds to the
Sellers' Representative and to cause the Sellers' Representative to
deliver all such funds to the Buyer for payment of such Taxes, pay or
cause to be paid in a timely fashion all Taxes due for periods covered by
such returns. The Buyer will indemnify Sellers for any Loss incurred by
the Sellers as a result of the failure of Buyer to timely pay the Taxes
for which the Funds were delivered to the extent that the funds were
timely delivered and were sufficient to pay all such Taxes.
(b) Tax Returns of the Partnership.
(i) The Sellers shall cause to be prepared (at the Sellers' expense)
all Federal and state income Tax Returns of the Partnership covering
periods ending on or before the Closing Date, and all other Tax Returns
due after the Closing Date and covering periods ending on or before the
Closing Date, including, without limitation, all Tax Returns required to
be filed as a result of (A) the termination of the Partnership under
Section 708(b)(1)(B) of the Code and (B) any termination under Section
708(b)(1)(A) of the Code of any new partnership (including a partnership
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that is both created and terminated on the Closing Date) that is created
as a result of the application of Treasury Regulation Section
1.708-1(b)(1)(iv). Such returns shall be prepared on a basis consistent
with the past practice of the Partnership in filing its federal income Tax
Returns so long as such practices are in accordance with applicable law
and regulations. Such returns shall treat the purchase transactions that
are the subject of this Agreement as a sale or exchange of the Limited
Partnership Interests in the Partnership, and as a sale of all of the
stock of QFAC and QFMC and will be consistent with the Allocation and the
provisions of paragraph (d)(iv). In addition, the Returns will provide for
elections under Section 754 or 732(d) of the Code as requested by the
Buyer. The Sellers' Representative shall provide the Buyer with a draft of
such Tax Returns at least 60 days prior to the due date for filing (taking
into account any extensions for which requests have been properly prepared
by the Sellers' Representative and provided to the Buyer at least 45 days
prior to the due date, along with any funds necessary to assure that such
extension will not give rise to penalties) and if such draft is not
presented to the Buyer within such time period, the Buyer shall be
entitled to prepare and file such returns and the Sellers will remain
obligated to provide the Buyer with funds shown to be due on such Returns.
The Buyer shall provide the Sellers' Representative with written comments
on such draft Tax Returns within 30 days of receipt of the draft. If the
Buyer fails to notify the Sellers' Representative within 30 days of its
receipt of any draft of any disagreement therewith, such draft shall be
deemed approved. If the Buyer timely notifies the Sellers' Representative
of an objection to a draft return, the Buyer and the Sellers'
Representative shall in good faith resolve any disputes regarding such
draft return no later than 30 days before the due date for filing such
return. If the Buyer and the Sellers' Representative are unable to resolve
any such dispute, the disputed matter(s) shall be referred for
determination as promptly as practicable to the Accountants. The
Accountants shall make a determination no later than seven (7) days before
the due date for filing such return, which determination shall be binding
on the parties. Notwithstanding anything contained herein to the contrary,
the treatment of any item on a Federal Income Tax Return of the
Partnership shall be in accordance with the treatment proposed by the
Sellers' Representative (and any such dispute will not be referred to the
Accountants) if the treatment of such item (i) is not inconsistent with
the past practices of the Partnership, (ii) reflects the form of the
Transactions as described above and is consistent with the Allocation and
the provisions of paragraph (d)(iv), and (iii) the Sellers' Representative
delivers an opinion of counsel, reasonably acceptable to the Buyer stating
that the
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treatment proposed by the Sellers' Representative (a) has a realistic
possibility of being sustained on its merits as defined in Section 10.34
of Circular 230 of the Internal Revenue Service, (b) will not result in
the imposition of penalties on the Buyer, either General Partner or the
Partnership (unless the Sellers add a deposit to the Escrow Amount or post
a bond sufficient to pay any such penalties plus interest) and (c) is in
accordance with applicable Law. If the Buyer and the Sellers'
Representative are unable to agree on whether the conditions stated in
provisions (i) and (ii) of the preceding sentence have been fulfilled,
then such disputed matter(s) shall be referred for determination to the
Accountants as described above. The Buyer shall cause the General Partners
to execute and file, on behalf of the Partnership, the Tax Return as
finally agreed to by the Sellers' Representative and the Buyer, provided
in the opinion of counsel or determined by the Accountants, as the case
may be, and to pay all Taxes shown to be due thereon by the Partnership,
subject, however, to the obligation of the Sellers, in order to enable the
Buyer to pay such Taxes, to deliver to the Sellers' Representative in
immediately available funds an amount sufficient to pay all such Taxes due
and payable and to cause the Sellers' Representative, not later than 48
hours before the due date thereof, to cause to be delivered all such funds
to the Buyer. This provision does not obligate the Buyer or the
Partnership to pay any Taxes payable by any Partner with respect to the
income of the Partnership. The Buyer will indemnify Sellers for any Loss
incurred by the Sellers as a result of the failure of Buyer to timely pay
the Taxes for which the funds were delivered to the extent that the funds
were timely delivered and were sufficient to pay all such Taxes.
(ii) The Buyer shall prepare and file in a timely fashion all Tax
Returns of the Partnership, reports and forms for periods ending after the
Closing Date, but including a period prior to the Closing Date.
(c) Amended Tax Returns. To the extent to do so would increase any
Taxes owed by any Seller or trigger an indemnity payment of the Seller Group
under Section 10 hereof, the Buyer shall not file, or allow to be filed, any
amended Tax Return for either General Partner or the Partnership for any period
ending before the Closing Date without the written approval of the Sellers'
Representative, such approval not to be unreasonably withheld.
(d) Mutual Cooperation on Tax Matters. The parties agree as follows:
(i) Each shall make available to the other parties, as promptly as
practicable, any assistance, information or documents as may reasonably be
requested in
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connection with the preparation of any Tax Return, report or form, audit
or other examination, judicial or administrative proceeding or
determination relating to any Liability for Taxes (including payments
owing hereunder).
(ii) Each party shall retain, until the expiration of all applicable
statutes of limitation (including waivers or extensions thereof) or the
completion of any proceedings, and provide the other parties with, any
records or information relevant to any matter relating to Taxes.
(iii) To the extent reasonable, each party shall permit the other
parties or their authorized representatives, upon notice and during normal
business hours, to have access to books, records and workpapers relating
to the Taxes of the General Partners and the Partnership and to make
copies of such books, records, workpapers and such other additional
accounting, financial or Tax data and information as such other party or
its representative shall reasonably request, which is not otherwise
available and which is germane to the preparation of any Tax Return,
report or form, or necessary or advisable for use in or in preparation for
proceedings before any court or Governmental Entity relating to Liability
for Taxes. All of the foregoing shall be used only for the purposes sought
and shall otherwise be kept confidential by the receiving party except to
the extent such information is already in the public domain.
(iv) On or before March 15, 1997 (unless such date is extended with
the consent of the Sellers' Representative), the Buyer will provide the
Sellers' Representative with a determination of the fair market values of
the assets of the Partnership and an allocation (the determination of fair
market values and the allocation are collectively referred to as the
"Allocation") of the tax bases relating to the assets of the Partnership
generated by the acquisition by the Buyer and New CFP Holdings,
respectively, of all of the stock of QFMC and QFAC, the Limited
Partnership Interests and the Rollover Interests. The parties hereto will
use the Allocation for all tax purposes, including the preparation of the
Tax Returns described in Section 11.2 and the determination of the
allocation of purchase price paid and the portion of the amount realized
from the sale of the Limited Partnership Interests and Rollover Interests
that is attributable to recapture under Section 1245 and 1250 of the Code.
The Allocation will allocate up to an amount equal to the sum of (a) the
aggregate adjusted tax basis of all of the Partnership's assets (excluding
its inventory) as of the Closing Date and (b) $600,000, among the
Partnership's assets that have a positive tax basis (excluding its
inventory) immediately prior to the Closing Date, in
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proportion to the relative values of such assets as set forth on the books
and records of the Partnership used for purposes of generating its
financial statements; provided, however, that in no event will the
Allocation allocate less to any asset than such asset's adjusted tax basis
immediately prior to the Closing Date. In addition, the Allocation will
allocate tax basis to the Partnership's inventory up to an amount that is
equal to 119.5% of the adjusted tax basis of such property to the
Partnership as of the Closing Date. The Sellers' Representative will
accept the Allocation unless, within 10 days of its receipt of the
Allocation, it delivers an opinion of counsel, reasonably acceptable to
the Buyer, stating that the Allocation will trigger a current liability of
QFAC for Federal income taxes. If the Sellers' Representative provides
such an opinion, the Buyer and the Sellers' Representative will attempt to
agree upon a revised Allocation. If they cannot agree, those portions of
the Allocation that are in dispute will be referred to the Accountants for
a final and binding determination based upon the terms of this Agreement
and applicable Law.
11.3. Further Assurances; Transition Assistance. Each of the parties
agrees that it will from time to time from and after the Closing promptly do,
execute, acknowledge and deliver, and will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, certificates,
assignments, transfers, conveyances, powers of attorney, assurances and other
documents as may reasonably be requested by any other party for better
assigning, transferring, granting, conveying, assuring and conferring right,
title and interest to the Buyer in the business of the General Partners and the
Partnership. Without limiting the generality of the foregoing, and in
furtherance of the provisions of Section 11.2, the parties agree to cooperate
with each other and to provide each other with all information and documentation
reasonably necessary to permit the preparation and filing of all Federal, state,
local, and other Tax Returns and Tax elections with respect to the Business.
11.4. Confidential Information; Non-Competition. (a) None of the
Stockholders or Partners shall, directly or indirectly, disclose any
confidential or proprietary information relating to the Business, the General
Partners or the Partnership or any of their respective Affiliates to any Person,
nor shall any such Person make use of any such confidential or proprietary
information for its, his or her own purpose or for the benefit of any Person
except the Buyer or the General Partners or any Affiliate thereof, the parties
hereby acknowledging that the Buyer, the General Partners and their respective
Affiliates would be irreparably damaged if such confidential knowledge were
disclosed to or utilized on behalf of others in competition in any respect with
the Business, the General Partners or any of their respective Affiliates.
Notwithstanding anything to the
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contrary contained herein, no party shall be required to maintain the
confidentiality of any information that:
(i) is now, or hereafter becomes, through no act or failure to act
on the part of such party that constitutes a breach of this Section 11.4,
generally known or available to the public;
(ii) is known to such party at the time of the disclosure of such
information;
(iii) is hereafter furnished to such party by a third party, who, to
the knowledge of such party, is not under any obligation of
confidentiality to the other party, without restriction on disclosure;
(iv) is disclosed with the written approval of the party to which
such information or materials pertain;
(v) is required to be disclosed by law, court order, or similar
compulsion; provided, however, that, such disclosure shall be limited to
the extent so required or compelled; and provided further, however, that
the party required to disclose such confidential information shall give
the other party notice of such disclosure and cooperate with such other
party in seeking suitable protections; or
(vi) is required to be provided pursuant to or in connection with
any legal proceeding involving the parties hereto.
(b) Each of the Persons identified on Schedule 11.4(b) hereby
acknowledges and recognizes the highly competitive nature of the Business and,
accordingly, agrees that, in consideration of the premises contained herein and
the consideration to be received by such Person in connection with the
consummation of the transactions contemplated hereby, and to induce the Buyer to
enter into this Agreement, such Person will not, from and after the Closing
until 18 months following the Closing Date, (i) directly or indirectly engage
in, represent in any way or be connected with any Competitive Business (as
hereinafter defined) in any Restricted Territory, whether such engagement shall
be as an employer, officer, director, owner, employee, partner, Affiliate or
other participant in any Competitive Business; (ii) assist others in engaging in
any Competitive Business in the manner described in the foregoing clause (i);
(iii) induce any employee of the Buyer, either General Partner or the
Partnership or any Affiliate thereof to terminate such employee's employment or
engage in any Competitive Business or (iv) induce any entity or Person with
which the Buyer, either General Partner or the Partnership or any Affiliate
thereof has a business relationship to terminate or alter such business
relationship; provided, however, that the foregoing shall not prevent any Person
from
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owning the securities of or an interest in any business, provided such ownership
of securities or interest represents less than five percent (5%) of any class or
type of securities of, or interest in, such business. As used in this Agreement,
"Competitive Business" means any business that derives more than 10% of revenues
from any of the following, individually or in the aggregate:
(A) uncooked, thinly sliced (to a thickness of no more than
one-quarter of one inch), frozen cuts of solid beef muscle;
(B) cooked, solid muscle slices that are combined with spices and/or
peppers and onions;
(C) uncooked beef that is chopped, formed, thinly sliced and frozen;
and
(D) pre-cooked and uncooked thinly sliced frozen chicken meat.
As used in this Agreement, "Restricted Territory" means any geographic location
(whether domestic or foreign) in which the Business is conducted immediately
prior to the Closing, or in which any of the General Partners or the Partnership
has invested substantial expense in anticipation of conducting (or commencing to
conduct) any portion of the Business in such geographic area.
(c) It is the desire and intent of the parties that the foregoing
provisions of this Section 11.4 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Section shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision of this Section 11.4 in the particular jurisdiction
in which such adjudication is made. In addition, in the event of a breach or
threatened breach by any Person identified on Schedule 11.4(b) hereto of any of
the provisions of this Section, the Buyer, each General Partner and the
Partnership shall be entitled to an injunction restraining such party from such
breach. Nothing herein contained shall be construed as prohibiting the Buyer,
the General Partner(s) or the Partnership from pursuing any other remedies
available for such breach or threatened breach.
11.5. Release. (a) Anything contained herein to the contrary
notwithstanding, by the execution and delivery of this Agreement, in
consideration of the mutual covenants and agreements contained herein, each of
the Sellers hereby irrevocably releases and forever discharges each of the
General Partners and the Partnership (for the benefit of such Person, the
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Buyer and their respective Affiliates, divisions and predecessors and their past
and present directors, officers, employees and agents, and each of their
respective successors, heirs, assigns, executors and administrators
(collectively, the "Released Persons")) of and from all manner of action and
actions, cause and causes of action, suits, rights, debts, dues, sums of money,
accounts, bonds, bills, covenants, contracts, controversies, omissions,
agreements, promises, variances, trespasses, damages, liabilities, judgments,
executions, claims and demands whatsoever (including, without limitation, any
claim for deferred compensation or other compensation for services rendered
prior to the Closing), in law or in equity which against the Released Persons
such Seller ever had, now has or which such Seller hereafter can, shall or may
have, whether known or unknown, suspected or unsuspected, matured or unmatured,
fixed or contingent, for, upon or by reason of any matter or cause arising at
any time on or prior to the Closing Date.
(b) Each Seller specifically represents and warrants to the Released
Persons that such Person has not assigned any such claim set forth in Section
11.5(a), and agrees to indemnify and hold harmless the Released Persons from and
against any and all losses or damages arising from or in any way related to (i)
any such assignment, and (ii) any action by any third party arising from or in
any way related to the relationship among such Seller and the Released Persons,
which is the subject of this Section 11.5.
SECTION 12. TERMINATION; EFFECT OF TERMINATION.
12.1. Termination. This Agreement may be terminated at any time
prior to the Closing by:
(a) the mutual consent of the Buyer and QFAC; or
(b) the Buyer, if there has been a material breach by either General
Partner, the Partnership or any Seller of any representation, warranty, covenant
or agreement set forth in this Agreement which either General Partner, the
Partnership or such Seller fails to cure within ten Business Days after notice
thereof is given by the Buyer (except no cure period shall be provided for a
breach by any such Person that by its nature cannot be cured); or
(c) QFAC, if there has been a material breach by the Buyer of any
representation, warranty, covenant or agreement set forth in this Agreement
which the Buyer fails to cure within ten Business Days after notice thereof is
given by QFAC or the Sellers' Representative (except no cure period shall be
provided for a breach by any such Person that by its nature cannot be cured); or
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(d) the Buyer or QFAC, if the conditions set forth in Section 9.1
shall not have been satisfied or waived (to the extent they may be waived) by
December 31, 1996; or
(e) the Buyer, if the conditions set forth in Section 9.2 shall not
have been satisfied or waived (to the extent they may be waived) by December 31,
1996; or
(f) QFAC, if the conditions set forth in Section 9.3 shall not have
been satisfied or waived (to the extent they may be waived) by December 31,
1996; or
(g) the Buyer or QFAC, if any permanent injunction or other Order of
a court or other competent Governmental Entity preventing the Closing shall have
become final and nonappealable;
provided, however, that neither QFAC nor the Buyer shall be entitled to
terminate this Agreement pursuant to Section 12.1(d), (e) or (f) if such party's
breach, or in the case of QFAC, the Partnership's, QFMC's or a Seller's breach,
of this Agreement has prevented the satisfaction of a condition. Any termination
pursuant to Section 12.1(a) shall be effected by a written instrument signed by
the Buyer and QFAC and any termination pursuant to this Section 12.1 (other than
a termination pursuant to Section 12.1(a)) shall be effected by written notice
from the party or parties so terminating to the other parties hereto, which
notice shall specify the Section hereof pursuant to which this Agreement is
being terminated.
12.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 12.1, this Agreement shall be of no further
force or effect, except for this Section 12.2 and Sections 11.1, 11.4(a), 11.5
and 12.3 and Section 13, each of which shall survive the termination of this
Agreement; provided, however, that the Liability of any party for any breach by
such party of the representations, warranties, covenants or agreements of such
party set forth in this Agreement occurring prior to the termination of this
Agreement shall survive the termination of this Agreement and, in addition, in
the event of any action for breach of contract following a termination of this
Agreement, promptly following the rendering of a final, nonappealable judgment
the prevailing party shall be reimbursed by the other party or parties to the
action for reasonable attorneys' fees and expenses relating to such action.
12.3. Deposit. On or before execution and delivery of this
Agreement, the Buyer has paid to the Partnership a deposit in the aggregate
amount of $250,000 (the "Deposit"). In the event this Agreement is terminated
pursuant to Section 12.1(a), (b), (d), (e), (f), (g) or (h) hereof, the
Partnership shall, within three (3) Business Days of termination of this
Agreement pursuant to Section 12 hereof, return the Deposit in full to the
Buyer.
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SECTION 13. MISCELLANEOUS PROVISIONS.
13.1. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Buyer and QFAC.
13.2. Extension; Waiver. At any time prior to the Closing, the
parties (with QFAC acting on behalf of the Sellers) may (a) extend the time for
the performance of any of the obligations or other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement and (c)
waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party, and any such waiver shall not operate or be construed as a waiver of
any subsequent breach by any other party.
13.3. Entire Agreement. This Agreement and the other agreements and
documents referenced herein and therein (including, but not limited to, the
Schedules and Exhibits (in their executed form) attached hereto) contain all of
the agreements among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings among
the parties with respect thereto (including, but not limited to, the Letter of
Intent dated as of October 11, 1996, as amended, among the Buyer, the
Partnership and Strategic Investments & Holdings, Inc., except as otherwise
provided therein).
13.4. Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the Law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
13.5. No Third-Party Beneficiaries; Successors and Assigns. Except
as expressly provided herein, this Agreement shall not confer any rights or
remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns. This Agreement shall be binding upon and
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inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto; provided, however, that
anything contained herein to the contrary notwithstanding, (a) the General
Partners or the Partnership (in each case at or following the Closing) or the
Buyer may collaterally assign this Agreement without the prior consent of any
other party to a financial or lending institution providing financing to the
General Partners, the Partnership or the Buyer and (b) the Buyer may assign any
of its rights under this Agreement to any Affiliate of the Buyer or to any
Person who shall acquire substantially all of the assets of the General
Partners, the Partnership, the Business or the Buyer or a majority of the voting
securities of the General Partners, the Partnership, the Business or the Buyer,
whether pursuant to a merger, consolidation, sale of stock or otherwise.
13.6. Headings. Descriptive headings are for convenience only and
shall not control or affect in any way the meaning or construction of any
provision of this Agreement.
13.7. Notices. All notices or other communications pursuant to this
Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to any Partner or Stockholder, to the Sellers'
Representative at:
Cyclorama Building
369 Franklin Street
Buffalo, New York 14202
Attention: David M. Zebro
Telecopier: (716) 857-6490
with a copy to:
Nixon, Hargrave, Devans & Doyle LLP
1600 Main Place Tower
Buffalo, New York 14202-3716
Attention: Charles P. Jacobs, Esq.
Telecopier: (716) 853-8109
(b) if to the Buyer, to:
CFP Holdings, Inc.
1205 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
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with a copy to:
First Atlantic Capital, Ltd.
135 East 57th Street, 29th Floor
New York, New York 10022
Attention: James A. Long
Facsimile (212) 750-0954
and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2420.
All such notices and other communications shall be deemed to have been given and
received (c) in the case of personal delivery, on the date of such delivery, (d)
in the case of delivery by telecopy, on the date of such delivery, (e) in the
case of delivery by nationally-recognized, overnight courier, on the Business
Day following dispatch, and (f) in the case of mailing, on the third Business
Day following such mailing.
13.8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one agreement.
13.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the Laws of any jurisdiction other than the State of New York.
13.10. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
13.11. Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.
13.12. Remedies. Subject to the provisions of Section 10, the
parties shall each have and retain all other rights and remedies existing in
their favor at law or equity, including, without limitation, any actions for
specific performance and/or
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injunctive or other equitable relief to enforce or prevent any violations of the
provisions of this Agreement.
13.13. Jurisdiction and Venue. Subject to the terms of this
Agreement, the parties agree that any and all actions arising under or in
respect of this Agreement (including, without limitation, the resolution of any
disputed claims under Section 12) shall be litigated in the Federal or state
courts in the State of New York. By executing and delivering this Agreement,
each party irrevocably submits to the personal jurisdiction of such courts. Each
party agrees that venue would be proper in any of such courts and hereby waives
any objection that any such court is an improper or inconvenient forum for the
resolution of any such action. Each party further agrees that the mailing by
certified or registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of process against
such party, without the necessity for service by any other means provided by
statute or rule of court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
13.14. [Intentionally Omitted.]
13.15. Definitions. The following terms used in the Securities
Purchase Agreement shall have the following respective meanings:
"Additional Cash Payment" means (i) the Escrow Amount as adjusted
downward by the amount of any liability of any of the Sellers pursuant to this
Agreement funded out of the Escrow Amount; and (ii) any additional amounts that
become payable to the Sellers as contemplated by Section 3.3(a) hereof.
"Adjusted Enterprise Value" means the remainder of (i) 86,400,000,
less (ii) the amount of the Deposit, less (iii) $1,500,000, as such remainder
may be adjusted (a) upward by the amount by which Estimated Closing Working
Capital exceeds Target Working Capital or (b) downward by the amount by which
Target Working Capital exceeds Estimated Closing Working Capital, as the case
may be.
"Affiliate" means, with respect to any Person, any of (i) a
director, executive officer or stockholder of such Person, (ii) a spouse,
parent, sibling or descendant of such Person (or a spouse, parent, sibling or
descendant of any director or executive officer of such Person) and (iii) any
other Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, another Person.
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"Aggregate Consideration" means an amount equal to the sum of the
Seller Note Amount and the Initial Cash Payment, as such sum may be increased by
an Additional Cash Payment, if any, or otherwise adjusted pursuant to Section
3.3 hereof.
"Agreement" means this Securities Purchase Agreement.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction that forms or is reasonably likely to form
the basis for any specified consequence.
"Business Day" means any day, other than a Saturday, Sunday or legal
holiday on which banks are permitted to close in the City and State of New York.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C.ss.ss. 9601 et seq.
"Class A Common Stock" means the Class A Common Stock, $.01 par
value, of QFAC and/or QFMC, as the context may require.
"Class B Common Stock" means the Class B Common Stock, $.01 par
value, of QFAC and/or QFMC, as the context may require.
"Closing Funded Debt" means the Net Funded Debt immediately prior to
the Closing, as shown on the Closing Date Balance Sheet to be delivered pursuant
to Section 3.1 hereof.
"Closing Working Capital" means, as determined in accordance with
GAAP (except as otherwise specified in this definition) (i) the total current
assets, including cash held for the Deposit (excluding (A) cash and cash
equivalents to the extent included in calculating Net Funded Debt and (B)
pre-paid income taxes, industrial revenue bond sinking funds and restricted
construction funds to the extent included in the calculation of current assets),
including accrued income tax receivables, to the extent the Buyer is eligible to
receive such receivables, less (ii) the total current liabilities (excluding the
amount of the Deposit actually paid and reflected as a current liability and the
current portion of long-term indebtedness, short-term borrowings, bank
overdrafts and all accrued interest with respect thereto, to the extent already
included in current liabilities, and all accrued and unpaid fees, costs and
expenses relating to the construction, renovation, equipping of, and relocation
to, the Business' Tabor Road Facility, to the extent such fees, costs and
expenses are included in Closing Funded Debt) of the General Partners and the
Partnership, on a combined basis, at the Closing Date, as shown on the Closing
Date Balance Sheet to be delivered pursuant to Section 3.1 hereof.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value, of QFAC
and/or QFMC, as the context may require.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, instrument,
concession, franchise or license.
"control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Employee Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which either General Partner,
the Partnership or any ERISA Affiliate of either General Partner or the
Partnership has any present or future obligations or liability on behalf of its
employees or former employees, contractual employees or their dependents or
beneficiaries.
"Employment Agreements" means the Employment Agreement substantially
in the form of Exhibit A-1 hereto to be executed and delivered by Robert D.
Gioia and the Employment Agreement substantially in the form of Exhibit A-2
hereto to be executed by David Cohen.
"Encumbrances" means and includes any security interests, mortgages,
deeds of trust, liens, pledges, charges, claims, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal,
grants of power to confess judgment, conditional sales and title retention
agreements (including any lease in the nature thereof) and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money.
"Environmental Escrow Amount" means $100,000.
"Environmental and Safety Requirements" means all Laws, Orders,
contractual obligations and all common law in each case in effect on or before
the Closing Date concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including, without limitation,
all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
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pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation
(collectively, "Hazardous Materials"), including, but not limited to, the Solid
Waste Disposal Act, as amended, 42 U.S.C. ss.ss.6901, et seq., the Clean Air
Act, as amended, 42 U.S.C. ss.ss.7401 et seq., the Federal Water Pollution
Control Act, as amended, 33 U.S.C. ss.ss.1251 et seq., the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. ss.ss.11001 et seq., CERCLA, the
Hazardous Materials Transportation Uniform Safety Act, as amended, 49 U.S.C.
ss.1804 et seq., the Occupational Safety and Health Act of 1970, and the
regulations promulgated thereunder.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means, with respect to any Person, any entity that
is a member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"Escrow Agent" means United States Trust Company of New York, the
escrow agent pursuant to the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement in substantially the
form attached hereto as Exhibit B among the Sellers' Representative, the Buyer
and the Escrow Agent.
"Escrow Amount" means $5,000,000.
"Estimated Closing Working Capital" means the Closing Working
Capital of the General Partners and the Partnership, on a consolidated basis, at
the Closing Date, determined at the Sellers' expense by the Sellers'
Accountants, and approved by the Buyer's Accountants, based on a balance sheet
of each of the General Partners and the Partnership and a pro forma consolidated
balance sheet of the General Partners and the Partnership (in each case as at
the Closing Date) prepared in accordance with the procedures set forth in
Section 3.1 hereof. The Estimated Closing Working Capital shall be set forth in
a Certificate to be accompanied by (i) an agreed-upon procedures report prepared
by the Sellers' Accountants and (ii) detailed information indicating how
Estimated Closing Working Capital was calculated, together with copies of the
work papers of the Sellers' Accountants relating to the calculation of such
amount (including a pro forma balance sheet), all of which shall be delivered
not more than seven (7) days prior to the Closing Date. Such Certificate shall
be used for purposes of establishing Adjusted Enterprise Value and shall be
subject to modification pursuant to the provisions of Section 3 hereof.
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"Exchange Agreement" means the Exchange Agreement in substantially
the form attached hereto as Exhibit C among New CFP Holdings, The RDG Food Corp.
and Amjor Holdings, Inc. being executed simultaneously with this Agreement.
"Final Escrow Termination Date" means the earlier of (i) the sale of
the Business following the Closing Date, whether as a result of a sale of all or
substantially all of the assets of the Business or the sale of a majority of the
voting securities of the Buyer or New CFP Holdings, Inc., pursuant to a merger,
consolidation, sale of stock or otherwise and (ii) the seventh anniversary of
the Closing Date; provided, however, if at such time the Section 8.3 Resolution
Date has not occurred, the Environmental Escrow Amount (net of any amounts paid
out of the Environmental Escrow Amount pursuant to Section 8.3), together with
the accrued interest thereon, shall be retained in escrow until the Section 8.3
Resolution Date, and the Final Escrow Termination Date shall be such Section 8.3
Resolution Date.
"Final Settlement Date" means the date specified in Section
3.3(d)(i), (ii) or (iii), as applicable.
"Formation Documents" means, as to any entity, those instruments
that, among other things, (i) define its existence, as filed or recorded with
the applicable Governmental Entity, including, without limitation, its
certificate of incorporation (in the case of a corporation) or its certificate
of limited partnership (in the case of a limited partnership) and (ii) govern
its internal affairs, including, without limitation, its By-laws (in the case of
a corporation) or its agreement of limited partnership (in the case of a limited
partnership), in each case as amended, supplemented or restated.
"Funded Debt" means all indebtedness of the General Partners and the
Partnership for borrowed money (and accrued interest thereon) and includes,
without limitation, (i) bank overdrafts (including with respect to any cash
accounts, any negative balances), revolving credit facilities, term loans,
equipment loans, mortgages, capitalized lease obligations, notes and guarantees;
(ii) the deferred purchase price of property or services other than trade
payables arising in the ordinary course of business in accordance with customary
trade terms; (iii) indebtedness evidenced by bonds, debentures or similar
instruments or letters of credit; (iv) accrued interest, prepayment premiums and
any other fees, expenses and penalties payable on or relating to such
indebtedness (and the refinancing thereof); and (v) all accrued and unpaid fees,
costs and expenses relating to the construction, renovation, equipping of, and
relocation to, the Business' Tabor Road facility to the extent not already
included pursuant to clause (ii) of this definition but excluding overdrafts or
outstanding checks that are included in accounts payable for purposes of the
calculation of Closing Working Capital.
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"General Partners" means QFAC and QFMC.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state or local.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to such Act
or any successor law thereto.
"Indemnified Persons" means the Seller Group or the Buyer Group, as
the case may be.
"Indemnifying Persons" means the Seller Group or the Buyer Group, as
the case may be.
"Indemnifying Sellers" means the individuals listed in Part A of
Schedule III hereto.
"Initial Cash Payment" means an amount equal to the remainder of (i)
Adjusted Enterprise Value, less (ii) Closing Funded Debt, less (iii) the Escrow
Amount, less (iv) the Seller Note Amount, less (v) Seller Expenses (to the
extent not included in Closing Funded Debt).
"Initial Escrow Payout Amount" means that amount equal to the
remainder of (i) $3,000,000, less the Environmental Escrow Amount (net of any
amounts paid to the Buyer out of the Environmental Escrow Amount pursuant to
Section 8.3), together with the interest accrued on such remainder, and (ii) the
sum of all amounts distributed as of the Initial Escrow Termination Date
pursuant to Sections 3.3(f) or 10.9(a) of this Agreement, together with the
interest accrued on such remainder.
"Initial Escrow Termination Date" means the date that is thirty (30)
days following completion of the 1997 fiscal year audit of the Buyer and its
consolidated Affiliates.
"Intermediate Escrow Payout Amount" means that amount equal to the
remainder of (i) the Escrow Amount that has not been distributed, less (ii)
$1,000,000 (together with the interest accrued on such remainder), less (iii) to
the extent the Section 8.3 Resolution Date has not yet occurred, the
Environmental Escrow Amount (net of any amounts paid to the Buyer out of the
Environmental Escrow Amount pursuant to Section 8.3), together with the interest
accrued on such remainder.
"Intermediate Escrow Termination Date" means the fifth anniversary
of the Closing Date.
"Intellectual Property Rights" means (a) all inventions, all
improvements thereto and all patents, patent
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applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all registered and unregistered trademarks, service marks, trade
dress, logos, trade names, and corporate names, including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (d) all trade
secrets, formulae, customer lists, supplier lists, pricing and cost information,
business and marketing plans and other confidential business information, (e)
all computer programs and related software, (f) all other proprietary rights and
(g) all copies and tangible embodiments thereof.
"Jersey Matters" means the business, property, activities, assets or
operations of BDMC, Inc. or any of its predecessors or successors.
"Knowledge" (and like phrases) with respect to either General
Partner or the Partnership means and includes (i) actual knowledge of the
persons listed on Schedule 13.15 hereto and (ii) that knowledge which a
reasonable person in his or her capacity as an officer of an organization would
have obtained after making a due diligence investigation with respect to the
representations and warranties set forth in Section 5 or Section 6 hereof (as
applicable); provided, however, that for purposes of this clause (ii), such
knowledge shall not be based upon such knowledge of David M. Zebro.
"Law" means any law, statute, treaty, rule, directive or regulation
or Order of any Governmental Entity.
"Lenders" shall have the meaning ascribed to such term in Section
7.4 hereof.
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due.
"Limited Partnership Interests" means all limited partnership
interests in the Partnership owned by the limited partners of the Partnership
other than the Rollover Interests.
"Litigation Expense" means any out-of-pocket expenses incurred in
connection with investigating, defending or asserting any claim, legal or
administrative action, suit or Proceeding incident to any matter indemnified
against hereunder including, without limitation, court filing fees, court costs,
arbitration fees or costs, witness fees and fees and disbursements of outside
legal counsel, investigators, expert witnesses, accountants and other
professionals.
-76-
<PAGE>
"Losses" means any and all losses, claims, shortages, damages,
Liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees and Litigation Expenses), assessments, Tax
deficiencies, Taxes (including interest or penalties thereon) and insurance
premium increases arising from or in connection with any such matter that is the
subject of indemnification under Section 10, as reduced by (i) the amount
actually recovered under insurance policies (net of deductibles and incidental
expenses resulting therefrom) and (ii) tax benefits actually realized under Tax
Laws in respect of such Losses, in each case net of all costs and expenses of
recovering any such amount. For purposes of determining tax benefits actually
realized, there shall be included tax benefits actually realized before the
taxable year in which a payment for a Loss is received and tax benefits realized
in the taxable year in which a payment for a Loss is received.
"Management Fees" means the fees and expenses set forth on Schedule
13.15(a).
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, operations, assets, condition
(financial or otherwise), operating results, liabilities, customer, supplier or
employee relations or business prospects of such Person or any material casualty
loss or damage to the assets of such Person, whether or not covered by
insurance; provided, however, that Material Adverse Change with respect to the
Business, either General Partner or the Partnership shall not include the
information with respect to meat prices or the Partnership's business
relationship with Subway as set forth on Schedule 13.15(c) hereto.
"Material Adverse Effect" on any Person means a material adverse
effect on the business, operations, assets, condition (financial or otherwise),
operating results, liabilities, customer, supplier or employee relations or
business prospects of such Person.
"Maximum Consideration" means an amount equal to the remainder of
(i) $86,400,000, less (ii) the amount of the Deposit, less (iii) $1,500,000,
less (iv) Closing Funded Debt, less (v) Seller Expenses (to the extent not
included in Closing Funded Debt), less (vi) the Escrow Amount, plus (vii) the
Additional Cash Payment, if any.
"Net Funded Debt" means Funded Debt, net of industrial revenue bond
sinking funds not to exceed $100,000 and restricted construction funds not to
exceed $600,000, in each case to the extent not included in current assets for
purposes of determining Estimated Closing Working Capital or Closing Working
Capital.
"New CFP Holdings" means CFP Group, Inc., a Delaware corporation.
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<PAGE>
"Orders" means settlements, judgments, writs, decrees, compliance
agreements, injunctions or orders of any Governmental Entity or arbitrator.
"Permits" means all permits, licenses, authorizations, Orders,
registrations, franchises, approvals, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet
due and payable or being contested in good faith by appropriate proceedings and
for which there are adequate reserves on the books; (ii) workers or unemployment
compensation liens arising in the ordinary course of business; (iii) mechanic's,
materialman's, supplier's, vendor's or similar liens arising in the ordinary
course of business securing amounts that are not delinquent; (iv) with respect
to the Partnership's Camden, New Jersey property, those exceptions to title set
forth as items 21 through 29 on Schedule B-Section II of First American Title
Insurance Company, Commitment Number ST 23102A dated April 18, 1995; and (v)
with respect to the Partnership's Tabor Road facility, those exceptions to title
set forth as Items 3 through 7 on Schedule B-Section II of First American Title
Insurance Company Commitment Number SETT-15362 dated May 9, 1996.
"Person" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a governmental entity (or any department, agency or political subdivision
thereof).
"Proceedings" means actions, suits, claims, investigations or legal
or administrative or arbitration proceedings.
"Proportionate Percentage" means, as to each Seller, the percentage
figure as set forth opposite such Seller's name on Schedule V hereto.
"Real Property" has the meaning set forth in Section 6.9(d).
"Related Documents" means the Escrow Agreement and the Exchange
Agreement.
"Roll-up" means the merger of QFMC with and into QFAC, with QFAC as
the surviving corporation, the contribution of the Rollover Interests and the
Limited Partnership Interests to QFAC and the dissolution and liquidation of the
Partnership into QFAC, assuming such transactions occur immediately following
the Closing.
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<PAGE>
"Sale" means the sale by the Sellers to the Buyer of the Shares and
the Limited Partnership Interests.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Expenses" means (i) all unpaid fees and expenses incurred or
accrued by or on behalf of each General Partner or the Partnership (including,
without limitation, any fees or expenses of the Sellers) as of the Closing Date
in connection with this Agreement and the transactions contemplated hereby and
(ii) the Management Fees (to the extent not included in Funded Debt or paid by
the Sellers prior to the Closing Date).
"Seller Note Amount" means the $57,313,656 aggregate principal
amount of Seller Notes.
"Seller Notes" means the Senior Secured Notes due January 3, 1997
substantially in the form of Exhibit D hereto, payable to the Sellers in the
aggregate principal amount of the Seller Note Amount.
"Sellers" means all the Stockholders, being all the stockholders of
QFAC and QFMC, and all the Partners selling limited partnership interests in the
Partnership as contemplated by this Agreement.
"Sellers' Accountants" means Ernst & Young LLP.
"Stockholders" has the meaning set forth in the caption and shall
include the Stockholders listed on Schedule II hereto.
"Subsidiary" means each corporation or other entity with respect to
which a specified Person, directly or indirectly, owns or has the power to vote
capital stock or other ownership interests representative of more than fifty
percent (50%) of the outstanding voting power thereof.
"Survival Date" means the date, if any, upon which any
representation, warranty, covenant or other agreement contained herein shall
terminate.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Target Working Capital" means $10,124,000, calculated as reflected
on Schedule 13.15(d) hereto.
"Tax" means any of the Taxes.
"Tax Returns" means any return (including, without limitation, any
Federal, state, local or foreign return), declaration, report, claim for refund
or information return or
-79-
<PAGE>
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Taxes" means, with respect to any entity, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
entity (if any) and (ii) any liability for the payment of any amount of the type
described in the immediately preceding clause (i) (A) as a result of being a
"transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another entity or a member of an affiliated or combined group
or (B) by reason of any contract or other agreement, arrangement or
understanding.
"Transaction" means the (i) Sale, plus (ii) the transfer by certain
Sellers of the Rollover Interests to New CFP Holdings, plus (iii) the transfer
of the Rollover Interests by New CFP Holdings to QFAC (following the merger of
QFMC into QFAC, with QFAC as the surviving entity), plus (iv) the transfer of
the Limited Partnership Interests by the Buyer to QFAC (following the merger of
QFMC into QFAC).
"Transition Period" has the meaning set forth in Section 8.1.
* * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Securities Purchase Agreement as of the date first written above.
QUALITY FOODS, L.P.
By: QF Acquisition Corp.,
its general partner
By:___________________________
Name: David M. Zebro
Title: Vice President
CFP HOLDINGS, INC.
By:___________________________
Name:
Title:
Stockholders:
_________________________________ In its capacity as Stockholder
Gary M. Brost, in his capacity as and Indemnifying Seller:
Stockholder and Indemnifying ESTATE OF DAVID F. HERRICK
Seller
By:_________________________
Executor
_________________________________ _________________________________
Alan R. Abt, in his capacity as Dennis C. Martin, in his capacity
Stockholder and Indemnifying as Stockholder and Indemnifying
Seller Seller
_________________________________ _________________________________
David M. Zebro, in his capacity John F. Dunbar Jr., in his
as Stockholder and Indemnifying capacity as Stockholder and
Seller Indemnifying Seller
_________________________________ _________________________________
William L. Joyce, in his capacity Robert D. Gioia, in his capacity
as Stockholder and Indemnifying as Stockholder and Indemnifying
Seller Seller
<PAGE>
Partners:
QF ACQUISITION CORP.
By:_________________________
Name: David M. Zebro
Title: Vice President
QF MANAGEMENT CORP.
By:_________________________
Name: David M. Zebro
Title: Vice President
SIHI FOOD HOLDINGS, INC.
By:_________________________
Name: David M. Zebro
Title:
SIHI FOOD GROUP, INC.
By:_________________________
Name: David M. Zebro
Title:
THE RDG FOOD CORP.
By:_________________________
Name: Robert D. Gioia
Title: President
QF PARTNERS, L.P.
QF/GP, INC., its general partner
By:_________________________
Name: Dana D. Messina
Title:
BQF PARTNERS, L.P.
By:_________________________
Name: Ross B. Kenzie
Title: General Partner
AMJOR HOLDINGS, INC.
By:_________________________
Name: David Cohen
Title: President
<PAGE>
___________________________________
David Cohen, in his capacity as
an Indemnifying Seller
___________________________________
Ross B. Kenzie, in his capacity
as an Indemnifying Seller
___________________________________
Dana D. Messina, in his capacity
as an Indemnifying Seller
<PAGE>
Schedule I
Partners of Quality Foods, L.P.
Name Percentage Interest
---- -------------------
General Partners
QF Acquisition Corp. 1.00%
QF Management Corp. .01%
Limited Partners
SIHI Food Holdings, Inc. .38%
SIHI Food Group, Inc. 26.00%
The RDG Food Corp. 10.2648%
QF Partners, L.P. 32.50%
BQF Partners, L.P. 18.57%
AMJOR Holdings, Inc. 8.7248%
<PAGE>
Schedule II
Stockholders of QF Acquisition Corp.
Name Number of Shares
- - - ---- ----------------
Gary M. Brost 280
Alan R. Abt 280
David M. Zebro 280
William L. Joyce 280
Estate of David F. Herrick 140
Dennis C. Martin 70
John F. Dunbar Jr 70
Robert D. Gioia 700
Stockholders of QF Management Corp.
Name
Gary M. Brost 20
Alan R. Abt 20
David M. Zebro 20
William L. Joyce 20
Estate of David F. Herrick 10
Dennis C. Martin 5
John F. Dunbar Jr 5
<PAGE>
Schedule III
Indemnifying Sellers
Part A
Name
----
Gary M. Brost
Alan R. Abt
David M. Zebro
William L. Joyce
Estate of David F. Herrick
Dennis C. Martin
John F. Dunbar, Jr.
Robert D. Gioia
David Cohen
Ross B. Kenzie
Dana D. Messina
Part B
Ross B. Kenzie
Dana D. Messina
<PAGE>
Schedule IV
Sellers' Ownership of Shares and Limited
Partnership Interests; Consideration
QFAC QFMC Initial Cash Seller Note
Stockholders Shares Shares Payment Amount
------------ ------ ------ ------- ------
Gary M. Brost 280 20 0 $ 79,398.44
Alan R. Abt 280 20 0 79,398.44
David M. Zebro 280 20 0 79,398.44
William L. Joyce 280 20 0 79,398.44
Estate of David F. Herrick 140 10 0 40,581.42
Dennis C. Martin 70 5 0 19,996.64
John F. Dunbar, Jr. 70 5 0 19,996.64
Robert D. Gioia 700 - 0 195,849.47
----- ----- --- -----------
TOTAL: 2,100 100 0 $594,017.93
===== ===== === ===========
Amount of Type of Initial Cash Seller Note
Limited Partners Interest Interest Payment Amount
---------------- -------- -------- ------- ------
SIHI Food Holdings, Inc. .38% Limited Partner 0 $ 223,491.89
SIHI Food Group, Inc. 26.00% Limited Partner 0 15,291,550.56
The RDG Food Corp. 11.54% Limited Partner 0 6,037,095.90
QF Partners, L.P. 32.50% Limited Partner 0 19,114,438.20
BQF Partners, L.P. 18.57% Limited Partner 0 10,921,695.92
AMJOR Holdings, Inc. 10.00% Limited Partner 0 5,131,365.60
TOTAL: 98.99% 0 $56,719,638.07
======= === ==============
<PAGE>
Schedule V
Sellers' Proportionate Percentages
Proportionate
Name Percentage
- - - ---- ----------
Gary M. Brost 0.135%
Alan R. Abt 0.135%
David M. Zebro 0.135%
William L. Joyce 0.135%
Estate of David F. Herrick 0.069%
Dennis C. Martin 0.034%
John F. Dunbar Jr 0.034%
Robert D. Gioia 0.333%
SIHI Food Holdings, Inc. 0.38%
SIHI Food Group, Inc. 26.00%
The RDG Food Corp. 11.54%
QF Partners, L.P. 32.50%
BQF Partners, L.P. 18.57%
AMJOR Holdings, Inc. 10.00%
======
TOTAL: 100.00%
<PAGE>
Schedule 11.4(b)
Persons Bound by Section 11.4(b)
Robert D. Gioia
David Cohen
David M. Zebro
Alan R. Abt
Gary M. Brost
Dennis C. Martin
William L. Joyce
John F. Dunbar, Jr.
<PAGE>
Schedule 13.15
Knowledge Definition
David M. Zebro
David Cohen
Larry K. Davis
Robert D. Gioia
Kathy Griess
John R. Stipa
<PAGE>
Schedule 13.15(a)
Management Fees
1. Management stay bonuses in the aggregate amount of $450,000.
2. Management fees payable to Strategic Investments and
Holdings, Inc. in the aggregate amount of $865,000.
3. Such other bonuses and fees as are listed on Schedule 6.27 to the
Securities Purchase Agreement, to the extent not included in Net Funded
Debt or paid by the Sellers prior to the Closing.
<PAGE>
Schedule 13.15(d)
Target Working Capital
Accounts Receivable 5,450,000
Inventory 8,092,000
Prepaid Expenses 213,000
Total Accounts Payable (3,405,000)
Less Tabor Road Payable + 843,000
----------
(2,562,000)
Trade Accounts Payable (2,562,000)
Accrued Expenses (1,069,000)
-----------
Target Working Capital $10,124,000
<PAGE>
- - - --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
AMONG
QUALITY FOODS, L.P.,
THE PARTNERS OF
QUALITY FOODS, L.P.,
CERTAIN ADDITIONAL BENEFICIAL
OWNERS OF
QUALITY FOODS, L.P.,
THE STOCKHOLDERS OF
QF ACQUISITION CORP.,
THE STOCKHOLDERS OF
QF MANAGEMENT CORP.
AND
CFP HOLDINGS, INC.
December 31, 1996
- - - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. PURCHASE AND SALE OF SECURITIES............... 2
SECTION 2. CONSIDERATION................................. 2
SECTION 3. ADJUSTMENT OF AGGREGATE CONSIDERATION......... 2
3.1. Delivery of Closing Date Balance Sheet, Etc... 2
3.2. Determination of Closing Working Capital...... 3
3.3. Adjustments; Payments......................... 3
SECTION 4. CLOSING OF THE TRANSACTION.................... 4
4.1. The Closing................................... 4
4.2. Deliveries at Closing......................... 5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE
SELLERS....................................... 5
5.1. Authority..................................... 5
5.2. Noncontravention.............................. 5
5.3. Consents; Litigation.......................... 6
5.4. Title to the Shares and Limited Partnership
Interests..................................... 6
5.5. Bankruptcy, Etc............................... 6
5.6. Taxes......................................... 7
5.7. Related Party Transactions.................... 7
5.8. Disclosure.................................... 7
5.9. Limitations................................... 7
SECTION 6. REPRESENTATIONS AND WARRANTIES OF EACH
GENERAL PARTNER AND THE PARTNERSHIP........... 8
6.1. Organization; Good Standing; Qualification
and Power..................................... 8
6.2. Equity Investments............................ 9
6.3. Equity Ownership.............................. 9
6.4. Authority; Noncontravention; Consents........ 10
6.5. Financial Statements......................... 11
6.6. Absence of Undisclosed Liabilities........... 12
6.7. Absence of Changes........................... 12
6.8. Tax Matters.................................. 13
6.9. Title to Properties.......................... 14
6.10. Inventory.................................... 16
6.11. Intellectual Property........................ 17
6.12. Agreements; No Defaults; Etc................. 18
6.13. Litigation, Etc.............................. 19
6.14. Compliance; Governmental Authorizations...... 19
6.15. Insurance.................................... 20
6.16. Labor Relations; Employees................... 20
6.17. ERISA Compliance............................. 21
6.18. Environmental Matters........................ 23
6.19. Brokers...................................... 24
6.20. Suppliers and Vendors........................ 24
6.21. Customers.................................... 24
6.22. Accounts and Notes Receivable................ 25
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<PAGE>
Page
----
6.23. Accounts and Notes Payable................... 25
6.24. Related Party Transactions................... 25
6.25. Warranties of Products; Product Liability;
Regulatory Compliance........................ 26
6.26. Directors and Officers; Banks Accounts;
Powers of Attorney........................... 27
6.27. Certain Agreements........................... 27
6.28. Disclosure................................... 27
6.29. Limitations.................................. 28
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER.. 28
7.1. Authority.................................... 28
7.2. Noncontravention; Consents................... 28
7.3. Brokers' Fees................................ 29
7.4. Financing.................................... 29
7.5. Inaccuracies................................. 29
7.6. Investment Intent............................ 30
SECTION 8. PRE-CLOSING COVENANTS........................ 30
8.1. Affirmative Covenants of the General
Partners, the Partnership and the
Sellers...................................... 30
8.2. Negative Covenants of the General Partners
and the Partnership.......................... 31
8.3. Pennsylvania Environmental Matters........... 32
8.4. Consents..................................... 35
8.5. Efforts to Consummate........................ 35
8.6. Notice of Prospective Breach................. 36
8.7. Public Announcements......................... 36
8.8. Exclusivity; Disposition of Securities....... 36
8.9. Confidentiality............................. 37
8.10. Seller's Representative...................... 39
(a) Appoint...................................... 39
(b) Reliance by Representative................... 39
(c) Expenses of Representative................... 40
(d) Indemnification.............................. 40
(e) No Personal Liability........................ 40
(f) Authority Regarding Letter of Credit......... 40
8.11. Employee Matters............................. 40
SECTION 9. CONDITIONS................................... 41
9.1. Conditions to Each Party's Obligations....... 41
(a) Approvals.................................... 41
(b) No Injunctions or Restraints................. 41
(c) Litigation; Statutes......................... 41
(d) The Escrow Agreement......................... 41
9.2. Conditions to Obligations of the Buyer....... 41
(a) Representations and Warranties............... 41
(b) Performance of Obligations................... 42
(c) Authorization................................ 42
(d) Opinions of Counsel to the General Partners,
the Partnership and the Sellers.............. 42
-ii-
<PAGE>
Page
----
(e) Consents and Approvals....................... 42
(f) Corporate Resolutions........................ 42
(g) Absence of Material Adverse Change........... 42
(h) Officer's Certificate........................ 43
(i) Directors.................................... 43
(j) Financing.................................... 43
(k) Title Policies............................... 43
(l) Key Person Insurance......................... 43
(m) Seller Expenses.............................. 43
(n) Good Standing Certificates................... 43
(o) Employment Agreements........................ 43
(p) Funded Debt Certification.................... 44
(q) Solvency Opinion............................. 44
(r) The Exchange Agreement....................... 44
(s) Accounts and Notes Payable Aging Schedule.... 44
(t) Union Agreement.............................. 44
(u) Penns Grove.................................. 44
9.3. Conditions to Obligations of the Sellers..... 44
(a) Representations and Warranties............... 44
(b) Performance of Obligations of the Buyer...... 45
(c) Authorization................................ 45
(d) Government Consents, Authorizations, Etc..... 45
(e) Opinion of Counsel to the Buyer.............. 45
(f) Consents and Approvals....................... 45
(g) Employment Agreement......................... 45
(h) Escrow Agreement............................. 45
(i) Corporate Resolutions........................ 46
(j) Officer's Certificate........................ 46
(k) Solvency Opinion............................. 46
SECTION 10. INDEMNIFICATION.............................. 46
10.1. By the Sellers in Favor of the Buyer......... 46
10.2. By the Buyer in Favor of the Sellers......... 47
10.3. Limitations on Seller Group Indemnification.. 48
10.4. Limitations on Buyer Group Indemnification... 49
10.5. Assertion of Claims.......................... 49
10.6. Notice and Defense of Third Party Claims..... 50
10.6A. Notice and Resolution of Environmental
Indemnity Claims............................. 51
10.8. No Third Party Reliance...................... 54
10.9. Distribution of Escrow Amount................ 54
10.10. Remedies Exclusive........................... 56
SECTION 11. ADDITIONAL AGREEMENTS........................ 56
11.1. Expenses..................................... 56
11.2. Tax-Related Matters.......................... 56
(a) Tax Returns of the General Partners.......... 56
(b) Tax Returns of the Partnership............... 58
(c) Amended Tax Returns.......................... 60
(d) Mutual Cooperation on Tax Matters............ 60
11.3. Further Assurances; Transition Assistance.... 62
11.4. Confidential Information; Non-Competition.... 62
-iii-
<PAGE>
Page
----
11.5. Release...................................... 64
SECTION 12. TERMINATION; EFFECT OF TERMINATION........... 65
12.1. Termination.................................. 65
12.2. Effect of Termination........................ 66
12.3. Deposit...................................... 66
SECTION 13. MISCELLANEOUS PROVISIONS..................... 67
13.1. Amendment.................................... 67
13.2. Extension; Waiver............................ 67
13.3. Entire Agreement............................. 67
13.4. Severability................................. 67
13.5. No Third-Party Beneficiaries; Successors and
Assigns...................................... 67
13.6. Headings..................................... 68
13.7. Notices...................................... 68
13.8. Counterparts................................. 69
13.9. Governing Law................................ 69
13.10. Incorporation of Exhibits and Schedules...... 69
13.11. Construction................................. 69
13.12. Remedies..................................... 70
13.13. Jurisdiction and Venue....................... 70
13.14. [Intentionally Omitted.]..................... 70
13.15. Definitions.................................. 70
-iv-
<PAGE>
SCHEDULES AND EXHIBITS
Schedules
- - - ---------
Schedule I - Partners of Quality Foods, L.P.
Schedule II - Stockholders of QF Acquisition Corp. and
QF Management Corp.
Schedule III - Indemnifying Sellers
Schedule IV - Sellers' Ownership of Shares and Limited
Partnership Interests; Consideration
Schedule V - Sellers' Proportionate Percentages
Schedule 5.2 - Noncontravention
Schedule 5.3 - Consents
Schedule 5.4 - Agreements Relating to Equity Interests
Schedule 5.6 - Taxes
Schedule 5.10 - Residence of Sellers
Schedule 6.1 - Organization; Good Standing;
Qualification and Power
Schedule 6.3 - Equity Ownership
Schedule 6.4 - Consents
Schedule 6.5 - Financial Statements
Schedule 6.6 - Undisclosed Liabilities
Schedule 6.7 - Changes
Schedule 6.8 - Tax Matters
Schedule 6.9 - Title to Properties
Schedule 6.9(b) - Condition of Assets
Schedule 6.9(c) - Location of Assets
Schedule 6.9(d) - Real Property
Schedule 6.9(e) - Vehicles
Schedule 6.10 - Inventory
Schedule 6.11 - Intellectual Property
Schedule 6.12 - Agreements
Schedule 6.13 - Litigation
Schedule 6.14 - Compliance; Governmental Authorizations
Schedule 6.15 - Insurance
Schedule 6.16 - Labor Relations; Employees
Schedule 6.17 - ERISA Compliance
Schedule 6.18(a) - Environmental Proceedings
Schedule 6.18(b) - Notices of Violation
Schedule 6.18(c) - Real Property
Schedule 6.18(d) - Existence on Real Property
Schedule 6.18(e) - Environmental Liability
Schedule 6.19 - Brokers
Schedule 6.21 - Customers
Schedule 6.22 - Accounts and Notes Receivable
Schedule 6.23 - Accounts and Notes Payable
Schedule 6.25(a) - Standard Forms and Conditions of Sale
Schedule 6.25(b) - Governmental Investigation; Product
Liability
Schedule 6.27 - Acceleration of Payments, Etc.
Schedule 7.2 - Consents
Schedule 7.3 - Brokers
Schedule 8.2 - Negative Covenant Exceptions
Schedule 9.2(i) - Directors
-v-
<PAGE>
Schedule 11.4(b) - Persons Bound by Section 11.4(b)
Schedule 13.15 - Knowledge Definition
Schedule 13.15(a) - Management Fees
Schedule 13.15(b) - Sellers' Expenses Relating to Tabor Road
Schedule 13.15(c) - Material Adverse Change
Schedule 13.15(d) - Target Working Capital
Exhibits
- - - --------
Exhibit A-1 - Form of Employment Agreement with Robert
D. Gioia
Exhibit A-2 - Form of Employment Agreement with David
Cohen
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Exchange Agreement
Exhibit D - Form of Seller Note
-vi-
<PAGE>
DEFINITIONS
The following terms used in this Agreement are defined where
indicated below:
Term Section
- - - ---- -------
Accountants................................................................3.2
Additional Cash Payment..................................................13.15
Adjusted Enterprise Value................................................13.15
Affiliate................................................................13.15
Aggregate Consideration..................................................13.15
Agreement................................................................13.15
Allocation.............................................................11.2(d)
Another Transaction........................................................8.8
Assets.....................................................................6.9
Basis....................................................................13.15
Basket Amount..........................................................10.3(a)
Bound Persons..............................................................8.8
Business..............................................................Preamble
Business Day.............................................................13.15
Buyer..................................................................Caption
Buyer Group...............................................................10.1
Buyer's Accountants........................................................3.1
Campbell................................................................8.3(a)
CERCLA...................................................................13.15
Class A Common Stock.....................................................13.15
Class B Common Stock.....................................................13.15
Closing....................................................................4.1
Closing Date...............................................................4.1
Closing Date Balance Sheet.................................................3.1
Closing Funded Debt......................................................13.15
Closing Working Capital..................................................13.15
Code.....................................................................13.15
Commitment Letters.........................................................7.4
Common Stock..........................................................Preamble
Competitive Business...................................................11.4(b)
Contract.................................................................13.15
Control..................................................................13.15
Deposit...................................................................12.3
Designated Persons.....................................................6.16(b)
Employee Plan............................................................13.15
Employment Agreements....................................................13.15
Encumbrances.............................................................13.15
Environmental Escrow Amount..............................................13.15
Environmental Loss.......................................................10.6A
Environmental Loss Notice................................................10.6A
Environmental and Safety Requirements....................................13.15
Environmental Panel......................................................10.6A
ERISA....................................................................13.15
ERISA Affiliate..........................................................13.15
Escrow Agent.............................................................13.15
Escrow Agreement.........................................................13.15
Escrow Amount............................................................13.15
Estimated Closing Working Capital........................................13.15
-vii-
<PAGE>
Term Section
- - - ---- -------
Exchange Agreement.......................................................13.15
Final Determination........................................................3.2
Final Escrow Termination Date............................................13.15
Final Settlement Date....................................................13.15
Financial Statements.......................................................6.5
Formation Documents......................................................13.15
Funded Debt..............................................................13.15
GAAP.......................................................................3.1
General Partners.........................................................13.15
Governmental Entity......................................................13.15
Greenfield Agreement....................................................8.3(a)
Hazardous Materials......................................................13.15
HSR Act..................................................................13.15
Indemnified Persons......................................................13.15
Indemnifying Persons.....................................................13.15
Indemnifying Sellers...................................................Caption
Initial Cash Payment.....................................................13.15
Initial Escrow Payment Amount............................................13.15
Initial Escrow Termination Date..........................................13.15
Intellectual Property Rights.............................................13.15
Intermediate Escrow Payout Amount........................................13.15
Intermediate Escrow Termination Date ....................................13.15
ISRA....................................................................8.1(f)
Jersey Matters...........................................................13.15
Knowledge................................................................13.15
Latest Balance Sheet....................................................6.5(a)
Latest Balance Sheet Date...............................................6.5(a)
Law......................................................................13.15
Leased Real Property....................................................6.9(d)
Lenders....................................................................7.4
Liability................................................................13.15
Limited Partnership Interests............................................13.15
Litigation Expense.......................................................13.15
Losses...................................................................13.15
Management Fees..........................................................13.15
Material Adverse Change..................................................13.15
Material Adverse Effect..................................................13.15
Maximum Consideration....................................................13.15
Net Funded Debt..........................................................13.15
New CFP Holdings.........................................................13.15
NJDEP...................................................................8.1(f)
Notice.....................................................................3.2
Notice of Objection........................................................3.2
Orders...................................................................13.15
Owned Real Property.....................................................6.9(d)
PADEP...................................................................8.3(b)
Partners...............................................................Caption
Partnership............................................................Caption
Per Share Additional Cash Payment........................................13.15
Percentage Interest......................................................13.15
Permits..................................................................13.15
-viii-
<PAGE>
Term Section
- - - ---- -------
Permitted Encumbrances...................................................13.15
Person...................................................................13.15
Price Adjustment........................................................3.3(a)
Pro Forma Balance Sheet.................................................6.5(b)
Proceedings..............................................................13.15
Proportionate Percentage.................................................13.15
QFAC...................................................................Caption
QFAC Shares...........................................................Preamble
QFMC.....................................................................13.15
QFMC Shares...........................................................Preamble
Real Property...........................................................6.9(d)
Related Documents........................................................13.15
Released Persons.......................................................11.5(a)
Remedial Action..........................................................10.6A
Restricted Territory...................................................11.4(b)
Rollover Interests....................................................Preamble
Sale.....................................................................13.15
Schedule of Expenses....................................................9.2(m)
Section 8.3 Resolution..................................................8.3(b)
Section 8.3 Resolution Date.............................................8.3(b)
Securities Act...........................................................13.15
Seller Expenses..........................................................13.15
Seller Group..............................................................10.1
Seller Note Amount.......................................................13.15
Seller Notes.............................................................13.15
Sellers..................................................................13.15
Sellers' Accountants.....................................................13.15
Sellers' Representative................................................8.10(a)
Settlement.................................................................3.2
Shares................................................................Preamble
Stockholders.............................................................13.15
Subsidiary...............................................................13.15
Survival Date.............................................................10.7
SWDA.....................................................................13.15
Target Working Capital...................................................13.15
Tax......................................................................13.15
Tax Return...............................................................13.15
Taxes....................................................................13.15
Third Party Claim.........................................................10.6
Transaction..............................................................13.15
Transition Period..........................................................8.1
-ix-
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
dated as of December 31, 1996,
between CFP HOLDINGS, INC., a
Delaware corporation (the
"Company"), and DAVID COHEN (the
"Executive").
Reference is made to the Securities Purchase Agreement dated as of
December 31, 1996 (the "Securities Purchase Agreement") among the Company,
Quality Foods, L.P. ("Quality Foods"), the partners of Quality Foods, certain
additional beneficial owners of Quality Foods, the stockholders of QF
Acquisition Corp., a Delaware corporation, and the stockholders of QF Management
Corp., a Delaware corporation. Pursuant to the Securities Purchase Agreement,
the Company is acquiring the business of Quality Foods.
The Executive is the Chief Operating Officer of Quality Foods and
possesses unique knowledge of the business, products and operations thereof. The
Company desires to enter into this Agreement in order to assure itself of the
continued service of the Executive and the Executive desires to accept
employment with the Company upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment by the Company upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The employment of the Executive hereunder shall be
for the period (the "Employment Period") commencing on the date hereof (the
"Commencement Date") and ending on (a) the third anniversary of the date hereof
(the "Scheduled Termination Date"), or (b) such earlier date (the "Termination
Date") upon which the employment of the Executive shall terminate in accordance
with the provisions hereof.
SECTION 3. Duties. (a) During the Employment Period, the Executive
shall be employed as the President and Chief Operating Officer of Quality Foods
and shall perform such duties as are consistent therewith, but shall have such
other titles and duties (including with respect to affiliates of Quality Foods)
consistent with the status of a senior level executive of the Company, as the
Board of Directors of the Company (the "Board") shall in its discretion
designate. The Executive shall use his best efforts to perform well and
faithfully the foregoing duties and responsibilities.
(b) The Executive shall serve as a member of the Board of
Directors of the Company.
<PAGE>
SECTION 4. Time to be Devoted to Employment. During the Employment
Period, the Executive shall devote substantially all of his working time,
attention and energies to the business of the Company and its subsidiaries
(except for vacations to which he is entitled pursuant to Section 6(b) and
except for illness or incapacity). During the Employment Period, the Executive
shall not engage in any business activity which, in the reasonable judgment of
the Board, conflicts with the duties of the Executive hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary advantage.
SECTION 5. Compensation; Bonus. (a) The Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay or caused to be paid to
the Executive an annual base salary (the "Base Salary") during the Employment
Period of $240,000 per annum, payable in such installments (but not less often
than monthly) as is generally the policy of the Company with respect to its
officers, less such deductions as are required by applicable law, including
required withholding taxes, payable on a current basis.
(b) Subject to the last sentence of this Section 5(b), on
January 1 of each year (each such year, an "Adjustment Year") commencing January
1, 1998, the Executive's Base Salary shall be subject to increase by a
percentage of the Executive's Base Salary equal to the percentage increase, if
any, in the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Wage Earners, "all items" for the city or
metropolitan area to which Philadelphia, Pennsylvania bears the closest
geographic proximity, 1982-84=100 base, or any successor or substitute index
between December of the year that is two years immediately prior to the
adjustment year and December of the year immediately preceding the adjustment
year (the "Index Year"). The Company shall calculate any increase as soon as
practicable after the Consumer Price Index information for December of the Index
Year is made available and any such increase shall be effective on January 1st
of the Adjustment Year. Any increase in Base Salary pursuant to this Section
5(b) shall be added to the Base Salary then being paid to the Executive, and the
sum thereof shall then become the Base Salary for each successive year, until
further adjusted in accordance with the provisions of this Section 5(b).
Notwithstanding anything to the contrary contained herein, any increase in Base
Salary pursuant to this Section 5(b) shall be offset against any other increase
in Base Salary to which the Executive might, in the discretion of the Board of
Directors of the Company, become entitled.
(c) In addition to the Base Salary, the Executive shall also
be eligible to participate in the Company's annual cash bonus plan based upon
achieving and exceeding the annual performance targets for Quality Foods as
follows:
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<PAGE>
(i) In respect of each of the 1997 through
1999 fiscal years (each, a "Bonus Year"), the Company shall award a cash bonus
(the "Annual Cash Bonus") of up to 100% of the Executive's Base Salary,
depending upon the percentage of Annual Budgeted EBITDA (as hereinafter defined)
attained by Quality Foods, according to the following schedule:
Annual Budgeted Cash Bonus
EBITDA % Attained as % of Base Salary
----------------- -------------------
less than 80% 0%
80% 30%
90% 40%
100% 50%
110% 75%
125% and above 100%
; provided, however, that in each Bonus Year (as long as the Employee has been
continuously employed throughout such year), the Executive shall be entitled to
a cash bonus in the amount of at least $50,000 (the "Minimum Annual Bonus"),
except that in the event this Agreement expires upon the Scheduled Termination
Date without being renewed, the Executive shall be entitled to a pro rata share
of such amount for the period the Executive was actually employed during the
1999 Bonus Year.
(d) As used herein, the following terms shall have the
following meanings:
(i) "Annual Budgeted EBITDA" of Quality Foods for the
fiscal year ended December 31, 1997 equals $16,600,000 and for each subsequent
fiscal year means the figure set by the Board of Directors on a yearly basis in
advance of the relevant year.
(ii) "EBITDA" means the net income of Quality Foods
excluding the effect of any Stipulated Items (as hereinafter defined) and before
payment or provision for payment of (A) interest expense; (B) any Federal,
state, local or other taxes based on income; (C) depreciation expense; and (D)
amortization of goodwill and other intangible assets.
(iii) "Stipulated Items" means income or expense items
of a character significantly different from those incurred in the typical or
customary business activities of Quality Foods conducted in the ordinary course
or that would not be considered recurring factors in any evaluation of the
ordinary operations of the business of Quality Foods, including, but not limited
to, (A) the sale or abandonment of a plant or significant segment of the
business of Quality Foods; (B) the sale of an investment not acquired for
resale; (C) the writeoff of goodwill due to unusual events or developments
within the fiscal year
- 3 -
<PAGE>
being considered; (D) the condemnation or expropriation of properties; and (E)
certain adjustments to the reserve accounts recorded by Quality Foods; (F) any
management fees payable to First Atlantic Capital, Ltd. or the Parent (as
hereinafter defined) or any of their affiliates; and (G) fees and expenses
relating to the consummation of the transactions contemplated by the Securities
Purchase Agreement and the Rule 144A debt offering of senior notes of the
Company.
(e) The Company shall, promptly following the Company's
receipt from its certified public accountants of the audited financial
statements of Quality Foods for each Bonus Year, compute and promptly pay the
Annual Cash Bonus based upon EBITDA as reflected in such audited consolidated
financial statements.
(f) Notwithstanding anything to the contrary contained herein,
any and all Annual Cash Bonuses otherwise payable hereunder shall be subject to
the Company's obligations to comply with the covenants set forth in its
agreements with its lenders and payment of any and all Annual Cash Bonuses
otherwise payable may be deferred in order to maintain the Company's compliance
with such covenants. If any Annual Cash Bonus hereunder is not paid when due as
a result of the Company's obligations to its lenders, such bonus shall accrue
interest at the Applicable Federal Rate, as such term is defined in Section
1274(d) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder) until paid but shall, in any event, be paid
as soon as permissible whether or not the Executive is employed by the Company
at such time.
(g) In addition to the Base Salary, the Executive shall be
entitled to participate in the Company's (or its parent company's) incentive
stock option plan to be formulated by the Board of Directors of the Company.
(h) Upon the Commencement Date, the Company's parent, CFP
Group, Inc., a Delaware corporation (the "Parent"), shall grant the Executive
options to purchase Class B Nonvoting Common Stock, $.01 par value (the "Class B
Nonvoting Stock"), of the Parent representing up to 1.25% (determined on the
Commencement Date on a fully diluted basis) of the issued and outstanding Common
Stock, $.01 par value, of the Parent. Such options shall be issued on such terms
as the Board of Directors of the Parent shall, in its discretion, determine,
provided such options shall be exercisable for the five year period commencing
on the first anniversary of the Commencement Date in the event the employee
remains continuously employed through such anniversary date and the exercise
price thereof shall be $693.75 per share.
SECTION 6. Business Expenses; Benefits. (a) The Company (or, at the
Company's option, any subsidiary or affiliate
- 4 -
<PAGE>
thereof) shall reimburse or cause to be reimbursed the Executive, in accordance
with the practice from time to time for officers of the Company, for all
reasonable and necessary expenses and other disbursements incurred by the
Executive for or on behalf of the Company in the performance of his duties
hereunder. The Executive shall provide such appropriate documentation of
expenses and disbursements as may from time to time be reasonably required by
the Company.
(b) During the Employment Period, the Executive shall be
entitled to four weeks paid vacation during each twelve-month period worked
beginning on the Commencement Date.
(c) During the Employment Period, the Company shall provide
the Executive with group health, hospitalization and disability insurance and
other employee benefits consistent with such benefits as are generally made
available from time to time to senior executive employees of the Company.
(d) The Company shall also reimburse the Executive for (i)
premiums (not to exceed $2,500 in any year) on a current supplemental term life
insurance policy through Cigna Insurance Company for a maximum amount of Five
Hundred Thousand Dollars ($500,000) and (ii) annual membership fees for the
Young Presidents Organization.
(e) The Executive shall also be entitled to an automobile
allowance not to exceed $1,000 per month.
SECTION 7. Involuntary Termination. (a) If, in the written
determination of a physician selected by the Company (and whose services
contemplated by this Section 7 shall be paid by the Company) and reasonably
acceptable to the Executive (provided the Executive has the capacity at such
time to make such a judgment), the Executive is incapacitated or disabled by
accident, sickness or otherwise so as to render him mentally or physically
incapable of performing the services required to be performed by him under this
Agreement (such condition being hereinafter referred to as a "Disability") for a
period of 180 consecutive days or longer, or for an aggregate of 210 days during
any twelve-month period, the Company may, at any time following such 180 or 210
day period of Disability, at its option, terminate the employment of the
Executive under this Agreement immediately upon giving him written notice
(accompanied by the physician's written determination) to that effect (such
termination, as well as a termination under Section 7(b), being hereinafter
referred to as an "Involuntary Termination"). Until the Executive's employment
hereunder shall have been terminated in accordance with the foregoing, the
Executive shall be entitled to receive his compensation notwithstanding any such
Disability.
- 5 -
<PAGE>
(b) If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to cease as of the date of his death.
SECTION 8. Termination For Cause. The Company may terminate the
employment of the Executive hereunder at any time for Cause (as hereinafter
defined) (such termination being referred to herein as a "Termination For
Cause") by giving the Executive written notice of such termination, effective
immediately upon the giving of such notice to the Executive. As used in this
Agreement (a) "Cause" means any of the following: (i) any deliberate or
intentional act or omission undertaken or omitted by the Executive causing
damage to the Company or any of its affiliates or any of their respective
properties, assets or business; (ii) any fraud, misappropriation or embezzlement
by the Executive involving properties, assets or funds of the Company or any of
its affiliates or a conviction of the Executive, or pleading nolo contendere by
the Executive, to any crime or offense involving monies or other property of the
Company or any of its affiliates or any other felony offense for any crime of
gross moral turpitude; (iii) the violation by the Executive of Sections 13, 14
or 15 of this Agreement or the provisions of any other employment,
non-competition or confidentiality agreement with the Company or any of its
affiliates; (iv) the Executive's material breach of any agreement to which he is
a party with the Company or any of its affiliates; (v) any usurpation by the
Executive of a corporate opportunity of the Company or any of its affiliates;
(vi) the Executive's failure or refusal to perform any of his material duties,
responsibilities or obligations as an employee of the Company; provided,
however, that any action or omission by the Executive taken in good faith and in
the reasonable belief that such action or omission was in the best interests of
the Company shall not constitute "Cause"; and provided further, however, that
the Executive shall be entitled to cure any investment that unintentionally
violates clause (iii) hereof or any violation of clause (iv) hereof, in each
case within thirty (30) days of his receipt of written notice thereof from the
Company.
SECTION 9. Termination Without Cause. The Company may terminate the
employment of the Executive hereunder without Cause (such termination being
hereinafter referred to as a "Termination Without Cause") by giving the
Executive written notice of such termination, which notice shall be effective on
the date specified therein but not earlier than the date on which such notice is
given. For purposes of this Agreement, "Termination Without Cause" shall also
include the following:
(a) any material reduction, in the absence of the Executive's
consent, of the Executive's title, duties or responsibilities;
- 6 -
<PAGE>
(b) any reduction, in the absence of the Executive's consent,
in the Executive's Base Salary, Annual Cash Bonus or the perquisites listed in
Sections 6(c), (d) or (e) hereof, in each case as in effect on the Commencement
Date; and
(c) the Company's permanent relocation of the Executive, in
the absence of the Executive's consent, to a location other than the
metropolitan Philadelphia, Pennsylvania area. Notwithstanding the foregoing
provision of this clause (c), the parties acknowledge that the discharge of the
Executive's duties hereunder will require the Executive to travel as necessary
to the facilities of the Company and its affiliates and that a substantial
portion of his duties will require the Executive to be present at the facilities
of the Company and its affiliates. The Executive may from time to time also be
required to travel to other locations to carry out the business of the Company
and perform his duties hereunder. Accordingly, such travel shall be expressly
included in the Executive's duties and shall not be the basis of a Termination
Without Cause;
provided, however, that a Termination Without Cause pursuant to clauses (a)
through (c) of this Section 9 shall not be deemed to have occurred unless,
within 30 days of the occurrence of any of the events described in said clauses
(a) through (c), the Executive shall have given the Company reasonable notice of
his intention to claim a Termination Without Cause pursuant to this Section 9
and the basis therefor, and the Company shall have failed to cure the act or
omission described in the notice within 30 days of receipt of such notice from
the Executive.
SECTION 10. Voluntary Termination. Any termination of the employment
of the Executive hereunder other than as a result of an Involuntary Termination,
a Termination For Cause, a Termination Without Cause or a Termination For
Nonrenewal shall be deemed to be a "Voluntary Termination."
SECTION 10A. Renewal of Agreement. On the second anniversary of the
Commencement Date, the Company and the Executive shall enter into good faith
negotiations for the renewal of this Agreement following the Scheduled
Termination Date. If the parties are unable, within 90 days after commencement
of such negotiations, to agree to a renewal of this Agreement on mutually
acceptable terms, the Executive shall continue to perform the services required
hereunder until the Scheduled Termination Date, whereupon a Termination For
Nonrenewal shall be deemed to have occurred; provided, however, that a
"Termination For Nonrenewal" shall not be deemed to have occurred in the event
the Executive and the Company do in fact renew this Agreement prior to the
Scheduled Termination Date.
SECTION 11. Effect of Termination. (a) Upon the termination of the
Executive's employment hereunder due to a Termination for Cause or a Voluntary
Termination, neither the
- 7 -
<PAGE>
Executive nor his beneficiary or estate shall have any further rights or claims
against the Company under this Agreement, except to receive (i) the unpaid
portion, if any, of the Base Salary provided for in Section 5(a), computed on a
pro rata basis to the Termination Date (based on the actual number of days
elapsed over a year of 365 or 366 days, as applicable); (ii) any unpaid accrued
benefits of the Executive (including any Annual Cash Bonus deferred pursuant to
Section 5(f) hereof); and (iii) reimbursement for any expenses for which the
Executive shall not have been reimbursed as provided in Section 6(a).
(b) Upon the termination of the Executive's employment
hereunder due to an Involuntary Termination, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under the Agreement except (i) to receive the amounts set forth in
Section 11(a) above; (ii) to continue to receive the Base Salary and the Minimum
Annual Bonus, payable in such installments and on such terms as they were paid
to the Executive prior to such termination of employment through the later to
occur of the Scheduled Termination Date and the date which is 18 months after
the Termination Date; and (iii) in the case of an Involuntary Termination due to
Disability, to participate in all group health, hospitalization and disability
insurance plans as contemplated by Section 6(c) hereof and to receive the
payments contemplated in Sections 6(d) and (e) hereof until the later to occur
of the Scheduled Termination Date and the date which is 18 months after the
Termination Date; provided, however, that any such rights under clauses (ii) and
(iii) of this Section 11(b) shall be reduced, to the extent the Executive shall
obtain other employment during the period such payments are required to be made,
by the amount of the salary and benefits received by the Executive in connection
with such new employment.
(c) Upon the termination of the Executive's employment
hereunder due to a Termination Without Cause, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment, through the later to occur of the Scheduled Termination Date and the
date which is 18 months after the Termination Date, (iii) to receive the greater
of the pro rata portion (based upon the number of periods elapsed in the fiscal
year up to the Termination Date) of (A) the Minimum Annual Bonus and (B) the
Special Cash Bonus, (iv) to receive the Minimum Annual Bonus for the 18-month
period commencing on the Termination Date, payable on such terms as it was paid
to the Executive prior to such termination of employment and (v) to participate
in all group health, hospitalization and disability insurance plans as
contemplated by Section 6(c) hereof and to receive the payments contemplated in
Section 6(d) and (e) hereof
- 8 -
<PAGE>
until the later to occur of the Scheduled Termination Date and the date which is
18 months after the Termination Date; provided, however, that any such rights
under clauses (ii), (iv) and (v) of this Section 11(c) shall be reduced, to the
extent the Executive shall obtain other employment during the period such
payments are required to be made, by the amount of the salary and benefits
received by the Executive in connection with such new employment. As used in
this paragraph (c), "Special Cash Bonus" shall mean a cash bonus, based upon the
percentage of Periodic Budgeted EBITDA attained by Quality Foods, through the
period in which the Termination Date occurs, according to the following
schedule:
Periodic Budgeted Cash Bonus
EBITDA % Attained as % of Base Salary
----------------- -------------------
less than 80% 0%
80% 30%
90% 40%
100% 50%
110% 75%
125% and above 100%
As used herein, "Periodic Budgeted EBITDA" means budgeted EBITDA for each of the
13 periods in a fiscal year (as determined by the Board of Directors on a yearly
basis in advance of the relevant year).
(d) Upon the termination of the Executive's employment
hereunder due to a Termination For Nonrenewal, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above; (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment for a period of 18 months; and (iii) to participate in all group
health, hospitalization and disability insurance plans as contemplated by
Section 6(c) hereof and to receive the payments contemplated in Section 6(d) and
(e) hereof for a period of 18 months after the Termination Date; provided,
however, that any such rights under clauses (ii) and (iii) of this Section 11(d)
shall be reduced, to the extent the Executive shall obtain other employment
during the period such payments are required to be made, by the amount of the
salary and benefits received by the Executive in connection with such new
employment.
SECTION 12. Insurance. The Company may, for its own benefit,
maintain "key-man" life and disability insurance policies (collectively, the
"Insurance Policies") covering the Executive. The Executive will cooperate with
the Company and provide such information or other assistance as the Company may
reasonably request in connection with the Company's obtaining and maintaining
the Insurance Policies.
- 9 -
<PAGE>
SECTION 13. Disclosure of Information. (a) The Executive agrees that
he will not, at any time during the Employment Period or thereafter, disclose to
any person, firm, corporation or other business entity, except as required by
law, any non-public information concerning the business, clients or affairs of
the Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof.
(b) Notwithstanding anything to the contrary contained herein, the
Executive shall not be required to maintain the confidentiality of any
information that:
(i) is now, or hereafter becomes, through no act or failure to
act on the part of the Executive that constitutes a breach of this Section 13,
generally known or available to the public;
(ii) is known to the Executive at the time of the disclosure
of such information;
(iii) is hereafter furnished to the Executive by a third
party, who, to the knowledge of such party, is not under any obligation of
confidentiality to the Company or any of its affiliates, without restriction on
disclosure;
(iv) is disclosed with the written approval of the party to
which such information or materials pertain;
(v) is required to be disclosed by law, court order, or
similar compulsion; provided, however, that, such disclosure shall be limited to
the extent so required or compelled; and provided further, however, that the
Executive required to disclose such confidential information shall give the
Company notice of such disclosure and cooperate with such other party in seeking
suitable protections; or
(vi) is required to be provided pursuant to or in connection
with any legal proceeding involving the parties hereto.
SECTION 14. Right to Inventions. The Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business actually conducted by the
Company, which he may develop or which may be acquired by the Executive during
the Employment Period (whether or not during usual working hours), together with
all trademarks, patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such mark,
- 10 -
<PAGE>
design, logo, invention, improvement or technical information.
In connection therewith:
(a) the Executive shall without charge, but at the expense of
the Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any such
marks, designs, logos, inventions, improvements, technical information,
trademarks, patent applications, patents, copyrights or reissues thereof in the
Company and to enable it to obtain and maintain the entire right and title
thereto throughout the world;
(b) the Executive shall render to the Company at its expense
(including a reasonable payment for the time involved in case he is not then in
its employ based on his last per diem earnings) all such assistance as it may
require in the prosecution of applications for said trademarks, patents,
copyrights or reissues thereof, in the prosecution or defense of interferences
which may be declared involving any said trademarks, applications, patents or
copyrights and in any litigation in which the Company may be involved relating
to any such trademarks, patents, inventions, improvements or technical
information; and
(c) for the avoidance of doubt, it is hereby agreed that the
foregoing provisions shall be deemed to include an assignment of future
copyright in accordance with Section 37 of the Copyright Act of 1986 and any
amendment or re-enactment thereof.
SECTION 15. Restrictive Covenant. (a) The Executive acknowledges
and recognizes that during the Employment Period he will be privy to non-public
information critical to the Company's and its affiliates' business and further
acknowledges and recognizes that the Company would find it extremely difficult
to replace him. Accordingly, in consideration of the premises contained herein,
and the consideration to be received by the Executive hereunder and the granting
of certain stock options to the Executive, during the Employment Period and the
Non-Competition Period (as defined below), the Executive shall not (i) directly
or indirectly engage in, represent in any way, or be connected with, any
Competing Business (as defined below), whether such engagement shall be as an
officer, director, owner, employee, partner, affiliate or other participant in
any Competing Business; (ii) assist others in engaging in any Competing
Business; (iii) induce any employee of the Company or any affiliate thereof to
terminate such employee's employment with the Company or any such affiliate or
to engage in any Competing Business; or (iv) induce any entity or person with
which the Company or any affiliate thereof has a business relationship to
terminate or alter such business relationship; provided, however, that the
foregoing shall not prevent the
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Executive from owning the securities of or an interest in any business (other
than the Company and any entity controlling the Company), provided such
ownership of securities or interest represents less than five percent (5%) of
any class or type of securities of, or interest in, such business.
(b) The Executive understands that the foregoing restrictions
may limit his ability to earn a livelihood in a business similar to the business
of the Company or any affiliate thereof, but he nevertheless believes that he
has received and will receive sufficient consideration and other benefits as an
employee of the Company and as otherwise provided hereunder and pursuant to
other agreements between the Company and the Executive to justify clearly such
restrictions which, in any event (given his education, skills and ability), the
Executive does not believe would prevent him from earning a living.
(c) As used herein, "Competing Business" shall mean any
business in North America if such business or the products sold by it are
competitive, directly or indirectly, with (i) the business of the Company or any
of its affiliates for which the Executive has direct managerial responsibility,
(ii) any of the products manufactured, sold or distributed by the Company or any
of its affiliates for which the Executive has direct managerial responsibility,
or (iii) any products or business being developed by the Company or any of its
affiliates for which the Executive has direct managerial responsibility; and
"Non-Competition Period" shall mean the period commencing on the day immediately
following the Termination Date and ending upon the expiration of 18 months
following the Termination Date.
SECTION 16. Right to Sell Securities. In the event (the "Trigger
Event") of a (i) Termination Without Cause; (ii) Termination For Nonrenewal; or
(iii) Involuntary Termination, the Executive shall have the right and option
(the "Put Option") during the 90-day period (the "Put Period") following the
Trigger Event to sell to the Company the shares of Class B Nonvoting Stock
and/or options (the "Options") to acquire such shares of Class B Nonvoting Stock
that are then vested and exercisable, in each case owned by the Executive (or
any member of the Group (as defined in the Stockholders' Agreement) of the
Executive) on the date of the Trigger Event (collectively, the "Put
Securities"). The Put Option shall be exercisable by the Executive by written
notice to the Company during the Put Period, and upon receipt thereof, the
Company shall be obligated to purchase the Put Securities that are the subject
of such notice on the following basis:
(A) The price (the "Put Price") of the Put Securities shall be
determined as follows:
(1) if the Trigger Event is a Termination Without Cause or an
Involuntary Termination, the Put Price
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for the Put Securities shall be the greater of (x) the price paid by the
Executive for the Put Securities and (y) the Fair Value Per Share (as
defined in the Stockholders' Agreement (the "Stockholders' Agreement")
dated as of the date hereof among the Company, the Executive and the other
signatories thereto), net of the exercise price in the case of Options;
and
(2) if the Trigger Event is a Termination For Nonrenewal, the
Put Price for the Put Securities shall be Fair Value Per Share, net of the
exercise price, in the case of Options.
(B) The Put Price shall be payable as follows:
(1) if the Trigger Event is a Termination For Nonrenewal, the
Put Price shall be payable in cash or, at the option of the Company, by
delivery of a subordinated promissory note that (a) matures ratably on a
quarterly basis over a three year period; (b) is subordinated to all other
current or future indebtedness of the Company; (c) bears interest, payable
on a quarterly basis, at a fluctuating annual rate equal to that rate
announced by NationsBank, N.A. from time to time as its prime rate; (d)
shall be secured with the Put Securities repurchased by delivery of such
note; and (e) shall otherwise contain such terms and provisions as may be
required by the Company's lenders, and
(2) if the Trigger Event is a Termination Without Cause or an
Involuntary Termination, the Put Price shall be payable in cash.
(C) The Put Price shall be paid within 90 days of the exercise by
the Executive of the Put Option.
(D) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 16 shall be subject to the following:
(1) The put rights set forth in this Section 16 shall be
subject to the terms and conditions of the Tripartite Agreement dated as
of the date hereof among the Executive, Robert D. Gioia and Richard D.
Griffith.
(2) The parties acknowledge that any obligation on the part of
the Company to pay the Put Price shall be subject to the Company's
obligations to comply with the covenants set forth in its agreements with
its lenders and payment of any Put Price payable may be deferred in order
to maintain the Company's compliance with such covenants but shall, in any
event, be paid as soon as permissible.
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<PAGE>
(3) Anything contained herein to the contrary notwithstanding,
the Put Option of the Executive shall terminate (if not theretofore
exercised) and be of no further force or effect simultaneously with the
consummation by the Parent of the initial public offering of shares of its
capital stock.
SECTION 17. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 18. Remedies. The Executive acknowledges and understands
that the provisions of this Agreement are of a special and unique nature, the
loss of which cannot be adequately compensated for in damages by an action at
law, and that the breach or threatened breach of the provisions of this
Agreement would cause the Company irreparable harm. In the event of a breach or
threatened breach by the Executive of the provisions of this Agreement, the
Company shall be entitled to an injunction restraining him from such breach.
Nothing contained in this Agreement shall be construed as prohibiting the
Company from or limiting the Company in pursuing any other remedies available
for any breach or threatened breach of this Agreement.
SECTION 19. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to it at:
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
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<PAGE>
with a copy to:
First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Mr. James A. Long
Telecopier: (212) 750-0954
Telephone: (212) 750-0300; and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2420
Telephone: (212) 408-2400;
if to the Executive, to him at:
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
Attention: John F. Dougherty, Jr.
Telecopier: (215) 564-8120
Telephone: (215) 564-8084
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (iii) in the case of telecopy transmission, when received, and (iv)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication is posted. It is further agreed and
understood that any such notice or communication may also be given by counsel on
behalf of any of the parties to the Employment Agreement hereto.
SECTION 20. Binding Agreement; Benefit. Subject to Section 25
hereof, the provisions of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives, successors and
assigns of the parties.
SECTION 21. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(without giving effect to principles of conflicts of laws).
SECTION 22. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other breach.
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<PAGE>
SECTION 23. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
with respect thereto, including, without limitation, the Agreement dated as of
July 22, 1992 by and between Quality Foods and the Executive. This Agreement may
be amended only by an agreement in writing signed by the parties.
SECTION 24. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 25. Assignment. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that if the
Executive fails to consent to the assignment of this Agreement, such failure
will be deemed a Voluntary Termination of this Agreement. Notwithstanding the
foregoing, (a) the parties acknowledge that the Company may, at any time, assign
this Agreement to any of its affiliates (determined on the date hereof); and (b)
in the event of a Change of Control (as hereinafter defined) of the Company,
provided the Executive consents to the assignment of this Agreement to the
Company's successor, the Executive shall be entitled, in his sole discretion, to
terminate the Employment Period at any time after nine months shall have elapsed
from the date of the change of control (provided the Executive shall have been
continuously employed by the Company during such nine-month period), in which
case such termination shall be deemed a Termination Without Cause. As used
herein, "Change of Control" shall mean the failure of Atlantic Equity Partners,
L.P. (together with its affiliates determined on the date hereof) to own,
directly or indirectly, beneficially or of record, in excess of 50% of the
issued and outstanding voting securities of the Company having the ordinary
power to elect directors.
SECTION 26. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 27. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 28. Attorney Fees. (a) In connection with any action, suit
or proceeding arising under or in connection with this Agreement, the prevailing
party in such action, suit or proceeding shall be entitled to the reasonable
attorneys' fees incurred in connection with such action, suit or proceeding.
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(b) The Company agrees to pay the reasonable fees and expenses of
Stradley Ronon Stevens & Young (not to exceed $7,500) in connection with
negotiation of this Agreement.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first written above.
CFP HOLDINGS, INC.
By:_____________________________
Name:
Title:
________________________________
David Cohen
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT dated as of
December 31, 1996, between CFP HOLDINGS,
INC., a Delaware corporation (the
"Company"), and ERIC W. EK (the
"Executive").
The Company and the Executive are parties to the Employment
Agreement dated as of June 30, 1993 (the "Original Employment Agreement"). The
Company and the Executive desire to terminate the Original Employment Agreement
as of the date hereof and to continue the employment relationship between the
Company and the Executive from and after the date hereof pursuant to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment by the Company upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The employment of the Executive hereunder shall be
for the period (the "Employment Period") commencing on the date hereof (the
"Commencement Date") and ending on (a) December 31, 1999 (the "Scheduled
Termination Date"), or (b) such earlier date (the "Termination Date") upon which
the employment of the Executive shall terminate in accordance with the
provisions hereof. The Employment Period may be extended at the sole discretion
of the Company for an additional 90-day period to facilitate contract
negotiations in the event the Company desires to retain the services of the
Executive following the expiration of the Employment Period.
SECTION 3. Duties. During the Employment Period, the Executive shall
be employed as Vice President and Chief Financial Officer of the Company, CFP
Group, Inc., the parent of the Company (the "Parent"), and Custom Food Products,
Inc., a wholly-owned subsidiary of the Company ("Custom Food"), and shall
perform such duties as are consistent therewith. The Executive shall further
serve as a member of the Board of Directors of the Company (the "Board"), the
Parent and Custom Food and shall have such other titles and duties, consistent
with the status of a senior level executive of the Company, as the Board shall
in its sole discretion designate. The Executive shall use his best efforts to
perform well and faithfully the foregoing duties and responsibilities.
SECTION 4. Time to be Devoted to Employment. During the Employment
Period, the Executive shall devote all of his working time, attention and
energies to the business of the Company and its subsidiaries (except for
vacations to which he is entitled pursuant to Section 6(b) and except for
illness or
<PAGE>
incapacity). During the Employment Period, the Executive shall not engage in any
business activity which, in the reasonable judgment of the Board, conflicts with
the duties of the Executive hereunder, whether or not such activity is pursued
for gain, profit or other pecuniary advantage. Nothing contained in this Section
4 shall prohibit the Executive from (a) owning up to 1% of the outstanding
capital stock or other class of securities of any corporation whose shares are
traded on a national securities exchange or are listed on NASDAQ or (b) making
other passive investments in entities which do not compete in any manner with
the Company after obtaining the prior written consent of the Board.
SECTION 5. Compensation; Bonus. (a) The Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay to the Executive an
annual base salary (the "Base Salary") during the Employment Period of $165,200
per annum, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to its officers.
(b) Subject to the last sentence of this Section 5(b), as of
July 1 of each year during the Employment Period (each such year, an "Adjustment
Year") commencing July 1, 1997, the Executive's Base Salary shall be subject to
increase by a percentage of the Executive's Base Salary equal to the percentage
increase, if any, in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index for Urban Wage Earners, "all items" for the
city or metropolitan area to which Montebello, California bears the closest
geographic proximity, or any successor or substitute index reasonably selected
by the Company (the "Index Year"). The Company shall calculate any increase as
soon as practicable after the Consumer Price Index information for June of the
Index Year is made available and any such increase shall be effective on July 1
of the Adjustment Year. Any increase in Base Salary pursuant to this Section
5(b) shall be added to the Base Salary then being paid to the Executive, and the
sum thereof shall then become the Base Salary for each successive year, until
further adjusted in accordance with the provisions of this Section 5(b).
Anything contained herein to the contrary notwithstanding, any increase in Base
Salary pursuant to this Section 5(b) shall be offset against any other increase
in Base Salary to which the Executive might, in the discretion of the Board of
Directors of the Company, become entitled.
(c) In addition to the Base Salary, the Executive shall be
eligible to participate in the Company's annual cash bonus plan based upon
achieving and exceeding the annual performance targets for Custom Food as
follows:
(i) In respect of each of the 1997 through 1999 fiscal
years (each, a "Bonus Year"), the Company shall
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award a cash bonus (the "Annual Cash Bonus"), if any, of between 30% and
100% of the Executive's Base Salary, depending upon the percentage of
Annual Budgeted EBITDA of Custom Food (as hereinafter defined) attained,
according to the following schedule:
Annual Budgeted EBITDA
of Custom Food Cash Bonus as % of
% Attained Base Salary
-------------------------------- ----------------------------
less than 80% 0%
80% 30%
90% 40%
100% 50%
110% 75%
125% and above 100%
, provided, however, that in each Bonus Year (as long as the Employee has
been continuously employed throughout such year), the Executive's Annual
Cash Bonus shall be at least $25,000 (the "Minimum Annual Bonus").
(ii) As used herein, the following terms shall have the
following meanings:
(A) "Annual Budgeted EBITDA" for Custom Food for
the fiscal year ended December 31, 1997 equals $12,200,000 and for each
subsequent fiscal year means the figure set by the Board on a yearly
basis.
(B) "EBITDA" means the net income (after provision
for all bonuses) of Custom Food, determined on a consolidated basis
excluding the effect of any Stipulated Items (as hereinafter defined) and
before payment or provision for payment of (1) interest expense; (2) any
Federal, state, local or other taxes based on income; (3) depreciation
expense and (4) amortization of goodwill and other tangible assets.
(C) "Stipulated Items" means income or expense
items of a character significantly different from those incurred in the
typical or customary business activities of Custom Food or that would not
be considered recurring factors in any evaluation of the ordinary
operations of the business of Custom Food, including, but not limited to,
(1) the sale or abandonment of a plant or significant segment of the
business of Custom Food; (2) the sale of an investment not acquired for
resale; (3) the writeoff of goodwill due to unusual events or developments
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<PAGE>
within the fiscal year being considered; (4) the condemnation or
expropriation of properties; (5) certain adjustments to the reserve
accounts recorded by Custom Food; and (6) any management fees payable to
First Atlantic Capital, Ltd. and its affiliates.
(iii) The Company shall, promptly following the
Company's receipt from its certified public accountants of the audited
consolidated financial statements of the Company for each Bonus Year,
compute and promptly pay the Annual Cash Bonus based upon the EBITDA of
Custom Food as reflected in such audited consolidated financial
statements.
(d) In addition to the Base Salary, the Executive
shall be entitled to participate in the incentive stock option plan to be
formulated by the Board of Directors of the Parent.
SECTION 6. Business Expenses; Benefits. (a) The Company (or, at the
Company's option, any subsidiary or affiliate thereof) shall reimburse the
Executive, in accordance with the practice from time to time for officers of the
Company, for all reasonable and necessary expenses and other disbursements
incurred by the Executive for or on behalf of the Company in the performance of
his duties hereunder. The Executive shall provide such appropriate documentation
of expenses and disbursements as may from time to time be reasonably required by
the Company.
(b) During the Employment Period, the Executive shall be
entitled to four weeks paid vacation during each twelve-month period worked
beginning on the Commencement Date.
(c) During the Employment Period, the Company shall provide
the Executive with group health, hospitalization and other employee benefits in
amounts and with terms consistent with the policies of the Company with respect
to its officers.
(d) During the Employment Period, the Company will reimburse
the Executive for professional association fees in an aggregate amount not to
exceed $2,000 per year.
(e) During the Employment Period, the Company will reimburse
the Executive for costs incurred by the Executive for registration or tuition
fees for classes or seminars attended by the Executive in the metropolitan Los
Angeles area (or elsewhere if approved in advance by the Board of Directors of
the Company, such approval not to be unreasonably withheld) for so long as and
to the extent that such classes or seminars are required by the American
Institute of Certified Public Accountants (or its successor organization) in
order for the Executive to maintain his certified public accountant's
certificate. The aggregate amount payable under this Section 6(e) shall not
exceed $2,000 per year.
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(f) During the Employment Period, the Company will pay the
premiums for a long-term disability plan for the Executive and a life insurance
policy on the Executive having an aggregate benefit of $250,000. The aggregate
cost of the disability plan and life insurance shall not exceed $550 per month.
(g) During the Employment Period, the Company shall pay or
reimburse the Executive $700 per month for the expenses of an automobile
utilized by the Executive.
SECTION 7. Involuntary Termination. (a) If the Executive is
incapacitated or disabled by accident, sickness or otherwise so as to render him
mentally or physically incapable of performing the services required to be
performed by him under this Agreement (such condition being hereinafter referred
to as a "Disability") for a period of 180 consecutive days or longer, or for an
aggregate of 210 days during any twelve-month period, the Company may, at any
time following such 180 or 210 day period of Disability, at its option,
terminate the employment of the Executive under this Agreement immediately upon
giving him written notice to that effect (such termination, as well as a
termination under Section 7(b), being hereinafter referred to as an "Involuntary
Termination"). Until the Executive's employment hereunder shall have been
terminated in accordance with the foregoing, the Executive shall be entitled to
receive his compensation notwithstanding any such Disability.
(b) If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to cease as of the date of his death.
SECTION 8. Termination For Cause. The Company may terminate the
employment of the Executive hereunder at any time for Cause (as hereinafter
defined) (such termination being referred to herein as a "Termination For
Cause") by giving the Executive written notice of such termination, effective
immediately upon the giving of such notice to the Executive. As used in this
Agreement (a) "Cause" means (i) the Executive's material breach of this
Agreement and, if such breach is capable of being cured, the failure to cure
such breach within 30 days of notice thereof from the Company to the Executive,
(ii) the Executive's past, present or future conduct which has a Material
Adverse Effect, (iii) the Executive's disregard of lawful instructions of the
Board that are consistent with the Executive's position, or neglect of duties or
failure to act, which, in either case, may reasonably be anticipated to have a
Material Adverse Effect, and the continuance of such condition for a period of
30 days after notice thereof from the Company to the Executive, (iv) alcohol or
drug abuse by the Executive or (v) the commission by the Executive of a felony
or an act involving fraud, theft or dishonesty and (b) "Material Adverse Effect"
means a material adverse effect on the business, operations,
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<PAGE>
financial condition, results of operations, assets, liabilities or prospects of
the Company or any of its subsidiaries or affiliates.
SECTION 9. Termination Without Cause. The Company may terminate the
employment of the Executive hereunder without Cause (such termination being
hereinafter referred to as a "Termination Without Cause") by giving the
Executive written notice of such termination, which notice shall be effective on
the date specified therein but not earlier than the date on which such notice is
given. For purposes of this Agreement, "Termination Without Cause" shall also
include the following:
(a) any material reduction, in the absence of the Executive's
consent, of the Executive's title, duties or responsibilities;
(b) any material breach by the Company of its obligations
under this Agreement;
(c) the expiration of this Agreement at the Scheduled
Termination Date or the failure of the Executive or the Company to extend the
term hereof, after good faith negotiations for a reasonable period of time (not
to exceed 90 days following the Scheduled Termination Date) by the Executive and
the Company to enter into a new employment agreement; and
(d) the Company's relocation of the Executive, in the absence
of the Executive's consent, to a location other than the metropolitan Los
Angeles, California area, provided that the Executive acknowledges that as part
of his duties hereunder, it may be necessary for him to make periodic business
trips of short duration (including, for example, trips to attend meetings of
boards of directors of which he is a member), which trips shall not be
considered the relocation of the Executive for purposes of this Section 9(d);
provided, however, that a Termination Without Cause pursuant to clauses (a) and
(b) of this Section 9 shall not be deemed to have occurred unless, within 30
days of the occurrence (or, in the case of an event described in clause (b) of
this Section 9, the Executive's actual knowledge of such occurrence) of any of
the events described in said clauses (a) and (b), the Executive shall have given
the Company notice, with reasonable specificity, of his intention to claim a
Termination Without Cause pursuant to this Section 9 and the basis therefor, and
the Company shall have failed to cure the act or omission described in the
notice within 30 days of receipt of such notice from the Executive.
SECTION 10. Voluntary Termination. Any termination of the employment
of the Executive hereunder other than as a result of an Involuntary Termination,
a Termination For Cause or a Termination Without Cause shall be deemed to be a
"Voluntary
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<PAGE>
Termination" (it being understood that the resignation by the Executive prior to
the Scheduled Termination Date shall be deemed a "Voluntary Termination").
SECTION 11. Effect of Termination. (a) Upon the termination of the
Executive's employment hereunder due to a Termination for Cause or a Voluntary
Termination, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the Termination Date (based on the
actual number of days elapsed over a year of 365 or 366 days, as applicable),
(ii) any unpaid accrued benefits due the Executive and (iii) reimbursement for
any expenses for which the Executive shall not have been reimbursed as provided
in Section 6(a).
(b) Upon the termination of the Executive's employment
hereunder due to an Involuntary Termination, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment for a period of six (6) months, (iii) the pro rata portion of the
bonus to which the Executive would be entitled for the fiscal year of the
Company in which such termination occurred, computed by multiplying (A) the
bonus that would have been payable to the Executive for the entire year if his
employment had not been terminated by (B) a fraction, the numerator of which is
the number of days elapsed from the beginning of such year to and including the
effective date of such termination and the denominator of which is 365, such
portion of the bonus to be payable at such time and in such manner as is
consistent with the Company's historical practice regarding the payment of
bonuses to the Executive or to its officers generally and (iv) to participate in
all group health and hospitalization plans as contemplated by Sections 6(c) and
6(f) hereof until the earlier to occur of the Scheduled Termination Date and the
date which is six (6) months after the Termination Date.
(c) Upon the termination of the Executive's employment
hereunder due to a Termination Without Cause, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment, for a period of 12 months after the termination of the Executive's
employment with the Company(including a termination of such employment on or
after the Scheduled Termination Date in circumstances contemplated by
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<PAGE>
Section 9(c) hereof), (iii) to receive the pro rata portion of the bonus to
which the Executive would be entitled for the fiscal year of the Company in
which such termination occurred, computed by multiplying (A) the bonus that
would have been payable to the Executive for the entire year if his employment
had not been terminated by (B) a fraction, the numerator of which is the number
of days elapsed from the beginning of such year to and including the effective
date of such termination and the denominator of which is 365, such portion of
the bonus to be payable at such time and in such manner as is consistent with
the Company's historical practice regarding the payment of bonuses to the
Executive or to its officers generally and (iv) to participate in all group
health and hospitalization plans as contemplated by Sections 6(c) and 6(f)
hereof for a period of 12 months after the termination of the Executive's
employment with the Company (including a termination of such employment on or
after the Scheduled Termination Date in circumstances contemplated by Section
9(c) hereof).
SECTION 12. Insurance. The Company may, for its own benefit,
maintain "key-man" life and disability insurance policies (collectively, the
"Insurance Policies") covering the Executive. The Executive will cooperate with
the Company and provide such information or other assistance as the Company may
reasonably request in connection with the Company's obtaining and maintaining
the Insurance Policies.
SECTION 13. Disclosure of Information. The Executive agrees that he
will not, at any time during the Employment Period or thereafter, disclose to
any person, firm, corporation or other business entity, except as required by
law, any non-public information concerning the business, clients or affairs of
the Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. For purposes of this Section 13, "non-public" information
shall not include any information that:
(i) is now, or hereafter becomes, through no act or failure to
act on the part of the Executive that constitutes a breach of this Section 13,
generally known or available to the public;
(ii) is known to the Executive at the time of the
disclosure of such information;
(iii) is hereafter furnished to the Executive by a third
party, who, to the knowledge of such party, is not under any obligation of
confidentiality to the Company or any of its affiliates, without restriction on
disclosure;
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<PAGE>
(iv) is disclosed with the written approval of the party to
which such information or materials pertain;
(v) is required to be disclosed by law, court order, or
similar compulsion; provided, however, that such disclosure shall be limited to
the extent so required or compelled; and provided further, however, that if the
Executive is required to disclose such confidential information, he shall give
the Company notice of such disclosure and cooperate in seeking suitable
protections; or
(vi) is required to be provided pursuant to or in connection
with any legal proceeding involving the parties hereto.
SECTION 14. Right to Inventions. (a) The Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business actually conducted by the
Company, which he may develop or which may be acquired by the Executive during
the Employment Period (whether or not during normal working hours), together
with all trademarks, patent applications, letters patent, copyrights and
reissues thereof that may at any time be granted for or upon any such mark,
design, logo, invention, improvement or technical information.
In connection therewith:
(i) the Executive shall without charge, but at the
expense of the Company, promptly at all times hereafter execute and
deliver such applications, assignments, descriptions and other instruments
as may be necessary or proper in the opinion of the Company to vest title
to any such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its
expense (including a reasonable payment for the time involved in case he
is not then in its employ based on his last per diem earnings) all such
assistance as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in any litigation in
which the Company may be involved relating to any such trademarks,
patents, inventions, improvements or technical information; and
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<PAGE>
(iii) for the avoidance of doubt, it is hereby agreed that
the foregoing provisions shall be deemed to include an assignment of
future copyright in accordance with Section 37 of the Copyright Act of
1986 and any amendment or re-enactment thereof.
(b) Any provision of this Agreement requiring the Executive to
assign his rights in any invention shall not apply to an invention which
qualifies fully under the provisions of Section 2870 of the California Labor
Code. That Section provides that the requirement to assign "shall not apply to
any invention for which no equipment, supplies, facility or trade secret
information of the employer was used and which was developed entirely on the
employee's own time, and (a) which does not relate (i) to the business of the
employer or (ii) to the employer's actual or demonstrably anticipated research
or development, or (b) which does not result from any work performed by the
employee for the employer." The Executive understands that he bears the full
burden of proving to the Company that an invention qualifies fully under Section
2870. By signing this Agreement, the Executive acknowledges receipt of a copy of
this Agreement and of written notification of the provisions of Section 2870.
SECTION 15. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 16. Remedies. The Company and the Executive acknowledge and
understand that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be adequately compensated for in damages by an
action at law, and that the breach or threatened breach of the provisions of
this Agreement would cause the Company or the Executive irreparable harm. In the
event of a breach or threatened breach by the Company or the Executive of the
provisions of this Agreement, the Company or the Executive shall be entitled to
an injunction restraining such party from such breach. Nothing contained in this
Agreement shall be construed as prohibiting the Company or the Executive from or
limiting the Company or the Executive in pursuing any other remedies available
for any breach or threatened breach of this Agreement.
SECTION 17. Notices. All notices, claims, certificates, requests,
demands and other communications
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<PAGE>
hereunder shall be in writing and shall be deemed to have been duly given and
delivered if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:
if to the Company, to it at:
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
with a copy to:
First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Mr. James A. Long
Telecopier: (212) 750-0954
Telephone: (212) 750-0300; and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2467
Telephone: (212) 408-2400;
if to the Executive, to him at:
Mr. Eric W. Ek
1032 Marengo Drive
Glendale, California 91206
Telecopier: (818) 795-1441
Telephone: (818) 795-9302;
with a copy to:
Keith Sharp, Esq.
Falk & Sharp
660 South Figueroa Street, Suite 1600
Los Angeles, California 90017
Telecopier: (213) 622-4486
Telephone: (213) 622-6868
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day
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<PAGE>
after the date when sent, (c) in the case of telecopy transmission, when
received, and in the case of mailing, on the third business day following that
on which the piece of mail containing such communication is posted.
SECTION 18. Binding Agreement; Benefit. Subject to Section 23
hereof, the provisions of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives, successors and
assigns of the parties.
SECTION 19. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of California
(without giving effect to principles of conflicts of laws).
SECTION 20. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other breach.
SECTION 21. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
with respect thereto, including, without limitation, the Original Employment
Agreement. This Agreement may be amended only by an agreement in writing signed
by the parties.
SECTION 22. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 23. Assignment. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates and
the provisions of this Agreement shall inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger, consolidation, transfer
of all or substantially all of its assets, or otherwise (no such assignment
shall relieve the Company from its obligations hereunder).
SECTION 24. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 25. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
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<PAGE>
SECTION 26. Unlimited Guaranty. As a condition to the execution of
this Agreement and the performance by the Executive of its obligations
hereunder, Custom Food is delivering a guaranty to the Executive in the form of
Exhibit A simultaneously with the execution and delivery hereof.
SECTION 27. Attorney Fees. In connection with any action, suit or
proceeding arising under or in connection with this Agreement, the prevailing
party in such action, suit or proceeding shall be entitled to the reasonable
attorneys' fees incurred in connection with such action, suit or proceeding.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first written above.
CFP HOLDINGS, INC.
By:________________________________
Name:
Title:
___________________________________
ERIC W. EK
<PAGE>
EXHIBIT A
Unlimited Guaranty
In consideration of the management advice to be obtained by Custom
Food Products, Inc., a California corporation ("CFP"), pursuant to the
Employment Agreement dated as of December 31, 1996, (the "Employment
Agreement"), between Eric W. Ek and CFP Holdings, Inc., a Delaware corporation
("Holdings"), CFP hereby unconditionally guarantees the payment and performance
in full of all of the obligations of Holdings arising in connection with the
Employment Agreement.
IN WITNESS WHEREOF, CFP has caused this Unlimited Guaranty to be
duly executed as of this 31st day of December 1996.
CUSTOM FOOD PRODUCTS, INC.
By:________________________________
Name:
Title:
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
dated as of December 31, 1996,
between CFP HOLDINGS, INC., a
Delaware corporation (the
"Company"), and ROBERT D. GIOIA
(the "Executive").
Reference is made to the Securities Purchase Agreement dated as of
December 31, 1996 (the "Securities Purchase Agreement") among the Company,
Quality Foods, L.P. ("Quality Foods"), the partners of Quality Foods, certain
additional beneficial owners of Quality Foods, the stockholders of QF
Acquisition Corp., a Delaware corporation, and the stockholders of QF Management
Corp., a Delaware corporation. Pursuant to the Securities Purchase Agreement,
the Company is acquiring the business of Quality Foods.
The Executive is the Chief Executive Officer of Quality Foods and
possesses unique knowledge of the business, products and operations thereof. The
Company desires to enter into this Agreement in order to assure itself of the
continued service of the Executive and the Executive desires to accept
employment with the Company upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment by the Company upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The employment of the Executive hereunder shall be
for the period (the "Employment Period") commencing on the date hereof (the
"Commencement Date") and ending on (a) the fifth anniversary of the date hereof
(the "Scheduled Termination Date"), or (b) such earlier date (the "Termination
Date") upon which the employment of the Executive shall terminate in accordance
with the provisions hereof.
SECTION 3. Duties; Etc. (a) During the Employment Period, the
Executive shall be employed as the President and Chief Executive Officer of the
Company. Subject to the authority of the Board of Directors of the Company (the
"Board"), the Executive shall have the authority and responsibility to manage
the business and affairs of the Company and shall have such other titles and
duties consistent with the status of a senior level executive of the Company as
the Board shall in its discretion designate which, initially, shall include
serving as the Chief
<PAGE>
Executive Officer of the Company's Quality Foods subsidiary. The Executive shall
use his best efforts to perform well and faithfully the foregoing duties and
responsibilities.
(b) Nothing contained in this Agreement shall obligate the Executive
to relocate to a location other than the metropolitan Buffalo, New York area.
The parties acknowledge that the discharge of the Executive's duties hereunder
will require the Executive to travel as necessary to the facilities of the
Company and its affiliates and that a substantial portion of his duties will
require the Executive to be present at the facilities of the Company and its
affiliates. The Executive may from time to time also be required to travel to
other locations to carry out the business of the Company and perform his duties
hereunder. The Executive shall be provided, at the expense of the Company or one
of its affiliates, with an office at the facilities of the Company located at
5501 Tabor Road, Philadelphia, Pennsylvania. Subject to the foregoing and to the
extent consistent with the proper discharge of his duties hereunder, the
Executive may perform his duties from Buffalo, New York and the Company (or any
of its affiliates) shall provide the Executive with an office in Buffalo, New
York (not to exceed a cost per month of $750).
(c) During the Employment Period, the Executive shall receive an
annual performance review, with the first such review to take place on the first
anniversary of the Commencement Date.
SECTION 4. Time to be Devoted to Employment. (a) During the
Employment Period, the Executive shall devote such time, attention and energies
to the business of the Company and its subsidiaries (except for vacations to
which he is entitled pursuant to Section 6(b) and except for illness or
incapacity) as shall be necessary for the Executive to perform the duties
required to be performed hereunder as outlined in Section 3 hereof. During the
Employment Period, the Executive shall not engage in any business activity
which, in the reasonable judgment of the Board, conflicts with the duties of the
Executive hereunder, whether or not such activity is pursued for gain, profit or
other pecuniary advantage.
(b) The parties recognize that the Executive currently holds public
and private sector positions, both volunteer and non-volunteer, as Chairman of
the Niagara Frontier Transportation Authority. He has also in the past served as
a member of the Boards of Directors of various institutions, and the parties
intend that nothing in this Agreement shall preclude his continued involvement
in these capacities, provided that such involvement does not interfere with, or
prevent the Executive from, complying with the terms of this Agreement,
including, without limitation, those set forth in Section 4(a).
SECTION 5. Compensation; Bonus. (a) The Company (or, at the
Company's option, any affiliate thereof) shall pay to the Executive an annual
base salary (the "Base Salary") during
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the Employment Period of $325,000 per annum, payable in such installments (but
not less often than monthly) as is generally the policy of the Company with
respect to its officers.
(b) Subject to the last sentence of this Section 5(b), on
January 1 of each year (each such year, an "Adjustment Year") commencing January
1, 1998, the Executive's Base Salary shall be subject to increase by a
percentage of the Executive's Base Salary equal to the percentage increase, if
any, in the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Wage Earners, "all items" for the city or
metropolitan area to which Buffalo, New York bears the closest geographic
proximity, 1982-84=100 base, or any successor or substitute index between
December of the year that is two years immediately prior to the adjustment year
and December of the year immediately preceding the adjustment year (the "Index
Year"). The Company shall calculate any increase as soon as practicable after
the Consumer Price Index information for December of the Index Year is made
available and any such increase shall be effective on January 1st of the
Adjustment Year. Any increase in Base Salary pursuant to this Section 5(b) shall
be added to the Base Salary then being paid to the Executive, and the sum
thereof shall then become the Base Salary for each successive year, until
further adjusted in accordance with the provisions of this Section 5(b).
Notwithstanding anything to the contrary contained herein, any increase in Base
Salary pursuant to this Section 5(b) shall be offset against any other increase
in Base Salary to which the Executive might, in the discretion of the Board of
Directors of the Company, become entitled.
(c) In addition to the Base Salary, the Executive shall also
be eligible to participate in the Company's annual cash bonus plan based upon
achieving and exceeding the annual performance targets for the Company and its
affiliates as follows:
(i) In respect of each of the 1997 through 2001 fiscal
years (each, a "Bonus Year"), the Company shall award a cash bonus (the "Annual
Cash Bonus") of up to 100% of the Executive's Base Salary, depending upon the
percentage of Annual Budgeted EBITDA (as hereinafter defined) attained,
according to the following schedule:
Annual Budgeted Cash Bonus
EBITDA % Attained as % of Base Salary
----------------- -------------------
less than 80% 0%
80% 30%
90% 40%
100% 50%
110% 75%
125% and above 100%
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; provided, however, that in each Bonus Year (as long as the Employee has been
continuously employed throughout such Bonus Year), the Executive shall be
entitled to an Annual Cash Bonus in the amount of at least $50,000 (the "Minimum
Annual Bonus"), except that in the event this Agreement expires upon the
Scheduled Termination Date without being renewed, the Executive shall be
entitled to a pro rata share of the Annual Minimum Bonus in respect of the 2001
Bonus Year for the period the Executive was actually employed during such year.
(d) As used herein, the following terms shall have the
following meanings:
(i) "Annual Budgeted EBITDA" for the Company for the
fiscal year ended December 31, 1997 equals $28,818,000 and for each subsequent
fiscal year means the figure set by the Board of Directors on a yearly basis in
advance of the relevant year.
(ii) "EBITDA" means the net income of the Company and
its subsidiaries, determined on a consolidated basis excluding the effect of any
Stipulated Items (as hereinafter defined) and before payment or provision for
payment of (A) interest expense; (B) any Federal, state, local or other taxes
based on income; (C) depreciation expense; and (D) amortization of goodwill and
other intangible assets.
(iii) "Stipulated Items" means income or expense items
of a character significantly different from those incurred in the typical or
customary business activities of the Company and any of its subsidiaries or that
would not be considered recurring factors in any evaluation of the ordinary
operations of the business of the Company and its subsidiaries, including, but
not limited to, (A) the sale or abandonment of a plant or significant segment of
the business of the Company or any of its subsidiaries; (B) the sale of an
investment not acquired for resale; (C) the writeoff of goodwill due to unusual
events or developments within the fiscal year being considered; (D) the
condemnation or expropriation of properties; (E) certain adjustments to the
reserve accounts recorded by the Company or any of its subsidiaries; (F) any
management fees payable to First Atlantic Capital, Ltd. or the Parent (as
hereinafter defined) or any of their affiliates; and (G) fees and expenses
relating to the consummation of the transactions contemplated by the Securities
Purchase Agreement and the Rule 144A debt offering of senior notes of the
Company.
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<PAGE>
(e) The Company shall, promptly following the Company's
receipt from its certified public accountants of the audited consolidated
financial statements of the Company for each Bonus Year, compute and promptly
pay the Annual Cash Bonus based upon EBITDA as reflected in such audited
consolidated financial statements.
(f) Notwithstanding anything to the contrary contained herein,
any and all Annual Cash Bonuses otherwise payable hereunder shall be subject to
the Company's obligations to comply with the covenants set forth in its
agreements with its lenders and payment of any and all Annual Cash Bonuses
otherwise payable may be deferred in order to maintain the Company's compliance
with such covenants. If any Annual Cash Bonus hereunder is not paid when due as
a result of the Company's obligations to its lenders, such bonus shall accrue
interest at the Applicable Federal Rate, as such term is defined in Section
1274(d) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder) until paid but shall, in any event, be paid
as soon as permissible.
(g) In addition to the Base Salary, the Executive shall be
entitled to participate in the Company's (or its parent company's) incentive
stock option plan to be formulated by the Board of Directors of the Company.
(h) Upon the Commencement Date, the Company's parent, CFP
Group, Inc., a Delaware corporation (the "Parent"), shall grant the Executive
options to purchase Class B Nonvoting Common Stock, $.01 par value (the "Class B
Nonvoting Stock"), of the Parent representing up to 1.25% (determined on the
Commencement Date on a fully diluted basis) of the issued and outstanding Common
Stock, $.01 par value, of the Parent. Such options shall be issued on such terms
as the Board of Directors of the Parent shall, in its discretion, determine,
provided such options shall be exercisable for the five year period commencing
on the first anniversary of the Commencement Date in the event the employee
remains continuously employed through such anniversary date and the exercise
price thereof shall be $693.75 per share.
SECTION 6. Business Expenses; Benefits. (a) The Company (or, at the
Company's option, any subsidiary or affiliate thereof) shall reimburse the
Executive, in accordance with the practice from time to time for officers of the
Company, for all reasonable and necessary expenses and other disbursements
incurred by the Executive for or on behalf of the Company in the performance of
his duties hereunder. The Executive shall provide such appropriate documentation
of expenses and disbursements as may from time to time be reasonably required by
the Company.
(b) During the Employment Period, the Executive shall be
entitled to five weeks paid vacation during each twelve-month period worked
beginning on the Commencement Date.
(c) During the Employment Period, the Company shall provide
the Executive with group health, hospitalization and disability insurance and
other employee benefits consistent with such benefits as are generally made
available from time to time to executive employees of the Company.
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<PAGE>
(d) During the Employment Period, the Company shall reimburse
the Executive for premiums (not to exceed $2500 in any year) on a current
supplemental life insurance policy through Cigna Insurance Company for a maximum
amount of Five Hundred Thousand Dollars ($500,000).
SECTION 7. Involuntary Termination. (a) If the Executive is
incapacitated or disabled by accident, sickness or otherwise so as to render him
mentally or physically incapable of performing the services required to be
performed by him under this Agreement (such condition being hereinafter referred
to as a "Disability") for a period of 180 consecutive days or longer, or for an
aggregate of 210 days during any twelve-month period, the Company may, at any
time following such 180 or 210 day period of Disability, at its option,
terminate the employment of the Executive under this Agreement immediately upon
giving him written notice to that effect (such termination, as well as a
termination under Section 7(b), being hereinafter referred to as an "Involuntary
Termination"). Until the Executive's employment hereunder shall have been
terminated in accordance with the foregoing, the Executive shall be entitled to
receive his compensation notwithstanding any such Disability.
(b) If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to cease as of the date of his death.
SECTION 8. Termination For Cause. The Company may terminate the
employment of the Executive hereunder at any time for Cause (as hereinafter
defined) (such termination being referred to herein as a "Termination For
Cause") by giving the Executive written notice of such termination, effective
immediately upon the giving of such notice to the Executive. As used in this
Agreement (a) "Cause" means any of the following: (i) any deliberate or
intentional act or omission undertaken or omitted by the Executive causing
damage to the Company or any of its affiliates or any of their respective
properties, assets or business; (ii) any fraud, misappropriation or embezzlement
by the Executive involving properties, assets or funds of the Company or any of
its affiliates or a conviction of the Executive, or pleading nolo contendere by
the Executive, to any crime or offense involving monies or other property of the
Company or any of its affiliates or any other felony offense for any crime of
gross moral turpitude; (iii) the violation by the Executive of Sections 13, 14
or 15 of this Agreement or the provisions of any other employment,
non-competition or confidentiality agreement with the Company or any of its
affiliates; (iv) the Executive's material breach of any agreement to which he is
a party with the Company or any of its affiliates; (v) any usurpation by the
Executive of a corporate opportunity of the Company or any of its affiliates;
(vi) the Executive's failure or refusal to perform any of his material duties,
responsibilities or obligations as an employee of the Company; provided,
however, that any action or omission by the Executive taken in good faith and in
the
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<PAGE>
reasonable belief that such action or omission was in the best interests of
the Company shall not constitute "Cause"; and provided further, however, that
the Executive shall be entitled to cure any investment that unintentionally
violates clause (iii) hereof or any violation of clause (iv) hereof, in each
case within thirty (30) days of his receipt of written notice thereof from the
Company.
SECTION 9. Termination Without Cause. The Company may terminate the
employment of the Executive hereunder without Cause (such termination being
hereinafter referred to as a "Termination Without Cause") by giving the
Executive written notice of such termination, which notice shall be effective on
the date specified therein but not earlier than the date on which such notice is
given. For purposes of this Agreement, "Termination Without Cause" shall also
include the following:
(a) any material reduction, in the absence of the Executive's
consent, of the Executive's title, duties or responsibilities;
(b) any reduction, in the absence of the Executive's consent,
in the Executive's Base Salary, Annual Cash Bonus or the perquisites listed in
Sections 6(c) or (d) hereof, in each case as in effect on the Commencement Date;
and
(c) the Company's permanent relocation of the Executive, in
the absence of the Executive's consent, to a location other than the
metropolitan Buffalo, New York area. Notwithstanding the foregoing provision of
this clause (c), the parties acknowledge that the discharge of the Executive's
duties hereunder will require the Executive to travel as necessary to the
facilities of the Company and its affiliates and that a substantial portion of
his duties will require the Executive to be present at the facilities of the
Company and its affiliates. The Executive may from time to time also be required
to travel to other locations to carry out the business of the Company and
perform his duties hereunder. Accordingly, such travel shall be expressly
included in the Executive's duties and shall not be the basis of a Termination
Without Cause;
provided, however, that a Termination Without Cause pursuant to clauses (a)
through (c) of this Section 9 shall not be deemed to have occurred unless,
within 30 days of the occurrence of any of the events described in said clauses
(a) through (c), the Executive shall have given the Company reasonable notice of
his intention to claim a Termination Without Cause pursuant to this Section 9
and the basis therefor, and the Company shall have failed to cure the act or
omission described in the notice within 30 days of receipt of such notice from
the Executive.
SECTION 10. Voluntary Termination. Any termination of the employment
of the Executive hereunder other than as a result of an Involuntary Termination,
a Termination For Cause, a
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Termination Without Cause or a Termination For Nonrenewal shall be deemed to be
a "Voluntary Termination."
SECTION 10A. Renewal of Agreement. On the fourth anniversary of the
Commencement Date, the Company and the Executive shall enter into good faith
negotiations for the renewal of this Agreement following the Scheduled
Termination Date. If the parties are unable, within 90 days after commencement
of such negotiations, to agree to a renewal of this Agreement on mutually
acceptable terms, the Executive shall continue to perform the services required
hereunder until the Scheduled Termination Date, whereupon a Termination For
Nonrenewal shall be deemed to have occurred; provided, however, that a
"Termination For Nonrenewal" shall not be deemed to have occurred in the event
the Executive and the Company do in fact renew this Agreement prior to the
Scheduled Termination Date.
SECTION 11. Effect of Termination. (a) Upon the termination of the
Executive's employment hereunder due to a Termination for Cause or a Voluntary
Termination, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the Termination Date (based on the
actual number of days elapsed over a year of 365 or 366 days, as applicable),
(ii) any unpaid accrued benefits of the Executive (including any Annual Cash
Bonus deferred pursuant to Section 5(f) hereof), and (iii) reimbursement for any
expenses for which the Executive shall not have been reimbursed as provided in
Section 6(a).
(b) Upon the termination of the Executive's employment
hereunder due to an Involuntary Termination, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under the Agreement except (i) to receive the amounts set forth in
Section 11(a) above; (ii) to continue to receive the Base Salary and the Minimum
Annual Bonus, payable in such installments and on such terms as they were paid
to the Executive prior to such termination of employment through the later to
occur of the Scheduled Termination Date and the date which is 18 months after
the Termination Date; (iii) in the case of an Involuntary Termination due to
Disability, to participate in all group health, hospitalization and disability
insurance plans as contemplated by Sections 6(c) hereof and to receive the
payments contemplated in Section 6(d) hereof until the later to occur of the
Scheduled Termination Date and the date which is 18 months after the Termination
Date; provided, however, that any such rights under clauses (ii) and (iii) of
this Section 11(b) shall be reduced, to the extent the Executive shall obtain
other employment during the period such payments are required to be made, by the
amount of the salary and benefits received by the Executive in connection with
such new employment.
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<PAGE>
(c) Upon the termination of the Executive's employment
hereunder due to a Termination Without Cause, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary and the Minimum
Annual Bonus, payable in such installments and on such terms as they were paid
to the Executive prior to such termination of employment, through the later to
occur of the Scheduled Termination Date and the date which is 18 months after
the Termination Date and (iii) to participate in all group health,
hospitalization and disability insurance plans as contemplated by Section 6(c)
hereof and to receive the payments contemplated in Section 6(d) hereof until the
later to occur of the Scheduled Termination Date and the date which is 18 months
after the Termination Date; provided, however, that any such rights under
clauses (ii) and (iii) of this Section 11(c) shall be reduced, to the extent the
Executive shall obtain other employment during the period such payments are
required to be made, by the amount of the salary and benefits received by the
Executive in connection with such new employment.
(d) Upon the termination of the Executive's employment
hereunder due to a Termination For Nonrenewal, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above; (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment for a period of 18 months; and (iii) to participate in all group
health, hospitalization and disability insurance plans as contemplated by
Section 6(c) hereof and to receive the payments contemplated in Section 6(d)
hereof for a period of 18 months after the Termination Date; provided, however,
that any such rights under clauses (ii) and (iii) of this Section 11(d) shall be
reduced, to the extent the Executive shall obtain other employment during the
period such payments are required to be made, by the amount of the salary and
benefits received by the Executive in connection with such new employment.
SECTION 12. Insurance. The Company may, for its own benefit,
maintain "key-man" life and disability insurance policies (collectively, the
"Insurance Policies") covering the Executive. The Executive will cooperate with
the Company and provide such information or other assistance as the Company may
reasonably request in connection with the Company's obtaining and maintaining
the Insurance Policies.
SECTION 13. Disclosure of Information. The Executive agrees that he
will not, at any time during the Employment Period or thereafter, disclose to
any person, firm, corporation or other business entity, except as required by
law, any non-public information concerning the business, clients or affairs of
the Company or any subsidiary or affiliate thereof for any reason or
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<PAGE>
purpose whatsoever nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof.
SECTION 14. Right to Inventions. The Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business actually conducted by the
Company, which he may develop or which may be acquired by the Executive during
the Employment Period (whether or not during usual working hours), together with
all trademarks, patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such mark, design, logo,
invention, improvement or technical information. In connection therewith:
(a) the Executive shall without charge, but at the expense of
the Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(b) the Executive shall render to the Company at its expense
(including a reasonable payment for the time involved in case he is not
then in its employ based on his last per diem earnings) all such
assistance as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in any litigation in
which the Company may be involved relating to any such trademarks,
patents, inventions, improvements or technical information; and
(c) for the avoidance of doubt, it is hereby agreed that the
foregoing provisions shall be deemed to include an assignment of future
copyright in accordance with Section 37 of the Copyright Act of 1986 and
any amendment or re-enactment thereof.
SECTION 15. Restrictive Covenant. (a) The Executive acknowledges and
recognizes that during the Employment Period he will be privy to non-public
information critical to the Company's and its affiliates' business and further
acknowledges and recognizes that the Company would find it extremely difficult
to
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<PAGE>
replace him. Accordingly, in consideration of the premises contained herein, and
the consideration to be received by the Executive hereunder and the granting of
certain stock options to the Executive, during the Employment Period and the
Non-Competition Period (as defined below), the Executive shall not (i) directly
or indirectly engage in, represent in any way, or be connected with, any
Competing Business (as defined below), whether such engagement shall be as an
officer, director, owner, employee, partner, affiliate or other participant in
any Competing Business; (ii) assist others in engaging in any Competing
Business; (iii) induce any employee of the Company or any affiliate thereof to
terminate such employee's employment with the Company or any such affiliate or
to engage in any Competing Business; or (iv) induce any entity or person with
which the Company or any affiliate thereof has a business relationship to
terminate or alter such business relationship; provided, however, that the
foregoing shall not prevent the Executive from owning the securities of or an
interest in any business, provided such ownership of securities or interest
represents less than five percent (5%) of any class or type of securities of, or
interest in, such business.
(b) The Executive understands that the foregoing restrictions may
limit his ability to earn a livelihood in a business similar to the business of
the Company or any affiliate thereof, but he nevertheless believes that he has
received and will receive sufficient consideration and other benefits as an
employee of the Company and as otherwise provided hereunder and pursuant to
other agreements between the Company and the Executive to justify clearly such
restrictions which, in any event (given his education, skills and ability), the
Executive does not believe would prevent him from earning a living.
(c) As used herein, "Competing Business" shall mean any business in
North America if such business or the products sold by it are competitive,
directly or indirectly, with (i) the business of the Company or any of its
affiliates for which the Executive has direct managerial responsibility, (ii)
any of the products manufactured, sold or distributed by the Company or any of
its affiliates for which the Executive has direct managerial responsibility or
(iii) any products or business being developed by the Company or any of its
affiliates for which the Executive has direct managerial responsibility and
"Non-Competition Period" shall mean the period commencing on the day immediately
following the Termination Date and ending upon the expiration of 18 months
following the Termination Date. For purposes of this paragraph (c), the
Executive shall be deemed to have direct managerial responsibility for the
business of the Company, Quality Foods and Custom Food Products, Inc.
SECTION 16. Right to Sell Securities. In the event (the "Trigger
Event") of a (i) Termination Without Cause; (ii) Termination For Nonrenewal; or
(iii) Involuntary Termination, the Executive shall have the right and option
(the "Put Option")
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during the 90-day period (the "Put Period") following the Trigger Event to sell
to the Company the shares of Class B Nonvoting Stock and/or options (the
"Options") to acquire such shares of Class B Nonvoting Stock that are then
vested and exercisable, in each case owned by the Executive (or any member of
the Group (as defined in the Stockholders' Agreement) of the Executive) on the
date of the Trigger Event (collectively, the "Put Securities"). The Put Option
shall be exercisable by the Executive by written notice to the Company during
the Put Period, and upon receipt thereof, the Company shall be obligated to
purchase the Put Securities that are the subject of such notice on the following
basis:
(A) The price (the "Put Price") of the Put Securities shall be
determined as follows:
(1) if the Trigger Event is a Termination Without Cause
or an Involuntary Termination, the Put Price for the Put Securities shall
be the greater of (x) the price paid by the Executive for the Put
Securities and (y) the Fair Value Per Share (as defined in the
Stockholders' Agreement (the "Stockholders' Agreement") dated as of the
date hereof among the Company, the Executive and the other signatories
thereto), net of the exercise price in the case of Options; and
(2) if the Trigger Event is a Termination For
Nonrenewal, the Put Price for the Put Securities shall be Fair Value Per
Share, net of the exercise price, in the case of Options.
(B) The Put Price shall be payable as follows:
(1) if the Trigger Event is a Termination For
Nonrenewal, the Put Price shall be payable in cash or, at the option of
the Company, by delivery of a subordinated promissory note that (a)
matures ratably on a quarterly basis over a three year period; (b) is
subordinated to all other current or future indebtedness of the Company;
(c) bears interest, payable on a quarterly basis, at a fluctuating annual
rate equal to that rate announced by NationsBank, N.A. from time to time
as its prime rate; (d) shall be secured with the Put Securities
repurchased by delivery of such note; and (e) shall otherwise contain such
terms and provisions as may be required by the Company's lenders; and
(2) if the Trigger Event is a Termination Without Cause
or an Involuntary Termination, the Put Price shall be payable in cash.
(C) The Put Price shall be paid within 90 days of the exercise by
the Executive of the Put Option.
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<PAGE>
(D) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 16 shall be subject to the following:
(1) The put rights set forth in this Section 16 shall be
subject to the terms and conditions of the Tripartite Agreement dated as
of the date hereof among the Executive, David Cohen and Richard D.
Griffith.
(2) The parties acknowledge that any obligation on the
part of the Company to pay the Put Price shall be subject to the Company's
obligations to comply with the covenants set forth in its agreements with
its lenders and payment of any Put Price payable may be deferred in order
to maintain the Company's compliance with such covenants but shall, in any
event, be paid as soon as permissible.
(3) Anything contained herein to the contrary
notwithstanding, the Put Option (if not theretofore exercised) of the
Executive shall terminate and be of no further force or effect
simultaneously with the consummation by the Parent of the initial public
offering of shares of its capital stock.
SECTION 17. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 18. Remedies. The Executive acknowledges and understands
that the provisions of this Agreement are of a special and unique nature, the
loss of which cannot be adequately compensated for in damages by an action at
law, and that the breach or threatened breach of the provisions of this
Agreement would cause the Company irreparable harm. In the event of a breach or
threatened breach by the Executive of the provisions of this Agreement, the
Company shall be entitled to an injunction restraining him from such breach.
Nothing contained in this Agreement shall be construed as prohibiting the
Company from or limiting the Company in pursuing any other remedies available
for any breach or threatened breach of this Agreement.
SECTION 19. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by
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<PAGE>
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to it at:
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
with a copy to:
First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Mr. James A. Long
Telecopier: (212) 750-0954
Telephone: (212) 750-0300; and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2420
Telephone: (212) 408-2400;
if to the Executive, to him at:
36 Rumsey Road
Buffalo, New York 14209
with a copy to:
Saperston & Day, P.C.
Attorneys At Law
1100 M&T Center
Three Fountain Plaza
Buffalo, New York 14203-1486
Attention: Gary L. Mucci, Esq.
Telecopier: (716) 856-0139
Telephone: (716) 856-5400;
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (iii) in the case of telecopy transmission, when received, and (iv)
in the case of mailing, on the third business day following that on which the
piece of mail containing such communication is posted.
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<PAGE>
SECTION 20. Binding Agreement; Benefit. Subject to Section 25
hereof, the provisions of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives, successors and
assigns of the parties.
SECTION 21. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(without giving effect to principles of conflicts of laws).
SECTION 22. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other breach.
SECTION 23. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
with respect thereto, including, without limitation, the Agreement dated as of
July 22, 1992 by and between Quality Foods and the Executive. This Agreement may
be amended only by an agreement in writing signed by the parties.
SECTION 24. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 25. Assignment. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that if the
Executive fails to consent to the assignment of this Agreement, such failure
will be deemed a Voluntary Termination of this Agreement. Notwithstanding the
foregoing, (a) the parties acknowledge that the Company may, at any time, assign
this Agreement to any of its affiliates (determined on the date hereof); and (b)
in the event of a Change of Control (as hereinafter defined) of the Company,
provided the Executive consents to the assignment of this Agreement to the
Company's successor, the Executive shall be entitled, in his sole discretion, to
terminate the Employment Period at any time after nine months shall have elapsed
from the date of the change of control (provided the Executive shall have been
continuously employed by the Company during such nine-month period), in which
case such termination shall be deemed a Termination Without Cause. As used
herein, "Change of Control" shall mean the failure of Atlantic Equity Partners,
L.P. (together with its affiliates determined on the date hereof) to own,
directly or indirectly, beneficially or of record, in excess of 50% of the
issued and outstanding voting securities of the Company having the ordinary
power to elect directors.
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<PAGE>
SECTION 26. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 27. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 28. Attorney Fees. (a) In connection with any action, suit
or proceeding arising under or in connection with this Agreement, the prevailing
party in such action, suit or proceeding shall be entitled to the reasonable
attorneys' fees incurred in connection with such action, suit or proceeding.
(b) The Company agrees to pay the reasonable fees and expenses of
Saperston & Day, P.C. (not to exceed $7,500) in connection with negotiation of
this Agreement.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first written above.
CFP HOLDINGS, INC.
By:_____________________________
Name:
Title:
________________________________
Robert D. Gioia
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT dated as of
December 31, 1996, between CFP HOLDINGS,
INC., a Delaware corporation (the
"Company"), and RICHARD W. GRIFFITH (the
"Executive").
The Company and the Executive are parties to the Employment
Agreement dated as of March 31, 1993 (the "Original Employment Agreement"). The
Company and the Executive desire to terminate the Original Employment Agreement
as of the date hereof and to continue the employment relationship between the
Company and the Executive from and after the date hereof pursuant to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. Employment. The Company hereby employs the Executive and
the Executive hereby accepts employment by the Company upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The employment of the Executive hereunder shall be
for the period (the "Employment Period") commencing on the date hereof (the
"Commencement Date") and ending on (a) December 31, 1999 (the "Scheduled
Termination Date"), or (b) such earlier date (the "Termination Date") upon which
the employment of the Executive shall terminate in accordance with the
provisions hereof. Upon not less than 30 days written notice prior to the
Scheduled Termination Date, the Employment Period may be extended at the sole
discretion of the Company for an additional 30-day period (a "Renewal Period")
to facilitate contract negotiations in the event the Company desires to retain
the services of the Executive following the expiration of the Employment Period.
SECTION 3. Duties. During the Employment Period, the Executive shall
be employed as President and Chief Executive Officer of Custom Food Products,
Inc., a wholly-owned subsidiary of the Company ("Custom Food"), and as Vice
Chairman of the Company and CFP Group, Inc., the parent of the Company (the
"Parent"), and shall perform such duties as are consistent therewith. The
Executive shall further serve as a member of the Board of Directors of the
Company (the "Board"), the Parent, Custom Food and the successor to the business
of Quality Foods and shall have such other titles and duties, consistent with
the status of a senior level executive of the Company, as the Board shall in its
sole discretion designate. The Executive shall use his best efforts to perform
well and faithfully the foregoing duties and responsibilities.
<PAGE>
SECTION 4. Time to be Devoted to Employment. During the Employment
Period, the Executive shall devote all of his working time, attention and
energies to the business of the Company and its subsidiaries (except for
vacations to which he is entitled pursuant to Section 6(b) and except for
illness or incapacity). During the Employment Period, the Executive shall not
engage in any business activity which, in the reasonable judgment of the Board,
conflicts with the duties of the Executive hereunder, whether or not such
activity is pursued for gain, profit or other pecuniary advantage. Nothing
contained in this Section 4 shall prohibit the Executive from (a) owning up to
1% of the outstanding capital stock or other class of securities of any
corporation whose shares are traded on a national securities exchange or are
listed on NASDAQ or (b) making other passive investments in entities which do
not compete in any manner with the Company after obtaining the prior written
consent of the Board.
SECTION 5. Compensation; Bonus. (a) The Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay to the Executive an
annual base salary (the "Base Salary") during the Employment Period of $300,000
per annum, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to its officers.
(b) In addition to the Base Salary, the Executive shall be
eligible to participate in the Company's annual cash bonus plan based upon
achieving and exceeding the annual performance targets for Custom Food as
follows:
(i) In respect of each of the 1997 through 1999 fiscal
years (each, a "Bonus Year"), the Company shall award a cash bonus (the
"Annual Cash Bonus"), if any, of between 30% and 100% of the Executive's
Base Salary, depending upon the percentage of Annual Budgeted EBITDA of
Custom Food (as hereinafter defined) attained, according to the following
schedule:
Annual Budgeted EBITDA
of Custom Food Cash Bonus as % of
% Attained Base Salary
-------------------------------- ----------------------------
less than 80% 0%
80% 30%
90% 40%
100% 50%
110% 75%
125% and above 100%
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<PAGE>
, provided, however, that in each Bonus Year (as long as the Employee has been
continuously employed throughout such year), the Executive's Annual Cash Bonus
shall be at least $25,000 (the "Minimum Annual Bonus").
(ii) As used herein, the following terms shall have the
following meanings:
(A) "Annual Budgeted EBITDA" for Custom Food for
the fiscal year ended December 31, 1997 equals $12,200,000 and for each
subsequent fiscal year means the figure set by the Board on a yearly
basis.
(B) "EBITDA" means, with respect to any person,
the net income (after provision for all bonuses) of such person,
determined on a consolidated basis excluding the effect of any Stipulated
Items (as hereinafter defined) before payment or provision for payment of
(1) interest expense; (2) any Federal, state, local or other taxes based
on income; (3) depreciation expense and (4) amortization of goodwill and
other tangible assets.
(C) "Stipulated Items" means, with respect to any
person, income or expense items of a character significantly different
from those incurred in the typical or customary business activities of
such person and any of its subsidiaries or that would not be considered
recurring factors in any evaluation of the ordinary operations of the
business of Custom Food, including, but not limited to, (1) the sale or
abandonment of a plant or significant segment of the business of such
person; (2) the sale of an investment not acquired for resale; (3) the
writeoff of goodwill due to unusual events or developments within the
fiscal year being considered; (4) the condemnation or expropriation of
properties; (5) certain adjustments to the reserve accounts recorded by
such person; and (6) any management fees payable to First Atlantic
Capital, Ltd. and its affiliates.
(iii) The Company shall, promptly following the
Company's receipt from its certified public accountants of the audited
consolidated financial statements of the Company for each Bonus Year,
compute and promptly pay the Annual Cash Bonus based upon the EBITDA of
Custom Food as reflected in such audited consolidated financial
statements.
(c) In addition to the Base Salary, the Executive shall be
entitled to participate in the incentive stock option plan to be formulated by
the Board of Directors of the Parent.
(d) Subject to the last sentence of this Section 5(d), as of
July 1 of each year during the Employment Period (each such year, an "Adjustment
Year") commencing July 1, 1997, the Executive's Base Salary shall be subject to
increase by a
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<PAGE>
percentage of the Executive's Base Salary equal to the percentage increase, if
any, in the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for Urban Wage Earners, "all items" for the city or
metropolitan area to which Montebello, California bears the closest geographic
proximity, or any successor or substitute index reasonably selected by the
Company (the "Index Year"). The Company shall calculate any increase as soon as
practicable after the Consumer Price Index information for June of the Index
Year is made available and any such increase shall be effective on July 1 of the
Adjustment Year. Any increase in Base Salary pursuant to this Section 5(d) shall
be added to the Base Salary then being paid to the Executive, and the sum
thereof shall then become the Base Salary for each successive year, until
further adjusted in accordance with the provisions of this Section 5(d).
Anything contained herein to the contrary notwithstanding, any increase in Base
Salary pursuant to this Section 5(d) shall be offset against any other increase
in Base Salary to which the Executive might, in the discretion of the Board of
Directors of the Company, become entitled.
SECTION 6. Business Expenses; Benefits. (a) The Company (or, at the
Company's option, any subsidiary or affiliate thereof) shall reimburse the
Executive, in accordance with the practice from time to time for officers of the
Company, for all reasonable and necessary expenses and other disbursements
incurred by the Executive for or on behalf of the Company in the performance of
his duties hereunder. The Executive shall provide such appropriate documentation
of expenses and disbursements as may from time to time be reasonably required by
the Company.
(b) During the Employment Period, the Executive shall be
entitled to five weeks paid vacation during each twelve-month period worked
beginning on the Commencement Date.
(c) During the Employment Period, the Company shall provide
the Executive with group health, hospitalization and other employee benefits in
amounts and with terms consistent with the policies of the Company with respect
to its officers.
(d) During the Employment Period, the Company shall (i) from
the date hereof through the expiration date (September 1997) of the current
lease with respect to the Executive's automobile, continue to pay or reimburse
the Executive for the monthly lease payments therefor and (ii) at the expiration
of such lease, at the option of the Executive, either (A) obtain a new lease for
a comparable automobile at an aggregate maximum annual cost (including lease
payments, insurance, gas, repairs and maintenance) of $20,300 or (B) pay to the
Executive, in lieu of providing an automobile as aforesaid, $20,300 per annum in
equal monthly installments of $1,691.67.
SECTION 7. Involuntary Termination. (a) If the Executive is
incapacitated or disabled by accident, sickness or
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otherwise so as to render him mentally or physically incapable of performing the
services required to be performed by him under this Agreement (such condition
being hereinafter referred to as a "Disability") for a period of 180 consecutive
days or longer, or for an aggregate of 210 days during any twelve-month period,
the Company may, at any time after such 180 or 210 day period of Disability, at
its option, terminate the employment of the Executive under this Agreement
immediately upon giving him written notice to that effect (such termination, as
well as a termination under Section 7(b), being hereinafter referred to as an
"Involuntary Termination"). Until the Executive's employment hereunder shall
have been terminated in accordance with the foregoing, the Executive shall be
entitled to receive his compensation notwithstanding any such Disability.
(b) If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to cease as of the date of his death.
SECTION 8. Termination For Cause. The Company may terminate the
employment of the Executive hereunder at any time for Cause (as hereinafter
defined)(such termination being referred to herein as a "Termination for Cause")
by giving the Executive written notice of such termination, effective
immediately upon the giving of such notice to the Executive. As used in this
Agreement (a) "Cause" means (i) the Executive's material breach of this
Agreement and, if such breach is capable of being cured, the failure to cure
such breach within 30 days of notice thereof from the Company to the Executive,
(ii) the Executive's disregard of lawful instructions of the Board that are
consistent with the Executive's position, or neglect of duties or failure to
act, which, in either case, may reasonably be anticipated to have a Material
Adverse Effect, and the continuance of such condition for a period of 30 days
after notice thereof from the Company to the Executive, (iii) alcohol or drug
abuse by the Executive or (iv) the commission by the Executive of a felony or an
act involving fraud, theft or dishonesty; and (b) "Material Adverse Effect"
means a material adverse effect on the business, operations, financial
condition, results of operations, assets, liabilities or prospects of the
Company or any of its subsidiaries or affiliates.
SECTION 9. Termination Without Cause. The Company may terminate the
employment of the Executive hereunder without Cause (such termination being
hereinafter referred to as a "Termination Without Cause") by giving the
Executive written notice of such termination, which notice shall be effective on
the date specified therein but not earlier than the date on which such notice is
given. For purposes of this Agreement, "Termination Without Cause" shall also
include the following:
(a) any material reduction, in the absence of the Executive's
consent, of the Executive's title, duties or responsibilities;
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(b) any material breach by the Company of its obligations
under this Agreement; and
(c) the Company's relocation of the Executive, in the absence
of the Executive's consent, to a location other than the metropolitan Los
Angeles, California area, provided that the Executive acknowledges that as part
of his duties hereunder, it may be necessary for him to make periodic business
trips of short duration (including, for example, trips to attend meetings of
boards of directors of which he is a member), which trips shall not be
considered the relocation of the Executive for purposes of this Section 9(c);
provided, however, that a Termination Without Cause pursuant to clauses (a), (b)
or (c) of this Section 9 shall not be deemed to have occurred unless, within 30
days of the occurrence (or, in the case of an event described in clause (b) of
this Section 9, the Executive's actual knowledge of such occurrence) of any of
the events described in said clauses (a), (b) or (c), the Executive shall have
given the Company notice (with reasonable specificity) of his intention to claim
a Termination Without Cause pursuant to this Section 9 and the basis therefor,
and the Company shall have failed to cure the act or omission described in the
notice within 30 days of receipt of such notice from the Executive.
SECTION 10. Voluntary Termination. Any termination of the employment
of the Executive hereunder other than as a result of an Involuntary Termination,
a Termination For Cause or a Termination Without Cause shall be deemed to be a
"Voluntary Termination", including the expiration of this Agreement at the end
of the Employment Period and the failure of the Executive and the Company to
extend the term hereof beyond the Scheduled Termination Date or the expiration
of the Renewal Period, if applicable (a "Nonrenewal").
SECTION 11. Effect of Termination. (a) Upon the termination of the
Executive's employment hereunder due to a Termination for Cause or a Voluntary
Termination, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the Termination Date (based on the
actual number of days elapsed over a year of 365 or 366 days, as applicable),
(ii) any unpaid accrued benefits due the Executive, (iii) reimbursement for any
expenses for which the Executive shall not have been reimbursed as provided in
Section 6(a) and (iv) in the case of a Voluntary Termination resulting from
Nonrenewal following the extension of the Employment Period beyond the Scheduled
Termination Date (as contemplated by the last sentence of Section 2), a pro rata
portion of the Minimum Annual Bonus computed by multiplying (A) the amount of
the Minimum Annual Bonus by (B) a fraction, the numerator of which is the number
of days elapsed in the Renewal
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Period from the beginning of such year to and including the effective date of
such termination and the denominator of which is 365, such portion of the
Minimum Annual Bonus to be payable at such time and in such manner as is
consistent with the Company's historical practice regarding the payment of
bonuses to the Executive or to its officers generally.
(b) Upon the termination of the Executive's employment
hereunder due to an Involuntary Termination, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment for a period of six (6) months, (iii) to receive the pro rata portion
of the bonus to which the Executive would be entitled for the fiscal year of the
Company in which such termination occurred, computed by multiplying (A) the
bonus that would have been payable to the Executive for the entire year if his
employment had not been terminated by (B) a fraction, the numerator of which is
the number of days elapsed from the beginning of such year to and including the
effective date of such termination and the denominator of which is 365, such
portion of the bonus to be payable at such time and in such manner as is
consistent with the Company's historical practice regarding the payment of
bonuses to the Executive or to its officers generally and (iv) to participate in
all group health and hospitalization plans as contemplated by Section 6(c)
hereof until the earlier to occur of the Scheduled Termination Date and the date
which is six (6) months after the Termination Date.
(c) Upon the termination of the Executive's employment
hereunder due to a Termination Without Cause, neither the Executive nor his
beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except (i) to receive the amounts set forth in
Section 11(a) above, (ii) to continue to receive the Base Salary, payable in
such installments as it was paid to the Executive prior to such termination of
employment, through the earlier to occur of the Scheduled Termination Date and
the date which is eighteen (18) months after the Termination Date, (iii) to
receive the pro rata portion of the bonus to which the Executive would be
entitled for the fiscal year of the Company in which such termination occurred,
computed by multiplying (A) the bonus that would have been payable to the
Executive for the entire year if his employment had not been terminated by (B) a
fraction, the numerator of which is the number of days elapsed from the
beginning of such year to and including the effective date of such termination
and the denominator of which is 365, such portion of the bonus to be payable at
such time and in such manner as is consistent with the Company's historical
practice regarding the payment of bonuses to the Executive or to its officers
generally and (iv) to participate in all group health and hospitalization plans
as contemplated by Section 6(c) hereof
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until the earlier to occur of the Scheduled Termination Date and the date which
is eighteen (18) months after the Termination Date; provided, however, that any
such rights under clauses (ii) and (iv) of this Section 11(c) shall be reduced,
to the extent the Executive shall obtain other employment during the period such
payments are required to be made, by the amount of the salary and benefits
received by the Executive in connection with such new employment.
SECTION 12. Right to Sell Securities. (a) In the event (the "Trigger
Event") of (i) the expiration of this Agreement on the Scheduled Termination
Date or the last day of the Renewal Period, if applicable, and the Nonrenewal of
this Agreement or (ii) if earlier, a Termination Without Cause or an Involuntary
Termination, the Executive shall have the right and option (the "Put Option"),
during the 90-day period (the "Put Period") following the date of the Trigger
Event, to sell to the Parent up to 20% of the shares of Class A Nonvoting Common
Stock, $.01 par value (the "Class A Nonvoting Stock"), and/or options (the
"Options") to acquire such shares of Class A Nonvoting Stock which are then
vested and exercisable, in each case owned by the Executive on the date of the
Trigger Event (collectively, the "Put Securities"). Notwithstanding anything to
the contrary contained herein, if a Termination Without Cause or Involuntary
Termination shall occur within 18 months after the date hereof, the Trigger
Event shall not be deemed to have occurred, and the Put Period shall not
commence, until the date that is 18 months from the date hereof. The Put Option
shall be exercisable by the Executive by written notice to the Company and the
Parent during the Put Period, and upon receipt thereof, the Parent shall be
obligated to purchase the Put Securities which are the subject of such notice on
the following basis:
(A) The price (the "Put Price") of the Put Securities
shall be equal to the Stipulated Put Price Per Share (as hereinafter
defined);
(B) The Put Price shall be payable in cash or, in the
event and to the extent that such payment is not permitted by any
covenants set forth in agreements with its lenders, by delivery of a
subordinated promissory note of the Parent that (1) matures ratably on a
quarterly basis over a three year period; (2) is subordinated to all other
current or future indebtedness of the Parent; (3) bears interest, payable
on a quarterly basis, at a fluctuating annual rate equal to that rate
announced by NationsBank, N.A. from time to time as its prime rate; (4)
shall be secured with the Stock repurchased by delivery of such note; and
(5) shall otherwise contain such terms and provisions as may be required
by the Parent's lenders; provided, however, that in the event the Put
Price is payable by the Parent with promissory notes as provided in this
Section 12(a) (B), the Parent shall give notice to the Executive to such
effect within ten (10) days of receipt by the Company and the
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Parent of the notice exercising the Put Option and the Executive shall
have the right, during the ten (10) day period following receipt of the
aforesaid notice, to withdraw his exercise of the Put Option by giving
notice thereof to the Parent; provided further, however, that any such
withdrawn exercise of such Put Option shall be deemed, automatically and
without any further action on the part of the Executive or the Parent, to
be re-instated in the event that, following any such withdrawal, the
Company makes a cash payment to either Robert D. Gioia or David Cohen
under the circumstances contemplated by Section 1 of the Special Agreement
dated as of the date hereof among the Company, the Parent, the Executive
and the other signatories thereto.
(C) The Put Price shall be paid within 90 days of the
exercise by the Executive of the Put Option;
(D) The Put Option shall be utilized first, with respect
to shares of Class A Nonvoting Common Stock, and thereafter, with respect
to options to purchase such Class A Nonvoting Common Stock;
(E) The option agreement(s) relating to the Option shall
provide that, in addition to the rights of the Executive currently set
forth therein, the Executive may exercise the vested and exercisable
Options as of the Trigger Date at any time prior to the second anniversary
of the Trigger Date;
(F) "Parent EBITDA" shall mean the EBITDA of the Parent
for the last 12 months of operations immediately preceding the
commencement of the Put Period;
(G) "Stipulated Put Price Per Share" shall mean the
quotient obtained by dividing (1) four (4) times Parent EBITDA, LESS
consolidated indebtedness and the liquidation value of preferred stock of
the Parent and its subsidiaries, PLUS unrestricted consolidated cash and
cash equivalents of the Parent and its subsidiaries, LESS any other
adjustments necessary to determine the consolidated equity value of the
Parent and its subsidiaries by (2) the aggregate number of shares of Class
A Voting Common Stock, $.01 par value (the "Class A Voting Stock"),
outstanding or deemed outstanding as of the date of calculation, after
giving effect to all securities (including the Class A Nonvoting Stock and
Class B Nonvoting Common Stock, $.01 par value, of the Parent) convertible
into, or exchangeable or exercisable for, Class A Voting Stock (regardless
of whether such securities are at the time convertible into, or
exchangeable or exercisable for, such Class A Voting Stock), as determined
by the Board of Directors of the Parent from time to time; and
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(H) As it relates to Options, the Put Price shall be the
Stipulated Put Price Per Share, LESS the exercise price per share of the
Options which are the subject of the Put Option.
(b) The Executive shall have the additional right and option,
on each of the first, second, third and fourth anniversaries of the date of the
Trigger Event and during the 90-day periods following such anniversaries, to
exercise the Put Option for up to 20% of the Put Securities then owned by the
Executive in the same manner, and on the same terms, as set forth above.
(c) Anything contained herein to the contrary notwithstanding,
(i) the Put Option of the Executive shall terminate and be of no further force
or effect simultaneously with the consummation by the Parent of the initial
public offering of shares of its capital stock (the "IPO") and (ii) in the event
of any inconsistency between the provisions of this Section 12 and the transfer
restrictions set forth in the Stockholders' Agreement (as hereinafter defined),
the provisions of this Section 12 shall govern.
SECTION 13. Right to Purchase Securities. (a) Upon the occurrence of
the Trigger Event, the Parent shall have the right and option (the "Call
Option"), during the 90-day period (the "Call Period") following the Put Period,
to purchase from the Executive up to 20% of the Class A Nonvoting Stock and/or
Options which are then vested and exercisable, in each case owned by the
Executive on the date of the commencement of the Call Period (collectively, the
"Call Securities"). The Call Option shall be exercisable by the Parent by notice
to the Executive during the Call Period, and upon receipt thereof, the Executive
shall be obligated to sell the Call Securities which are the subject of such
notice on the following basis:
(A) The price (the "Call Price") of the Call Securities
shall be equal to the Stipulated Call Price Per Share (as hereinafter
defined);
(B) The Call Price shall be payable in cash or, in the
event and to the extent that such payment is not permitted by any
covenants set forth in agreements with its lenders, and subject to the
prior written consent of the Executive, by delivery of a subordinated
promissory note of the Parent that (1) matures ratably on a quarterly
basis over a three year period; (2) is subordinated to all other current
or future indebtedness of the Parent; (3) bears interest, payable on a
quarterly basis, at a fluctuating annual rate equal to that rate announced
by NationsBank, N.A. from time to time as its prime rate; (4) shall be
secured with the Stock repurchased by delivery of such note; and (5) shall
otherwise contain such terms and provisions as may be required by the
Parent's lenders;
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(C) The Call Price shall be paid within 90 days of the
exercise by the Parent of the Call Option;
(D) The Call Option shall be utilized first, with
respect to shares of Class A Nonvoting Common Stock, and thereafter, with
respect to options to purchase such Class A Nonvoting Common Stock;
(E) The option agreement(s) relating to the Options
shall provide that, in addition to the rights of the Executive currently
set forth therein, the Executive may exercise the vested and exercisable
Options as of the Trigger Date at any time prior to the second anniversary
of the Trigger Date;
(F) "Parent EBITDA" shall mean EBITDA of the Parent, for
the last 12 months of operations immediately preceding the commencement of
the Put Period.
(G) "Stipulated Call Price Per Share" shall mean the
quotient obtained by dividing (1) five (5) times Parent EBITDA, LESS
consolidated indebtedness and the liquidation value of Preferred Stock of
the Parent and its subsidiaries, PLUS unrestricted consolidated cash and
cash equivalents of the Parent and its subsidiaries, LESS any prepayment
penalties and other adjustments necessary to determine the consolidated
equity value of the Parent and its subsidiaries by (2) the aggregate
number of shares of Class A Voting Common Stock, $.01 par value (the
"Class A Voting Stock"), outstanding or deemed outstanding as of the date
of calculation, after giving effect to all securities (including the Class
A Nonvoting Stock and Class B Nonvoting Common Stock, $.01 par value, of
the Parent) convertible into, or exchangeable or exercisable for, Class A
Voting Stock (regardless of whether such securities are at the time
convertible into, or exchangeable or exercisable for, such Class A Voting
Stock), as determined by the Board of Directors of the Parent from time to
time; and
(H) As it relates to Options, the Call Price shall be
the Stipulated Call Price Per Share, LESS the exercise price per share of
the Options which are the subject of the Put Option.
(b) The Parent shall have the additional right and option, on
each of the first, second, third and fourth anniversaries of the date of the
expiration of the applicable Put Period and during the 90-day periods following
such anniversaries, to exercise the Call Option for up to 20% of the Call
Securities then owned by the Executive in the same manner, and on the same
terms, as set forth above.
(c) Anything contained herein to the contrary notwithstanding,
(i) the Call Option of the Parent shall
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terminate and be of no further force or effect simultaneously with the
consummation by the Parent of the IPO and (ii) in the event of any inconsistency
between the provisions of this Section 13 and the provisions of the
Stockholders' Agreement dated as of December 31, 1996 (the "Stockholders'
Agreement") among the Parent, the Executive and the other signatories thereto,
the provisions of this Section 13 shall govern.
SECTION 14. Insurance. The Company may, for its own benefit,
maintain "key-man" life and disability insurance policies (collectively, the
"Insurance Policies") covering the Executive. The Executive will cooperate with
the Company and provide such information or other assistance as the Company may
reasonably request in connection with the Company's obtaining and maintaining
the Insurance Policies. Upon payment by the Executive of the applicable premiums
therefor, and upon completion of other customary and reasonable arrangements
with respect thereto, the Executive may name his estate or other beneficiary as
the named insured with respect to up to $2 million of life insurance coverage
under the Insurance Policies (which currently provide $7 million of life
insurance coverage). Upon the termination of the Executive's employment
hereunder, at the sole expense of the Executive, the Company shall cooperate
with the Executive to divide the life insurance policy included in the Insurance
Policies to provide for a separate $2 million life insurance policy for the
benefit of the Executive's estate or other beneficiary designated by the
Executive, provided the payment of all premiums for such $2 million policy shall
be the sole responsibility of the Executive (and not the Company or any of its
affiliates) and neither the Company nor any of its affiliates shall have any
obligation to pay any premiums, costs or expenses related to establishing or
maintaining, or arising as a result of, such separate $2 million life insurance
policy.
SECTION 15. Disclosure of Information. The Executive agrees that he
will not, at any time during the Employment Period or thereafter, disclose to
any person, firm, corporation or other business entity, except as required by
law, any non-public information concerning the business, clients or affairs of
the Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. For purposes of this Section 15, "non-public" information
shall not include any information that:
(i) is now, or hereafter becomes, through no act or failure to
act on the part of the Executive that constitutes a breach of this Section 15,
generally known or available to the public;
(ii) is known to the Executive at the time of the disclosure
of such information;
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(iii) is hereafter furnished to the Executive by a third
party, who, to the knowledge of such party, is not under any obligation of
confidentiality to the Company or any of its affiliates, without restriction on
disclosure;
(iv) is disclosed with the written approval of the party to
which such information or materials pertain;
(v) is required to be disclosed by law, court order, or
similar compulsion; provided, however, that such disclosure shall be limited to
the extent so required or compelled; and provided further, however, that if the
Executive is required to disclose such confidential information, he shall give
the Company notice of such disclosure and cooperate in seeking suitable
protections; or
(vi) is required to be provided pursuant to or in connection
with any legal proceeding involving the parties hereto.
SECTION 16. Right to Inventions. (a) The Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business actually conducted by the
Company, which he may develop or which may be acquired by the Executive during
the Employment Period (whether or not during normal working hours), together
with all trademarks, patent applications, letters patent, copyrights and
reissues thereof that may at any time be granted for or upon any such mark,
design, logo, invention, improvement or technical information.
In connection therewith:
(i) the Executive shall without charge, but at the
expense of the Company, promptly at all times hereafter execute and
deliver such applications, assignments, descriptions and other instruments
as may be necessary or proper in the opinion of the Company to vest title
to any such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its
expense (including a reasonable payment for the time involved in case he
is not then in its employ based on his last per diem earnings) all such
assistance as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in
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any litigation in which the Company may be involved relating to any such
trademarks, patents, inventions, improvements or technical information;
and
(iii) for the avoidance of doubt, it is hereby agreed
that the foregoing provisions shall be deemed to include an assignment of
future copyright in accordance with Section 37 of the Copyright Act of
1986 and any amendment or re-enactment thereof.
(b) Any provision of this Agreement requiring the Executive to
assign his rights in any invention shall not apply to an invention which
qualifies fully under the provisions of Section 2870 of the California Labor
Code. That Section provides that the requirement to assign "shall not apply to
any invention for which no equipment, supplies, facility or trade secret
information of the employer was used and which was developed entirely on the
employee's own time, and (a) which does not relate (i) to the business of the
employer or (ii) to the employer's actual or demonstrably anticipated research
or development, or (b) which does not result from any work performed by the
employee for the employer." The Executive understands that he bears the full
burden of proving to the Company that an invention qualifies fully under Section
2870. By signing this Agreement, the Executive acknowledges receipt of a copy of
this Agreement and of written notification of the provisions of Section 2870.
SECTION 17. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 18. Remedies. The Company and the Executive acknowledge and
understand that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be adequately compensated for in damages by an
action at law, and that the breach or threatened breach of the provisions of
this Agreement would cause the Company or the Executive irreparable harm. In the
event of a breach or threatened breach by the Company or the Executive of the
provisions of this Agreement, the Company or the Executive shall be entitled to
an injunction restraining such party from such breach. Nothing contained in this
Agreement shall be construed as prohibiting the Company or the Executive from or
limiting the Company or the Executive in pursuing any other remedies available
for any breach or threatened breach of this Agreement.
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SECTION 19. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to it at:
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
with a copy to:
First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Mr. James A. Long
Telecopier: (212) 750-0954
Telephone: (212) 750-0300; and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2467
Telephone: (212) 408-2400;
if to the Executive, to him at:
10750 Wilshire Boulevard, #806
Los Angeles, California 90024
Telecopier: (310) 470-3649
Telephone: (310) 474-7486;
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with a copy to:
Keith Sharp, Esq.
Falk & Sharp
660 South Figueroa Street, Suite 1600
Los Angeles, California 90017
Telecopier: (213) 622-4486
Telephone: (213) 622-6868
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and in the
case of mailing, on the third business day following that on which the piece of
mail containing such communication is posted.
SECTION 20. Binding Agreement; Benefit. Subject to Section 25
hereof, the provisions of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives, successors and
assigns of the parties.
SECTION 21. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of California
(without giving effect to principles of conflicts of laws).
SECTION 22. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement must be in writing and shall not operate or
be construed as a waiver of any other breach.
SECTION 23. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
with respect thereto, including, without limitation, the Original Employment
Agreement. This Agreement may be amended only by an agreement in writing signed
by the parties.
SECTION 24. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 25. Assignment. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates
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and the provisions of this Agreement shall inure to the benefit of, and be
binding upon, each successor of the Company, whether by merger, consolidation,
transfer of all or substantially all of its assets, or otherwise (no such
assignment shall relieve the Company from its obligations hereunder).
SECTION 26. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 27. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 28. Unlimited Guaranty. As a condition to the execution of
this Agreement and the performance by the Executive of its obligations
hereunder, Custom Food is delivering a guaranty to the Executive in the form of
Exhibit A simultaneously with the execution and delivery hereof.
SECTION 29. Attorney Fees. In connection with any action, suit or
proceeding arising under or in connection with this Agreement, the prevailing
party in such action, suit or proceeding shall be entitled to the reasonable
attorneys' fees incurred in connection with such action, suit or proceeding.
* * * *
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IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the date first written above.
CFP HOLDINGS, INC.
By:________________________________
Name:
Title:
___________________________________
RICHARD W. GRIFFITH
Agreed to as to Sections 12 and 13:
CFP GROUP, INC.
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT A
Unlimited Guaranty
In consideration of the management advice to be obtained by Custom
Food Products, Inc., a California corporation ("CFP"), pursuant to the
Employment Agreement dated as of December 31, 1996, (the "Employment
Agreement"), between Richard W. Griffith and CFP Holdings, Inc., a Delaware
corporation ("Holdings"), CFP hereby unconditionally guarantees the payment and
performance in full of all of the obligations of Holdings arising in connection
with the Employment Agreement.
IN WITNESS WHEREOF, CFP has caused this Unlimited Guaranty to be
duly executed as of this 31st day of December 1996.
CUSTOM FOOD PRODUCTS, INC.
By:________________________________
Name:
Title:
<PAGE>
Exhibit 10.7
MANAGEMENT CONSULTING AGREEMENT
dated as of December 31, 1996, between CFP
HOLDINGS, INC., a Delaware corporation (the
"Company"), and FIRST ATLANTIC CAPITAL,
LTD., a Delaware corporation (the
"Consultant").
The Company desires to avail itself of the Consultant's expertise
and consequently has requested the Consultant to provide such expertise, from
time to time, in rendering certain management consulting and advisory services
related to the business and affairs of the Company and its subsidiaries and the
review and analysis of certain financial and other transactions. The Consultant
and the Company agree that it is in their respective interests to enter into
this Agreement whereby, for the consideration specified herein, the Consultant
shall provide such services as an independent consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the Company and the Consultant agree as follows:
SECTION 1. Retention of the Consultant. The Company retains the
Consultant, and the Consultant accepts such retention, upon the terms and
conditions set forth in this Agreement.
SECTION 2. Term. This Agreement shall commence on the date hereof
and shall terminate on December 31, 2003 (the "Initial Term"). Upon the
termination of the Initial Term and each additional year thereafter, if any,
pursuant to this sentence, this Agreement shall automatically be subsequently
extended for an additional year unless notice to the contrary is given by either
party at least 30 but not more than 60 days prior to such termination (the
Initial Term and all extensions thereof are collectively referred to as the
"Term").
SECTION 3. Management Consulting Services. (a) The Consultant shall
advise the Company concerning such management matters as relate to proposed
financial transactions, acquisitions and other senior management matters related
to the Company's and its subsidiaries' business, administration and policies, in
each case as the Company shall reasonably and specifically request by way of
written notice to the Consultant, which notice shall specify the services
required of the Consultant and shall include all background material necessary
for the Consultant to complete such services. The Consultant shall not be
required to devote any specified amount of time to any such written request and
shall be required to devote only so much time to any such written request as the
Consultant shall, in its reasonable discretion, deem necessary to complete such
services. Such consulting services shall, in the Consultant's reasonable
discretion, be rendered in person or by telephone or
<PAGE>
other communication. The Consultant shall be free of domination or control by
the Company over the manner and time of rendering its services hereunder, and
the Company shall have no right to dictate or direct the details of the services
rendered hereunder. The Consultant shall (i) use its reasonable efforts to deal
effectively with all subjects submitted to it hereunder and (ii) endeavor to
further, by performance of its services hereunder, the policies and objectives
of the Company.
(b) The Consultant shall perform all such services as an
independent contractor to the Company. The Consultant is not an employee, agent
or representative of the Company and has no authority to act for or to bind the
Company without its prior written consent.
(c) This Agreement shall in no way prohibit the Consultant or
any partner or employee thereof from engaging in other activities, whether or
not competitive with any business of the Company.
SECTION 4. Compensation. (a) As consideration for the Consultant's
agreement to render the management consulting services set forth in Section 3 of
this Agreement and as compensation for any such services rendered by the
Consultant, the Company shall pay the Consultant an annual fee of $600,000 in
equal monthly installments in advance on the first day of each month (or, if
such date is not a business day in New York City, on the next business day in
New York City).
(b) The Company (or, at the Company's option, any subsidiary
or affiliate thereof) shall, upon presentation by the Consultant to the Company
of such appropriate documentation as may be required by the Company, reimburse
the Consultant for all reasonable and necessary expenses and other disbursements
incurred by any and all directors, officers, employees or agents of the
Consultant in the performance of its obligations hereunder.
(c) Nothing in this Agreement shall have the effect of
prohibiting the Consultant from receiving from the Company or its subsidiaries,
on a transaction-by-transaction basis, a fee for financial advisory and
consulting services rendered by the Consultant to the Company or its
subsidiaries in connection with future acquisitions or dispositions by the
Company or its subsidiaries.
SECTION 5. Indemnification. The Company shall indemnify and hold
harmless the Consultant and its directors, officers, employees, agents and
affiliates from and against any and all liabilities, costs, expenses and
disbursements (collectively, "Claims") of any kind with respect to or arising
from this Agreement or the performance by the Consultant of any services in
connection herewith. Notwithstanding the foregoing
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<PAGE>
provision, the Company shall not be liable for any Claim arising from the gross
negligence or willful misconduct of the Consultant.
SECTION 6. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed sufficient if
personally delivered, sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
if to the Consultant, to:
First Atlantic Capital, Ltd.
135 East 57th Street
29th Floor
New York, New York 10022
Attention: Mr. Keith Pennell
Telecopier: (212) 207-0316
Telephone: (212) 207-8842;
If to the Company:
CFP Holdings, Inc.
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 7. Benefits of Agreement. This Agreement shall bind and
inure to the benefit of any successors to or assigns of the Consultant and the
Company; provided, however, that this Agreement may not be assigned by either
party hereto without the prior written consent of the other party.
SECTION 8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
(without giving effect to principles of conflicts of laws).
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<PAGE>
SECTION 9. Headings. Section headings are used for convenience only
and shall in no way affect the construction of this Agreement.
SECTION 10. Entire Agreement; Amendments. This Agreement contains
the entire understanding of the parties with respect to its subject matter, and
neither it nor any part of it may in any way be altered, amended, extended,
waived, discharged or terminated except by a written agreement signed by each of
the parties hereto.
SECTION 11. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 12. Waivers. Any party to this Agreement may, by written
notice to the other party, waive any provision of this Agreement. The waiver by
any party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Management
Consulting Agreement as of the date first above written.
CFP HOLDINGS, INC.
By:________________________________
Name:
Title:
FIRST ATLANTIC CAPITAL, LTD.
By:________________________________
Name:
Title:
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<PAGE>
Exhibit 10.8
CFP HOLDINGS, INC.
1117 WEST OLYMPIC BOULEVARD
MONTEBELLO, CALIFORNIA 90640
March 1, 1996
First Atlantic Capital, Ltd.
135 East 57th Street
New York, New York 10022
Attention: Roberto Buaron
Investment Banking Services
Investment Banking Services
Gentlemen:
The purpose of this letter is to confirm the engagement of First
Atlantic Capital, Ltd. ("FACL"), to act as exclusive financial advisor to CFP
Holdings, Inc., and its subsidiary, Custom Food Products, Inc. (collectively,
the "Company"), in connection with the potential sale, transfer or other
disposition of the assets, securities, or businesses of the Company. You will
assist the Company in connection with a possible sale, in one or more
transactions, of all or substantially all of the Company's stock or assets or
any substantially similar transaction or arrangement (a "Sale").
With respect to any Sale, you will undertake certain services on our
behalf including, to the extent requested by the Company: (i) assisting in the
preparation of an offering memorandum describing the Company, its operations,
its historical performance and future prospects as is appropriate under the
circumstances; (ii) arranging for any potential acquirors to conduct business
investigations; and (iii) negotiating the financial aspects of any proposed
Sale.
In consideration of FACL's devotion of considerable time and
resources should any Sale of the Company be completed the Company shall pay FACL
a non-refundable fee in cash upon closing equal to 1% of the aggregate
consideration received for the Company, including the value of all debt
refinanced or assumed in connection with such Sale (the "Enterprise Value").
Irrespective of the completion of any Sale, the Company shall reimburse FACL for
all out-of-pocket costs and expenses reasonably incurred by FACL in connection
with its provision of services under this agreement.
No fee payable to any other financial advisor, by the Company or any
other party, in connection with the subject matter of this engagement, shall
reduce or otherwise affect any fee payable hereunder.
<PAGE>
The provisions of hereof shall inure to the benefit of and be
binding upon the successors and assigns of the Company. You will not assign this
agreement without our prior written consent.
This agreement shall be interpreted with the laws of the State of
New York.
If the foregoing correctly sets forth the understanding between us,
please so indicate on the enclosed signed copy of this letter in the space
provided therefor and return it to us, whereupon this letter shall constitute a
valid and binding agreement between us.
Very truly yours
CFP HOLDINGS, INC.
By:_____________________
Name:
Title:
AGREED TO AND ACCEPTED
as of the date first above written:
FIRST ATLANTIC CAPITAL, LTD.
By:__________________________
Name:
Title:
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<PAGE>
Exhibit 10.9
STOCKHOLDERS' AGREEMENT dated
as of December 31, 1996, among CFP
GROUP, INC., a Delaware corporation
(the "Corporation"), and the
STOCKHOLDERS of the Corporation
identified on Annex I (each, a
"Stockholder" and, collectively,
the "Stockholders").
Each Stockholder owns or has been granted the right or option to
acquire that number of shares of Stock (as hereinafter defined) set forth
opposite such Stockholder's name on Annex I hereto. It is deemed to be in the
best interest of the Corporation and the Stockholders that provision be made for
the continuity and stability of the business and policies of the Corporation,
and, to that end, the Corporation and the Stockholders hereby set forth their
agreement with respect to the shares of Stock owned by them.
NOW, THEREFORE, in consideration of the premises and of the mutual
consents and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Definitions. As used herein, the following terms shall
have the following respective meanings:
"AEP Stockholders" shall mean Atlantic Equity Partners, L.P., and
shall include any successor to, or assignee or transferee of, any AEP
Stockholder who shall agree in writing to be treated as an AEP Stockholder and
to be bound by the terms and to comply with the provisions of this Agreement.
"Affiliate" shall have the meaning ascribed to it in Rule 12(b)(2)
promulgated under the Securities Exchange Act of 1934, as amended.
"Cause" shall mean (A) as to any Management Investor who has entered
into an Employment Agreement with the Corporation or any of its Affiliates,
"cause" as defined therein or (B) in addition, as to all other Management
Investors, resignation or any of the following: (i) any deliberate or
intentional act or omission undertaken or omitted by such Management Investor
causing damage to the Corporation or any of its affiliates or any of their
respective properties, assets or business; (ii) any fraud, misappropriation or
embezzlement by such Management Investor involving properties, assets or funds
of the Corporation or any of its affiliates or a conviction of such Management
Investor, or pleading nolo contendere by such Management Investor, to any crime
or offense involving monies or other property of the Corporation or any of its
affiliates or any other felony offense for any crime of gross moral turpitude;
(iii) the
<PAGE>
violation by such Management Investor of the provisions of any employment,
non-competition or confidentiality agreement with the Corporation or any of its
affiliates; (iv) such Management Investor's material breach of any agreement to
which he is a party with the Corporation or any of its affiliates; (v) any
usurpation by such Management Investor of a corporate opportunity of the
Corporation or any of its affiliates; (vi) such Management Investor's failure or
refusal to perform any of his material duties, responsibilities or obligations
as an employee of the Corporation; provided, however, that any action or
omission by such Management Investor taken in good faith and in the reasonable
belief that such action or omission was in the best interests of the Corporation
shall not constitute "Cause"; and provided further, however, that such
Management Investor shall be entitled to cure any action or inaction that
unintentionally violates clause (iii) hereof or any violation of clause (iv)
hereof, in each case within thirty (30) days of his receipt of written notice
thereof from the Corporation.
"Class A Nonvoting Common Stock" shall mean the shares of Class A
nonvoting common stock, $.01 par value, of the Corporation.
"Class A Voting Common Stock" shall mean the shares of Class A
voting common stock, $.01 par value, of the Corporation.
"Class B Nonvoting Common Stock" shall mean the shares of Class B
nonvoting common stock, $.01 par value, of the Corporation.
"Cohen" shall mean David Cohen.
"Common Stock" shall mean (i) the shares of Class A Voting Common
Stock, (ii) the shares of Class A Nonvoting Common Stock and (iii) the shares of
Class B Nonvoting Common Stock.
"Control" shall have the meaning ascribed to it in Rule 12(b)(2)
promulgated under the Securities Exchange Act of 1934, amended.
"Event of Option" shall mean, with respect to an Investor, the
occurrence of one or more of the following events:
(a) such Investor shall be declared bankrupt or a receiver,
executor, administrator, guardian, legal committee or other legal
custodian of his or its property (including any Stock owned by such
Investor) shall be appointed; provided, however, that no appointment of
any executor or administrator of the property of an Investor who is an
individual, upon the death or disability of such Investor, shall be deemed
an Event of Option as to any Stock owned by such Investor until and unless
such executor or
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<PAGE>
administrator, or any successor thereof, shall have disposed of such Stock
other than by transferring it to a member or members of the Group of such
Investor, which member or members shall have agreed in writing, at the
time of such transfer, to be bound by and to comply with, to the same
extent as the Investor as a result of whose death such Stock was
distributed, all applicable provisions of this Agreement and to be a
member of such Investor's Group for all purposes under this Agreement; or
(b) a writ of attachment or levy shall prevent an Investor
from exercising his or its voting and other rights with respect to any
Stock, which writ or levy shall not be stayed or removed within 30 days
after such attachment.
An Event of Option shall be deemed to be continuing until the procedures set
forth in Section 5 with respect to the Stock affected thereby have been
exhausted.
"Fair Value Per Share" shall mean, as of any date of determination,
the fair value of each share of Stock, determined as provided herein, without
regard to any discount, including, without limitation, for the fact that such
share is nonvoting common stock, is held by a minority stockholder of the
Corporation, that there is no market for the Corporation's common stock or if
there were a public market for such common stock, such shares would be
"restricted" as defined under Rule 144 promulgated under the Securities Act of
1933. At any time that the Fair Value Per Share shall be required to be
determined hereunder, the Board of Directors of the Corporation (the "Board")
shall make a good faith determination (the "Board's Determination") of the fair
value of each share of Stock and provide to the Investor with respect to whose
Stock such determination is being made a written notice thereof, which notice
shall set forth supporting data in respect of such calculation (the
"Determination Notice"). The Investor shall have 30 days following his or its
receipt of the Determination Notice within which to deliver to the Corporation a
written notice (the "Objection Notice") of his or its objection, if any, to the
Board's Determination, which Objection Notice shall set forth the Investor's
good faith determination (the "Investor's Determination") of the fair value of
each share of Stock. The failure by the Investor to deliver the Objection Notice
within such 30-day period shall constitute the Investor's acceptance of the
Board's Determination as conclusive. In the event of the timely delivery of an
Objection Notice, the Corporation and the Investor shall attempt in good faith
to arrive at an agreement with respect to the Fair Value Per Share, which
agreement shall be set forth in writing within 30 days following delivery of the
Objection Notice. If the Corporation and the Investor are unable to reach an
agreement within such 30-day period, the matter shall
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<PAGE>
be referred for determination to a regionally or nationally recognized
investment banking or valuation firm (the "Valuer") reasonably acceptable to the
Corporation and the Investor. The Corporation and the Investor will cooperate
with each other in good faith to select such Valuer. The Valuer may select the
Board's Determination or the Investor's Determination as the Fair Value Per
Share or may select any other number or value. The Valuer's selection will be
(i) furnished to the Corporation and the Investor in writing and (ii) conclusive
and binding upon the Corporation and the Investor. The fees and expenses of the
Valuer shall be split equally by the Corporation and the Investor with respect
to whose Stock such determination relates.
"Gioia" shall mean Robert D. Gioia.
"Group" shall mean:
(a) in the case of any Stockholder who is an individual, (i)
such Stockholder, (ii) the siblings, spouse, lineal descendants, adopted
children, parents and grandparents of such Stockholder and (iii) any trust
for the benefit of any of the foregoing;
(b) in the case of any Stockholder which is a partnership, (i)
such partnership and any of its limited or general partners, (ii) any
corporation or other business organization to which such partnership shall
sell all or substantially all of its assets or with which it shall be
merged and (iii) in the case of any AEP Stockholders, any Affiliate of
such partnership; and
(c) in the case of any Stockholder which is a corporation, (i)
such Corporation and (ii) any stockholder controlling such corporation.
"Institutional Investor" shall mean and include any (i) federal or
state chartered bank or savings and loan institution or any subsidiary thereof
subject to Regulation Y promulgated by the Federal Reserve Board or which
qualifies as a Small Business Investment Company under applicable rules and
regulations, (ii) nationally recognized investment banking firm, (iii) insurance
company, (iv) public or private pension fund, (v) registered investment company
and (vi) foreign bank subject to the Bank Holding Company Act by virtue of the
International Banking Act.
"Investors" shall mean each of the signatories hereto identified
under the heading "Investors" on the signature pages hereof and any member of
the Group of such Investors who shall agree in writing to be treated as an
Investor and to be bound by the terms of and to comply with the provisions of
this Agreement.
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<PAGE>
"Majority in Interest of AEP Stockholders" shall mean, at any point
in time, AEP Stockholders owning, in the aggregate, more than 50% of the Stock
owned by all AEP Stockholders at such time.
"Management Investors" shall mean Richard W. Griffith, Eric W. Ek,
Gioia, Cohen, Larry K. Davis, Jerry Harger, John Stipa and Robert Capobianco.
"Option Agreements" shall mean the Stock Option Agreements between
each of the Management Investors and the Corporation relating to the granting of
options to purchase shares of Common Stock.
"Person" shall mean any individual, partnership, corporation, group,
trust or other legal entity.
"Proportionate Percentage" shall mean:
(a) for the purposes of Section 3, the pro rata percentage of
Stock being offered by a Selling Group pursuant to Section 3 that each AEP
Stockholder shall be entitled to purchase, which pro rata percentage, as
to each such AEP Stockholder, shall be the percentage figure which
expresses the ratio between the number of shares of Stock owned by such
AEP Stockholder and the aggregate number of shares of Stock owned by all
AEP Stockholders at the date of determination;
(b) for the purposes of Section 4.1, the pro rata percentage
of the number of shares of Stock to which a Section 4.1 Offer relates that
each Investor shall be entitled to Transfer to the Section 4.1 Offeror,
which pro rata percentage, as to each such Investor, shall be the
percentage figure which expresses the ratio between the number of shares
of Stock owned by such Investor and the aggregate number of shares of
Stock owned by all Investors and the Section 4.1 Offeree at the date of
determination; and
(c) for the purposes of Section 5, the pro rata percentage of
Stock subject to purchase pursuant to Section 5 that each AEP Stockholder
shall be entitled to purchase, which pro rata percentage, as to each such
AEP Stockholder, shall be the percentage figure which expresses the ratio
between the number of shares of Stock owned by such AEP Stockholder and
the aggregate number of shares of Stock owned by all AEP Stockholders at
the date of determination.
"Selling Group" shall mean an Investor or a member of the Group of
an Investor proposing to Transfer its Stock, or
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<PAGE>
which has delivered a notice of intention to Transfer, pursuant to Section 3
hereof.
"Stock" shall mean (a) the presently issued and outstanding shares
of capital stock of the Corporation and any options or stock subscription
warrants exercisable therefor (which options and warrants shall be deemed to be
that number of outstanding shares of Stock for which they are exercisable), (b)
any additional shares of capital stock of the Corporation hereafter issued and
outstanding and (c) any shares of capital stock of the Corporation into which
such shares may be converted or for which they may be exchanged or exercised.
"Stockholders" shall mean those persons identified on Annex I and
shall include any other person who agrees in writing with the parties hereto to
be bound by and to comply with all applicable provisions of this Agreement as an
Investor or an AEP Stockholder hereunder.
"Termination of Relationship" shall mean, (i) the termination of the
employment by the Corporation of any Management Investor for any reason
whatsoever, including, but not limited to, termination by resignation, discharge
(with or without cause), retirement, disability or non-renewal of an employment
agreement between the Corporation or any of its successors and such Management
Investor for any reason whatsoever, including a termination of employment
pursuant to the terms of any employment agreement between the Corporation or any
of its successors and such Management Investor; (ii) in addition, in the case of
Gioia, the failure of Gioia or his Group to own, beneficially, all of the issued
and outstanding capital stock of The RDG Food Corp.; and (iii) in addition, in
the case of Cohen, the failure of Cohen or his Group to own, beneficially, all
of the issued and outstanding capital stock of Amjor Holdings, Inc.
"Termination Date" shall mean, as to a Management Investor, the
effective date of the Termination of Relationship of such Management Investor.
"Transfer", as to any shares of Stock, shall mean to sell, or in any
other way transfer, assign, pledge, distribute, encumber or otherwise dispose of
(including, without limitation, the foreclosure or other acquisition by any
lender with respect to any shares pledged to such lender by an Investor or
member of the Group thereof), such shares, either voluntarily or involuntarily
and with or without consideration.
SECTION 2. Limitations on Transfers of Stock; General. (a) The
restrictions on Transfer described in this Agreement shall apply to all shares
of Stock now owned or hereafter acquired by an Investor, including shares of
Stock acquired by reason of any Stock dividend or other distribution, additional
issue of shares of Stock and acquisition of outstanding shares of
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<PAGE>
Stock from another Person and such restrictions shall apply to any shares of
Stock obtained by an Investor upon exercise of any warrant or option or
conversion of any convertible share of Stock.
(b) No Investor or any member of the Group of an Investor may,
at any time during the term of this Agreement, Transfer (other than pursuant to
Section 4) any Stock (i) if such Transfer would violate any loan document to
which the Corporation or any of its subsidiaries is then a party or give the
lender thereunder the right to accelerate such loan or (ii) to any Person
engaged in, or an Affiliate of any Person engaged in, a business that competes
in any manner with the business conducted by the Corporation and its
subsidiaries. In addition, an Investor and each member of the Group of an
Investor shall not, at any time during the term of this Agreement, Transfer any
Stock except (i) by a Transfer in accordance with the provisions of Sections 3
and 4 of this Agreement, (ii) by a Transfer to the Corporation or an AEP
Stockholder in accordance with the provisions of Sections 5 or 6 of this
Agreement or (iii) by transfer to another member of the Group of such Investor
if the recipient of such Stock shall agree in writing with the other
Stockholders to be bound by and comply with all applicable provisions of this
Agreement as if the recipient were an Investor. The restrictions on Transfer
described in this Agreement shall be binding upon each Investor and each Person
(other than an AEP Stockholder) to which an Investor shall Transfer Stock, it
being a condition to any such Transfer that such transferee agree in writing to
be bound by and to comply with the provisions of this Agreement. Any Transfer of
Stock by any Investor or any member of the Group of such Investor that shall not
be in compliance with the provisions of this Agreement shall be void ab initio.
SECTION 3. Right of First Offer. Except as otherwise provided in
Section 2 or in any Employment Agreement with the Corporation (or any of its
Affiliates) to which such Investor is a party, each Investor and each member of
the Group of each Investor (other than any Investor who was a party to the
Stockholders' Agreement dated as of March 31, 1993 among CFP Holdings, Inc. and
the other signatories thereto) hereby agrees that he or it shall not Transfer
any Stock prior to the third anniversary of the date hereof and thereafter shall
only Transfer Stock in accordance with the following procedures:
(a) The Selling Group shall first deliver to the Corporation
and each AEP Stockholder a written notice (the "Section 3 Offer Notice"),
which shall be irrevocable for a period of 45 days after delivery thereof
(the "Section 3 Offer Period"), offering (the "Section 3 Offer") all of
the Stock proposed to be Transferred by the Selling Group at the purchase
price and on the terms specified therein (such Notice of
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<PAGE>
Offer shall include the foregoing information and all other relevant terms
of the proposed Transfer). The Corporation (or its designee) shall have
the right and option, for a period of 15 days after delivery of the
Section 3 Offer Notice, to accept all or any part (subject to Section
3(f)) of the Stock so offered at the purchase price and on the terms
stated in the Section 3 Offer Notice. Such acceptance shall be made by
delivering a written notice to the Selling Group and the AEP Stockholders
within said 15-day period.
(b) If the Corporation (or its designee) shall fail to accept
all of the Stock offered for sale pursuant to, or shall reject in writing,
the Section 3 Offer (the Corporation being required to notify in writing
the Selling Group and the AEP Stockholders of its rejection or failure to
accept all of the Stock in such event), then, upon the earlier of the
expiration of such 15-day period or the receipt of such written notice of
rejection or failure to accept such offer by the Corporation, each AEP
Stockholder shall have the right and option, until the expiration of the
Section 3 Offer Period, (i) to accept all or any part of its Proportionate
Percentage of the Stock (subject to Section 3(f)) so offered and not
accepted by the Corporation (the "Refused Stock") at the purchase price
and on the terms stated in the Section 3 Offer Notice and (ii) to offer,
in any written notice of acceptance, to purchase any of such Refused Stock
not accepted by the other AEP Stockholders, in which case such Refused
Stock not accepted by the other AEP Stockholders shall be deemed to have
been offered to and accepted by the AEP Stockholders which exercised their
option under this clause (ii) pro rata in accordance with their respective
Proportionate Percentages (computed without including the AEP Stockholders
who have not exercised their option to purchase Stock under clause (ii) of
this subparagraph (b)), on the above-described terms and conditions. Such
acceptance shall be made by delivering a written notice to the Corporation
and the Selling Group prior to the expiration of the Section 3 Offer
Period.
(c) A notice of acceptance delivered by either the Corporation
or an AEP Stockholder pursuant to Section 3(a) or Section 3(b) shall be a
binding commitment to purchase the Stock referred to therein.
(d) Transfers of Stock under the terms of Sections 3(a) and
3(b) shall be made at the offices of the Corporation on a mutually
satisfactory business day within 30 days after the expiration of the
Section 3 Offer Period. Delivery of certificates or other
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<PAGE>
instruments evidencing such Stock duly endorsed for transfer shall be made
on such date against payment of the purchase price therefor.
(e) If effective acceptance shall not be received pursuant to
Sections 3(a) and 3(b) with respect to all Stock offered for Transfer
pursuant to the Section 3 Offer Notice, then the Selling Group may
Transfer all or any part of the Stock so offered and not so accepted at a
price not less than the price, and on terms not more favorable to the
purchaser thereof than the terms, stated in the Section 3 Offer Notice at
any time within 60 days after the expiration of the Section 3 Offer Period
to an Institutional Investor or to any other purchaser approved by a
Majority in Interest of the AEP Stockholders, such approval not to be
unreasonably withheld, conditioned or delayed. In the event that the Stock
is not Transferred by the Selling Group during such 60-day period, the
right of the Selling Group to Transfer such Stock shall expire and the
obligations of this Section 3 shall be reinstated.
(f) The Selling Group may specify in the Section 3 Offer
Notice that all or a minimum amount of Stock mentioned therein must be
Transferred, in which case any acceptance received pursuant to Sections
3(a) and 3(b) shall be deemed conditioned upon (i) receipt of written
notices of binding acceptance with respect to all or such stated amount of
Stock mentioned in such Section 3 Offer Notice and/or (ii) the Transfer of
the remaining Stock, if any, pursuant to Section 3(e).
(g) Anything contained herein to the contrary notwithstanding,
any purchaser of Stock pursuant to Section 3 who is not a Stockholder
shall agree in writing in advance with the parties hereto to be bound by
and comply with all applicable provisions of this Agreement and shall be
deemed to be an Investor for all purposes of this Agreement.
SECTION 4. Right of Co-Sale; Required Sale.
4.1. Right of Co-Sale; Consent to Transaction. (a) In the event that
any AEP Stockholder or any member of a Group of any AEP Stockholder
(hereinafter, the "Section 4.1 Offeree") receives a bona fide offer (the
"Section 4.1 Offer") from a third party that is not an Affiliate of such AEP
Stockholder (the "Section 4.1 Offeror") to purchase from such Section 4.1
Offeree that number of shares of Stock which, in any one transaction or in
several transactions during any 12-month period, constitutes in the aggregate
more than 50% of the total number of shares of Stock outstanding at such time,
for a specified price payable in
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<PAGE>
cash or otherwise and on specified terms and conditions, such Section 4.1
Offeree shall promptly forward a notice (the "Section 4.1 Notice") complying
with Section 4.1(b) to the Corporation, the Investors and the other AEP
Stockholders. The Section 4.1 Offeree shall not Transfer any Stock to the
Section 4.1 Offeror unless the terms of the Section 4.1 Offer are extended to
the Investors with respect to their Proportionate Percentage of the aggregate
number of shares of Stock to which the Section 4.1 Offer relates, whereupon each
such Investor shall be entitled to Transfer to the Section 4.1 Offeror pursuant
to the Section 4.1 Offer such Investor's Proportionate Percentage of the
aggregate number of shares of Stock to which the Section 4.1 Offer relates.
(b) The Section 4.1 Notice shall set forth (i) the number of
shares of Stock to which the Section 4.1 Offer relates and the name of the
Section 4.1 Offeree, (ii) the name and address of the Section 4.1 Offeror, (iii)
the proposed amount and type of consideration (including, if the consideration
consists in whole or in part of non-cash consideration, such information
available to the Section 4.1 Offeree as may be reasonably necessary for the
Investors to analyze properly the economic value and investment risk of such
non-cash consideration) and the terms and conditions of payment offered by the
Section 4.1 Offeror and (iv) that the Section 4.1 Offeror has been informed of
the co-sale rights provided for in this Section 4.1 and has agreed to purchase
Stock in accordance with the terms of this Section 4.1. Each Investor shall have
a period of 15 days to deliver a written notice (the "Section 4.1 Acceptance")
to the Section 4.1 Offeree evidencing such Investor's acceptance of the Section
4.1 Offer.
4.2. Required Sale. Anything contained herein to the contrary
notwithstanding, if at any time a Majority in Interest of AEP Stockholders shall
approve (i) a proposal from a Person that is not an Affiliate of any AEP
Stockholder (the "Buyer") for the Transfer, directly or indirectly, of all of
the Stock of the Corporation to the Buyer, (ii) the merger or consolidation of
the Corporation with or into another Person that is not an Affiliate of an AEP
Stockholder in which the Stockholders will receive cash or securities of any
other Person for their shares or (iii) the sale by the Corporation or its
subsidiaries of all or substantially all of their assets to a Person which is
not an Affiliate of an AEP Stockholder, in each of the above cases for a
specified price payable in cash or otherwise and on specified terms and
conditions (a "Sale Proposal"), then such AEP Stockholders (or their designated
representative) may deliver a notice (a "Required Sale Notice") with respect to
such Sale Proposal to each other Stockholder (as well as each other holder of
any shares of Stock) stating that a Majority in Interest of AEP Stockholders
have approved or propose to effect the Sale Proposal and providing the identity
of Persons involved in such Sale Proposal and the terms thereof. Each such
Stockholder and the members of the Group thereof, upon receipt of a Required
Sale
-10-
<PAGE>
Notice, shall be obligated, which obligation shall be enforceable by the
Majority in Interest of AEP Stockholders (or their designee), to either sell
their Stock and participate in the transaction (a "Required Sale") contemplated
by the Sale Proposal or vote their shares of Stock in favor of such Sale
Proposal at any meeting of Stockholders called to vote on or approve such Sale
Proposal, and to otherwise take all necessary action to cause the Corporation
and the Stockholders to consummate such Required Sale, in each case for a
purchase price per share of Common Stock and on other terms and conditions not
less favorable to such Stockholders than shall apply in such Required Sale to
any AEP Stockholder or any member of the Group of any AEP Stockholder. Any such
Required Sale Notice may be rescinded by such AEP Stockholders by delivering
written notice thereof to all of the Stockholders.
SECTION 5. Event of Option. (a) If an Event of Option shall occur as
to any Investor, such Investor shall promptly notify the Corporation of such
occurrence. In the event the Corporation shall receive any such notice or become
aware of the occurrence of any Event of Option, the Corporation shall promptly
notify each AEP Stockholder of the occurrence of any Event of Option. The
Corporation and each AEP Stockholder shall have the right and option to give
such Investor, or his or its representatives or assigns, as the case may be,
notice of his or its election to have the Fair Value Per Share determined with
respect to all of the Stock held by such Investor. The Corporation shall cause
such determination of the Fair Value Per Share to be made as soon as is
practicable and shall promptly notify each AEP Stockholder electing to have the
Fair Value Per Share determined of such Fair Value Per Share (and the
Corporation shall forward to each such AEP Stockholder supporting documentation
showing the calculation of such Fair Value Per Share). Upon the determination of
such Fair Value Per Share (i) first, the Corporation and (ii) second, each AEP
Stockholder shall have the right and option to purchase from the Investor as to
which such Event of Option has occurred, or his or its representatives or
assigns, as the case may be, for cash, at the Fair Value Per Share, all Stock
owned by the Investor as to which an Event of Option has occurred. Each AEP
Stockholder shall have the right hereunder to purchase his or its Proportionate
Percentage of the Stock held by the Investor as to which such Event of Option
has occurred which Stock has not been accepted for purchase by the Corporation.
The Corporation shall exercise its option hereunder by delivering a written
notice to the Investor as to which an Event of Option has occurred during the
30-day period following the determination of the Fair Value Per Share evidencing
its election to purchase Stock hereunder and indicating the number of shares of
Stock it elects to purchase. A copy of such notice shall be delivered to each
AEP Stockholder. If the Corporation elects not to purchase all Stock available
for purchase hereunder, each AEP Stockholder may then exercise its right to
purchase its Proportionate Percentage of any remaining
-11-
<PAGE>
Stock by delivering to the Corporation, within 30 days of its receipt of the
Corporation's notice, a written notice of its election to purchase Stock
hereunder (each such notice, a "Section 5 Notice"), whereupon the Corporation
shall forthwith transmit such Section 5 Notice to the Investor as to which such
Event of Option has occurred, its representatives or assigns, as the case may
be, but failure of the Corporation so to transmit any such Section 5 Notice
shall in no way invalidate such Section 5 Notice. In addition, the AEP
Stockholders delivering such Section 5 Notice shall have the further right and
option to purchase (the intention to exercise such option to be included in such
Section 5 Notice) all or part of such Stock not purchased by the other AEP
Stockholders, in which case such Stock not accepted by the other AEP
Stockholders shall be deemed to have been offered to and accepted by the AEP
Stockholders which exercised their Proportionate Percentages (but calculated
without including the AEP Stockholders who have not exercised their right to
purchase more than their Proportionate Percentage of such Stock), and on the
above-described terms and conditions.
(b) Sales of Stock effected under the terms of Section 5(a)
shall be made at the offices of the Corporation on a mutually acceptable
business day within 30 days after the expiration of the last applicable period
referred to in Section 5(a). Delivery of certificates or other instruments
evidencing such Stock duly endorsed for transfer shall be made on such date
against payment of the purchase price therefor.
SECTION 6. Right to Repurchase Stock. (a) In the event of a
Termination of Relationship of a Management Investor, the Corporation or its
designee shall have the right (but not the obligation, except as may be provided
in any Employment Agreement between such Management Investor and the Corporation
or any of its Affiliates) to repurchase from such Management Investor (or The
RDG Food Corp., in the case of Gioia, and Amjor Holdings, Inc., in the case of
Cohen) and the members of the Group thereof, all or any part of any Stock owned
by them. For purposes of this Section 6, any Management Investor (or, in the
case of Gioia and Cohen, The RDG Food Corp. and Amjor Holdings, Inc., as the
case may be) to whom a Termination of Relationship applies is referred to as the
"Terminated Investor".
(b) The repurchase right of the Corporation or its designee
under this Section 6 may be exercised by written notice (a "Repurchase Notice"),
specifying the number of shares of Stock to be repurchased, and given to the
Terminated Investor within 90 days of the Termination Date (except in the case
of a Termination of Relationship due to resignation or, in the case of a
Management Investor who has entered into an Employment Agreement with the
Corporation, a "Voluntary Termination" as defined therein, in which case such
Repurchase Notice shall be given within 18 months of the Termination Date) or,
in the event the Repurchase Notice states an intention to purchase options to
-12-
<PAGE>
purchase Common Stock, within 90 days (or 18 months, as applicable) of the date
upon which the Terminated Investor either exercises or fails to exercise such
options pursuant to the terms of the Option Agreement to which the Terminated
Investor is a party (or, if the Corporation shall not have assigned its rights
under this Section 6 and shall be legally prevented from making such repurchase
during such 90-day (or 18-month, as applicable) period, then such Repurchase
Notice may be delivered by the Corporation within 90 days (or 18 months, as
applicable) after the date on which it shall be legally permitted to make such
repurchase). Upon the delivery of a Repurchase Notice to the Terminated
Investor, the Terminated Investor shall be obligated to sell or cause to be sold
to the Corporation or its designee the Stock specified in such Repurchase
Notice.
(c) The price per share of Stock to be paid under this Section
6 and the form of payment shall be determined as follows:
(i) if the Termination of Relationship arose out of a
termination for Cause, then, the repurchase price to be paid per share of
Stock shall be the lesser of (A) the price paid by such Terminated
Investor for the Stock repurchased and (B) Fair Value Per Share (net of
the exercise price, in the case of Stock consisting of options that have
vested and are exercisable in accordance with the terms of the option
agreement pursuant to which such options were granted);
(ii) if the Termination of Relationship occurred for any
reason other than as set forth in (i) above, then, the repurchase price to
be paid per share of Stock shall be the greater of (A) the price paid by
such Terminated Investor for the Stock repurchased and (B) Fair Value Per
Share as of the Termination Date (net of the exercise price, in the case
of Stock consisting of options that have vested in accordance with the
terms of the option agreement pursuant to which such options were
granted); and
(iii) the repurchase price to be paid under this Section 6
shall be paid by delivery of a subordinated promissory note in the form
attached hereto as Exhibit A, which note (x) shall have a three year term,
with 10% of the principal being paid on the first and second anniversaries
of the date thereof and the balance being paid on the third anniversary,
(y) shall bear interest at a fluctuating rate per annum announced by
NationsBank, N.A. from time to time as its prime rate and (z) shall
otherwise contain such terms and provisions as may be required by the
Corporation's lenders.
-13-
<PAGE>
To the extent that any provision in this Section 6(c) is not consistent with the
terms and conditions of the put rights contained in a Management Investor's
Employment Agreement, the terms of this Section 6(c) shall be deemed modified to
conform to the terms and conditions of the put rights set forth in such
Employment Agreement to the extent such terms are more favorable to the
Management Investor than those contained herein.
(d) Repurchases of Stock under the terms of this Section 6
shall be made at the offices of the Corporation or its designee on a mutually
satisfactory business day within 30 days after the final determination of the
repurchase price as described above. Delivery of certificates or other
instruments evidencing such Stock duly endorsed for transfer and free and clear
of all liens, claims and other encumbrances (other than those encumbrances
hereunder) shall be made on such date against payment of the purchase price
therefor or delivery of the promissory note, as the case may be.
(e) Anything contained herein to the contrary notwithstanding,
the repurchase right of the Corporation set forth in this Section 6 shall
terminate and be of no further force or effect simultaneously with the
consummation by the Corporation of the initial public offering of shares of its
capital stock.
SECTION 7. Election of Directors. (a) At each annual meeting of the
Stockholders, and at each special meeting of the Stockholders called for the
purpose of electing directors of the Corporation, and at any time at which the
Stockholders shall have the right to, or shall, vote for or consent in writing
to the election of directors of the Corporation, then, and in each event, the
Stockholders shall vote all shares of Stock owned by them (to the extent the
holder of such shares is entitled to vote thereon) for the election of a Board
consisting of at least nine directors, designated in the following manner:
(i) one director shall be Griffith, for so long as he shall be an
employee of the Corporation and he shall own Stock;
(ii) one director shall be Eric W. Ek, for so long as he shall be an
employee of the Corporation and he shall own Stock;
(iii) one director shall be Gioia, for so long as he shall be an
employee of the Corporation and he shall own Stock (either directly or
through The RDG Food Corp.);
(iv) one director shall be Cohen, for so long as he shall be an
employee of the Corporation and he shall own Stock (either directly or
through Amjor Holdings, Inc.); and
-14-
<PAGE>
(v) the remaining directors shall be designated by a Majority in
Interest of AEP Stockholders.
(b) The Corporation and the Stockholders shall use its and
their best efforts (including any action required to amend the Certificate of
Incorporation or By-laws of the Corporation) to cause the size of the Board to
consist of nine directors (or such other number as a Majority in Interest of AEP
Stockholders shall determine) and to provide that, notwithstanding any
vacancies, any corporate action taken by the Board of the Corporation must be
approved by at least five directors (or such larger number as shall constitute a
majority of the Board).
SECTION 8. Legend on Stock Certificates. Each
certificate representing shares of Stock shall bear a legend
containing the following words:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF THE HOLDER OF SUCH
SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER __,
1996, AMONG CFP GROUP, INC. AND CERTAIN HOLDERS OF THE OUTSTANDING CAPITAL
STOCK OF SUCH CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF CFP GROUP, INC."
SECTION 9. Additional Shares of Stock; Etc. In the event additional
shares of Stock are issued by the Corporation to a Stockholder at any time
during the term of this Agreement, either directly or upon the exercise or
exchange of securities of the Corporation exercisable for or exchangeable into
shares of Stock, such additional shares of Stock shall, as a condition to such
issuance, become subject to the terms and provisions of this Agreement.
SECTION 10. Duration of Agreement; Compliance. The rights and
obligations of each Stockholder under this Agreement shall terminate as to such
Stockholder upon the earliest to occur of (a) the Transfer of all Stock owned by
such Stockholder, (b) the twentieth anniversary of the date hereof, (c) a sale
of all or substantially all of the stock of the Company in a single transaction
or (d) the Company's consummation of an initial public offering of its Common
Stock which results in net proceeds to the Company of at least $100,000,000.
Each of the Stockholders agrees to take such actions as shall be reasonably
necessary to carry out the terms of this Agreement.
-15-
<PAGE>
SECTION 11. Severability; Governing Law. If any provision of this
Agreement shall be determined to be illegal and unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in accordance
with their terms. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York (without regard to
principles of conflicts of laws), except to the extent that this Agreement
relates to the internal laws of the Corporation, which shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
SECTION 12. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties and their respective successors and assigns,
transferees, legal representatives and heirs.
SECTION 13. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or by telecopy or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by such party to the other parties:
(a) if to the Corporation, to:
CFP Group, Inc.
1117 West Olympic Boulevard
Montebello, California 90640
Attention: President
Telecopier: (213) 727-0412
Telephone: (213) 727-0900;
with copies to:
First Atlantic Capital, Ltd.
135 East 57th Street
29th Floor
New York, New York 10022
Attention: James A. Long
Telecopier: (212) 750-0954
Telephone: (212) 750-0300;
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
41st Floor
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2420
Telephone: (212) 408-2400;
-16-
<PAGE>
(b) if to the AEP Stockholders, to:
Atlantic Equity Partners, L.P.
P.O. Box 847
Elizabethan Square, 4th Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: Mr. Rick T. Gorter
Telecopier: (809) 949-0881
Telephone: (809) 949-0880; and
(c) if to the Investors, to their respective
addresses set forth on Annex I hereto.
All such notices, requests, consents and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (ii) in the case of dispatch
by nationally-recognized overnight courier, on the next business day following
such dispatch and (iii) in the case of mailing, on the third business day after
the posting thereof.
SECTION 14. Modification. Except as otherwise provided herein,
neither this Agreement nor any provisions hereof can be modified, changed,
discharged or terminated except by an instrument in writing signed by (i) the
Corporation, (ii) the holders of at least 75% of the Stock then held by the
Investors and (iii) AEP Stockholders holding at least 75% of the Stock then held
by all AEP Stockholders; provided, however, that no modification or amendment
shall be effective to reduce the percentage of the shares of Stock the consent
of the holders of which is required under this Section 14 nor shall any
modification or amendment discriminate against any Stockholder or impair,
diminish or adversely affect the rights of such Stockholder (unless the rights
of all Stockholders are similarly impaired, diminished or adversely affected)
without the consent of such Stockholder.
SECTION 15. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
SECTION 16. Entire Agreement. This Agreement, the Subscription
Agreement and the other writings referred to herein or therein contain the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings with respect
thereto.
SECTION 17. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
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<PAGE>
SECTION 18. Distributions. The Stockholders acknowledge that under
ARTICLE FOUR, Section B.2 of the Corporation's Amended and Restated Certificate
of Incorporation ("Certificate") the outstanding shares of the Class B Nonvoting
Common Stock have no right to participate in the Class A Dividend Amount, as
defined in the Certificate. The parties agree that the Class A Dividend Amount
shall not be paid in stock or other securities of a direct or indirect
subsidiary of the Corporation unless such distribution is approved by the
affirmative vote of holders representing at least 75% of the outstanding shares
of the Class B Nonvoting Common Stock as of the date of this Agreement, voting
as a class. Nothing in this Section 18 is intended to limit the power of the
Corporation, or impose any requirement of additional shareholder approval, in
connection with the sale or other disposition of any direct or indirect
subsidiary.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement on the date first above written.
CFP GROUP, INC.
By:______________________________
Name:
Title:
ATLANTIC EQUITY PARTNERS, L.P.
By: Atlantic Equity Associates, L.P.,
its General Partner
By: Buaron Capital Corporation,
Managing General Partner
By:______________________________
Name: Roberto Buaron
Title: President
INVESTORS:
CFP ASSOCIATES
By:______________________________
Name:
Title:
NATIONSCREDIT COMMERCIAL
CORPORATION
By:______________________________
Name:
Title:
THE RDG FOOD CORP.
By:______________________________
Name:
Title:
<PAGE>
AMJOR HOLDINGS, INC.
By:______________________________
Name:
Title:
___________________________________
RICHARD W. GRIFFITH
___________________________________
ANDREW BOYD-JONES
___________________________________
RONALD E. AINSWORTH
___________________________________
CONNIE C. GRIFFITH
R. W. GRIFFITH PROFIT SHARING TRUST
By:______________________________
Name:
Title:
___________________________________
ERIC W. EK
___________________________________
LARRY DAVIS
___________________________________
JERRY HARGER
<PAGE>
___________________________________
JOHN STIPA
___________________________________
ROBERT CAPOBIANCO
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
Shares of Class A
Class A Voting Shares of Nonvoting Nonvoting
Stockholders Common Stock Common Stock Options
- - - ------------ ------------ ------------ -------
Class A Class B
-------------------
<S> <C> <C> <C> <C>
Atlantic Equity Partners, L.P. 14,705
P.O. Box 847
Elizabethan Square
4th Floor
Grand Cayman, Cayman Islands
British West Indies
Telecopier: (809) 949-0881
Attention: Rick T. Gorter
CFP Associates 589
c/o W.P. Carey & Co.
50 Rockefeller Plaza
New York, New York 10020
Telecopier: (212) 977-3022
NationsCredit Commercial Corporation 3,949
One Canterbury Green Street
Stamford, CT 06912
Telecopier: (203) 352-4170
The RDG Food Corp. 1,081
369 Franklin Street
Buffalo, NY 14202
Amjor Holdings, Inc. 1,081
8 Bryn Mawr Court
Sicklerville, NJ 08081
with a copy to:
John F. Dougherty, Esq.
Stradley Ronon Stevens
& Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Richard W. Griffith 645 3,445
The Westford
10750 Wilshire Boulevard, #806
Los Angeles, California 90024
Telecopier: (310) 474-7486
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares of Class A
Class A Voting Shares of Nonvoting Nonvoting
Stockholders Common Stock Common Stock Options
- - - ------------ ------------ ------------ -------
Class A Class B
-------------------
<S> <C> <C> <C> <C>
Connie C. Griffith 150
c/o Richard W. Griffith
The Westford
10750 Wilshire Boulevard, #806
Los Angeles, California 90024
Telecopier: (310) 474-7486
R. W. Griffith Profit Sharing Trust 70
c/o Richard W. Griffith
The Westford
10750 Wilshire Boulevard, #806
Los Angeles, California 90024
Telecopier: (310) 474-7486
Eric W. Ek 131 1,379
c/o CFP Holdings, Inc.
1117 West Olympic Boulevard
P.O. Box 1027
Montebello, CA 90640
Telecopier: (213) 727-0412
Larry Davis 288
c/o QF Acquisition Corp.
5501 Tabor Road
Philadelphia, PA 19120
Telecopier: (215) 288-5804
Jerry Harger 168
c/o QF Acquisition Corp.
5501 Tabor Road
Philadelphia, PA 19120
Telecopier: (215) 288-5804
John Stipa 86
c/o QF Acquisition Corp.
5501 Tabor Road
Philadelphia, PA 19120
Telecopier: (215) 288-5804
Robert Capobianco 178
c/o QF Acquisition Corp.
5501 Tabor Road
Philadelphia, PA 19120
Telecopier: (215) 288-5804
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares of Class A
Class A Voting Shares of Nonvoting Nonvoting
Stockholders Common Stock Common Stock Options
- - - ------------ ------------ ------------ -------
Class A Class B
-------------------
<S> <C> <C> <C> <C>
Andrew Boyd-Jones 433
c/o The Trenwith Group
450 Newport Center Drive
Suite 550
Newport Beach, California 92660
Telecopier: (714) 729-1513
Ronald E. Ainsworth 432
c/o The Trenwith Group
450 Newport Center Drive
Suite 550
Newport Beach, California 92660
Telecopier: (714) 729-1513
</TABLE>
<PAGE>
Exhibit 10.10
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
Standard Industrial Lease
1. Parties. This Lease dated for reference purposes only April 27, 1981, is made
by and between PHILIP E. BAUER PROPERTIES (herein called "Lessor") and BEST
WESTERN FOODS, INC. (herein called Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of Los Angeles State of California,
commonly known as 2929 East 44th Street, Vernon (Los Angeles), California 90058,
and described as a meat processing and fabricating plant. Said real property
including the land and all improvements thereon, is called "the Premises".
3. Term.
3.1 Term. The term of this Lease shall be for thirty-six (36) months
commencing on May 1, 1981 and ending on April 30, 1984 unless sooner terminated
pursuant to any provision hereof.
3.2 Delay in Commencement. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee hereunder
or extend the term hereof, but in such case Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder. If
Lessee occupies the Premises prior to said commencement date, such occupancy
shall be subject to all provisions hereof, such occupancy shall not advance the
termination date, and Lessee shall pay rent for such period at the initial
monthly rates set forth below.
4. Rent; Net Lease.
4.1 Rent. Lessee shall pay to Lessor as rent of the Premises Five Hundred
Fifty-Eight Thousand ($558,000.00), payable in equal monthly installments of
$15,500.00, in advance, on the first day of each month of the term hereof.
Lessee shall pay Lessor upon the execution hereof $31,00.00 as rent for the
first and last month's rental hereunder. Rent for any period during the term
hereof which is for less than one month shall be a pro rata portion of the
monthly installment. Rent shall be payable in lawful money of the United States
to Lessor at the address stated herein or to such other persons or at such other
places as Lessor may designate in writing.
4.2 Additional Rent. This Lease is what is commonly called a "net lease",
it being understood that Lessor shall receive the rent set forth in Paragraph
4.1 free and clear of any and all other impositions, taxes, liens, charges or
expenses of any nature whatsoever in connection with the ownership and operation
of the Premises. In addition to the rent reserved by Paragraph 4.1, Lessee shall
pay to the parties respectively entitled thereto all impositions, insurance
premiums, operating charges, maintenance charges, construction costs, and any
other charges, costs and expenses which arise or may be contemplated under any
provisions of this Lease during the term hereof. All of such charges, costs and
expenses shall constitute additional rent, and upon the failure of Lessee to pay
any of such costs, charges or expenses, Lessor shall have the same rights and
remedies as otherwise provided in this Lease for the failure of Lessee to pay
rent. It is the intention of the parties hereto that this Lease shall not be
terminable for any reason by the Lessee, and that Lessee shall in no event be
entitled to any abatement of or reduction in rent payable hereunder, except as
herein expressly provided. any present or future law to the contrary shall not
alter this agreement of the parties.
5. Security Deposit. Lessee shall Deposit with Lessor upon execution hereof $
None as security for Lessee's faithful performance of Lessee's obligation
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which the Lesser may become obligated by reason of Lessee's default, or
to compensate Lessor for any loss or damage which Lesser may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee's failure to do so shall be a material breach of this Lease.
Lessor shall not be required to keep said deposit separate from its general
accounts. If Lessee performs all of Lessee's obligations hereunder, said
deposit, or so much thereof as has not theretofore been applied by Lessor, shall
be returned, without payment of interest or other increment for its use, to
Lessee (or, at Lessor's option, to the last asignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated Premises.
6. Use.
6.1 Use. The Premises shall be used and occupied only for processing beef.
6.2 Compliance with Law. Lessee shall, at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by Lessee of the Premises. Lessee shall not use or permit the
use of the Premises in any manner that will tend to create waste or a nuisance
or, if there shall be more than one tenant of the building containing the
Premises, which shall tend to disturb such other tenants.
6.3 Condition of Premises. Lessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the suitability of the Premises for the conduct
of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessee's Obligations. Lessee shall during the term of this Lease keep
in good order, condition and repair, the Premises and every part thereof,
structural or non-structural, and all adjacent sidewalks, landscaping,
driveways, parking lots, fences and signs located in the areas which are
adjacent to and included with the Premises. Lessor shall incur no expense nor
have any obligation of any kind whatsoever in connection with maintenance of the
Premises, and Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.
7.2 Surrender. On the last day of the term hereof or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, broom clean, ordinary wear and tear excepted. Lessee shall
repair any damage to the Premises occasioned by the removal of Lessee's trade
fixtures, furnishings and equipment pursuant to Paragraph 7.4(c), which repair
shall include the patching and filling of holes and repair of structural damage.
7.3 Lessor's rights. If Lessee fails to perform Lessee's obligations under
this Paragraph 7, Lessor may at its option (but shall not be required to) enter
upon the Premises, after ten (10) days' prior written notice to Lessee, and put
the same in good order, condition and repair, and the cost thereof together with
interest thereon at the rate of 10% per annum shall become due and payable as
additional rental to Lessor together with Lessee's next rental installment.
<PAGE>
7.4 Alteration and Additions.
(a) Lessee shall not, without Lessor's prior written consent, make
any alterations, improvements, additions or utility installations in, on or
about the Premises, except for non-structural alterations not exceeding $1,000
in costs. As used in this Paragraph 7.4, the term "utility installations " shall
include bus ducting, power panels, fluorescent fixtures, space heaters, conduits
and wiring. As a condition to giving such consent, Lessor may require that
Lessee agree to remove any such alterations, improvements, additions or utility
installations at the expiration of the term, and to restore the Premises to
their prior condition. As a further condition to giving such consent, Lessor may
require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such improvements, to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
(b) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialsmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.
(c) Unless Lessor requires their removal, as set forth in Paragraph
7.4(a), all alterations, improvements, additions and utility installations
(whether or not such utility installations constitute trade fixtures of Lessee),
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this paragraph 7.4(c), Lessee's machinery and
equipment, other than that which is affixed to the premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2.
8. Insurance; Indemnity.
8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the insurance required
hereunder. The insuring party in this case shall be designated in paragraph
16.21. Whether the insuring party is the Lessor or the Lessee, Lessee shall, as
additional rent for the Premises, pay the cost of all insurance required
hereunder. If Lessor is the insuring party Lessee shall, within ten (10) days
following demand by Lessor, reimburse Lessor for the cost of the insurance so
obtained.
8.2 Liability Insurance. The insuring party shall obtain and keep in force
the term of this Lease a policy of comprehensive public liability insurance
insuring Lessor and Lessee against any liability arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be in an amount of not less than $300,000 for injury to or
death of one person in any one accident or occurrence and in an amount of not
less than $600,000 for injury to or death of more than one person in any one
accident or occurrence. Such insurance shall further insure Lessor and Lessee
against liability for property damage of at least $50,000. The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. In the
event that the Premises constitute a part of a larger property said insurance
shall have a Lessor's Protective Liability endorsement attached thereto. If the
insuring party shall fail to procure and maintain said insurance the other party
may, but shall not be required to, procure and maintain the same, but at the
expense of Lessee.
8.3 Property Insurance. The insuring party shall obtain and keep in force
during the term of this lease a policy or policies of insurance covering loss or
damage to the Premises, in the amount of the full replacement value thereof,
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, special extended perils
(all risk) and sprinkler leakage. Said insurance shall provide for payment for
loss thereunder to Lessor or to the holder of a first mortgage or deed of trust
on the Premises. If the insuring party shall fail to procure and maintain said
insurance the other party may, but shall not be required to, procure and
maintain the same, but at the expense of Lessee.
8.4 Insurance Policies. Insurance required hereunder shall be in companies
rated AAA or better in "Best's Insurance Guide". The insuring party shall
deliver to the other party copies of policies of such insurance or certificates
evidencing the existence and amounts of such insurance with loss payable clauses
satisfactory to Lessor. No such policy shall be cancellable or subject to
reduction of coverage or other modification except after 10 days prior written
notice to Lessor. If Lessee is the insuring party, Lessee shall, within 10 days
prior to the expiration of such policies, furnish Lessor with renewals or
"binders" thereof, or Lessor may order such insurance and charge the cost
thereof to Lessee, which amount shall be payable by Lessee upon demand. Lessee
shall not do or permit to be done anything which shall invalidate the insurance
policies referred to in Paragraph 8.3. If Lessee does or permits to be done
anything which shall increase the cost of the insurance policies referred to in
Paragraph 8.3, then Lessee shall forthwith upon Lessor's demand reimburse Lessor
for any additional premiums attributable to any act of omission or operation of
Lessee causing such increase in the cost of insurance. If Lessor is the insuring
party, and if the insurance policies maintained hereunder cover other
improvements in addition to the Premises, Lessor shall deliver to Lessee a
written statement setting forth the amount of any such insurance cost increase
and showing in reasonable detail the manner in which it has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby waive any and all
rights of recovery against the other, or against the officers, employees, agents
and representatives of the other, for loss of or damage to such waiving party or
its property or the property of others under its control to the extent that such
loss or damage is insured against under any insurance policy in force at the
time of such loss or damage. The insuring party shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in the
Lease.
8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from breach or default in the performance of any obligation on Lessee's
part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any Lessee's agents, contractors, or employees, and
from and against all costs, attorney's fees, expenses and liabilities incurred
in the defense of any such claim or any action or proceeding brought thereon;
and in case any action or proceeding be brought against Lessor by reason of any
such claim, Lessee upon notice from Lessor shall defend the same at Lessee's
expense by counsel satisfactory to Lessor. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property or injury
to persons, in, upon or about the Premises arising from any cause and Lessee
hereby waives all claims in respect thereof against Lessor.
8.7 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefor or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invites, customers, or any other person in or about
the Premises nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said damage or injury results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located.
9. Damage or Destruction; Obligation to Rebuild. In the event the improvements
on the Premises are damaged or destroyed, partially or totally, from any cause
whatsoever, whether or not such damage or destruction is covered by any
insurance required to be maintained under Paragraph 8, then Lessee shall repair,
restore, and rebuild the Premises to their condition existing immediately prior
to such damage or destruction and this Lease shall continue in full force and
effect. Such repair, restoration and rebuilding (all of which are herein called
the "repair") shall be commenced within a reasonable time after such damages or
destruction and shall be diligently prosecuted to completion. There shall be no
abatement of rent or any other obligation of Lessee hereunder by reason of such
damage or destruction. The proceeds of any insurance maintained under Paragraph
8.3 shall be made available to Lessee for payment of the cost and expense of the
repair; provided, however, that such proceeds may be made available to Lessee
subject to reasonable conditions including, but not limited to, architect's
certification of costs and retention of a percentage of such proceeds pending
final notice of completion. In the event that such proceeds are not made
available to Lessee within ninety (90) days after such damage or destruction,
Lessee shall have the options for 30 days, commencing on the expiration of such
90-day period, of cancelling this Lease. If Lessee shall exercise such option,
Lessee shall have no further obligation hereunder and shall have no further
claim against Lessor; provided, however, that Lessor shall return to Lessee so
much of Lessee's security deposit as has not theretofore been applied to Lessor.
Lessee shall exercise such option by written notice to Lessor within said 30-day
period. Lessor may require that Lessee provide, at Lessee's sole cost and
expense, a lien and completion bond to insure against mechanics' or
materialsmen's liens arising out of the repair, and to insure completion of the
repair. In the event that the insurance proceeds are insufficient to cover the
cost of the repair, then any amount in excess thereof required to complete the
repair shall be paid to Lessee.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay all real property taxes applicable
to the Premises during the term of this Lease. All such payments shall be made
at least ten (10) days prior to the delinquency date of such payment. Lessee
shall promptly furnish Lessor with satisfactory evidence that such taxes have
been paid. If any such taxes paid by Lessee shall cover any period of time prior
to or after the expiration of the term hereof, Lessee's share of such taxes
shall be equitably prorated to cover only the period of time within the tax
fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to the extent required. If Lessee shall fail to pay any such
taxes, Lessor shall have the right to pay the same, in which case Lessee shall
repay such amount to Lessor with Lessee's next rent installment together with
interest at the rate of 10% per annum.
10.2 Definition of "Real Property" Tax. As used herein, the term "real
property tax" shall include any form of assessment, license fee, commercial
rental tax, levy, penalty, or tax (other than inheritance or estate taxes),
imposed by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school agricultural,
lighting, drainage or other improvement district thereof, as against any legal
or equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, or as against Lessor's business of Leasing the Premises.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Lessee contained in the Premises or
elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
<PAGE>
12.2 No Release of Lessee. Regardless of Lessor's consent, no subletting
or assignment shall release Lessee of Lessee's obligation or after the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting.
12.3 Attorney's Fees. In the event that Lessor shall consent to a sublease
or assignment under Paragraph 12.1, Lessee shall pay Lessor's reasonable
attorney's fees not to exceed $100 incurred in connection with giving consent.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent required to be
made by Lessee hereunder, as and when due, where such failure shall continue for
a period of three days after written notice thereof from Lessor to Lessee.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in Paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice hereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general assignment, or general
arrangement for the benefit of creditors; (ii) the filing by or against Lessee
of a petition to have Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
13.2 Remedies. In the event of any such default or breach by Lessee,
Lessor may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event Lessor
shall be entitled to recover from Lessee all damages incurred by Lessor by
reason of Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorney's fees, and any
real estate commission actually paid; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period of that Lessee proves could be reasonably
avoided; that portion of the leasing commission paid by Lessor pursuant to
Article 15 applicable to the unexpired term of this Lease. Unpaid installments
of rent or other sums shall bear interest from the date due at the rate of 10%
per annum in the event Lessee shall have abandoned the Premises, Lessor shall
have the option of (i) retaking possession of the Premises and recovering from
Lessee the amount specified in this Paragraph 13.2(a), or (ii) proceeding under
Paragraph 13.2(b).
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lesser
under the laws or judicial decisions of the State of California.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lesson has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur cost
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lesser by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be due,
Lessee shall pay to Lessor a late charge equal to 10% of such overdue amount.
The parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
improvements on the Premises, or more than 25% of the land area of the Premises
which is not occupied by any improvements, is taken by condemnation, Lessee may,
at Lessee's option, to be exercised in writing only within ten (10) days after
Lesser shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with foregoing, this lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent shall be reduced in the
proportion that the floor area taken bears to the total floor area of the
building situated on the Premises. Any award for the taking of all or any part
of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be property of Lessor, whether such
award shall be made as compensation for diminution in value of the leasehold or
for the taking of the fee, or as severance damages; provided, however, that this
Lease shall be entitled to any award for loss of or damage to Lessee's trade
fixtures and removable personal property. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall, to the extent of
severance damages received by Lessor in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall pay any amount in excess of such severance damages required to
complete such repair.
15. Broker's Fee. Upon execution of this Lease by both parties Lessor shall pay
to None, a licensed real estate broker, a fee of $ None for brokerage services
heretofore rendered. Lessor further agrees that if Lessee exercises any option
granted herein or any option substantially similar thereto, either to extend the
term of this Lease, to renew this Lease, to purchase said Premises or any part
thereof and/or any adjacent property which Lessor has an interest, or any other
option granted herein, or if said broker is the procuring cause of any other
lease or sale entered into between the parties pertaining to the Premises and/or
any adjacent property in which Lesser has an interest, then as to any of said
transactions, Lessor shall pay said broker a fee in accordance with the schedule
of said broker in effect at the time of execution of this Lease. Lessor agrees
to pay said fee not only on behalf of Lessor but also on behalf of any person,
corporation, association, or other entity having an ownership interest in said
real property or any part thereof, when such fee is due hereunder. Any
transferee of Lessor's interest in this Lease, by accepting an assignment of
such interest, shall be deemed to have assumed Lessor's obligation under his
Paragraph 15. Said broker shall be paid a third party beneficiary of the
provisions of this Paragraph.
16. General Provisions.
16.1 Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lesser hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) Lessee's failure to deliver such statement within such time
shall be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance or refinance the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender designated by Lessor
such financial statements of Lessee as may be reasonably required by such
lender. Such statements shall include the past three years' financial statements
of Lessee. All such financial statements shall be received by Lessor in
confidence and shall be used only for the purposes herein set forth.
16.2 Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title or a lessee's interest
in a ground lease of the Premises, and except as expressly provided in Paragraph
15, in the event of any transfer of such title or interest, Lessor herein named
(and in case of any subsequent transfers the then grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
Obligations thereafter to be performed, provided that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
16.3 Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
16.4 Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at 10%
per annum from the date due. Payment of such interest shall not excuse or cure
any default by Lessee under this Lease.
16.5 Time of Essence. Time is of the essence.
16.6 Captions. Article and paragraph captions are not a part of hereof.
16.7 Incorporation of Prior Agreements; Amendments. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification.
16.8 Notices. Any notice required or permitted to be given hereunder shall
be in writing and may be served personally or by regular mail, addressed to
Lessor and Lessee respectively at the addresses set forth after their signatures
at the end of this Lease.
16.9 Waivers. No waiver by Lessor of any provision hereof shall be deemed
a waiver of any other provision hereof or any subsequent breach by Lessee of the
same or any other provision. Lessor's consent to or approval of any act shall
not be deemed to render unnecessary the obtaining of Lessor's consent to or
approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
<PAGE>
16.10 Recording. Lessee shall not record this Lease without Lessor's prior
written consent and such recordation shall, at the option of Lessor, constitute
a non-curable default of Lessee hereunder. Either party shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
16.11 Holding Over. If Lessee remains in possession of the Premises or any
part thereof after the expiration of the term hereof without the express written
consent of Lessor, such occupancy shall be a tenancy from month to month at a
rental in the amount of the last monthly rental plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month-to-month tenancy.
16.12 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible be cumulative with all other remedies at
law or in equity.
16.13 Covenants and Conditions. Each provision of this Lease performable
by Lessee shall be deemed both a covenant and a condition.
16.14 Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 16.2, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.
16.15 Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
now or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any mortgage, deed
of trust or ground lease, as the case may be, and failing to do so within ten
(10) days after written demand, does hereby make, constitute and irrevocably
appoint Lessor as Lessee's attorney in fact and in Lessee's name, place and
stead, to do so.
16.16 Attorney's Fees. If either party or the broker named herein brings
an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall insure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
16.17 Lessor's Access. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, or lenders, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
16.18 Signs and Auctions. Lessee shall not place any sign upon the
Premises or conduct any auction thereon without Lessor's prior written consent.
16.19 Merger. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, shall not work a merger, and shall, at the option
of Lessor, Terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such subtenancies.
16.20 Corporate Authority. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Lessee is a corporation Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
16.21 Insuring Party. The insuring party under this Lease shall be to
Lessee.
17. Options to Renew.
Lessee, if it is not then in default under the terms of this Lease, shall
have the right at the end of the Initial Term to extend the term of this Lease
for an additional period of thirty-six (36) months (hereinafter referred to as
the "First Renewal Term") from and after the end of the Initial Term on the same
terms and conditions as are provided herein for the Initial Term, upon written
notice to Lessor given no later than ninety (90) days before the expiration of
said Initial Term. This First Renewal Term shall commence May 1, 1984, and
continue until April 30, 1987.
In the event this Lease is in full force and effect on May 1, 1984, and
Lessee has duly exercised the option to extend the term of this Lease for an
additional thirty-six (36) months in the manner hereinabove set forth, the
monthly rental for said extended term of thirty-six months, commencing May 1,
1984, shall be adjusted upward by an amount equal to the increase in the
Consumer Price Index, All-Items for Los Angeles, California (based on 1967
equals 100), published in the monthly Labor Review of the Bureau of Labor
Statistics, U.S. Department of Labor, which said increase shall be represented
by that percentage of increase, if any, between the Price (CONTINUED ON ATTACHED
SHEETS)
The parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.
If this Lease has been filled in it has been prepared for submission
to your attorney for his approval. No representation or
recommendation is made by the real estate broker or its agents or
employees as to the legal sufficiency, legal effect, or tax
consequences of this Lease or the transaction relating thereto.
Executed at Los Angeles, California 90058 PHILIP E. BAUER ENTERPRISES
on April __, 1981. By__________________________________
Philip E. Bauer
Address 3501 East Vernon Avenue
Los Angeles, California 90058 By__________________________________
"LESSOR"
Executed at Los Angeles, California 90058 BEST WESTERN FOODS, INC.
on April __, 1981. By__________________________________
Address __________________________ By__________________________________
___________________________________ "LESSEE"
<PAGE>
Index in October, 1980, and such Price Index in April, 1983, as applied to the
sum of Fifteen Thousand Five Hundred ($15,500.00) Dollars. If for any reason
whatever there is any change of any kind in the method of calculating or
formulating of U. S. Department of Labor, Bureau of Labor Statistics, Consumer
Price All-Items Index for Los Angeles, California (1967 equals 100) or if that
Index should no longer be published, then another Index generally recognized as
authoritative shall be substituted by agreement of the parties hereto; and if
the parties should not agree with respect to such substituted Index, a
Substituted Index shall be selected by the Presiding Judge of the Superior Court
of the State of California, County of Los Angeles, upon the application of
either Lessor or Lessee. The monthly rental so adjusted and increased by the
Consumer Price Index, as set forth above, shall constitute the monthly rental
for each month of the extended term of thirty-six (36) months, commencing May 1,
1984. In no event shall the monthly rental be less than Fifteen Thousand Five
Hundred ($15,500.00) Dollars, nor exceed ten (10%) percent over said figure.
Lessee, if it is not then in default under the terms of this Lease, shall
have the right at the end of the First Renewal Term to extend the term of this
Lease for an additional period of thirty-six (36) months (hereinafter referred
to as the "Second Renewal Term") from and after the end of the First Renewal
Term on the same terms and conditions as are provided herein for the Initial
Term, upon written notice to Lessor given no later than ninety (90) days before
the expiration of the First Renewal Term. This Second Renewal Term shall
commence May 1, 1987, and continue until April 30, 1990.
In the event this Lease is in full force and effect on May 1, 1987, and
Lessee has duly exercised the option to extend the term of this Lease for an
additional period of thirty-six (36) months in the manner hereinabove set forth,
the monthly rental for said extended term of thirty-six (36) months, commencing
May 1, 1987,
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<PAGE>
shall be adjusted upward by an amount equal to the increase in the Consumer
Price Index, All-Items Index for Los Angeles, California, (based on 1967 equals
100), published in the monthly Labor Review of the Bureau of Labor Statistics,
U. S. Department of Labor, which said increase shall be represented by that
percentage of increase, if any, between the Price Index in May, 1984, and such
Price Index in May, 1987, as applied to the sum of the monthly rental fixed for
said premises for the First Renewal Term hereof. If for any reason whatever
there is any change of any kind in the method of calculating or formulating of
U. S. Department of Labor, Bureau of Labor Statistics, Consumer Price All-Index
for Los Angeles, California (1967 equals 100) or if that Index should no longer
be published, then another Index generally recognized as authoritative shall be
substituted by agreement of the parties hereto; and if the parties should not
agree with respect to such substituted Index, a Substituted Index shall be
selected by the Presiding Judge of the Superior Court of the State of
California, County of Los Angeles, upon the application of either Lessor or
Lessee. The monthly rental so adjusted and increased by the Consumer Price
Index, as above set forth, shall constitute the monthly rental for each month of
the extended term of thirty-six (36) months, commencing May 1, 1987. In no event
shall the monthly rental be less than the monthly rental for the period of the
First Renewal Term hereof, nor exceed ten (10%) percent over said figure.
18. Lessee has examined the lease by and between SALEM PACKING CO., a
California corporation, as Lessor, and GENERAL PROCESSORS, INC., a California
corporation, as Lessee, dated October 1, 1980.
GENERAL PROCESSORS, INC. desires to escape from the monthly rental payments
described in said Lease and will remain obligated to all other things described
in said Lease, including but not
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<PAGE>
limited to the costs of receiving the machinery, the storage of the same, the
restoration of the machinery, etc.
Lessee, as a material inducement to rent the premises, will do and
undertake the following:
(a) Use. Lessee shall use the property leased in a careful and proper
manner and shall comply with all laws, ordinances, and regulations relating to
the possession, use, or maintenance of the property.
(b) Inspection by Lessee. Lessee has inspected the property fully and
acknowledges that the property is in good condition and repair, and that Lessee
is satisfied with and has accepted the property in such good condition and
repair.
(c) Inspection by Lessor. Lessor shall at all times during business hours
have the right to enter on the premises where the property may be located for
the purpose of inspecting it or observing its use. Lessee shall give Lessor
immediate notice of any attachment or other judicial process affecting any item
leased and shall, whenever requested by Lessor, advise Lessor of the exact
location of the item.
(d) Alterations. Lessee is hereby given the right to make alterations,
additions, or improvements to the property, so long as its value is not reduced
thereby. All additions to and improvements of the property of any kind shall
immediately become the property of the Lessor and subject to the terms of this
Lease. Notwithstanding anything to the contrary herein contained, improvements
to equipment that are additions to existing equipment and that can be removed
and still leave the existing equipment as it was when leased, do not become the
property of Lessor, and any and all new portable type equipment shall not become
the property of Lessor.
(e) Maintenance and repair. Lessee, at its own cost and expense, shall keep
the property leased in good repair, condition, and working order, and shall
furnish all parts required to keep it
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<PAGE>
in good working order. Lessee shall not remove, alter, disfigure, or cover up
any numbering, lettering, or insignia displayed upon the leased property, and
shall see that the property is not subjected to careless or needlessly rough
usage.
(f) Loss and Damage. Lessee hereby assumes all risk of loss and damage to
the property leased from any cause. No loss or damage to the property leased
shall impair any obligation of Lessee under this Lease, which shall continue in
full force and effect. In the event of loss or damage to the property leased,
Lessee at the option of Lessor shall:
(i) Place the same in good repair; or
(ii) Replace the same with like property in good repair, which
property shall thereupon become subject to this lease; or
(iii) Pay Lessor therefor, in cash, the appraised value thereof, as
determined by appraisers as follows: Each party hereto shall appoint an
appraiser, within five (5) days of the loss or damage. If the two appraisers
appointed shall be unable to agree on the value of such lost or damaged
equipment within five (5) days after their appointment, they shall appoint a
third appraiser. The decision in writing of any two of the three appraisers so
appointed shall be binding and conclusive on the parties hereto and on any
person legally entitled to receive the value of such lost or damaged equipment.
Upon such payment this Lease shall terminate with respect to the property so
paid for and Lessee thereupon shall become entitled thereto, as the owner
thereof.
(g) Return of Leased Property. On expiration or earlier termination of this
lease, with respect to the leased property, Lessee shall (unless Lessee has paid
Lessor in cash the "Appraised Value" of the property pursuant to Paragraph 12
hereof) return the same to Lessor in good repair.
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<PAGE>
(h) Insurance. Lessee, at its own expense, shall maintain the leased
property insured for such risks and in such amounts as Lessor shall require with
carriers acceptable to Lessor, shall maintain a loss payable endorsement in
favor of Lessor affording to Lessor such additional protection as Lessor shall
require, and shall maintain liability insurance satisfactory to Lessor. All such
insurance shall name Lessor and Lessee as insured. The policies shall provide
that they may not be canceled or altered without at least ten (10) days' prior
written notice to Lessor, and the loss payable endorsement shall provide that
all amounts payable by reason of loss of or damage to the property shall be
payable only to Lessor. Lessee shall deliver to Lessor evidence satisfactory to
Lessor of all such insurance.
(i) Indemnity. Lessee shall indemnify Lessor against, and hold Lessor
harmless from, all claims, actions, proceedings, costs, damages, and
liabilities, including attorney's fees, arising out of, connected with, or
resulting from the leased property, including without limitation the
manufacture, selection, delivery, possession, use, operation, or return thereof.
(j) Ownership. The property leased is and shall at all times remain the
sole property of SALEM PACKING CO., and Lessee shall have no right, title, or
interest therein except as expressly set forth in this Lease.
(k) Personal Property. The property leased is, and shall at all times
remain, personal property, notwithstanding that it or any part of it may now be,
or hereafter become, in any manner attached to, or embedded in, or permanently
resting on, real property or any building thereon, or attached in any manner to
what is permanent as by means of cement, plaster, nails, bolts, or screws.
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<PAGE>
19. SALEM PACKING CO., at its option, shall have the right to remove said
personal property exclusive of the electrical panels and circuit breaker upon
giving Lessee two (2) weeks' notice of the same.
In the event that SALEM PACKING CO. desires to sell the machinery, all or
part, SALEM PACKING CO. gives Lessee the option of first refusal to buy the
same. Lessee must exercise its right to purchase all of the equipment offered
for sale within two (2) weeks after written notification to do, upon the same
terms and conditions as is offered to others.
20. Lessee desires to make improvements in the refrigeration system and the
freezer system. Lessor hereby gives Lessee permission to do so at Lessee's sole
expense. It is understood and agreed that all Lessee's changes, improvements,
refrigeration equipment in the refrigeration and/or freezer system shall belong
to the Lessor at the expiration of the Lease and shall be in excellent working
order at the expiration of the Lease, and no part of the same shall be removed
by the Lessee.
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<PAGE>
EXTENSION AND AMENDMENT
TO STANDARD INDUSTRIAL LEASE
This Extension and Amendment to Standard Industrial Lease is entered into
October 2, 1990 by and between PHILIP E. BAUER PROPERTIES ("Lessor") and BEST
WESTERN FOODS, INC., a California corporation ("Lessee"), with reference to the
following facts:
WHEREAS, Lessee is leasing that certain real property from Lessor known as
2929 East 44th Street, Vernon (Los Angeles), California 90058, pursuant to that
certain Standard Industrial Lease dated April 27, 1981 ("Lease"); and
WHEREAS, the term of the Lease, which had been extended in accordance with
its terms, was due to expire on April 30, 1990 and the parties desired to extend
and modify the Lease; and
WHEREAS, the parties entered into an Agreement dated December 22, 1989 to
amend and extend the lease, a copy of which is attached hereto; and
WHEREAS, the parties desire to further extend and modify the lease and the
above mentioned Extension and Amendment dated December 22, 1989 as hereinafter
provided,
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is agreed:
1. Extension of Term. The term of the lease is hereby extended for a
period of Thirty-six (36) months commencing retroactively on May 1, 1990 and
ending on April 30, 1993. ("Third Renewal Term"). All terms and conditions of
the Lease shall be and remain in full force and effect during the Third Renewal
Term and option periods thereof, including the adjustment and increase of the
monthly rental, except as specifically hereinafter provided.
2. Option to Renew. Lessee shall have the option to extend the term of the
lease for a one (1), two (2) or three (3) year period at the end of the above
extension period which ends on April 30, 1993.
3. Monthly Rent. During the initial three years of the Third Renewal Term
the monthly rental shall be Twenty-one Thousand ($21,000.00) Dollars retroactive
to May 1, 1990, the effective date of the renewal, and continuing through the
April 1, 1993 monthly payment. The monthly payment in the amount of Twenty
Thousand Six Hundred thirty Dollars and Fifty Cents ($20,630.50) paid during the
months
<PAGE>
of May, June, July, August, September and October 1990 shall be a credit against
the monthly payments of Twenty-one Thousand ($21,000) Dollars required under
this Extension and Modification.
4. Monthly Rent - Option Periods. If the lease is extended for a one (1)
year period, May 1, 1993 to April 30, 1994 the monthly rent shall be increased
by fourteen percent (14%) so that the monthly rent would be Twenty-three
Thousand Nine Hundred Forty ($23,940.00) Dollars;
If the lease is extended for a two (2) year period, May 1, 1993 to April 30,
1995 the monthly rent shall be increased by twelve percent (12%) so that the
monthly rent would be Twenty-Three Thousand Five Hundred Twenty ($23,520.00)
Dollars;
If the lease is extended for a three (3) year period, May 1, 1993 to April 30,
1996 the monthly rent shall be increased by ten percent (10%) 50 that the
monthly rent would be Twenty-Three Thousand One Hundred ($23,100.00) Dollars.
5. Notice to Extend. Written notice to lessor to extend for a one (1) two
(2) or three (3) year period must be given no later than February 1, 1993.
6. Right to Assign Lease. Lessee may at any time assign Lessee's interest
in the Lease without Lessor's prior written consent, and without being in breach
of the Lease, to any person or entity who/which has purchased or otherwise
acquired all or substantially all of Lessee's assets or capital stock, so long
as said assignee conducts upon the Premises a similar business to that of Lessee
and so long as Lessee shall NOT be released of its obligation to pay rent and to
perform all other obligations required of Lessee under the Lease.
IN WITNESS WHEREOF, the parties have executed this Extension and
Modification To Standard Industrial Lease as of the date first above written.
"LESSOR" "LESSEE"
PHILIP E. BAUER PROPERTIES BEST WESTERN FOODS, INC.
By: /s/ Philip E. Bauer By: /s/ Richard W. Griffith
----------------------------- -----------------------------
Philip E. Bauer Richard W. Griffith
President
<PAGE>
[Letterhead of Best Western Foods, Inc.]
February 11, 1993
Mr. Philip E. Bauer
8831 Sunset Blvd.
Los Angeles, CA 90096
Dear Phil:
This letter confirms our discussion on Tuesday regarding the extension of the
Best Western Foods, Inc. lease.
We will extend the term for a one (1) year period ending on April 30, 1994 with
the monthly rental remaining as it is currently, Twenty One Thousand ($21,000)
Dollars. All other terms and conditions shall remain the same.
Please acknowledge your approval by signing where provided below.
BEST WESTERN FOODS, INC.
/s/ R. W. Griffith
- - - ---------------------------------
R. W. Griffith/President
I hereby acknowledge and approve the extension of the lease.
By: /s/ Philip E. Bauer
-----------------------------
Philip E. Bauer
Lessor
<PAGE>
[Letterhead of Custome Food Products, Inc.]
November 3, 1994
Mr. Philip E. Bauer
Philip E. Bauer Properties
8630 Allenwood Road
Los Angeles, California 90046
Dear Mr. Bauer:
This letter confirms our intention to extend the term of our original lease of
2929 East 44th Street in Vernon California dated April 27, 1981 and extended
thereafter.
We will extend the term for a three (3) year period beginning September 1, 1994
and ending on August 30, 1997 with the monthly rental being Eighteen Thousand
Dollars Only ($18,000) per month. All other applicable terms and conditions of
the original lease shall remain the same.
Please acknowledge your approval by signing where provided below.
Sincerely,
/s/ R. W. Griffith
- - - -------------------------------
R. W. Griffith
President
I hereby acknowledge and approve the extension of the lease as provided above.
By: /s/ Philip E. Bauer
---------------------------
Philip E. Bauer
Lessor
<PAGE>
Exhibit 10.11
STANDARD INDUSTRIAL LEASE -- NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO] AIR
1. Parties. This Lease, dated, for reference purposes only, November 3, 1991, is
made by and between William I. Altshuler and Maxine Altshuler (herein called
"Lessor") and CENTER OF THE PLATE FOODS, INC., a California corporation (herein
called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of Los Angeles State of California,
commonly known as 1008-1018, 1117 and 1205 W. Olympic Blvd., Montebello,
California and described as (SEE ADDENDUM, SECTION 48). Said real property,
including the land and all improvements therein, is herein called the "the
Premises".
3. Term.
3.1 Term. The term of this Lease shall commence on the date first written
above and ending on April 30, 1993 unless sooner terminated pursuant to any
provision hereof.
4. Rent. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $__________, in advance, on the ___________ day of each month of the term
hereof. Lessee shall pay Lessor upon the execution hereof $_______________ as
rent for (SEE ADDENDUM, Section 49), Rent for any period during the term hereof
which is for less than one month, shall be a pro rata portion of the monthly
installment. Rent shall be payable in lawful money of the United States to
Lessor at the address stated herein or to such other persons or at such other
places as Lessor may designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof $-0-
as security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of said deposit, lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated, and Lessee's failure to do so
shall be a material breach of this Lease. If the monthly rent shall, from time
to time, increase during the term of this Lease, Lessee shall thereupon deposit
with Lessor additional security deposit so that the amount of security deposit
held by Lessor shall at all times bear the same proportion to current rent as
the original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use to Lessee (or at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for any lawful
purpose or any other use which is reasonably comparable and for no other
purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, with regard to the use for
which Lessee will use the Premises, does not violate any convenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of the violation of this warranty within six months from the date
that the Lease term commences, the correction of same shall be the obligation of
the Lessee at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by lessee of the Premises. Lessee shall not use nor permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant in the building containing
the Premises, shall tend to disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession), and
Lessor further warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of the Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date, shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal county and state laws,
ordinances and regulations governing and regulating the use of the Premises, and
any covenants or restrictions of record and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessee's Obligations. Lessee shall keep in good order, condition and
repair the Premises and every part thereof, structural and nonstructural
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee and whether or
not the need for such repairs occurs as a result of Lessee's use, any prior use,
the elements or the age of such portion of the Premises including without
limiting the generality of the foregoing, all plumbing, heating, air
conditioning (Lessee shall procure and maintain at [ ILLEGIBLE ] maintenance
contract) ventilating, electrical, lighting facilities and equipment within the
Premises, fixtures walls (interior and exterior), foundations, ceilings, roofs
(interior and exterior), floors, windows, doors, plate glass and skylights
located within the Premises and all landscaping, driveways, parking lots, fences
and signs located on the Premises and sidewalks and parkways adjacent to the
Premises.
7.2 Surrender. On the last day of the term hereof, or any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, ordinary wear and tear excepted, clean and free of debris.
Lessee shall repair any damage to the Premises occasioned
<PAGE>
by the installation or removal of Lessee's trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated in this
Lease, Lessee shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning, plumbing and
fencing on the premises in good operating condition.
7.3 Lessor's Rights. If Lessee fails to perform Lessee's obligations under
this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its
option (but shall not be required to) enter upon the Premises after thirty (30)
days' prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.
7.4 Lessor's Obligations. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9
(relating to destruction of the Premises) and under Paragraph 14 (relating to
condemnation of the Premises), it is intended by the parties hereto that Lessor
have no obligation, in any manner whatsoever, to repair and maintain the
Premises nor the building located thereon nor the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives the benefit of
any statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the premises in good order, condition and repair.
7.5 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent, make
any alterations, improvements, additions, or Utility installations in, on or
about the Premises, except for nonstructural alterations not exceeding $25,000
in cumulative costs during the term of this Lease. In any event, Lessee shall
make no change or alteration to the exterior of the Premises nor the exterior of
the building(s) on the Premises without Lessor's prior written consent. As used
in this Paragraph 7.5, the term "Utility Installation" shall mean carpeting,
window coverings, air lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing and fencing. Lessor
may require that Lessee remove any or all said alterations, improvements,
additions or Utility Installations at the expiration of the term, and restore
the Premises to their prior condition. Should Lessee make any alterations,
improvements, additions or Utility Installations in violation of this section
without the prior approval of Lessor, Lessor may require that Lessee remove any
or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor, shall be presented to Lessor in
written form with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys' fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless approved by Lessee, all alterations, improvements,
additions and Utility Installations (whether or not such Utility Installations
constitute trade fixtures of Lessee), which may be made on the Premises, shall
become the property of Lessor and remain upon and be surrendered with the
Premises at the expiration of the term. Notwithstanding the provisions of the
Paragraph 7.5(d), Lessee's machinery and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises, shall remain the property of Lessee and may be removed by Lessee
subject to provisions of Paragraph 7.2.
8. Insurance Indemnity.
8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the Property Insurance
required hereunder. The insuring party shall be designated in Paragraph 46
hereof. In the event Lessor is the insuring party, Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, in addition to, and
not in lieu of, the insurance required to be maintained by Lessee under said
paragraph 8.2, but Lessor shall not be required to name Lessee as an additional
insured on such policy. Whether the insuring party is the Lessor or the Lessee,
Lessee shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party, Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of the insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease, a policy of Combined Single Limit,
Bodily Injury and Property Damage insurance insuring Lessor and Lessee against
any liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $500,000 per occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of the Lessee hereunder.
8.3 Property Insurance.
(a) The insuring party shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Premises, in the amount of the full replacement value thereof, as the same
may exist from time to time, which replacement value is now $___________, but in
no event less than the total amount required by lenders having liens on the
Premises, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, flood (in the event same is
required by a lender having a lien on the Premises), and special extended perils
("all risks" as such term is used in the insurance industry). Said insurance
shall provide for payment of loss thereunder to Lessor or to the holders of
mortgages or deeds of trust on the Premises. The insuring party shall, in
addition, obtain and keep in force during the term of this Lease a policy of
rental value insurance covering a period of one year, with loss payable to
Lessor which insurance shall also cover all real estate taxes and insurance
costs for said period. A stipulated value or agreed amount endorsement deleting
the coinsurance provision of the policy shall be procured with said insurance as
well as an automatic increase in insurance endorsement causing the increase in
annual property insurance coverage by 2% per quarter. If the insuring party
shall fail to procure and maintain said insurance the other party may, but shall
not be required to, procure and maintain the same, but at the expense of Lessee.
If such insurance coverage has a deductible clause, the deductible amount shall
not exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount.
(b) If the Premises are part of a larger building, or if the
Premises are part of a group of buildings owned by Lessor which are adjacent to
the Premises, then Lessee shall pay for any increase in the property insurance
of such other building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(c) If the Lessor is the insuring party, the Lessor will not insure
Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof. But
if Lessee is the insuring party, the Lessee shall insure its fixtures equipment
and tenant improvements.
8.4 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide". The insuring party
shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8.3. No such policy shall be
CANCELLABLE or subject to reduction of coverage or other modification except
after thirty (30) days prior written notice to Lessor. If Lessee is the insuring
party, Lessee shall, at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with renewals or "binders" thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee upon demand. Lessee shall not do or permit to do anything
which shall invalidate the insurance policies referred to in Paragraph 8.3. If
Lessee does or permits to be done anything which shall increase the cost of the
insurance policies referred to in Paragraph 8.3, then Lessee shall forthwith
upon Lessor's demand reimburse Lessor for any additional premiums attributable
to any act or omission or operation of Lessee causing such increase in the cost
of Insurance. If Lessor is the insuring party, and if the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall deliver to Lessee's written statement setting forth the amount of
any such insurance cost increase and showing in reasonable detail the manner in
which it has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises whether due
to the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. Lessee and Lessor shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
8.6 Indemnity. Except for matters covered by Lessor's indemnity under
Section 52 hereof, Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon, and in case any action or proceeding be brought against Lessor by
reason of any such claim, Lessee upon notice from Lessor, shall defend the same
at Lessee's expense by counsel satisfactory to Lessor.
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9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the then replacement cost of the Premises. "Premises Building Partial
Damage" shall herein mean damage or destruction to the building of which the
Premises are a part to the extent that the cost of repair is less than 50% of
the then replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the then replacement cost of the Premises. "Premises Building Total
Destruction" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more of
the then replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the Insurance described in
paragraph 8.
9.2 Partial Damage -- Insured Loss. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements unless the same have become a part of the Premises pursuant
to Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue in full force and effect .
9.3 Partial Damage -- Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period, this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of this
Lease there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if it
is to be exercised at all, no later than 20 days after the occurrence of an
Insured Loss falling within the classification of Premises Partial Damage during
the last six months of the term of this Lease. If Lessee duly exercises such
option during said 20-day period, Lessor shall, at Lessor's expense, repair such
damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option during said 20-day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said 20-day period by giving written notice to Lessee of
Lessor's election to do so within 10 days after the expiration of said 20-day
period, notwithstanding any term or provision in the grant of option to the
contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraph 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 10 days after such obligations shall accure, Lessee may at
Lessee's option cancel and terminate this Lease by giving Lessor written notice
of Lessee's election to do so at any time prior to the commencement of such
repair or restoration. In such event, this Lease shall terminate as of the date
of such notice and Lessee may exercise all other rights and remedies.
9.7 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the real property tax, as defined
in paragraph 10.2, applicable to the Premises during the term of this Lease. All
such payments shall be made at least ten (10) days prior to the delinquency date
of such payment. Lessee shall promptly furnish Lessor with satisfactory evidence
that such taxes have been paid. If any such taxes paid by Lessee shall cover any
period of time prior to or after the expiration of the term hereof, Lessee's
share of such taxes shall be equitably prorated to cover only period of time
within the tax fiscal year during which this Lease shall be effect, and Lessor
shall reimburse Lessee to the extent required. If Lessee shall fail to pay any
such taxes, Lessor shall have the right to pay the same, in which case Lessee
shall repay such amount to Lessor with Lessee's next rent installment together
with interest at the maximum rate then allowable by law.
10.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bonds or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available.
10.4 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligation of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or [ILLEGIBLE] are materially changed or altered
without the consent of Lessee, the consent of whom shall not be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no [ILLEGIBLE]
or assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee in the performance of any of the terms hereof,
Lessor may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee. Lessor may consent to subsequent assignments or
subletting of this Lease or amendments or modifications to this Lease with
assignees
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of Lessee, without notifying Lessee, or any successor of Lessee, and without
obtaining its or their consent thereto, and such action shall not relieve Lessee
of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do,
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.000 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breech of this Lease by Lessee.
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of ten days after written notice thereof
from Lessor to Lessee in the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes, such Notice
to Pay Rent or Quit shall also constitute the notice required by this
subparagraph.
(c) The failure by Lessee to observe or perform any of the
convenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice thereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
13.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor, shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the coat of
recovering possession of the Premises; expenses of reletting, reasonable
attorney's fees, and any real estate commission actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Lessee proves could be
reasonably avoided; that portion of the leasing commission paid by Lessor
pursuant to Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event, Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease, shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor
specifying wherein Lessor has failed to perform such obligation, provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance, then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
late charge equal to 6% per annum of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's default
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding paragraph 4 or any
other provision of this Lease to the contrary.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all or which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area of the Premises
which is not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within 30 days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession), terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the rent shall be reduced in the proportion
that the floor area of the building taken bears to the total floor area of the
building situated on the Premises.
16. Enclosed Certificate
(a) Lessee shall, at any time upon not less than thirty (30) days
prior written notice from Lessor, execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance if any, and in
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the party of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
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<PAGE>
conclusive upon Lessee (i) that this Lease is in full force and affect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity, of
any other provision hereof.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail, and if given
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to the Lessor at the address noted below the signature of the respective
parties, as the case may be. Either party may by notice to the other specify a
different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
24. Waivers. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. Subordination.
(a) Provided that Lessee receives a nondisturbance agreement
acceptable to Lessee this Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation or security
now or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
31. Attorney's Fees. If either party or the broker named herein brings an action
to enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court. The
provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall have the right without the prior permission of Lessor to
place signs on the Premises.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in this Lease the consent
of one party is required to an act of the other party such consent shall not be
unreasonably withheld.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessor that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Premises.
39. Options
39.1 Definition. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchase other property of Lessor.
-5-
<PAGE>
39.2 Options. The Options herein granted to Lessee are not assignable
separate and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the default
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) continuing until
the obligation is paid, or (iii) at any time after an event of default described
in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee).
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
40. Multiple Tenant Building. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights and dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. Authority. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Insuring Party. The insuring party under this lease shall be the Lessor.
47. Addendum. Attached hereto is an addendum or addends containing paragraphs 48
through 54 which constitutes a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at________________________ WILLIAM I. AND MAXINE ALTSHULER
on_________________________________ By /s/ William I. Altshuler
--------------------------------------
Address____________________________ By_______________________________________
___________________________________
"LESSOR" (Corporate seal)
Executed at________________________ CENTER OF THE PLATE FOODS, INC.
on_________________________________ By /s/ [ILLEGIBLE]
--------------------------------------
Address____________________________ By_______________________________________
___________________________________ "LESSEE" (Corporate seal)
For these forms write or call the American Industrial Real Estate Association,
345 South Figueroa St., M-1, Los Angeles, CA 90071
<PAGE>
ADDENDUM TO STANDARD INDUSTRIAL LEASE DATED
NOVEMBER 3, 1991 BETWEEN WILLIAM I. ALTSHULER
AND MAXINE ALTSHULER AND CENTER OF THE PLATE FOODS, INC.
(COPF Space and Parking Lot)
THIS ADDENDUM amends, modifies and supplements that certain Standard
Industrial Lease ("Lease") by and between William I. Altshuler and Maxine
Altshuler (collectively "Lessor") and Center of the Plate Foods, Inc. ("Lessee")
dated November 3, 1991. Unless otherwise defined below, all words and phrases
capitalized in this Addendum shall have the same meanings set forth for such
words and phrases in the Lease.
48. Description of Premises. The Premises includes the following
properties (including all improvements):
A. COPF Space. All of the property identified as the "COPF Space" on
the diagram attached hereto as Exhibit "A-1", the complete legal description of
which is set forth on Exhibit "B-1" hereto;
B. Parking Lot. The entire parking lot identified as such at the
Northeast corner of Olympic Boulevard and Greenwood Avenue on the diagram
attached hereto as Exhibit "A-2", the complete legal description of which is set
forth on Exhibit "B-2" hereto.
49. Rent. Lessee shall pay to Lessor as rent for the Premises, monthly
payments of $16,000.00, in advance, on the first day of each month of the term
hereof. Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the monthly rent. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
50. Option to Extend. Lessee shall have the option to extend the term of
the Lease for a period of either (as determined by Lessee) one year, two years,
or three years beyond April 30, 1993; provided, however, that in no event shall
Lessee have any obligation to exercise such option. Lessee may exercise such
option by giving written notice thereof to Lessor no later than February 1,
1993.
51. Superseded Lease. This Lease supersedes that certain lease between
Lessor and Lessee dated December 21, 1984, which is hereby rendered null and
avoid.
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<PAGE>
52. Indemnity. Lessor shall indemnify and hold harmless Lessee from and
against any and all claims arising from Lessor's use of the Premises or the
conduct of Lessor's business or any activity, work, or things done, permitted or
suffered by Lessor in or about the Premises or elsewhere, or arising from any
negligence of Lessor, and from and against all costs, attorney's fees, expenses
and liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessee by reason of any such claim. Lessor upon notice from Lessee shall
defend the same at Lessor's expense by counsel satisfactory to Lessee.
53. Ownership of Premises. The parties hereby acknowledge that this Lease
is subject to a Master Lease dated September 10, 1987, (the "IBM Lease") between
IBM Foods, Inc. ("IBM Foods"), as lessor, and the Altshulers, as lessee. No
later than November 11, 1991, Lessor shall deliver to Lessee (i) a Consent to
Sublease and Nondisturbance Agreement executed by IBM Foods in form acceptable
to Lessee and (ii) a duly executed Agreement (the "Extension Agreement") between
IBM Foods and Lessor providing for the extension of the IBM Lease until no later
than March 25, 1992 and the acquisition by Lessor on or before said date of all
the Premises covered by this Lease. Lessor hereby agrees to acquire all the
Premises no later than March 25, 1992 and to perform fully all of Lessor's
obligations under the Extension Agreement.
54. Freezer Space Lease and Cattleman's Space Lease. The parties hereto
acknowledge that Lessee concurrently herewith is entering into two (2) lease
agreements with Cattleman's Choice, Inc. whereby Lessee shall lease from
Cattleman's Choice, Inc. the Freezer Space and the Cattleman's Space,
respectively (as identified on Exhibit "A-1" hereto) for a term that is
coterminous with this Lease. In the event that the Freezer Space Lease or the
Cattleman's Space Lease is terminated for any reason, Lessee shall have the
right to terminate this Lease.
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<PAGE>
FIRST AMENDMENT TO STANDARD INDUSTRIAL LEASE - NET
THIS FIRST AMENDMENT TO STANDARD INDUSTRIAL LEASE - NET ("First
Amendment"), is made and entered into as of this 25th day of March, 1992, by and
among William I. Altshuler, Maxine Altshuler, Aaron Magidow, and Center Of The
Plate Foods, Inc. ("Lessee") and amends, modifies and supplements that certain
Standard Industrial Lease - Net ("Lease"), dated November 3, 1991, by and
between William I. Altshuler and Maxine Altshuler (collectively, "Lessor") and
Lessee, a copy of which is attached hereto as Exhibit A and incorporated herein
by this reference (the "Lease").
Recitals
WHEREAS, Lessee has leased that certain real property situated in the
County of Los Angeles, State of California and commonly known as 1008-1018, 1117
and 1205 West Olympic Boulevard, Montebello, California (the "Premises"), the
complete legal description of which is set forth on Exhibits "B-1" and "B-2"
attached to the Lease, from Lessor pursuant to the Lease;
WHEREAS, the Lease was made subject to that certain Master Lease dated
September 10, 1987 (the "IBM Lease"), by and between IBM Foods, Inc. ("IBM
Foods"), as lessor, and William I. Altshuler and Maxine Altshuler, as lessee, as
amended by that certain Agreement dated November 11, 1991 (the "Extension
Agreement"), and said Master Lease expires as of the date hereof;
WHEREAS, pursuant to the Lease, Lessor agreed to purchase the Premises and
that the Lease would thereby remain in effect, notwithstanding the expiration of
the Master Lease;
WHEREAS, pursuant to the IBM Lease and the Extension Agreement, William I.
Altshuler and Aaron Magidow, assignee of all right, title and interest of Maxine
Altshuler in and to the Lease and the Extension Agreement, have acquired, as of
the date hereof good, valid and marketable title in fee to the Premises; and
WHEREAS, the parties hereto desire to amend the Lease to reflect the
change in Lessor and ownership of the Premises;
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<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledge, the parties hereto agree as follows:
A. Definitions. Unless otherwise defined in this First Amendment,
capitalized terms used in this First Amendment shall have the meanings
respectively ascribed to them in the Lease.
B. Substitution of New Lessor. The reference in paragraph 1 of the Lease
to "William I. Altshuler and Maxine Altshuler" is hereby amended to refer to
"William I. Altshuler, a married man, as to an undivided one half interest, and
Aaron Magidow, a married man as to an undivided one half interest as tenants in
common" to reflect the substitution of William I. Altshuler and Aaron Magidow as
the Lessor under the Lease, effective as of the date hereof.
C. Change in Ownership of the Premises. Paragraph 53 of the Lease shall be
deleted in its entirety and replaced with the following paragraph:
"53. Ownership of Premises. The parties hereby acknowledge that as of
March 25, 1992, good, valid and marketable title in fee to the Premises
was vested in William I. Altshuler, a married man as to an undivided
one-half interest, and Aaron Magidow, a married man as to an undivided
one-half interest, as tenants-in-common."
D. Continued Effect of the Lease. The Lease, as amended, modified and
supplemented by this First Amendment, is hereby ratified in all respects and
shall continue in full force and effect in accordance with its terms.
E. Counterparts. This First Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the date written above.
WILLIAM I. ALTSHULER
/s/ William I. Altshuler
-------------------------------------
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<PAGE>
MAXINE ALTSHULER
/s/ Maxine Altshuler
-------------------------------------
AARON MAGIDOW
/s/ Aaron Magidow
-------------------------------------
CENTER OF THE PLATE FOODS, INC.
By: /s/ R.W. Griffith
---------------------------------
Name: R.W. Griffith
Title: PRESIDENT
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<PAGE>
AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Amendment to Lease ("Amendment") dated March 31, 1993, is by and
between WILLIAM I. ALTSHULER and AARON MAGIDOW (together, "Lessor"), and CENTER
OF THE PLATE FOODS, INC., a California corporation ("Lessee").
II. RECITALS.
Lessor and Lessee entered into a standard industrial lease-net dated as of
November 3, 1991, as amended by that certain first amendment to standard
industrial lease-net dated March 25, 1992 (collectively, the "Lease"), for the
premises ("Premises") located at 1008-1018, 1117 and 1205 W. Olympic Blvd.,
Montebello, California, and more particularly described in the Lease.
Lessor and Lessee desire to modify the Lease in the manner provided in the
next section as "Modifications," which modifications shall be deemed effective
on the date of this Amendment as indicated above ("Effective Date").
III. MODIFICATIONS
Landlord and Tenant hereby agree that the Lease shall be modified and/or
supplemented as follows:
A. Lease Term. Notwithstanding anything to the contrary contained in the
Lease, the term of the Lease shall be ten (10) years, commencing on the
Effective Date ("Initial Term"). Lessee shall have (i) the option, exercisable
by Lessee at any time up to ninety (90) days prior to the expiration of the
Initial Term, to extend the term of the Lease for an additional five (5) years
("First Option Term"), and (ii) the option, exercisable by Lessee at any time up
to ninety (90) days prior to the expiration of the First Option Term, to extend
the term of the Lease for an additional five (5) years ("Second Option Term").
B. Rent. Notwithstanding anything to the contrary contained in the Lease,
the rent during the Initial Term shall be Sixteen Thousand Dollars ($16,000.00)
per month, the rent during the First Option Term, if the appropriate option
therefor is exercised by Lessee, shall be Eighteen Thousand Dollars ($18,000.00)
per month, and the rent during the Second Option Term, if the appropriate option
therefor is exercised by Lessee, shall be Nineteen Thousand Dollars ($19,000.00)
per month.
IV. GENERAL
A. Effect of Amendments. Except to the extent the Lease is modified by
this Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect.
<PAGE>
B. Landlord's Consent and Intercreditor Agreement. Lessor agrees to
execute and deliver, promptly upon request, a Landlord's Consent and
Intercreditor Agreement substantially in the form attached hereto as Exhibit A,
incorporated herein by this reference.
C. Entire Agreement. This Amendment embodies the entire understanding
between Lessor and Lessee with respect to its subject matter and can be changed
only by an instrument in writing signed by Lessor and Lessee.
D. Counterparts. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original.
"LESSOR" "LESSEE"
CENTER OF THE PLATE FOODS, INC.,
a California corporation
/s/ William I. Altschuler By: /s/ [ILLEGIBLE]
- - - --------------------------------- ----------------------------------
William I. Altschuler Its: CEO
/s/ Aaron Magidow
- - - ---------------------------------
Aaron Magidow
2
<PAGE>
EXHIBIT 10.12
LEASE AGREEMENT
by and between
CFP ASSOCIATES,
A KENTUCKY PARTNERSHIP,
as LANDLORD
and
CUSTOM FOOD PRODUCTS, INC.,
A CALIFORNIA CORPORATION,
as TENANT
Premises: Owingsville, Kentucky
Dated as of: September 30, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Demise of Premises . . . . . . . . . . . . . . . . . . . . . . 1
2. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . 1
3. Title and Condition. . . . . . . . . . . . . . . . . . . . . . 12
4. Use of Leased Premises; Quiet Enjoyment. . . . . . . . . . . . 14
5. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . 16
8. Net Lease; Non-Terminability . . . . . . . . . . . . . . . . . 19
9. Payment of Impositions . . . . . . . . . . . . . . . . . . . . 20
10. Compliance with Laws and Easement Agreements;
Environmental Matters. . . . . . . . . . . . . . . . . . . . . 21
11. Liens; Recording . . . . . . . . . . . . . . . . . . . . . . . 23
12. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . 24
13. Alterations and Improvements . . . . . . . . . . . . . . . . . 25
14. Permitted Contests . . . . . . . . . . . . . . . . . . . . . . 27
15. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 28
16. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
17. Casualty and Condemnation. . . . . . . . . . . . . . . . . . . 32
18. Termination Events . . . . . . . . . . . . . . . . . . . . . . 34
19. Restoration; Reduction of Rent . . . . . . . . . . . . . . . . 36
20. Procedures Upon Purchase . . . . . . . . . . . . . . . . . . . 38
21. Assignment and Subletting; Prohibition
against Leasehold Financing. . . . . . . . . . . . . . . . . . 39
22. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 42
23. Remedies and Damages Upon Default. . . . . . . . . . . . . . . 44
24. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
25. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . 49
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
27. No Merger of Title . . . . . . . . . . . . . . . . . . . . . . 49
28. Books and Records. . . . . . . . . . . . . . . . . . . . . . . 50
29. Determination of Value . . . . . . . . . . . . . . . . . . . . 51
30. Non-Recourse as to Landlord. . . . . . . . . . . . . . . . . . 52
31. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
32. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . 53
33. Tax Treatment; Reporting . . . . . . . . . . . . . . . . . . . 54
34. Option to Purchase . . . . . . . . . . . . . . . . . . . . . . 54
35. Obligation to Purchase . . . . . . . . . . . . . . . . . . . . 55
36. Financing Major Alterations. . . . . . . . . . . . . . . . . . 55
37. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 56
Exhibit "A" - Legal Description of Land
Exhibit "B" - Description of Building Systems Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Basic Rent Schedule
Exhibit "E" - Tenant Estoppel Certificate
-i-
<PAGE>
LEASE AGREEMENT, made as of this 30th day of September, 1994, between
CFP ASSOCIATES, a Kentucky partnership ("LANDLORD"), with an address c/o W. P.
Carey & Co., Inc., 620 Fifth Avenue, New York, New York 10020, and CUSTOM FOOD
PRODUCTS, INC., a California corporation ("TENANT") with an address at 1117 West
Olympic Boulevard, Montebello, California 90640.
In consideration of the rents and provisions herein stipulated to be
paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1. DEMISE OF PREMISES. Landlord hereby demises and lets to Tenant,
and Tenant hereby takes and leases from Landlord, for the term and upon the
provisions hereinafter specified, all right, title and interest of Landlord in
and to the following described property (collectively, the "LEASED PREMISES"):
(a) the premises described in EXHIBIT "A" hereto, together with the
Appurtenances (collectively, the "LAND"); (b) the buildings, structures and
other improvements hereinafter constructed on the Land (collectively, the
"STRUCTURES"); and (c) the Building Systems Equipment (as defined in Paragraph
2).
2. CERTAIN DEFINITIONS.
"Additional Rent" shall mean Additional Rent as defined in
Paragraph 7.
"Adjoining Property" shall mean all appurtenant sidewalks,
driveways, curbs, gores and vault spaces which are located on and adjoining the
Land and which Tenant is entitled to use and responsible to repair.
"Affiliate" with respect to Tenant shall mean any other Person
controlling, controlled by or under common control with Tenant and "control"
shall mean the power to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Alterations" shall mean all changes, additions, improvements or
repairs to, all alterations, reconstructions, renewals, replacements or removals
of and all substitutions or replacements for any of the Improvements, both
interior and exterior, structural and non-structural, and ordinary and
extraordinary.
"Appurtenances" shall mean all tenements, hereditaments,
easements, rights-of-way, rights, privileges in and to the Land, including (a)
easements over other lands granted by any Easement Agreement and (b) right to
use any streets, ways, alleys, vaults, gores or strips of land adjoining the
Land.
"Assignment" shall mean any assignment of rents and leases from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified from time to time.
<PAGE>
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6 and
determined in accordance with EXHIBIT "D" hereto.
"Basic Rent Commencement Date" shall mean the first day of the
first month following the date hereof.
"Basic Rent Payment Dates" shall mean the Basic Rent Payment
Dates as defined in Paragraph 6.
"Building Systems Equipment" shall mean the Building Systems
Equipment described on EXHIBIT "B" that are installed or located in or on the
Structures on the date hereof and paid for by Landlord and that includes two (2)
built-in steam ovens (Enviro-Pac 8-Truck Smoke House ovens bearing serial
numbers 89B-5467-035 and 89B-5467-036). Building Systems Equipment shall
include Alterations to the Building Systems Equipment whether paid for by
Landlord or, if required by the terms of this Lease, Tenant.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions are authorized or obligated to close in
the States of Connecticut, Kentucky or New York.
"Casualty" shall mean any loss of or damage to any property
included within the Leased Premises except Tenant's personal property or to any
property in which Landlord has an ownership interest.
"Competitor" shall mean any Person competing with Tenant in the
meat processing business and whose primary business is to engage in the meat
processing industry.
"Condemnation" shall mean a Taking and/or a Requisition.
"Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.
"Construction Agency Agreement" shall mean that certain
Construction Agency Agreement of even date among Landlord, as owner, Tenant, as
agent for Landlord in connection with the construction of the Improvements and
guaranteed by Corporate Property Associates 11 Incorporated, a Maryland
corporation.
"Construction Contracts" shall mean those certain Construction
Contracts described in the Construction Agency Agreement and any other contracts
between Tenant, as construction manager for Landlord, and Contractors, pursuant
to which the Improvements will be constructed.
"Contractors" shall mean those contractors who are parties to the
Construction Contracts.
"Costs" of a Person or associated with a specified transaction
shall mean all reasonable costs and expenses incurred by such Person or
associated with such transaction, including without limitation, attorneys' fees
and expenses, court costs, brokerage fees, escrow fees, title insurance
premiums, mortgage commitment fees, mortgage points, recording fees and transfer
<PAGE>
taxes, as the circumstances require.
"CPI" shall mean the CPI as defined in EXHIBIT "D".
"Default Rate" shall mean the Default Rate as defined in
Paragraph 7(a)(iv).
"Default Termination Amount" shall mean the Default Termination
Amount as defined in Paragraph 23(a)(i).
"Direct Costs" shall mean Direct Costs as defined in Section 1.01
of the Construction Agency Agreement.
"Early Termination Amount" shall mean the sum of (a) one hundred
ten percent (110%) of Landlord's Share of Project Costs and (b) any Prepayment
Premium which Landlord will be required to pay in prepaying any Loan with
proceeds of the Early Termination Amount.
"Early Termination Date" shall mean Early Termination Date as
defined in Paragraph 18.
"Early Termination Event" shall mean an Early Termination Event
as defined in Paragraph 18.
"Early Termination Notice" shall mean Early Termination Notice as
defined in Paragraph 18(a).
"Easement Agreements" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements listed as
Permitted Encumbrances or as may hereafter affect the Leased Premises. Neither
party hereto shall negotiate or execute any Easement Agreement without the prior
written approval of the other party hereto, which prior approval shall not be
unreasonably withheld and shall be deemed given if no response is received by
the requesting party within fifteen (15) days following receipt of such request.
If Tenant or Landlord negotiates and the other party approves any Easement
Agreements, such Easement Agreements shall be deemed to be included as Easement
Agreements to which this Lease applies. Neither Tenant nor Landlord shall be
bound by any Easement Agreements unless Landlord and Tenant expressly agree in
writing to be bound thereby. If either Landlord or Tenant do not so agree to be
bound by any Easement Agreements (the "EXCLUDED EASEMENT AGREEMENTS"), the
Excluded Easement Agreements shall not be included as Easement Agreements or
Permitted Encumbrances. Easement Agreements are Permitted Encumbrances.
"Environmental Law" shall mean (i) whenever enacted or
promulgated, any applicable federal, state, foreign and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water, groundwater, drinking water
supply, land (including land surface or subsurface), plant, aquatic and animal
life from injury caused
<PAGE>
by a Hazardous Substance or (y) concerning exposure to, or the use, containment,
storage, recycling, reclamation, reuse, treatment, generation, discharge,
transportation, processing, handling, labeling, production, disposal or
remediation of Hazardous Substances, Hazardous Conditions or Hazardous
Activities, in each case as amended and as now or hereafter in effect, and (ii)
any common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations or injuries or damages due
to or threatened as a result of the presence of, exposure to, or ingestion of,
any Hazardous Substance. The term Environmental Law includes, without
limitation, the federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
federal Water Pollution Control Act, the federal Clean Air Act, the federal
Clean Water Act, the federal Resources Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments to RCRA), the federal Solid
Waste Disposal Act, the federal Toxic Substance Control Act, the federal
Insecticide, Fungicide and Rodenticide Act, the federal Occupational Safety and
Health Act of 1970, the federal National Environmental Policy Act and the
federal Hazardous Materials Transportation Act, each as amended and as now or
hereafter in effect and any similar state or local Law.
"Environmental Violation" shall mean (a) any direct or indirect
discharge, disposal, spillage, emission, escape, pumping, pouring, injection,
leaching, release, seepage, filtration or transporting of any Hazardous
Substance at, upon, under, onto or within the Leased Premises, or from the
Leased Premises to the environment, in violation of any Environmental Law or in
excess of any reportable quantity established under any Environmental Law or
which could result in any liability to Landlord, Tenant or Lender, any Federal,
state or local government or any other Person for the costs of any removal or
remedial action or natural resources damage or for bodily injury or property
damage, (b) any deposit, storage, dumping, placement or use of any Hazardous
Substance at, upon, under or within the Leased Premises or which extends to any
Adjoining Property in violation of any Environmental Law or in excess of any
reportable quantity established under any Environmental Law or which could
result in any liability to any Federal, state or local government or to any
other Person for the costs of any removal or remedial action or natural
resources damage or for bodily injury or property damage, (c) the abandonment or
discarding of any barrels, containers or other receptacles containing any
Hazardous Substances in violation of any Environmental Laws, (d) any activity,
occurrence or condition which could result in any liability, cost or expense to
Landlord or Lender or any other owner or occupier of the Leased Premises, or
which could result in a creation of a lien on the Leased Premises under any
Environmental Law, or (e) any violation of or noncompliance with any
Environmental Law.
"Event of Default" shall mean an Event of Default as defined in
Paragraph 22(a).
"Expansion" shall mean the Expansion as defined in
Paragraph 13(a).
"Expansion Improvements" shall mean the Expansion
<PAGE>
Improvements as defined in Paragraph 13(a).
"Expansion Parcel" shall mean the Expansion Parcel as defined in
Paragraph 13(a).
"Fair Market Value" with respect to the Leased Premises shall
mean the higher of (a) the fair market value of the Leased Premises as of the
Relevant Date as if unaffected and unencumbered by this Lease or (b) the fair
market value of the Leased Premises as of the Relevant Date as affected and
encumbered by this Lease and assuming that the Term has been extended for all
extension periods provided for herein. For all purposes of this Lease, Fair
Market Value shall be determined in accordance with the procedure specified in
Paragraph 29.
"Fair Market Value Date" shall mean the date when the Fair Market
Value is determined in accordance with Paragraph 29.
"Federal Funds" shall mean federal or other immediately available
funds which at the time of payment are legal tender for the payment of public
and private debts in the United States of America.
"Final Completion Date" shall mean Final Completion Date as
defined in Section 1.01 of the Construction Agency Agreement.
"Force Majeure" shall mean Force Majeure as defined in
Paragraph 1.01 of the Construction Agency Agreement.
"Funding Deadline" shall mean the earliest to occur of (a) thirty
(30) days following the Occupancy Date, (b) the day on which Landlord has
disbursed the full amount of Landlord's Share of Project Costs and (c) June 30,
1995, subject to Force Majeure.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Guarantor" shall mean Holdings.
"Guaranty" shall mean that certain Guaranty and Suretyship
Agreement of even date from Guarantor to Landlord.
"Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems), (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause the Leased Premises or any portion
thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law; provided, however, that notwithstanding anything in this sentence or this
Lease to the contrary, Tenant
<PAGE>
shall not be deemed to be engaged in a Hazardous Activity if the subject
activity, process, procedure or undertaking is done or performed in accordance
with applicable Law and/or governmental permit.
"Hazardous Condition" means any condition which would support any
claim or liability under any Environmental Law, including the presence of
underground storage tanks.
"Hazardous Substance" means (i) any substance, material, product,
petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous or acutely hazardous to the environment or
public health or safety or (ii) any substance supporting a claim under any
Environmental Law, whether or not defined as hazardous as such under any
Environmental Law. Hazardous Substances include, without limitation, any toxic
or hazardous waste, pollutant, contaminant, industrial waste, petroleum or
petroleum-derived substances or waste, radon, radioactive materials, asbestos,
asbestos containing materials, urea formaldehyde foam insulation, lead and
polychlorinated biphenyls.
"Holdings" shall mean CFP Holdings, Inc., a Delaware corporation.
"Impositions" shall mean the Impositions as defined in Paragraph
9(a).
"Improvements" shall mean the Structures as defined in Paragraph
1 and Building Systems Equipment (as defined above).
"Indemnitee" shall mean an Indemnitee as defined in Paragraph 15.
"Indirect Costs" shall mean Indirect Costs as defined in Section
1.01 of the Construction Agency Agreement.
"Initial Lender" shall mean Greyrock Capital Group Inc., as
Agent.
"Initial Loan" shall mean the $2,200,000 loan from Initial Lender
to Landlord.
"Initial Loan Funding Date" shall mean the date on which the
Initial Lender funds the Initial Loan.
"Initial Term" shall mean Initial Term as defined in Paragraph 5.
"Initial Term Commencement Date" shall mean Initial Term
Commencement Date as defined in Paragraph 5(a).
"Initial Term Expiration Date" shall mean Initial Term Expiration
Date as defined in Paragraph 5(a).
"Insurance Requirements" shall mean the requirements of all
insurance policies required to be maintained in accordance with this Lease.
<PAGE>
"Land" shall mean the Land as defined in Paragraph 1 and
described in EXHIBIT "A".
"Landlord's Cash Contribution" shall mean $2,200,000.
"Landlord's Maximum Contribution" shall mean $4,200,000.
"Landlord's Share of Project Costs" shall mean the lesser of (i)
the Project Costs or (ii) the amount actually advanced by or on behalf of
Landlord for Direct Costs and Indirect Costs, but in no event more than
Landlord's Maximum Contribution.
"Law" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Year" shall mean each successive twelve (12) calendar
month period during the Term except that the first Lease Year shall commence on
the Primary Term Commencement Date and shall end at midnight on the last day of
the twelfth (12th) full calendar month hereafter.
"Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1.
"Legal Requirements" shall mean all present and future Laws
(including but not limited to Environmental Laws and Laws relating to
accessibility to, usability by, and discrimination against, disabled
individuals) and all covenants, restrictions and conditions now or hereafter of
record which may be applicable to Tenant or to any of the Leased Premises, or to
the use, manner of use, occupancy, possession, operation, maintenance,
alteration, repair or restoration of any of the Leased Premises, even if
compliance therewith necessitates structural changes or improvements or results
in interference with the use or enjoyment of any of the Leased Premises.
"Lender" shall mean (a) Initial Lender, its successors and
assigns, and (b) any other person (and their respective successors and assigns)
which may, after the date hereof, make a Loan to Landlord or is the holder of
any Note.
"Loan" shall mean the Initial Loan and any other loan made by one
or more Lenders to Landlord, which Initial Loan or other loan is secured by a
Mortgage and an Assignment and evidenced by a Note. For purposes of this Lease,
"Loan" shall not include the Tenant Loan.
"Monetary Event of Default" shall mean a failure by Tenant to pay
Rent or any other Monetary Obligation within the
<PAGE>
cure period, if any, as provided in this Lease.
"Monetary Obligations" shall mean Rent and all other sums payable
by Tenant under this Lease to Landlord, to any third party on behalf of Landlord
or to any Indemnitee pursuant to the provisions of this Lease.
"Mortgage" shall mean any mortgage or deed of trust from Landlord
to a Lender which (a) encumbers any of the Leased Premises and (b) secures
Landlord's obligation to repay a Loan, as the same may be amended, supplemented
or modified.
"Net Award" shall mean (a) the entire award payable to Landlord
or Lender by reason of a Condemnation whether pursuant to a judgment or by
agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v)
or (vi) of Paragraph 16(a) (to the extent payable to Landlord, Tenant or
Lender), as the case may be, less any expenses incurred by Tenant, Landlord and
Lender in collecting such award or proceeds.
"Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.
"Occupancy Date" shall mean the date on which all of the
following events have occurred: (i) the Improvements have been substantially
completed in accordance with the Plans, as certified to by the Architect (as
defined in the Construction Agency Agreement), (ii) the Architect has provided
to Landlord a list of "punch list" items together with the cost of, and schedule
for, completion of such items, and (iii) all permanent permits and licenses
required for the occupancy of the Improvements have been obtained, but in no
event later than June 30, 1995, as the same may be extended by Force Majeure.
"Offer" shall mean Offer as defined in Paragraph 8(d).
"Offer Rejection" shall mean Offer Rejection as defined in
Paragraph 10(h).
"Partial Casualty" shall mean any Casualty which does not
constitute an Early Termination Event.
"Partial Condemnation" shall mean any Condemnation which does not
constitute an Early Termination Event.
"Payment Date" shall mean the Payment Date as defined in
Paragraph 23(a)(i).
"Permitted Encumbrances" shall mean the existing state of title
to the Leased Premises, including those covenants, restrictions, reservations,
liens, conditions and easements and other encumbrances, other than any Mortgage
or Assignment and other than the Tenant Mortgage, listed on EXHIBIT "C" hereto.
It is agreed that such listing shall not be deemed to revive any such
encumbrances that have expired or terminated or are otherwise invalid or
unenforceable.
"Person" shall mean an individual, partnership, association,
corporation or other entity.
<PAGE>
"Plans" shall mean the plans and specifications prepared and to
be prepared by Suhar & Associates for the construction of the Improvements. A
list of the existing Plans is attached to the Construction Agency Agreement.
Any amendments, modifications or additions to the Plans shall be approved as
provided in the Construction Agency Agreement.
"Prepayment Premium" shall mean any payment (other than a payment
of principal and/or interest which Landlord is required to make under a Note or
a Mortgage) by reason of any prepayment by Landlord of any principal due under a
Note or Mortgage as the result of the occurrence of an Early Termination Event
or an Event of Default, and which may be (in lieu of such prepayment premium or
prepayment penalty) a "make whole" clause requiring a prepayment premium in an
amount sufficient to compensate the Lender for the loss of the benefit of the
Loan due to a prepayment.
"Present Value" of any amount shall mean such amount discounted
by a rate per annum which is the lower of (a) the Prime Rate at the time such
present value is determined or (b) eight percent (8%) per annum. As used
herein, "Present Value" shall apply only to the calculations set forth in
Paragraph 23.
"Primary Term" shall mean Primary Term as defined in Paragraph 5.
"Primary Term Commencement Date" shall mean Primary Term
Commencement Date as defined in Paragraph 5.
"Primary Term Expiration Date" shall mean Primary Term Expiration
Date as defined in Paragraph 5.
"Prime Rate" shall mean the annual interest rate as published,
from time to time, in the WALL STREET JOURNAL as the "Prime Rate" in its column
entitled "Money Rates". The Prime Rate may not be the lowest rate of interest
charged by any "large U.S. money center commercial banks" and Landlord makes no
representations or warranties to that effect. In the event the WALL STREET
JOURNAL ceases publication or ceases to publish the "Prime Rate" as described
above, the Prime Rate shall be the average per annum discount rate (the
"DISCOUNT RATE") on ninety-one (91) day bills ("TREASURY BILLS") issued from
time to time by the United States Treasury at is most recent auction, plus three
hundred (300) basis points. If no such 91-day Treasury Bills are then being
issued, the Discount Rate shall be the discount rate on Treasury Bills then
being issued for the period of time closest to ninety-one (91) days.
"Project Cost" shall mean the sum of all Direct Costs and
Indirect Costs incurred or to be incurred for the acquisition of the Land and
the acquisition, construction and/or installation of the Improvements.
"Relevant Amount" shall mean the Early Termination Amount, or the
Default Termination Amount or the Option Purchase Price, as the case may be.
<PAGE>
"Relevant Date" shall mean (a) the date on which Tenant exercises
its option to purchase the Leased Premises pursuant to Paragraph 34, (b) the
date which is six (6) months prior to the expiration of the Term for purposes of
determining the purchase price under Paragraph 35 hereof and (c) the date when
Fair Market Value is redetermined, in the event of a redetermination of Fair
Market Value pursuant to Paragraph 20(c).
"Remaining Obligations" shall mean Remaining Obligations as
defined in Paragraph 18(c).
"Remaining Sum" shall mean Remaining Sum as defined in Paragraph
19(c).
"Renewal Term" shall mean Renewal Term as defined in Paragraph 5.
"Rent" shall mean, collectively, Basic Rent and Additional Rent.
"Requisition" shall mean any temporary requisition or
confiscation of the use or occupancy of any of the Leased Premises by any
governmental authority, civil or military, whether pursuant to an agreement with
such governmental authority in settlement of or under threat of any such
requisition or confiscation, or otherwise.
"Retention Date" shall mean the later of the date on which the
amount of the Remaining Sum is finally determined or the date on which
Landlord's right to the Remaining Sum is finally determined.
"Site Assessment" shall mean a Site Assessment as defined in
Paragraph 10(c).
"State" shall mean the State of Kentucky.
"Structures" shall mean the Structures as defined in Paragraph 1.
"subject to adjustment" following any amount stated as a specific
number in this Lease, shall mean that such number is deemed to be increased on
the first day of each Lease Year commencing with the second Lease Year by an
amount determined by multiplying the number by a fraction, the numerator of
which is the difference between the CPI for the month prior to the first day of
such Lease Year and the CPI occurring one (1) year earlier and the denominator
of which shall be the CPI occurring one (1) year earlier and adding the product
of such multiplication to such number.
"Surviving Obligations" shall mean any obligations of Tenant
under this Lease, actual or contingent, which arise on or prior to the
expiration or prior termination of this Lease or which survive such expiration
or termination by their own terms.
"Taking" shall mean (a) any taking or damaging of all or a
portion of any of the Leased Premises (i) in or by condemnation or other eminent
domain proceedings pursuant to any Law, general or special, or (ii) by reason of
any agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding, or (b) any de
<PAGE>
facto condemnation. The Taking shall be considered to have taken place as of
the later of the date actual physical possession is taken by the condemnor, or
the date on which the right to compensation and damages accrues under the law
applicable to the Leased Premises.
"Tenant Loan" shall mean the non-recourse loan in the maximum
amount of $200,000 from Tenant to Landlord that is secured by the Tenant
Mortgage.
"Tenant Mortgage" shall mean the non-recourse second priority
mortgage and security agreement from Landlord to Tenant that secures the Tenant
Loan.
"Term" shall mean the Primary Term and the Initial Term, plus any
exercised Renewal Terms.
"Third Party Purchaser" shall mean Third Party Purchaser as
defined in Paragraph 21(f).
"Warrant Agreement" shall mean that certain Warrant Agreement of
even date between Landlord and Tenant.
3. TITLE AND CONDITION.
(a) The Leased Premises are demised and let subject to (i) the
Mortgage and Assignment presently in effect, (ii) the Tenant Mortgage, (iii) the
rights of any Persons in possession of the Leased Premises, (iv) the existing
state of title of any of the Leased Premises, including any Permitted
Encumbrances, (v) any state of facts which an accurate survey or physical
inspection of the Leased Premises might show, (vi) all Legal Requirements,
including any existing violation of any thereof, and (vii) the condition of the
Leased Premises as of the commencement of the Term, without representation or
warranty by Landlord.
(b) LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE
THE LEASED PREMISES AS IS. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS
LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR
SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY WARRANTY
OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR
USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii)
THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO,
(v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix)
CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii)
DURABILITY (xiv) OPERATION (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE,
HAZARDOUS CONDITION OR HAZARDOUS ACTIVITY OR (xvi) COMPLIANCE OF THE LEASED
PREMISES WITH ANY LAW OR LEGAL REQUIREMENT; AND ALL RISKS INCIDENT THERETO ARE
TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES IS OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE LEASED PREMISES HAS BEEN
INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER
<PAGE>
LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH
RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
(c) Tenant represents to Landlord that Tenant has examined the title
to the Leased Premises prior to the execution and delivery of this Lease and has
found the same to be satisfactory for the purposes contemplated hereby. Tenant
represents and warrants to Landlord that (i) Tenant has only the leasehold right
of possession and use of the Leased Premises as provided herein, (ii) on the
Final Completion Date the Improvements will substantially conform to all Legal
Requirements and all Insurance Requirements, (iii) all easements necessary or
appropriate for the use or operation of the Leased Premises have been obtained,
(iv) as of the Final Completion Date all contractors and subcontractors who have
performed work on or supplied materials to the Improvements will have been fully
paid unless Landlord or Tenant is contesting any such payment in accordance with
Paragraph 14 hereof, and all materials and supplies have been fully paid for,
(v) as of the Final Completion Date the Improvements will have been fully
completed in a workmanlike manner of first class quality, and (vi) as of the
Final Completion Date all Equipment necessary or appropriate for the use or
operation of the Improvements will have been installed and will be fully
operative in all material respects.
(d) Landlord hereby assigns to Tenant, without recourse or warranty
whatsoever, all warranties, guaranties, indemnities and similar rights which
Landlord may have against any manufacturer, seller, engineer, contractor or
builder in respect of any of the Leased Premises. Such assignment shall remain
in effect until an Event of Default occurs or until the expiration or earlier
termination of this Lease, whereupon such assignment shall cease and all of said
warranties, guaranties, indemnities and other rights shall automatically revert
to Landlord.
(e) Pursuant to the Construction Agency Agreement, and so long as
Landlord is not in default of its obligations under the Construction Agency
Agreement, Tenant will cause the Improvements to be constructed with funds to be
provided by or on behalf of Landlord, all as more particularly described in the
Construction Agency Agreement. The Improvements will be owned by Landlord and
are included within the Leased Premises. Tenant acknowledges that the
Improvements have not yet been constructed and that, pursuant to the
Construction Agency Agreement, Tenant has the responsibility for causing the
Improvements to be completed in accordance with the terms of the Construction
Agency Agreement. Landlord acknowledges that, to the extent and subject to the
terms and conditions specified in the Construction Agency Agreement, it is
obligated to and shall provide funds for the construction of the Improvements.
Landlord will not make any representations or warranties with respect to the
Improvements. Tenant further acknowledges that, upon occurrence of an Event of
Default, Landlord may terminate the Construction Agency Agreement, and in
addition to all other remedies of Landlord
<PAGE>
under this Lease, Landlord shall have the right but not the obligation to
complete construction of the Improvements in accordance with the Plans. If
Landlord so completes construction of the Improvements, Tenant will not be
excused from paying all Rent due pursuant to the terms of this Lease, and,
whether or not Landlord completes the Improvements, Landlord shall have the
right to exercise any or all of its remedies hereunder following an Event of
Default. All acknowledgments of Tenant regarding the Leased Premises contained
in Paragraph 3(b) shall be deemed to have been made again as of the Final
Completion Date.
(f) Tenant, at its sole cost and expense, shall promptly and
diligently enforce any third party warranties, guaranties and indemnities from
contractors, materialmen and manufacturers with respect to the construction and
installation of the Improvements, including any rights and remedies existing
under contract or pursuant to the Uniform Commercial Code.
(g) In the event Landlord fails to provide funds for construction and
installation of the Improvements in accordance with and subject to the terms of
the Construction Agency Agreement, Tenant shall have the right to pursue any
rights and remedies available to it at law or in equity, but shall have no right
of offset hereunder.
4. USE OF LEASED PREMISES; QUIET ENJOYMENT.
(a) Tenant may occupy and use the Leased Premises for food
processing, cold storage, blast freezing, packaging, distribution, warehousing
and related office uses and for no other purpose. Tenant shall not use or
occupy or permit any of the Leased Premises to be used or occupied, nor do or
permit anything to be done in or on any of the Leased Premises, in a manner
which would or might be reasonably expected to (i) violate any Law or Legal
Requirement, (ii) make void or voidable or cause any insurer to cancel any
insurance required by this Lease, or make it difficult or impossible to obtain
any such insurance at commercially reasonable rates, (iii) cause structural
injury to any of the Improvements or (iv) constitute a public or private
nuisance or waste.
(b) Subject to the provisions hereof, so long as no Event of Default
has occurred and is continuing, Tenant shall quietly hold, occupy and enjoy the
Leased Premises throughout the Term, without any hindrance, ejection or
molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord may enter upon and examine any of the Leased
Premises at such reasonable times as Landlord may select for the purpose of
inspecting the Leased Premises, verifying compliance or non-compliance by Tenant
with its obligations hereunder and the existence or non-existence of an Event of
Default or event which with the passage of time and/or notice would constitute
an Event of Default, showing the Leased Premises to prospective Lenders and
purchasers and taking such other action with respect to the Leased Premises as
is permitted by any provision hereof.
5. TERM.
<PAGE>
(a) Subject to the provisions hereof, Tenant shall have and hold the
Leased Premises for a primary term (the "PRIMARY TERM") commencing on the date
hereof (the "PRIMARY TERM COMMENCEMENT DATE") and ending on the last day of the
calendar month in which the Funding Deadline occurs (the "PRIMARY TERM
EXPIRATION DATE") and for an initial term (the "INITIAL TERM") commencing on the
first day following the Primary Term Expiration Date (the "INITIAL TERM
COMMENCEMENT DATE") and ending on the last day of the three hundredth (300th)
calendar month next following the date on which the Initial Term commences (the
"INITIAL TERM EXPIRATION DATE"). Promptly following the Initial Term
Commencement Date, Landlord and Tenant shall execute an Addendum to this Lease
setting forth the Initial Term Commencement Date and the Initial Term Expiration
Date. If all Rent and all other sums due hereunder shall not have been fully
paid by the end of the Term, Landlord may, at its option, extend the Term until
all said sums shall have been fully paid.
(b) Provided that if, on or prior to the Initial Term Expiration Date
or any other Renewal Date (as hereinafter defined) this Lease shall not have
been terminated pursuant to any provision hereof, then on the Initial Term
Expiration Date and on the fifth (5th) and tenth (10th) anniversaries of the
Initial Term Expiration Date (the Initial Term Expiration Date and each such
anniversary being a "RENEWAL DATE"), the Term shall be deemed to have been
automatically extended for an additional period of five (5) years (each such
five (5) year period, a "RENEWAL TERM"), unless Tenant shall notify Landlord in
writing at least four hundred twenty five (425) days prior to the next Renewal
Date that Tenant is terminating this Lease as of the next Renewal Date. Any
such extension of the Term shall be subject to all of the provisions of this
Lease, as the same may be amended, supplemented or modified.
(c) If Tenant exercises its option not to extend or further extend
the Term, or if an Event of Default occurs, then Landlord shall have the right
during the remainder of the Term then in effect and, in any event, Landlord
shall have the right during the last year of the Term, to (i) advertise the
availability of the Leased Premises for sale or reletting and to erect upon the
Leased Premises signs indicating such availability and (ii) show the Leased
Premises to prospective purchasers or tenants or their agents at such reasonable
times as Landlord may select.
6. BASIC RENT. Tenant shall pay to Landlord, as annual rent for the
Leased Premises during the Term, the amounts determined in accordance with
EXHIBIT "D" hereto ("BASIC RENT"). Basic Rent shall begin accruing on the
Primary Term Commencement Date. Commencing on the Basic Rent Commencement Date
and continuing on the first day of each month thereafter to and including the
month following the month in which the Initial Loan Funding Date occurs, Basic
Rent shall be payable monthly in arrears. Commencing on the first day of the
first month following the Initial Loan Funding Date and continuing on the first
day of each month thereafter for the balance of the Term, Basic Rent shall be
payable monthly in advance (each such monthly day being a "BASIC RENT PAYMENT
DATE"). Each such rental payment shall be made to Landlord at its address set
forth above and/or to such one or more other Persons, at such addresses and in
such proportions as Landlord may direct by fifteen (15) days' prior written
notice to Tenant (in which event Tenant shall give
<PAGE>
Landlord notice of each such payment concurrent with the making thereof), and in
Federal Funds. Tenant shall receive as a credit against monthly installments of
Basic Rent (a) amounts, if any, paid to Landlord from the proceeds of the
Business Income-Interruption Insurance described in Paragraph 16(v) hereof, and
(b) so long as no Event of Default exists and remains continuing, monthly
interest received by Landlord on that portion of the principal balance of the
Initial Loan which has been advanced to Landlord by the Initial Lender but not
further advanced by Landlord to Tenant pursuant to the Construction Agency
Agreement (the "UNADVANCED PROCEEDS"). Landlord hereby agrees to invest such
Unadvanced Proceeds as directed by Tenant, unless otherwise directed by the
Initial Lender.
7. ADDITIONAL RENT.
(a) Subject to any specific provisions of this Lease to the contrary,
Tenant shall pay and discharge, as additional rent (collectively, "ADDITIONAL
RENT"):
(i) except as otherwise specifically provided herein, all costs
and expenses of Tenant, Landlord and Lender which are incurred in connection or
associated with:
(A) the ownership, use, non-use, occupancy, possession,
operation, condition, design, construction, maintenance, alteration, repair or
restoration of any of the Leased Premises,
(B) the performance of any of Tenant's obligations under
this Lease,
(C) any sale or other transfer of any of the Leased Premises
to Tenant under this Lease,
(D) any Condemnation proceedings,
(E) the adjustment, settlement or compromise of any
insurance claims involving or arising from any of the Leased Premises,
(F) the prosecution, defense or settlement of any litigation
involving or arising from any of the Leased Premises, this Lease, or the sale of
the Leased Premises to Landlord (except and to the extent, in the case of
litigation commenced by Landlord, a court of competent jurisdiction rules,
pursuant to a final, non-appealable order, that Landlord has wrongfully sued the
defendant in such litigation),
(G) the exercise or enforcement by Landlord, its successors
and assigns, of any of its rights under this Lease,
(H) any amendment to or modification or termination of this
Lease made at the request of Tenant,
(I) Costs of Landlord's counsel actually incurred in
connection with the preparation, negotiation and
<PAGE>
execution of this Lease, and Costs of Initial Lender's counsel actually incurred
in connection with the preparation, negotiation and execution of the Initial
Loan documentation and review of and comment on related documentation, or
actually incurred in connection with any act undertaken by Landlord (or its
counsel) or Lender (or its counsel) at the request of Tenant, or actually
incurred in connection with any act of Landlord (or Lender) performed on behalf
of Tenant, if Tenant fails to perform such act after notice from Landlord (or
Lender) that Tenant is required to perform such act pursuant to the terms of
this Lease, and
(J) any other items specifically required to be paid by
Tenant under this Lease, which costs and expenses shall include, without
limitation, all Costs, judgments, settlement amounts, Impositions, insurance
premiums, appraisal fees, the cost of performing and reporting all Site
Assessments to the extent provided in Paragraph 10(c) (unless and to the extent
the Site Assessment reveals an Environmental Violation which is conclusively
demonstrated, in the reasonable judgment of the Site Reviewers, to be the direct
result of Landlord entering upon the Leased Premises and performing activities
thereon), the cost of curing any Environmental Violation (unless and to the
extent Landlord enters upon the Leased Premises and performs activities which
are conclusively demonstrated, in the reasonably judgment of the Site Reviewers,
to be the sole and direct cause of such Environmental Violation), and the cost
of complying with all Legal Requirements, fines, penalties and interest;
(ii) after the date all or any portion of any installment of
Basic Rent is due and not paid, an amount equal to five percent (5%) of the
amount of such unpaid installment or portion thereof ("LATE CHARGE"), provided,
however, that with respect to the first two late payments of all or any portion
of any installment of Basic Rent in any consecutive twelve (12) month period the
Late Charge shall not be due and payable unless the Basic Rent has not been paid
within five (5) days following the due date thereof;
(iii) a sum equal to any additional sums (including any late
charge, default penalties, interest and fees of Lender's counsel) which are
payable by Landlord to any Lender under any Note by reason of Tenant's late
payment or non-payment of Basic Rent or by reason of an Event of Default; and
(iv) interest at the rate (the "DEFAULT RATE") equal to the lower
of (A) the maximum rate permitted by Law and (B) of twelve and one-half percent
(12.5%) per annum on the following sums until paid in full: (1) all overdue
installments of Basic Rent from the respective due dates thereof, (2) all
overdue amounts of Additional Rent relating to obligations which Landlord shall
have paid on behalf of Tenant, beginning five (5) Business Days after notice of
payment thereof by Landlord, and (3) all other overdue amounts of Additional
Rent, from the date when any such amount becomes overdue;
(v) provided, that in no event shall amounts payable under
Paragraphs 7(a)(ii), (iii) and (iv) above exceed the maximum rate permitted by
applicable Law.
(b) Subject to any specific provisions of this Lease
<PAGE>
to the contrary, Tenant shall pay and discharge (i) any Additional Rent referred
to in Paragraph 7(a)(i) when the same shall become due, provided that amounts
which are billed to Landlord or any third party, but not to Tenant, shall be
paid within ten (10) days after Landlord's written demand for payment thereof,
and (ii) any other Additional Rent, within fifteen (15) days following
Landlord's written demand for payment thereof. At the time Landlord makes
written demand for payment, Landlord shall furnish to Tenant reasonably detailed
invoices or statements for all items of Additional Rent paid by Landlord or
Lender.
(c) Notwithstanding anything in this Paragraph 7 to the contrary,
Tenant shall not be responsible for paying any costs of Landlord and/or any
Lender incurred with respect to any sale, transfer, or financing of the Leased
Premises by Landlord unless Tenant purchases the Leased Premises from Landlord
pursuant to any provision of this Lease which requires Tenant to pay such costs.
8. NET LEASE; NON-TERMINABILITY.
(a) This Lease is a net lease and all Monetary Obligations shall be
paid without notice or demand and without set-off, counterclaim, recoupment,
abatement, suspension, deferment, diminution, deduction, reduction or defense,
except as otherwise expressly provided in this Lease (collectively, a
"SET-OFF").
(b) Except as otherwise expressly provided herein, this Lease and the
rights of Landlord and the obligations of Tenant hereunder shall not be affected
by any event or for any reason, including the following: (i) any damage to or
theft, loss or destruction of any of the Leased Premises, (ii) any Condemnation,
(iii) the prohibition, limitation or restriction of Tenant's use of any of the
Leased Premises, (iv) any eviction by paramount title or otherwise, (v) Tenant's
acquisition of ownership of any of the Leased Premises other than pursuant to an
express provision of this Lease, (vi) any default on the part of Landlord
hereunder or under any Note, Mortgage, Assignment or any other agreement, (vii)
any latent or other defect in any of the Leased Premises, (viii) the breach of
any warranty of any seller or manufacturer of any of the Building Systems
Equipment, (ix) any violation of Paragraph 4(b) or any other provision of this
Lease by Landlord, (x) the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution or winding-up of, or other proceeding
affecting Landlord so long as such proceeding does not terminate Tenant's right
to possession of the Leased Premises pursuant to the provisions of this Lease,
(xi) the exercise of any remedy, including foreclosure, under any Mortgage or
Assignment, (xii) any action with respect to this Lease (including the
disaffirmance hereof) which may be taken by Landlord, any trustee, receiver or
liquidator of Landlord or any court under the Federal Bankruptcy Code or
otherwise, (xiii) any interference with Tenant's use of the Leased Premises,
(xiv) market or economic changes or (xv) any other cause, whether similar or
dissimilar to the foregoing, any present or future Law to the
<PAGE>
contrary notwithstanding.
(c) Except as may be specifically provided herein to the contrary,
the obligations of Tenant hereunder shall be separate and independent covenants
and agreements, all Monetary Obligations shall continue to be payable in all
events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and the
obligations of Tenant hereunder shall continue unaffected unless the requirement
to pay or perform the same shall have been terminated pursuant to an express
provision of this Lease. All Rent payable by Tenant hereunder shall constitute
"rent" for all purposes (including Section 502(b)(6) of the Bankruptcy Code).
(d) Except as otherwise expressly provided herein, Tenant shall have
no right and hereby waives all rights which it may have under any Law (i) to
quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.
9. PAYMENT OF IMPOSITIONS.
(a) Subject to the provisions of Paragraph 14 hereof, Tenant shall,
before interest or penalties are due thereon, pay and discharge all taxes
(including real and personal property, franchise, sales and rent taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Leased Premises, all assessments and levies, all permit, inspection and license
fees, all rents and charges for water, sewer, utility and communication services
relating to any of the Leased Premises, all ground rents and all other public
charges whether of a like or different nature, even if unforeseen or
extraordinary, imposed upon or assessed against (i) Tenant, (ii) any of the
Leased Premises, (iii) Landlord as a result of or arising in respect of the
acquisition, ownership, occupancy, leasing, use, possession or sale of any of
the Leased Premises, any activity conducted on any of the Leased Premises, or
the Rent, or (iv) any Lender by reason of any Note, Mortgage, Assignment or
other document evidencing or securing a Loan and which (as to this clause (iv))
Landlord has agreed to pay (collectively, the "IMPOSITIONS"); provided, that
nothing herein shall obligate Tenant to pay (A) income, excess profits or other
taxes of Landlord (or Lender) which are determined on the basis of Landlord's
(or Lender's) net income or net worth (unless such taxes are in lieu of or a
substitute for any other tax, assessment or other charge upon or with respect to
the Leased Premises which, if it were in effect, would be payable by Tenant
under the provisions hereof or by the terms of such tax, assessment or other
charge), (B) any estate, inheritance, succession, gift or similar tax imposed on
Landlord, (C) any capital gains tax imposed on Landlord in connection with the
sale of the Leased Premises to any Person, (D) installments of principal and/or
interest payable by Landlord on any Loan, or (E) property management fees
payable by Landlord. If any Imposition may be paid in installments without
interest or penalty, Tenant shall have the option to pay such Imposition in
installments; in such event, Tenant shall be liable only for those installments
which accrue or become due and payable during the Term. Tenant shall prepare
and file all tax reports required by governmental authorities which relate to
the Impositions. Tenant shall deliver to Landlord (1) copies of all settlements
and notices pertaining to the Impositions which may be issued by any
governmental authority within ten (10) days after Tenant's receipt thereof,
(2) receipts for payment of all taxes required
<PAGE>
to be paid by Tenant hereunder within thirty (30) days after the due date
thereof and (3) receipts for payment of all other Impositions within ten (10)
days after Landlord's request therefor.
(b) At any time (i) that a Lender so requires or (ii) following the
occurrence and during the continuation of a Monetary Event of Default, Landlord
shall have the right to require Tenant to pay to Landlord an additional monthly
sum (each an "ESCROW PAYMENT") sufficient to pay the Escrow Charges (as
hereinafter defined) as they become due; PROVIDED, that should any subsequent
Monetary Event of Default occur, Landlord shall have the right to require Tenant
to pay to Landlord Escrow Payments in accordance with the terms of this
Paragraph 9(b) for the remainder of the Term. As used herein, "ESCROW CHARGES"
shall mean real estate taxes on the Leased Premises or payments in lieu thereof
and premiums on any insurance required by this Lease. Landlord shall determine
the amount of the Escrow Charges and of each Escrow Payment. If the Escrow
Payments are held by Lender, the Escrow Payments may be commingled with other
funds of Lender. If the Escrow Payments are held by Landlord, the Escrow
Payments shall not be commingled with other funds of Landlord, shall be invested
and interest thereon shall accrue to the benefit of Tenant. Landlord shall
apply the Escrow Payments to the payment of the Escrow Charges in such order or
priority as Landlord shall determine or as required by law. If at any time the
Escrow Payments theretofore paid to Landlord shall be insufficient for the
payment of the Escrow Charges, Tenant, within ten (10) days after Landlord's
demand therefor, shall pay the amount of the deficiency to Landlord.
10. COMPLIANCE WITH LAWS AND EASEMENT AGREEMENTS; ENVIRONMENTAL
MATTERS.
(a) Tenant shall, at its expense, comply with and conform to, in all
material respects, and cause any other Person occupying any part of the Leased
Premises to comply with and conform to, in all material respects, all Insurance
Requirements and Legal Requirements (including all applicable Environmental
Laws). Tenant shall not at any time (i) cause, permit or suffer to occur any
Environmental Violation or (ii) permit any sublessee, assignee or other Person
occupying the Leased Premises under or through Tenant to cause, permit or suffer
to occur any Environmental Violation.
(b) Tenant, at its sole cost and expense, will at all times promptly
and faithfully abide by, discharge and perform all of the covenants, conditions
and agreements contained in any Easement Agreement on the part of Landlord or
the occupier to be kept and performed thereunder. If and to the extent
necessary to enable Tenant to comply with its obligations set forth in the
preceding sentence, Landlord shall grant Tenant a license to enforce Landlord's
rights under any such Easement Agreement. Tenant will not alter, modify, amend
or terminate any Easement Agreement, give any consent or approval thereunder, or
enter into any new Easement Agreement without, in each case, the prior written
consent of Landlord.
<PAGE>
(c) Upon prior written notice from Landlord, Tenant shall permit such
persons as Landlord may designate ("SITE REVIEWERS") to visit the Leased
Premises and perform, as agents of Tenant, environmental site investigations and
assessments ("SITE ASSESSMENTS") on the Leased Premises for the purpose of
determining whether there exists on the Leased Premises any Environmental
Violation or any condition which could result in any Environmental Violation.
Such Site Assessments may include both above and below the ground testing for
Environmental Violations and such other tests as may be necessary, in the
opinion of the Site Reviewers, to conduct the Site Assessments. Tenant shall
supply to the Site Reviewers such historical and operational information
regarding the Leased Premises as may be reasonably requested by the Site
Reviewers to facilitate the Site Assessments, and shall make available for
meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. Landlord shall not have the right to conduct a Site Assessment more
than one time every three years during the Term except that such limitation
shall not apply to any Site Assessment conducted in connection with a financing,
refinancing or sale of the Leased Premises or if Landlord has reasonable cause
to believe that an Environmental Violation exists in violation of Law or if
Landlord is required to conduct a Site Assessment by any governmental agency or
in order to monitor an existing Environmental Violation. Provided that no
Monetary Event of Default shall have occurred and be continuing, Tenant shall
have the right to consent to the selection of the Site Reviewers, which consent
not be unreasonably withheld or delayed. If a Monetary Event of Default exists,
Tenant shall not have any right to consent to the selection of the Site
Reviewers so long as the Site Reviewers shall be a nationally recognized firm of
licensed engineers.
(d) If an Environmental Violation occurs or is found to exist and, in
the reasonable judgment of the Site Reviewer, the cost of remediation of the
same is likely to exceed $100,000, Tenant shall provide to Landlord, within
thirty (30) days after Landlord's written request therefor, adequate financial
assurances that Tenant will effect such remediation in accordance with
applicable Environmental Laws. Such financial assurances shall be a bond or
letter of credit satisfactory to Landlord in form and substance and in an amount
equal to or greater than Landlord's reasonable estimate, based upon a Site
Assessment performed pursuant to Paragraph 10(c), of the anticipated cost of
such remedial action.
(e) Notwithstanding any other provision of this Lease, if an
Environmental Violation occurs or is found to exist and the Term would otherwise
terminate or expire, then, at the option of Landlord, the Term shall be
automatically extended beyond the date of termination or expiration and this
Lease shall remain in full force and effect beyond such date until the earlier
to occur of (i) the completion of all remedial action in accordance with
applicable Environmental Laws or (ii) the date specified in a written notice
from Landlord to Tenant terminating this Lease.
(f) Tenant shall notify Landlord immediately after becoming aware of
any Environmental Violation (or alleged Environmental Violation) or
noncompliance with any of the covenants contained in this Paragraph 10 and shall
forward to Landlord immediately upon receipt thereof copies of all orders,
reports, notices, permits, applications or other communications relating to any
such violation or noncompliance.
<PAGE>
(g) All future leases, subleases or concession agreements relating to
the Leased Premises entered into by Tenant shall require the other Person
thereto to comply with all Environmental Laws with respect to its use and
occupancy of the Leased Premises.
(h) Upon the occurrence of an Environmental Violation whose
remediation costs are estimated by the Site Reviewers to exceed $500,000, Tenant
shall have the right (but not the obligation) to make an Offer to purchase the
Leased Premises for a purchase price equal to the Early Termination Amount,
which Offer must be given, if at all, no later than thirty (30) days following
receipt by Landlord and Tenant of the Site Reviewer's estimate of remediation
costs. If a rejection (an "OFFER REJECTION") shall be given by Landlord, which
Offer Rejection shall contain the written consent of Lender, within thirty (30)
days following receipt of such offer, this Lease shall remain in full force and
effect in accordance with its terms, and Tenant shall promptly commence
remediation of the Environmental Violation. Unless Tenant shall have received
an Offer Rejection on or before the thirtieth (30th) day following receipt of
the Offer, Landlord shall be conclusively presumed to have rejected the Offer.
If the Offer is accepted by Landlord, then Tenant shall have no obligation to
provide the financial assurances pursuant to Paragraph 10(d) and on the first
Basic Rent Payment Date which occurs at least sixty (60) days following receipt
of the Offer, Tenant shall pay to Landlord the Early Termination Amount and all
Remaining Obligations and Landlord shall convey the Leased Premises to Tenant in
accordance with the provisions of Paragraph 20.
11. LIENS; RECORDING.
(a) Tenant shall not, directly or indirectly, create or permit to be
created or to remain and shall promptly discharge or remove any lien, levy or
encumbrance on any of the Leased Premises or on any Rent or any other sums
payable by Tenant under this Lease, other than any Mortgage or Assignment, the
Tenant Mortgage, the Permitted Encumbrances and any mortgage, lien, encumbrance
or other charge created by or resulting solely from any act or omission of
Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE
HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND
THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED
PREMISES. LANDLORD MAY AT ANY TIME, AND AT LANDLORD'S REQUEST TENANT SHALL
PROMPTLY, POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY
OF LANDLORD.
(b) Landlord and Tenant shall execute, deliver and record, file or
register (collectively, "RECORD") all such instruments as may be required or
permitted by any present or future Law in order to evidence the respective
interests of Landlord and Tenant in the Leased Premises, and shall cause a
memorandum of this Lease (or, if such a memorandum cannot be recorded, this
Lease), and any supplement hereto or thereto, to
<PAGE>
be recorded in such manner and in such places as may be required or permitted by
any present or future Law in order to protect the validity and priority of this
Lease.
12. MAINTENANCE AND REPAIR.
(a) Except for ordinary wear and tear, Tenant shall at all times
maintain the Leased Premises and the Adjoining Property in as good repair and
appearance as they are in on the Final Completion Date and fit to be used for
their intended use in accordance with the better of the practices generally
recognized as then acceptable by other companies in its industry or observed by
Tenant with respect to the other real properties owned or operated by it, and,
in the case of the Building Systems Equipment, in as good mechanical condition
as it was on the later of the Final Completion Date or the date of its
installation, except for ordinary wear and tear. Tenant shall take such other
action or actions as may be necessary or appropriate for the preservation and
safety of the Leased Premises. Tenant shall promptly make all Alterations of
every kind and nature, whether foreseen or unforeseen, which may be required to
comply with the foregoing requirements of this Paragraph 12(a). Landlord shall
not be required to make any Alteration, whether foreseen or unforeseen, or to
maintain any of the Leased Premises or Adjoining Property in any way, and Tenant
hereby expressly waives any right which may be provided for in any Law now or
hereafter in effect to make Alterations at the expense of Landlord or to require
Landlord to make Alterations. Any Alteration made by Tenant pursuant to this
Paragraph 12 shall be made in conformity with the provisions of Paragraph 13.
(b) If any Improvement, now or hereafter constructed, shall
(i) encroach upon any setback or any property, street or right-of-way adjoining
the Leased Premises, (ii) violate the provisions of any restrictive covenant
affecting the Leased Premises, (iii) hinder or obstruct any easement or
right-of-way to which any of the Leased Premises is subject or (iv) impair the
rights of others in, to or under any of the foregoing, Tenant shall, promptly
after receiving notice or otherwise acquiring knowledge thereof, either
(A) obtain from all necessary parties waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation,
hindrance, obstruction or impairment, whether the same shall affect Landlord,
Tenant or both, or (B) take such action as shall be necessary to remove all such
encroachments, hindrances or obstructions and to end all such violations or
impairments, including, if necessary, making Alterations.
13. ALTERATIONS AND IMPROVEMENTS.
(a) In addition to Alterations required by Paragraph 12 and 17,
Tenant shall have the right without having obtained the prior written consent of
Landlord and Lender, to (i) make any Alterations or series of related
Alterations to the Structures for a cost of not more than Five Hundred Thousand
Dollars ($500,000) in any one instance, or (ii) install Building Systems
Equipment, in the Structures or accessions to the Building Systems Equipment,
the cost of which as to such Building Systems Equipment or series of related
Building Systems Equipment does not exceed Five Hundred Thousand Dollars
($500,000), subject to adjustment.
<PAGE>
In connection with the construction of improvements (the "EXPANSION
IMPROVEMENTS") on real property owned or to be owned by Tenant and immediately
adjacent to and contiguous with the Land (the "EXPANSION PARCEL"), Tenant shall
have the right to integrate the Expansion Improvements, for the duration of the
Term only, with the Improvements (such actions being referred to herein as the
"EXPANSION"); provided, that (a) any Expansion Improvements shall be used for
purposes consistent with the uses permitted in Paragraph 4 of this Lease, and
shall be located entirely on the Expansion Parcel, (b) the Expansion, the
Expansion Parcel, the Expansion Improvements and the Leased Premises, both
before and after giving effect to the Expansion, shall comply with all necessary
zoning, setback, building, subdivision and other Legal Requirements, and Tenant
shall obtain all variances necessary therefor, including any variance necessary
to permit the Improvements and the Expansion Improvements to be constructed so
as to abut the property line common to the Land and the Expansion Parcel,
(c) prior to the Expansion, reciprocal easement agreements for pedestrian and
vehicular access, utilities, parking, party walls, lateral and subjacent
support, maintenance and shared systems and such other matters as may be deemed
necessary or advisable by Landlord or Lender, must be executed, delivered and
recorded by Landlord, Tenant and any party having an ownership or equitable
interest in the Land and the Expansion Parcel, (d) Tenant shall submit all plans
and specifications relating to the Expansion to Landlord and Lender, and
Landlord and Lender shall have approved such plans and specifications which
approval shall not be unreasonably withheld and shall be deemed given if no
response is received by Tenant within thirty (30) days following receipt by
Landlord and Lender of said plans and specifications, (e) the Expansion must be
constructed in such a way that upon expiration of the Term, the Improvements and
any Expansion Improvements may be separated into two, separately functioning and
independent buildings, Tenant hereby agreeing that Paragraph 26 of this Lease
shall be construed to require Tenant to restore the Improvements to be a
separately functioning and independent building, in the same condition it was in
prior to the Expansion, without any legal or functional reliance on the
Expansion Parcel or any Expansion Improvements or any building systems installed
therein, (f) during the course of constructing the Expansion, Tenant shall have
obtained and paid for such insurance, from such carriers, and in such amounts as
Landlord and Lender shall require in their sole discretion, (g) Tenant shall
obtain such endorsements to Landlord's and Lender's policies of title insurance
and such additional title insurance coverages as Landlord or Lender may require
in their sole discretion, (h) an amendment to this Lease shall be executed and
delivered by the parties hereto, which amendment shall, inter alia, add to the
Leased Premises any reciprocal easements agreements created pursuant to clause
(b) above and which shall address such other matters as Landlord shall
reasonably require to reflect the construction of the Expansion, and (i) Tenant
shall bear all costs and expenses related to the Expansion, such costs and
expenses to include, but not be limited to, attorney's fees and costs of
Landlord's and Lender's counsel, the cost of executing and delivering all
necessary amendments to this Lease, the Construction Agency Agreement, any
memorandum of this Lease and other related
<PAGE>
documentation, obtaining and documenting the consent of Guarantor to the
Expansion, title policy endorsements and recording fees, and otherwise complying
with the provisions of this Paragraph 13(a).
The consent of Landlord and Lender shall be required (A) if a Monetary
Event of Default exists, or (B) if the Alterations (or a series of related
Alterations) exceeds Five Hundred Thousand Dollars ($500,000), or (C) if Tenant
desires to remove and not upgrade or replace during the Term any Improvements,
or (D) if Tenant desires to construct upon the Land any additional Improvements;
provided that, with respect to (D) and (E) above, such consent shall not be
unreasonably withheld and shall be deemed given if no response is received by
Tenant within thirty (30) days following receipt by Landlord and Lender of such
request.
(b) If Tenant makes any Alterations pursuant to this Paragraph 13 or
as required by Paragraph 12 or 17 (such Alterations and actions being
hereinafter collectively referred to as "WORK"), whether or not Landlord's
consent is required, then (i) the market value of the Leased Premises shall not
be lessened by any such Work or its usefulness impaired, (ii) all such Work
shall be performed by Tenant in a good and workmanlike manner, (iii) all such
Work shall be expeditiously completed in compliance with all Legal Requirements,
(iv) all such Work shall comply with the Insurance Requirements, (v) if any such
Work involves the replacement of Building Systems Equipment because of additions
or changes to the Structures (as opposed to repairs or replacements of Building
Systems Equipment or parts thereto as part of an on-going maintenance program)
all Building Systems Equipment shall have a value and useful life equal to the
greater of (A) the value and useful life on the Final Completion Date of the
Building Systems Equipment being replaced or (B) the value and useful life of
the Building Systems Equipment being replaced immediately prior to the
occurrence of the event which required its replacement, (vi) if any such Work
involves the replacement of Building Systems Equipment parts thereof in
connection with an on-going maintenance program, reconditioned equipment and
parts may be used and upon completion the Building Systems Equipment need not
have a value and useful life greater than the value and useful life of the
Building Systems Equipment or parts being replaced immediately prior to the
occurrence of the event which requires its replacement, (vii) Tenant shall
promptly discharge or remove all liens filed against any of the Leased Premises
arising out of such Work, (viii) Tenant shall procure and pay for all permits
and licenses required in connection with any such Work, (ix) all such Work shall
be subject to this Lease, and (x) Tenant shall comply, to the extent requested
by Landlord or required by this Lease, with the provisions of Paragraph 19(a),
whether or not such Work involves restoration of the Leased Premises.
(c) If, after the Final Completion Date, Tenant makes any Alterations
to existing equipment that are not Alterations to the Structures or Building
Systems Equipment, Tenant shall retain title to such Alterations and to such
equipment ("TENANT ALTERATIONS") and shall have the right to remove the same
upon the expiration or earlier termination of this Lease, provided that (1) such
removal will not cause material damage to the Leased Premises, and (2) Tenant
promptly repairs any damage caused by such removal. Title to any Alterations
which are not
<PAGE>
Tenant Alterations shall vest in Landlord, and Tenant shall not be entitled to
remove the same upon the expiration or earlier termination of this Lease.
14. PERMITTED CONTESTS.
(a) Notwithstanding any other provision of this Lease, Tenant shall
not be required to (a) pay any Imposition, (b) comply with any Legal
Requirement, (c) discharge or remove any lien referred to in Paragraph 11 or 13,
(d) take any action with respect to any encroachment, violation, hindrance,
obstruction or impairment referred to in Paragraph 12(b) or (e) pay contractors
and subcontractors who have performed work on or supplied materials to the
Improvements or pay for materials and supplies (such non-compliance with the
terms hereof being hereinafter referred to collectively as "PERMITTED
VIOLATIONS"), so long as at the time of such contest no Monetary Event of
Default exists and so long as Tenant shall contest, in good faith, the
existence, amount or validity thereof, the amount of the damages caused thereby,
or the extent of its or Landlord's liability therefor by appropriate proceedings
which shall operate during the pendency thereof to prevent or stay (i) the
collection of, or other realization upon, the Permitted Violation so contested,
(ii) the sale, forfeiture or loss of any of the Leased Premises or any Rent to
satisfy or to pay any damages caused by any Permitted Violation, (iii) any
interference with the use or occupancy of any of the Leased Premises, (iv) any
interference with the payment of any Rent, (v) the cancellation or increase in
the rate of any insurance policy or a statement by the carrier that coverage
will be denied, (vi) the enforcement or execution of any injunction, order or
Legal Requirement with respect to the Permitted Violation or (vii) the
attachment of any mechanics' or materialman's lien to all or any portion of the
Leased Premises or the Rent payable hereunder.
(b) Tenant shall provide Landlord security which is satisfactory, in
Landlord's reasonable judgment, to assure that such Permitted Violation is
corrected, including all Costs, interest and penalties that may be incurred or
become due in connection therewith. While any proceedings which comply with the
requirements of this Paragraph 14 are pending and the required security is held
by Landlord, Landlord shall not have the right to correct any Permitted
Violation thereby being contested unless Landlord is required by law to correct
such Permitted Violation and Tenant's contest does not prevent or stay such
requirement as to Landlord. Each such contest shall be promptly and diligently
prosecuted by Tenant to a final conclusion, except that Tenant, so long as the
conditions of this Paragraph 14 are at all times complied with, has the right to
attempt to settle or compromise such contest through negotiations. Tenant shall
pay any and all losses, judgments, decrees and Costs in connection with any such
contest and shall, promptly after the final determination of such contest, fully
pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interest and Costs thereof or in connection
therewith, and perform all acts the performance of which shall be ordered or
<PAGE>
decreed as a result thereof.
(c) Notwithstanding the foregoing, no provision of this Lease shall
allow the Tenant to continue any contest or other activity which shall subject
Landlord to the risk of any civil or criminal liability.
15. INDEMNIFICATION.
(a) Tenant shall pay, protect, indemnify, save and hold harmless
Landlord, Lender and all other Persons described in clauses (i), (ii), (iii) and
the parenthetical clause in clause (iv) of Paragraph 30 (each an "INDEMNITEE")
from and against any and all liabilities, losses, damages (including punitive
damages), penalties, Costs, causes of action, suits, claims, demands or
judgments of any nature whatsoever, howsoever caused, without regard to the form
of action and whether based on strict liability, gross or any other theory of
recovery at law or in equity, arising from (i) any matter pertaining to the
acquisition (or the negotiations leading thereto), ownership, use, non-use,
occupancy, operation, condition, design, construction, maintenance, repair or
restoration of the Leased Premises or Adjoining Property, (ii) any casualty in
any manner arising from the Leased Premises or Adjoining Property, whether or
not Landlord has or should have knowledge or notice of any defect or condition
causing or contributing to said casualty, (iii) any violation by Tenant of any
provision of this Lease, any contract or agreement to which Tenant is a party,
any Legal Requirement or any Permitted Encumbrance or (iv) any alleged,
threatened or actual Environmental Violation, including (A) liability for
response costs and for costs of removal and remedial action incurred by the
United States Government, any state or local governmental unit or any other
Person, or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to Section 107 of CERCLA, or any successor section or act or
provision of any similar state or local Law, (B) liability for costs and
expenses of abatement, correction or clean-up, fines, damages, response costs or
penalties which arise from the provisions of any of the other Environmental Laws
and (C) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity. The foregoing indemnity shall not apply to losses to the extent that
they are caused by the gross negligence or willful misconduct of the Indemnified
Party requesting the benefit of this Paragraph 15.
(b) In case any action or proceeding is brought against any
Indemnitee by reason of any such claim, such Indemnitee shall promptly notify
Tenant in writing of any such action or proceeding. If an Indemnitee fails to
give Tenant prompt notice of any such claim and Tenant is prejudiced as a result
of Indemnitee's delay, Tenant shall not be obligated to indemnify such
Indemnitee to the extent Tenant is thereby prejudiced. Upon receipt of notice
from any Indemnitee, Tenant shall, subject to the preceding sentence, resist or
defend such action or proceeding by retaining counsel reasonably satisfactory to
such Indemnitee, and such Indemnitee will cooperate and assist in the defense of
such action or proceeding if reasonably requested so to do by Tenant. Any
Indemnitee may retain separate counsel to represent Indemnitee, but only at such
Indemnitee's
<PAGE>
sole cost and expense.
(c) The obligations of Tenant under this Paragraph 15 shall survive
any termination or expiration of this Lease.
16. INSURANCE.
(a) Tenant shall maintain the following insurance on or in connection
with the Leased Premises:
(i) Insurance against physical loss or damage to the
Improvements as provided under a standard "All Risk" property policy including
but not limited to flood (if the Leased Premises is in a flood zone) and
earthquake coverage in amounts not less than the actual replacement cost of the
Improvements and Equipment. Such policies shall contain replacement cost and
agreed amount endorsements and shall contain deductibles not more than
$10,000.00 per occurrence.
(ii) Commercial General Liability Insurance against claims for
personal and bodily injury, death or property damage occurring on, in or as a
result of the use of the Leased Premises, in an amount not less than $15,000,000
per occurrence/annual aggregate including but not limited to Incidental Medical
Malpractice, Host Liquor Liability, Non-Owned and Hired Automobile Liability and
all other coverage extensions that are usual and customary for properties of
this size and type provided, however, that the Landlord shall have the right to
require such higher limits as may be reasonable and customary for properties of
this size and type.
(iii) Worker's Compensation Insurance covering all persons
employed by Tenant in connection with any work done on or about any of the
Leased Premises for which claims for death, disease or bodily injury may be
asserted against Landlord, Tenant or any of the Leased Premises or, in lieu of
such Worker's Compensation Insurance, a program of self-insurance complying with
the rules, regulations and requirements of the appropriate agency of the State.
(iv) Comprehensive Boiler and Machinery Insurance on any of the
Building Systems Equipment or any other equipment on or in the Leased Premises
including but not limited to Service Interruption, Expediting Expenses, Ammonia
Contamination, Hazardous Clean-Up and Comprehensive Object Definition, in an
amount not less than $5,000,000 for damage to property, bodily injury or death
resulting from such covered perils as found in a standard Comprehensive Boiler &
Machinery Policy. Such policies may contain a deductible not in excess of
$10,000.
(v) Business Income/Interruption Insurance to include Loss of
Rents on an Actual Loss Sustained basis with a period of indemnity not less than
one year from the time of loss. Such insurance shall name Landlord and Lender
as "loss payee" solely with respect to Rent payable to or for the benefit of
Landlord under this Lease.
(vi) During construction of the Improvements and
<PAGE>
during any period in which substantial Alterations at the Leased Premises are
being undertaken, (A) Builder's Risk insurance covering the total completed
value including any "soft costs" with respect to the Improvements being
constructed, altered or repaired (on a completed value, non-reporting basis),
replacement cost of work performed and equipment, supplies and materials
furnished in connection with such construction or repair of Improvements, and
(B) General Liability, Worker's Compensation and Automobile Liability Insurance
with respect to the Improvements being constructed, altered or repaired.
(vii) Such other insurance (or other terms with respect to any
insurance required pursuant to this Paragraph 16, including without limitation
amounts of coverage, deductibles, form of mortgagee clause) on or in connection
with any of the Leased Premises as Landlord or Lender may reasonably require,
which at the time is usual and commonly obtained in connection with properties
located in the Louisville, Kentucky area and similar in type of building size
and use to the Leased Premises.
(b) The insurance required by Paragraph 16(a) shall be written by
companies which have a Best's rating of A:X or above and are admitted in, and
approved to write insurance policies by, the State Insurance Department for the
State. The insurance policies (i) shall be in amounts sufficient at all times
to satisfy any coinsurance requirements thereof and (ii) shall (except for the
worker's compensation insurance referred to in Paragraph 16(a)(iii) hereof) name
Landlord, Tenant and Lender as insured parties, as their respective interests
may appear. If said insurance or any part thereof shall expire, be withdrawn or
become void, for any reason, Tenant shall immediately obtain new or additional
insurance reasonably satisfactory to Landlord.
(c) Subject to the provisions of Paragraph 19, all proceeds of any
insurance required under clauses (i), (ii) (except proceeds payable to a Person
other than Tenant, Landlord or Lender), (iv) and (v) of Paragraph 16(a) shall be
payable to Landlord or, if required by the Mortgage, to Lender. Each insurance
policy referred to in clauses (i), (iv), (v) and (vi) of Paragraph 16(a) shall
contain standard non-contributory mortgagee clauses in favor of and acceptable
to Lender. Tenant shall receive a credit against installments of Basic Rent to
the extent proceeds of insurance described in Paragraph (a)(v) are paid to
Landlord. Each policy required by any provision of Paragraph 16(a), except
clause (iii) thereof, shall provide that it may not be cancelled except after
thirty (30) days' prior notice to Landlord and Lender. Each such policy shall
also provide that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of any of the Leased Premises for purposes
more hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage, Note, Assignment or other document evidencing or
securing the Loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for the
insurance required by Paragraph 16(a), shall renew or replace each policy and
deliver to Landlord evidence of the
<PAGE>
payment of the full premium therefor or installment then due at least thirty
(30) days prior to the expiration date of such policy, and shall promptly
deliver to Landlord certificates evidencing such insurance or, if requested by
Landlord, all original policies or certified copies thereof.
(e) Anything in this Paragraph 16 to the contrary notwithstanding,
any insurance which Tenant is required to obtain pursuant to Paragraph 16(a) may
be carried under a "blanket" or umbrella policy or policies covering other
properties or liabilities of Tenant, provided that such "blanket" or umbrella
policy or policies otherwise comply with the provisions of this Paragraph 16 and
provided further that such policies shall provide for a reserved amount
thereunder with respect to the Leased Premises so as to assure that the amount
of insurance required by this Paragraph 16 will be available notwithstanding any
losses with respect to other property covered by such blanket policies. The
amount of the total insurance allocated to the Leased Premises, which amount
shall be not less than the amounts required pursuant to this Paragraph 16, shall
be specified either (i) in each such "blanket" or umbrella policy or (ii) in a
written statement, which Tenant shall deliver to Landlord, from the insurer
thereunder. The original or a certified copy of each such "blanket" or umbrella
policy shall promptly be delivered to Landlord.
(f) Tenant shall promptly comply with and conform to (i) all
provisions of each insurance policy required by this Paragraph 16 and (ii) all
requirements of the insurers thereunder applicable to Landlord, Tenant or any of
the Leased Premises or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration or repair of any of the Leased Premises, even
if such compliance necessitates Alterations or results in interference with the
use or enjoyment of any of the Leased Premises.
(g) Tenant shall not carry separate insurance concurrent in form or
contributing in the event of a Casualty with that required in this Paragraph 16
unless (i) Landlord and Lender are included therein as named insureds, with loss
payable as provided herein, and (ii) such separate insurance complies with the
other provisions of this Paragraph 16. Tenant shall immediately notify Landlord
of such separate insurance and shall deliver to Landlord the original policies
therefor.
(h) All policies shall contain effective waivers by the carrier
against all claims for insurance premiums against Landlord and shall contain
full waivers of subrogation against the Landlord.
17. CASUALTY AND CONDEMNATION.
(a) Subject to Paragraph 17(b) and the immediately following
sentence, Landlord and/or Lender shall be entitled to adjust, collect and
compromise insurance claims which relate to any Casualty involving property
damage to the Leased Premises. Notwithstanding anything in this Lease to the
contrary, Tenant shall be entitled to adjust, collect and compromise all
insurance
<PAGE>
claims which relate to: (i) the Business Income/Interruption Insurance provided
for in Paragraph 16(a)(v), subject, however, to Landlord's rights to Rent; (ii)
any furniture, fixtures or equipment owned by Tenant; and (iii) any other
insurance claim not involving property damage to the Leased Premises.
(b) If any Casualty in excess of Twenty-five Thousand Dollars
($25,000) occurs, Tenant shall give Landlord and Lender immediate notice
thereof. Provided that no Monetary Event of Default has occurred and is
continuing, Tenant shall be entitled to adjust, collect and compromise any Net
Award that is less than Twenty-five Thousand Dollars ($25,000), subject to
adjustment, without any notice to or consent of Landlord or Lender and shall be
entitled to participate with Landlord and Lender in any adjustment, collection
and compromise of the Net Award payable in connection with a Casualty that is
reasonably estimated by Landlord and Lender to be Twenty-five Thousand Dollars
($25,000), subject to adjustment, or more. Tenant agrees to sign, upon the
request of Landlord or Lender, all such proofs of loss, receipts, vouchers and
releases. If Landlord or Lender so requests, Tenant shall adjust, collect and
compromise any and all such claims equal to or in excess of Twenty-five Thousand
Dollars ($25,000), subject to adjustment, and Landlord and Lender shall have the
right to join with Tenant therein. Any adjustment, settlement or compromise of
any such claim equal to or in excess of Twenty-five Thousand Dollars ($25,000),
subject to adjustment, shall be subject to the prior written approval of
Landlord and Lender, and Landlord and Lender shall have the right to prosecute
or contest, or to require Tenant to prosecute or contest, any such claim,
adjustment, settlement or compromise. Each insurer is hereby authorized and
directed to make payment under said policies of Twenty-five Thousand Dollars
($25,000), subject to adjustment, or more, directly to Landlord or, if required
by the Mortgage, to Lender instead of to Landlord and Tenant jointly. Tenant
hereby appoints each of Landlord and Lender as Tenant's attorneys-in-fact to
endorse any draft for payments to be made to Landlord and/or Lender. Any
payment of a Net Award of less than Twenty-five Thousand Dollars ($25,000),
subject to adjustment, shall be paid directly to Tenant by the insurance
company.
(c) Tenant, immediately upon receiving a Condemnation Notice, shall
notify Landlord and Lender thereof. If Landlord receives a Condemnation Notice,
Landlord shall give Tenant and Lender prompt notice thereof. Except as
specifically provided in the following sentence, Landlord and Lender are
authorized to collect, settle and compromise, in their discretion (and, if no
Monetary Event of Default exists, upon notice to Tenant), the amount of any Net
Award. Provided that no Monetary Event of Default has occurred and is
continuing, Tenant shall be entitled to participate with Landlord and Lender in
any Condemnation proceeding or negotiations under threat thereof and to contest
the Condemnation or the amount of the Net Award therefor. No agreement with any
condemnor in settlement or under threat of any Condemnation shall be made by
Tenant without the written consent of Landlord and Lender. Subject to the
provisions of this Paragraph 17(c), Tenant hereby irrevocably assigns to
Landlord any award or payment to which Tenant is or may be entitled by reason of
any Condemnation, whether the same shall be paid or payable for Tenant's
leasehold interest hereunder or otherwise; but nothing in this Lease shall
impair Tenant's right to any award or payment on account of Tenant's personal
property, moving expenses or loss of business, if available, to the extent that
<PAGE>
and so long as (i) Tenant shall have the right to make, and does make, a
separate claim therefor against the condemnor and (ii) such claim does not in
any way reduce either the amount of the award otherwise payable to Landlord for
the Condemnation of Landlord's leasehold interest in the Leased Premises or the
amount of the award (if any) otherwise payable for the Condemnation of Tenant's
leasehold interest hereunder.
(d) If any Partial Casualty (whether or not insured against) or
Partial Condemnation shall occur, this Lease shall continue, notwithstanding
such event, and there shall be no abatement or reduction of any Monetary
Obligations, except as provided in Paragraph 17(d) and 19(c). Promptly after
such Partial Casualty or Partial Condemnation, Tenant, as required in Paragraph
12(a), shall commence and diligently continue to restore the Leased Premises as
nearly as possible to its value, condition and character immediately prior to
such event. Upon the receipt by Landlord of the entire Net Award of such
Partial Casualty or Partial Condemnation, Landlord shall make such Net Award
available to Tenant for restoration in accordance with and subject to the
provisions of Paragraph 19(a). If any Casualty or Condemnation which is not a
Partial Casualty or Partial Condemnation shall occur, Tenant shall comply with
the terms and conditions of Paragraph 18.
(e) In the event of a Requisition of any of the Leased Premises the
Net Award payable by reason of such Requisition shall, at the election of
Landlord, either be (i) retained by Landlord and credited against installments
of Basic Rent for the period of such Requisition as the same shall become due
and payable or (ii) paid to Tenant on a monthly basis in an amount equal to the
installment of Basic Rent then due and payable until such Net Award has been
applied in full or until the Term has expired, whichever first occurs. Any
portion of such Net Award which is allocable to any period after the expiration
of the Term shall be retained by Landlord.
18. TERMINATION EVENTS.
(a) If (i) the Leased Premises shall be taken in its entirety by a
Taking or (ii) any substantial portion of the Leased Premises shall be taken by
a Taking or all or any substantial portion of the Improvements shall be damaged
or destroyed by a Casualty and, in the case of (ii) above, Tenant certifies and
covenants to Landlord that it will forever abandon operations at the Leased
Premises (each of the events described in the above clauses (i) and (ii) shall
hereinafter be referred to as a "EARLY TERMINATION EVENT"), then (x) in the case
of (i) above, Tenant shall be obligated, within thirty (30) days after Tenant
receives a Condemnation Notice and (y) in the case of (ii) above, Tenant shall
have the option, within thirty (30) days after Tenant receives a Condemnation
Notice or thirty (30) days after the Casualty, as the case may be, to give to
Landlord written notice of the Tenant's option to terminate this Lease (an
"EARLY TERMINATION NOTICE") in the form described in Paragraph 18(b).
(b) An Early Termination Notice shall contain
<PAGE>
(i) notice of Tenant's intention to terminate this Lease on the first Basic Rent
Payment Date (the "EARLY TERMINATION DATE") which occurs at least forty-five
(45) days after receipt by Landlord of the Early Termination Notice, (ii) a
binding and irrevocable offer of Tenant to pay the Early Termination Amount and
(iii) if the Early Termination Event is an event described in
Paragraph 18(a)(ii), the certification and covenants described therein and a
certified resolution of the Board of Directors of Tenant authorizing the same.
(c) If Landlord shall reject such offer to terminate this Lease by
written notice to Tenant (a "REJECTION"), which Rejection shall contain the
written consent of Lender, not later than thirty (30) days following the date on
which Landlord receives the Early Termination Notice from Tenant, then this
Lease shall terminate on the Early Termination Date; provided that, if Tenant
has not satisfied all Monetary Obligations and all other obligations and
liabilities under this Lease which have arisen on or prior to the Termination
Date (collectively, "REMAINING OBLIGATIONS") on the Termination Date, then
Landlord may, at its option, extend the date on which this Lease may terminate
to a date which is no later than the first Basic Rent Payment Date after the
Early Termination Date on which Tenant has satisfied all Remaining Obligations.
Upon such termination (i) all obligations of Tenant hereunder shall terminate
except for any Surviving Obligations, (ii) Tenant shall immediately vacate and
shall have no further right, title or interest in or to any of the Leased
Premises and (iii) the Net Award shall be retained by Landlord. Notwithstanding
anything to the contrary hereinabove contained, if Tenant shall have received a
Rejection and, on the date when this Lease would otherwise terminate as provided
above, Landlord shall not have received the full amount of the Net Award payable
by reason of the applicable Early Termination Event, then the date on which this
Lease is to terminate automatically shall be extended to the first Basic Rent
Payment Date after the receipt by Landlord of the full amount of the Net Award
provided that, if Tenant has not satisfied all Remaining Obligations on such
date, then Landlord may, at its option, extend the date on which this Lease may
terminate to a date which is no later than the first Basic Rent Payment Date
after such date on which Tenant has satisfied all such Remaining Obligations.
(d) Unless Tenant shall have received a Rejection not later than the
forty-fifth (45th) day following the Fair Market Value Date, Landlord shall be
conclusively presumed to have accepted such offer. If such offer is accepted by
Landlord then, on the Termination Date, Tenant shall pay to Landlord the
Termination Amount and all Remaining Obligations and, if requested by Tenant,
Landlord shall (i) convey to Tenant the Leased Premises or the remaining portion
thereof, if any, and (ii) pay to or assign to Tenant its entire interest in and
to the Net Award, all in accordance with Paragraph 20.
19. RESTORATION; REDUCTION OF RENT.
(a) The Net Award shall, promptly upon receipt, be made available by
Landlord for the restoration of the Leased Premises, and, if the Net Award is
less than Two Hundred Thousand Dollars ($200,000), subject to adjustment, and at
the date of payment no Monetary Event of Default exists, the Net Award shall be
paid directly to Tenant in which event Tenant shall comply
<PAGE>
with the provisions of Paragraph 13(b) and Paragraph 19(a)(iii) in connection
with such restoration. If the Net Award is Two Hundred Thousand Dollars
($200,000), subject to adjustment, or more such Net Award in a fund (the
"RESTORATION FUND") and disburse amounts from the Restoration Fund only in
accordance with the following conditions:
(i) prior to commencement of restoration, the architects,
contracts, contractors, plans and specifications for the restoration shall have
been approved by Landlord, such approval not to be unreasonably withheld or
delayed, it being understood that if Landlord has not indicated to Tenant,
within sixty (60) days of the submission of such items to Landlord for approval,
whether such items have been approved or disapproved, Landlord shall be deemed
to have disapproved such items;
(ii) at the time of any disbursement, no Event of Default shall
exist and, subject to Tenant's right to contest pursuant to Paragraph 14 hereof
no mechanics' or materialmen's liens shall have been filed against any of the
Leased Premises and remain undischarged;
(iii) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement, upon
receipt of (A) satisfactory evidence, including architects' certificates, of the
stage of completion, the estimated total cost of completion and performance of
the work to date in a good and workmanlike manner in accordance with the
contracts, plans and specifications, (B) waivers of liens, (C) contractors' and
subcontractors' sworn statements as to completed work and the cost thereof for
which payment is requested, (D) other evidence of cost and payment so that
Landlord can verify that the amounts disbursed from time to time are represented
by work that is completed, in place and free and clear of mechanics' and
materialmen's lien claims, and (E) an endorsement to Landlord's and Lender's
title insurance policies insuring against any liens arising from the
restoration;
(iv) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the president or a vice president of Tenant,
describing the work for which payment is requested, stating the cost incurred in
connection therewith, stating that Tenant has not previously received payment
for such work and, upon completion of the work, also stating that the work has
been fully completed and complies with the applicable requirements of this
Lease;
(v) Landlord may retain ten percent (10%) of the restoration
fund until the restoration is fully completed;
(vi) the Restoration Fund shall be held in a separate account and
invested in any of the following investments and for such maturities as Landlord
and Tenant shall agree: obligations of the United States, its agencies, or
United States Government sponsored enterprises or obligations, the principal of
and interest on which are guaranteed by the United States or its agencies or
obligations of a state, a territory, or a possession of the United States, or
any political subdivision of any of the
<PAGE>
foregoing or of the District of Columbia, which investment shall be graded in
the highest of three (3) major grades as determined by at least one (1) national
rating service, or banker's acceptances, commercial accounts, certificates of
deposit, or depository receipts issued by a bank, trust company, savings and
loan association, savings bank, credit union or other financial institution
whose deposits are, as appropriate, insured by the Federal Deposit Insurance
Corporation or the National Credit Union Administration or any successor entity,
which investment shall be rated at the time of purchase within the two (2)
highest classifications established by at least one (1) national rating service,
and which matures within one hundred eighty (180) days; and
(vii) such other reasonable and customary conditions as Landlord
or Lender may impose.
(b) Prior to commencement of restoration and at any time during
restoration, if the estimated cost of completing the restoration work free and
clear of all liens, as determined by Landlord, exceeds the amount of the Net
Award available for such restoration, the amount of such excess shall, upon
demand by Landlord, be paid by Tenant to Landlord to be added to the Restoration
Fund. Any sum so added by Tenant which remains in the Restoration Fund upon
completion of restoration shall be refunded to Tenant. For purposes of
determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Award shall be deemed to
be disbursed prior to any amount added by Tenant.
(c) If any sum remains in the Restoration Fund after completion of
the restoration and any refund to Tenant pursuant to Paragraph 19(b), such sum
(the "REMAINING SUM") shall be retained by Landlord or, if required by a Note or
Mortgage, paid by Landlord to a Lender. If the Remaining Sum is (i) retained by
Landlord, Tenant shall receive a monthly credit against Basic Rent until the
amount of the Remaining Sum is credited in full, or (ii) paid to Lender, then
each installment of Basic Rent thereafter payable shall be reduced in the same
amount as payments are reduced under any Note if the Loan corresponding to such
Note is reamortized to reflect such payment, in each case until such Remaining
Sum has been applied in full or until the Term has expired, whichever occurs
first. Upon the expiration of the Term, any portion of the Remaining Sum which
has not been so applied shall be retained by Landlord.
20. PROCEDURES UPON PURCHASE.
(a) If the Leased Premises are purchased by Tenant pursuant to any
provision of this Lease, Landlord shall convey such title thereto as was
conveyed to Landlord, and Tenant shall accept such title, subject, however, to
the Permitted Encumbrances and to all other liens, exceptions and restrictions
on, against or relating to any of the Leased Premises and to all applicable
Laws, but free of the lien of and security interest created by any Mortgage or
Assignment and liens, exceptions and restrictions on, against or relating to the
Leased Premises which have been created by or resulted solely from acts of
Landlord after the date of this Lease, unless the same are Permitted
Encumbrances or customary utility easements benefiting the Leased Premises or
were created with the concurrence of Tenant or as a result of a default by
Tenant under this Lease.
<PAGE>
(b) Upon the date fixed for any such purchase of the Leased Premises
pursuant to any provision of this Lease (any such date the "PURCHASE DATE"),
Tenant shall pay to Landlord, or to any Person to whom Landlord directs payment,
the Relevant Amount therefor specified herein, in Federal Funds, less any credit
of the Net Award received and retained by Landlord or a Lender allowed against
the Relevant Amount, and Landlord shall deliver to Tenant (i) a special warranty
deed, which describes the premises being conveyed and conveys the title thereto
as provided in Paragraph 20(a), (ii) such other instruments as shall be
necessary to transfer to Tenant or its designee any other property (or rights to
any Net Award not yet received by Landlord or a Lender) then required to be sold
by Landlord to Tenant pursuant to this Lease, such as bills of sale, assignments
of warranties and guaranties relating to the Building Systems Equipment, and the
like, and (iii) any Net Award received by Landlord, not credited to Tenant
against the Relevant Amount and required to be delivered by Landlord to Tenant
pursuant to this Lease; provided, that if any Monetary Obligations remain
outstanding on such date, then Landlord may deduct from the Net Award the amount
of such Monetary Obligations; and further provided, that if any event has
occurred which, in Landlord's reasonable judgment, is likely to subject any
Indemnitee to any liability which Tenant is required to indemnify against
pursuant to Paragraph 15, then an amount shall be deducted from the Net Award
which, in Landlord's reasonable judgment, is sufficient to satisfy such
liability, which amount shall be deposited in an escrow account with a financial
institution reasonably satisfactory to Landlord and Tenant pending resolution of
such matter. If on the Purchase Date any Monetary Obligations remain
outstanding and no Net Award is payable to Tenant by Landlord or the amount of
such Net Award is less than the amount of the Monetary Obligations, then Tenant
shall pay to Landlord on the Purchase Date the amount of such Monetary
Obligations. Upon the completion of such purchase, this Lease and all
obligations and liabilities of Tenant hereunder shall terminate, except any
Surviving Obligations.
(c) Unless solely and directly caused by the gross negligence or
willful misconduct of Landlord, if the completion of such purchase shall be
delayed after (i) the Early Termination Date, in the event of a purchase
pursuant to Paragraph 18 or, (ii) the date scheduled for such purchase, in the
event of a purchase under any other provision of this Lease then (x) Rent shall
continue to be due and payable until completion of such purchase and (y) at
Landlord's sole option, Fair Market Value shall be redetermined and the Relevant
Amount payable by Tenant pursuant to the applicable provision of this Lease
shall be adjusted to reflect such redetermination.
(d) Any prepaid Monetary Obligations paid to Landlord shall be
prorated as of the Purchase Date, and the prorated unapplied balance shall be
deducted from the Relevant Amount due to Landlord; provided, that no
apportionment of any Impositions shall be made upon any such purchase.
21. ASSIGNMENT AND SUBLETTING; PROHIBITION AGAINST LEASEHOLD
FINANCING.
<PAGE>
(a) Except as provided in this Paragraph 21(a), Tenant may not assign
this Lease, whether by operation of law or otherwise, at any time to any other
Person without the prior written consent of Landlord and Lender, which consent,
in the event of an assignment, shall not be unreasonably withheld. In
determining whether to withhold its consent, Landlord shall have the right to
consider the following criteria as they relate to the proposed assignee, and
Landlord and Lender shall be deemed to have acted in good faith in granting or
withholding consent if they consider such criteria:
(i) its credit history;
(ii) its capital structure, net worth and unsecured senior debt
rating;
(iii) its management and real estate management record;
(iv) its operating history;
(v) its intended use of the Leased Premises; and
(vi) other factors associated with the proposed assignee's
business as it relates to the use of the Leased Premises, including potential
environmental concerns and liabilities;
provided, that if Landlord and Lender have not indicated to Tenant, within
thirty (30) days following the date on which Landlord and Lender receive all
information necessary for Landlord and Lender to analyze the factors set forth
in clauses (i) through (vii) above, whether such proposed assignee is acceptable
to Landlord and Lender, Landlord and Lender shall be deemed to have disapproved
such proposed assignee.
If Tenant assigns all its rights and interest under this Lease, the
assignee under such assignment shall expressly assume all the obligations of
Tenant hereunder, actual or contingent, including obligations of Tenant which
may have arisen on or prior to the date of such assignment, by a written
instrument delivered to Landlord at the time of such assignment. No assignment
made as permitted by this Paragraph 21 shall affect or reduce any of the
obligations of Tenant hereunder, and all such obligations shall continue in full
force and effect as obligations of a principal and not as obligations of a
guarantor, as if no assignment had been made. No assignment shall impose any
additional obligations on Landlord under this Lease.
(b) Tenant shall have the right, upon thirty (30) days' prior written
notice to Landlord and Lender to sublet up to, but not in excess of fifty
percent (50%) of the leasable space in the Leased Premises. No additional
subletting shall be permitted without the prior written consent of Landlord,
which consent may be withheld by Landlord for any or no reason, it being
understood that Landlord shall be deemed to have disapproved any proposed
additional subletting if Landlord has not indicated to Tenant whether such
proposed additional subletting is approved or not within fifteen (15) days of
Tenant's written request for such approval. Each sublease of any of the Leased
Premises shall be subject and subordinate to the provisions of this Lease. No
sublease made as permitted by this
<PAGE>
Paragraph 21 shall affect or reduce any of the obligations of Tenant hereunder,
and all such obligations shall continue in full force and effect as obligations
of a principal and not as obligations of a guarantor, as if no assignment had
been made. No sublease shall impose any additional obligations on Landlord
under this Lease.
(c) Tenant shall, within ten (10) days after the execution and
delivery of any assignment or sublease consented to by Landlord, deliver a
duplicate original copy thereof to Landlord which, in the event of an
assignment, shall be in recordable form.
(d) As security for performance of its obligations under this Lease,
Tenant hereby grants, conveys and assigns to Landlord all right, title and
interest of Tenant in and to all subleases hereinafter entered into for any or
all of the Leased Premises (the "SUBLEASES"), any and all extensions,
modifications and renewals thereof and all rents, issues and profits therefrom.
Landlord hereby grants to Tenant a license to collect and enjoy all rents and
other sums of money payable under any Sublease of any of the Leased Premises;
provided, however, that following the occurrence of any Event of Default
Landlord shall have the absolute right at any time upon notice to Tenant and any
subtenants to revoke said license and to collect such rents and sums of money
and to retain the same. If Landlord collects such rents and sums of money,
Tenant shall receive a credit against installments of Basic Rent or against
damages (as the case may be) an amount equal to any basic rent collected by
Landlord under the Subleases, less reasonable Costs incurred by Landlord in
connection with collecting from defaulting tenants or subtenants which are not
paid or reimbursed by such tenants. Tenant shall not consent to, cause or allow
any extension of the terms of any of the Subleases beyond the Term then in
effect, or, as to Subleases requiring Landlord approval, any reduction in the
rentals payable thereunder, without the prior written approval of Landlord,
which consent shall not be unreasonably withheld. In addition, Tenant shall not
accept any rents more than thirty (30) days in advance of the accrual thereof
(other than security deposits and first month's rent), permit anything to be
done, the doing of which, or omit or refrain from doing anything, the omission
of which, will or could be a breach of or default in the terms of any of the
Subleases.
(e) Tenant shall not have the power to mortgage, pledge or otherwise
encumber its interest under this Lease or any sublease of the Leased Premises,
and any such mortgage, pledge or encumbrance made in violation of this
Paragraph 21 shall be void. Nothing provided in Paragraph 21(e) shall be deemed
to prohibit or limit financing by Tenant of equipment used in the operation of
Tenant's business at the Leased Premises, and, so long as no Event of Default
has occurred and is continuing, Landlord shall provide to lenders for such
equipment waivers in form and substance reasonably acceptable to Landlord
waiving Landlord's lien rights in and to such equipment.
(f) Subject to Tenant's rights under Paragraph 35 and the prohibition
set forth in the following sentence, Landlord may
<PAGE>
sell or transfer the Leased Premises at any time without Tenant's consent to any
third party (each a "THIRD PARTY PURCHASER"). During the Term and provided no
Event of Default exists Landlord shall not sell the Leased Premises to a
Competitor without having first received the prior written consent of Tenant
which consent shall be deemed given if Tenant has elected to terminate the Lease
under Paragraph 5(b) hereof. In the event of any such transfer, Tenant shall
attorn to any Third Party Purchaser as Landlord so long as such Third Party
Purchaser and Landlord notify Tenant in writing of such transfer. At the
request of Landlord, Tenant will execute such documents confirming the agreement
referred to above and such other agreements as Landlord may reasonably request,
provided that such agreements do not increase the liabilities and obligations of
Tenant hereunder.
22. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following (after
expiration of any applicable cure period as provided in Paragraph 22(c)) shall,
at the sole option of Landlord, constitute an "EVENT OF DEFAULT" under this
Lease:
(i) a failure by Tenant to make any payment of any Monetary
Obligation, regardless of the reason for such failure;
(ii) subject to the provisions of Paragraph 14, a failure by
Tenant duly to perform and observe, or a violation or breach of, any other
provision hereof not otherwise specifically mentioned in this Paragraph 22(a);
(iii) any representation or warranty made by Tenant herein or in
any certificate, demand or request made pursuant hereto proves to be incorrect,
now or hereafter, in any material respect;
(iv) a default beyond any applicable cure period by Tenant in any
payment of principal or interest on any obligations for borrowed money having an
original principal balance of $2,000,000 or more in the aggregate, or in the
performance of any other provision contained in any instrument under which any
such obligation is created or secured (including the breach of any covenant
thereunder), (x) if such payment is a payment at maturity or a final payment or
(y) if the effect of such default is to cause the holder of such obligation to
accelerate such obligation prior to its stated maturity or if by the terms of
such instrument, such obligation automatically becomes due prior to its stated
maturity;
(v) a default by Tenant beyond any applicable cure period in the
payment of rent or any other Monetary Obligation under any other leases with
rental obligations over the terms thereof of $1,000,000 or more in the
aggregate, if the effect of such default is to cause such rental to become due
prior to its due date;
(vi) a final, non-appealable judgment or judgments for the
payment of money in excess of $1,000,000 in the aggregate shall be rendered
against Tenant and the same shall remain undischarged or unbonded for a period
of ninety (90) consecutive days;
<PAGE>
(vii) Tenant shall (A) voluntarily be adjudicated a bankrupt or
insolvent, (B) seek or consent to the appointment of a receiver or trustee for
itself or for the Leased Premises, (C) file a petition seeking relief under the
bankruptcy or other similar laws of the United States, any state or any
jurisdiction, (D) make a general assignment for the benefit of creditors, or (E)
be unable to pay its debts as they mature;
(viii) a court shall enter an order, judgment or decree appointing,
without the consent of Tenant, a receiver or trustee for it or for any of the
Leased Premises or approving a petition filed against Tenant which seeks relief
under the bankruptcy or other similar laws of the United States, any state or
any jurisdiction, and such order, judgment or decree shall remain undischarged
or unstayed ninety (90) days after it is entered;
(ix) the Leased Premises shall have been vacated for one hundred
twenty (120) days or abandoned or Tenant shall fail to occupy the Leased
Premises for normal business operations within sixty (60) days after the
Occupancy Date;
(x) Tenant shall be liquidated or dissolved or shall begin
proceedings towards its liquidation or dissolution;
(xi) except and to the extent the same is being contested
pursuant to Paragraph 14 hereof, the estate or interest of Tenant in any of the
Leased Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within ninety (90) days after it is made;
(xii) a failure by Tenant to perform or observe, or a violation or
breach of, any provision of any Assignment or any other document between Tenant
and Lender, if such failure, violation or breach gives rise to a default beyond
any applicable cure period with respect to any Loan;
(xiii) a failure by Tenant to maintain in effect any other license
or permit necessary for the use, occupancy or operation of the Leased Premises;
(xiv) an Event of Default (as defined in the Construction Agency
Agreement) shall exist under the Construction Agency Agreement beyond any
applicable cure period; or
(xv) an Event of Default (as defined in the Guaranty) shall exist
under the Guaranty beyond any applicable cure period or Tenant shall fail to
perform its obligations under the Warrant Agreement beyond any applicable cure
period.
(b) No notice or cure period shall be required in any one or more of
the following events:
(i) the occurrence of an Event of Default under clause (i)
(except as otherwise set forth below) (iv), (v), (vi), (vii), (viii), (ix), (x),
(xi), (xii) or (xiv) of Paragraph 22(a);
<PAGE>
(ii) the default consists of a failure to provide any insurance
required by Paragraph 16 or an assignment or sublease entered into in violation
of Paragraph 21; or
(iii) the default is such that any delay in the exercise of a
remedy by Landlord could reasonably be expected to cause irreparable harm to
Landlord.
(c) If the default consists of the failure to pay any Monetary
Obligation under clause (i) of Paragraph 22(a), the applicable cure period shall
be five (5) days from the date on which notice is given, but Landlord shall not
be obligated to give notice of, or allow any cure period for, any such default
more than once within any Lease Year. If the default consists of a default
under clause (ii) or clause (xiii) of Paragraph 22(a) other than the events
specified in clauses (ii) and (iii) of Paragraph 22(b) above, the applicable
cure period shall be thirty (30) days from the date on which notice is given or,
if the default cannot be cured within such thirty (30) day period and delay in
the exercise of a remedy would not (in Landlord's reasonable judgment) cause any
material adverse harm to Landlord or any of the Leased Premises, the cure period
shall be extended for the period required to cure the default (but such cure
period, including any extension, shall not in the aggregate exceed one hundred
twenty (120) days), provided that Tenant shall commence to cure the default
within the said thirty-day period and shall actively, diligently and in good
faith proceed with and continue the curing of the default until it shall be
fully cured. If the default consists of a default under clause (iii) of
Paragraph 22(a) the applicable cure period shall be fifteen (15) days from the
date which is the earlier of the date on which Tenant is aware of the
misrepresentation or breach of warranty or the date on which Tenant receives
notice of such misrepresentation or breach from Landlord.
23. REMEDIES AND DAMAGES UPON DEFAULT.
(a) (i) If at any time after the first day of the third Lease Year
the breach of a Financial Covenant or a Change in Control (as such terms are
defined in the Guaranty) shall have occurred (either such event a "COVENANT
DEFAULT"), Tenant shall have the right, within thirty (30) days following the
existence of a Covenant Default, to make an irrevocable offer to terminate this
Lease by paying to Landlord simultaneously with such offer an amount (the
"DEFAULT TERMINATION AMOUNT") equal to one hundred ten percent (110%) of the sum
of Landlord's Share of Project Costs and the applicable Prepayment Premium, less
the then outstanding principal amount of any Loan then encumbering the Leased
Premises, but only if and to the extent Tenant assumes and becomes liable for,
to the exclusion of Landlord, payment and performance of all obligations arising
under or in connection with such Loan. In no event shall this right be
construed as granting to Tenant any cure period or additional cure period with
respect to any Event of Default, and Tenant's sole right with respect to the
Covenant Default in question shall be to make an irrevocable offer to terminate
this Lease by paying the Default Termination Amount. Within fifteen (15) days
after receipt of such offer and the Default Termination Amount, Landlord shall
accept or reject such offer, and if such offer is rejected the Landlord shall
return the Default Termination Amount in the rejection notice. Any rejection by
Landlord of such offer shall be deemed to be a cure of such Covenant Breach. In
no event
<PAGE>
shall Tenant have any rights under this Paragraph 23(a) if the Covenant Breach
occurs prior to the first day of the third Lease Year.
(ii) Should Tenant pay the Default Termination Amount to
Landlord, Landlord agrees that (x) it shall forbear from exercising its remedies
set forth in Paragraph 23(b) and Paragraph 23(c), (y) this Lease shall terminate
and Tenant shall have no further obligations hereunder, except for Surviving
Obligations, and (z) if requested by Tenant, Landlord shall convey all of its
right, title and interest in the Leased Premises to Tenant or its designee in
accordance with Paragraph 20. If Tenant fails to make such offer and include
the Default Termination Amount therein or if such payment is required to be
returned or paid to Tenant, to Tenant's estate, or to any court, trustee,
representative or administrator of Tenant's estate, Landlord shall not be in any
way precluded from exercising its rights and remedies set forth in the following
Paragraph 23(b) and Paragraph 23(c).
(b) If a Covenant Breach shall have occurred and Tenant shall fail to
make the offer and pay the Default Termination Amount within the period
specified in Paragraph 23(a) above, Landlord shall have the right, at its sole
option, then or at any time thereafter, to exercise any or all of the remedies
set forth below and to collect damages from Tenant in accordance with this
Paragraph 23, without demand upon or notice to Tenant except as otherwise
provided in Paragraph 22(b) and this Paragraph 23.
(i) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease on a date specified in such notice. Upon such date, this
Lease, the estate hereby granted and all rights of Tenant hereunder shall expire
and terminate. Upon such termination, Tenant shall immediately surrender and
deliver possession of the Leased Premises to Landlord in accordance with
Paragraph 26. If Tenant does not so surrender and deliver possession of the
Leased Premises, Landlord may re-enter and repossess the Leased Premises, with
or without legal process, by peaceably entering the Leased Premises and changing
locks or by summary proceedings, ejectment or any other lawful means or
procedure. Upon or at any time after taking possession of the Leased Premises,
Landlord may, by peaceable means or legal process, remove any Persons or
property therefrom. Landlord shall be under no liability for or by reason of
any such entry, repossession or removal. Notwithstanding such entry or
repossession, Landlord may collect the damages set forth in Paragraph 23(c)(i)
or 23(c)(ii).
(ii) After repossession of the Leased Premises pursuant to clause
(i) above, Landlord shall have the right to relet any of the Leased Premises to
such tenant or tenants, for such term or terms, for such rent, on such
conditions and for such uses as Landlord in its sole discretion may determine,
and collect and receive any rents payable by reason of such reletting. Landlord
may make such Alterations in connection with such reletting as it may deem
advisable in its sole discretion. Notwithstanding any such reletting, Landlord
may collect the
<PAGE>
damages set forth in Paragraph 23(c)(ii).
(iii) Landlord may declare by notice to Tenant the entire Basic
Rent (in the amount of Basic Rent then in effect) for the remainder of the then
current Term to be immediately due and payable. Tenant shall immediately pay to
Landlord all such Basic Rent discounted to its Present Value, all accrued Rent
then due and unpaid, all other Monetary Obligations which are then due and
unpaid and all Monetary Obligations which arise or become due by reason of such
Event of Default (including any Costs of Landlord). Upon receipt by Landlord of
all such accelerated Basic Rent and Monetary Obligations, this Lease shall
remain in full force and effect and Tenant shall have the right to possession of
the Leased Premises from the date of such receipt by Landlord to the end of the
Term, and subject to all the provisions of this Lease, including the obligation
to pay all increases in Basic Rent and all Monetary Obligations that
subsequently become due, except that (A) no Basic Rent which has been prepaid
hereunder shall be due thereafter during the said Term, and (B) Tenant shall
have no option to extend or renew the Term.
(c) The following constitute damages to which Landlord shall be
entitled if Landlord exercises its remedies under Paragraph 23(b)(i) or
23(b)(ii):
(i) If Landlord exercises its remedy under Paragraph 23(b)(i)
but not its remedy under Paragraph 23(b)(ii) (or attempts to exercise such
remedy and is unsuccessful in reletting the Leased Premises) then, upon written
demand from Landlord, Tenant shall pay to Landlord, as liquidated and agreed
final damages for Tenant's default and in lieu of all current damages beyond the
date of such demand (it being agreed that it would be impracticable or extremely
difficult to fix the actual damages), an amount equal to the Present Value of
the excess, if any, of (A) all Basic Rent from the date of such demand to the
date on which the Term is scheduled to expire hereunder in the absence of any
earlier termination, re-entry or repossession over (B) the then fair market
rental value of the Leased Premises for the same period. Tenant shall also pay
to Landlord all of Landlord's Costs in connection with the repossession of the
Leased Premises and any attempted reletting thereof, including all brokerage
commissions, legal expenses attorneys' fees, employees' expenses, costs of
Alterations up to a maximum of $250,000 and expenses and preparation for
reletting.
(ii) If Landlord exercises its remedy under Paragraph 23(b)(i) or
its remedies under Paragraph 23(b)(i) and 23(b)(ii), then Tenant shall, until
the end of what would have been the Term in the absence of the termination of
the Lease, and whether or not any of the Leased Premises shall have been relet,
be liable to Landlord for, and shall pay to Landlord, as liquidated and agreed
current damages all Monetary Obligations which would be payable under this Lease
by Tenant in the absence of such termination less the net proceeds, if any, of
any reletting pursuant to Paragraph 23(c)(ii), after deducting from such
proceeds all of Landlord's Costs (including the items listed in the last
sentence of Paragraph 23(b)(i) hereof) incurred in connection with such
repossessing and reletting; provided, that if Landlord has not relet the Leased
Premises, such Costs of Landlord shall be considered to be Monetary Obligations
payable by Tenant. Tenant shall be and remain liable for all sums
<PAGE>
aforesaid, and Landlord may recover such damages from Tenant and institute and
maintain successive actions or legal proceedings against Tenant for the recovery
of such damages. Nothing herein contained shall be deemed to require Landlord
to wait to begin such action or other legal proceedings until the date when the
Term would have expired by its own terms had there been no such Event of
Default.
(d) Notwithstanding anything to the contrary herein contained, in
lieu of or in addition to any of the foregoing remedies and damages, Landlord
may exercise any remedies and collect any damages available to it at law or in
equity. If Landlord is unable to obtain full satisfaction pursuant to the
exercise of any remedy, it may pursue any other remedy which it has hereunder or
at law or in equity.
(e) Landlord shall not be required to mitigate any of its damages
hereunder unless required to by applicable Law. If any Law shall validly limit
the amount of any damages provided for herein to an amount which is less than
the amount agreed to herein, Landlord shall be entitled to the maximum amount
available under such Law.
(f) No termination of this Lease, repossession or reletting of the
Leased Premises, exercise of any remedy or collection of any damages pursuant to
this Paragraph 23 shall relieve Tenant of any Surviving Obligations.
(g) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD HEREUNDER,
TENANT WAIVES ANY RIGHT TO A TRIAL BY JURY.
(h) Upon the occurrence of any Event of Default, Landlord shall have
the right (but no obligation) to perform any act required of Tenant hereunder
and, if performance of such act requires that Landlord enter the Leased
Premises, Landlord may enter the Leased Premises for such purpose.
(i) No failure of Landlord (i) to insist at any time upon the strict
performance of any provision of this Lease or (ii) to exercise any option,
right, power or remedy contained in this Lease shall be construed as a waiver,
modification or relinquishment thereof. A receipt by Landlord of any sum in
satisfaction of any Monetary Obligation with knowledge of the breach of any
provision hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made unless
expressed in a writing signed by Landlord.
(j) Tenant hereby waives and surrenders, for itself and all those
claiming under it, including creditors of all kinds, (i) any right and privilege
which it or any of them may have under any present or future Law to redeem any
of the Leased Premises or to have a continuance of this Lease after termination
of this Lease or of Tenant's right of occupancy or possession pursuant to any
court order or any provision hereof, and (ii) the benefits of any present or
future Law which exempts property from liability for debt or for distress for
rent.
<PAGE>
(k) Except as otherwise provided herein, all remedies are cumulative
and concurrent and no remedy is exclusive of any other remedy. Each remedy may
be exercised at any time an Event of Default has occurred and is continuing and
may be exercised from time to time. No remedy shall be exhausted by any
exercise thereof.
24. NOTICES. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease shall be in writing and
shall be deemed to have been given for all purposes when delivered in person or
by telecopy (with a hard copy to follow by Federal Express or other reliable
24-hour delivery service) or by Federal Express or other reliable 24-hour
delivery service or five (5) business days after being deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid, addressed to the other party at its address stated in the first
paragraph of this Lease. A copy of any notice given by Tenant to Landlord shall
simultaneously be given by Tenant to Reed Smith Shaw & McClay, 2500 One Liberty
Place, Philadelphia, PA 19103, Attention: Chairman, Real Estate Department.
For the purposes of this Paragraph, any party may substitute another address
stated above (or substituted by a previous notice) for its address by giving
fifteen (15) days' notice of the new address to the other party, in the manner
provided above.
25. ESTOPPEL CERTIFICATE. Landlord or Tenant, as the case may be,
shall, at any time upon not less than ten (10) days' prior written request by
the other party, deliver to the other party a statement ("TENANT ESTOPPEL
CERTIFICATE") in writing, executed by the president or a vice president of
Landlord or Tenant, as the case may be, certifying that:
(a) Except as otherwise specified, this Lease is unmodified and in
full force and effect;
(b) The Basic Rent, Additional Rent and all other Monetary
Obligations have been paid to the dates stated in such certificate;
(c) The certifying party has not filed a voluntary or involuntary
bankruptcy petition;
(d) To the knowledge of the signer, based on reasonable inquiry and
except as may otherwise be specified, no default by either Landlord or Tenant
exists under this Lease;
(e) Landlord or Tenant, as the case may be, has performed all of its
obligations under the Lease with respect to the construction of the
Improvements;
(f) The other matters specified in the form of Tenant Estoppel
Certificate attached hereto as EXHIBIT "E" are true and correct, such
certification to be made by Tenant only.
26. SURRENDER. Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises to
Landlord in the same condition in which the Leased Premises was at the
commencement of this Lease, except as repaired, rebuilt, restored, altered,
replaced or added to as permitted or required by any provision of this
<PAGE>
Lease, and except for ordinary wear and tear. Upon such surrender, Tenant shall
(a) remove from the Leased Premises all property which is owned by Tenant or
third parties other than Landlord and (b) repair any damage caused by such
removal. Property not so removed shall become the property of Landlord, and
Landlord may thereafter cause such property to be removed from the Leased
Premises. The cost of removing and disposing of such property and repairing any
damage to any of the Leased Premises caused by such removal shall be paid by
Tenant to Landlord upon demand. Landlord shall not in any manner or to any
extent be obligated to reimburse Tenant for any such property which becomes the
property of Landlord pursuant to this Paragraph 26.
27. NO MERGER OF TITLE. There shall be no merger of the leasehold
estate created by this Lease with the leasehold estate or the fee estate in any
of the Leased Premises by reason of the fact that the same Person may acquire or
hold or own, directly or indirectly, (a) the leasehold estate created hereby or
any part thereof or interest therein, and (b) fee estate in any of the Leased
Premises or any part thereof or interest therein, unless and until all Persons
having any interest in the interests described in (a) and (b) above which are
sought to be merged shall join in a written instrument effecting such merger and
shall duly record the same.
28. BOOKS AND RECORDS. Tenant shall furnish Landlord with the
following:
(a) As soon as available and in any event within sixty (60) days
after the end of each quarterly accounting period in each fiscal year of Tenant
(with the exception of the last quarter), Tenant shall furnish copies of a
consolidated balance sheet of Holdings and its consolidated Affiliates as of the
last day of such quarterly accounting period, and copies of the related
consolidated statements of income and of changes in shareholders' equity and in
financial position of Holdings and its consolidated Affiliates for such
quarterly accounting period and for the elapsed portion of the current fiscal
year ended with the last day of such quarterly accounting period. All such
statements shall be prepared in accordance with GAAP (except that interim
quarterly financials are not required to include notes) certified as complete
and correct in all material respects by the chief financial officer of Holdings
(subject to year-end audit adjustments).
(b) As soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of Holdings, Tenant shall furnish
copies of a consolidated balance sheet of Holdings and its consolidated
Affiliates as of the end of such fiscal year, and copies of the related
consolidated statements of income and of changes in shareholders' equity and in
financial position of Holdings and its consolidated Affiliates for such fiscal
year. All such statements shall be in reasonable detail and with appropriate
notes, if any, and shall be prepared in accordance with GAAP and state in
comparative form the corresponding figures as of the end of and for the previous
fiscal year, and shall be accompanied by an opinion or report
<PAGE>
thereon, in scope and substance satisfactory to Landlord, by Holdings'
nationally recognized independent certified public accountants.
(c) Upon the request of Landlord, Tenant shall furnish copies of all
regular and periodic reports or filings which Holdings or Tenant of either of
them shall make or be required to file with the Securities and Exchange
Commission or any other federal or state regulatory agency or with any municipal
or other local body, and such other public, non-proprietary information relating
to the business, affairs and financial condition of Tenant as Landlord may from
time to time reasonably request.
(d) Upon reasonable advance notice to Tenant, Landlord and Lender
shall have the right to periodically visit the Leased Premises to meet with
officers of Tenant for the purpose of discussing the operating history of the
Leased Premises and the general condition of Tenant's business. At no time
shall Tenant be obligated to disclose to Landlord, Lender or any third party any
confidential or proprietary information about Tenant or Tenant's business. The
scope and nature of the information to be so provided by Tenant to Landlord
and/or Lender shall be limited to that which would be customarily provided to
investment analysts employed by investment banking firms.
29. DETERMINATION OF VALUE.
(a) Whenever a determination of Fair Market Value is required
pursuant to any provision of this Lease, such Fair Market Value shall be
determined in accordance with the following procedure:
(i) Landlord and Tenant shall endeavor to agree upon such Fair
Market Value within thirty (30) days after the date (the "APPLICABLE INITIAL
DATE") (A) on which (1) Tenant provides Landlord with notice of its intention to
terminate this Lease and purchase the Leased Premises pursuant to Paragraph 18,
or (2) Landlord provides Tenant with notice of its intention to redetermine Fair
Market Value pursuant to Paragraph 20(c), (B) Tenant exercises its option to
purchase the Leased Premises pursuant to Paragraph 35 hereof, or (C) which is
six (6) months prior to the expiration date of the Term. Upon reaching such
agreement, the parties shall execute an agreement setting forth the amount of
such Fair Market Value.
(ii) If the parties shall not have signed such agreement within
thirty (30) days after the Applicable Initial Date, Tenant shall within fifty
(50) days after the Applicable Initial Date select an appraiser and notify
Landlord in writing of the name, address and qualifications of such appraiser.
Within twenty (20) days thereafter, Landlord shall select an appraiser and
notify Tenant of the name, address and qualifications of such appraiser. Such
two appraisers shall endeavor to agree upon Fair Market Value based on an
appraisal made by each of them as of the Relevant Date. If such two appraisers
shall agree upon a Fair Market Value, the amount of such Fair Market Value as so
agreed shall be binding and conclusive.
(iii) If such two appraisers shall be unable to agree upon a Fair
Market Value within twenty (20) days after the selection of an appraiser by
Landlord, then such appraisers shall
<PAGE>
advise Landlord and Tenant of their respective determination of Fair Market
Value and shall select a third appraiser to make the determination of Fair
Market Value, which determination as to the selection of the third appraiser
shall be binding and conclusive upon Landlord and Tenant.
(iv) If such two appraisers shall be unable to agree upon the
designation of a third appraiser within ten (10) days after the expiration of
the twenty (20) day period referred to in clause (iii) above, or if such third
appraiser does not make a determination of Fair Market Value within twenty (20)
days after his selection, then such third appraiser or a substituted third
appraiser, as applicable, shall, at the request of either party hereto, be
appointed by the President or Chairman of the American Arbitration Association
in Louisville, Kentucky. The determination of Fair Market Value made by the
third appraiser appointed pursuant hereto shall be made within twenty (20) days
after such appointment. Fair Market Value shall be the average of the
determination of Fair Market Value made by the third appraiser and the
determination of Fair Market Value made by the appraiser (pursuant to Paragraph
29(a)(iii) hereof) whose determination of Fair Market Value is nearest to that
of the third appraiser. Such average shall be binding and conclusive upon
Landlord and Tenant.
(v) All appraisers selected or appointed pursuant to this
Paragraph 29(a) shall (A) be independent qualified MAI appraisers (B) have no
right, power or authority to alter or modify the provisions of this Lease,
(C) utilize the definition of Fair Market Value hereinabove set forth above, and
(D) be registered in the State if the State provides for or requires such
registration. The Cost of the procedure described in this Paragraph 29(a) above
shall be borne entirely by Tenant.
(b) If, by virtue of any delay, Fair Market Value of the Leased
Premises is not determined by the expiration or termination of the then current
Term, then the date on which the Term would otherwise expire or terminate shall
be extended to the date specified for termination in the particular provision of
this Lease pursuant to which the determination of Fair Market Value is being
made.
(c) In determining Fair Market Value of the Leased Premises as
defined in clause (b) of the definition of Fair Market Value of the Leased
Premises, the appraisers shall add (a) the present value of the Rent for the
then-remaining Term (with assumed increases in the CPI (as defined in Exhibit D)
to be determined by the appraisers) and (b) the present value of the Leased
Premises as of the end of such Term. The appraisers shall further assume that
no default then exists under the Lease, that Tenant has complied (and will
comply) with all provisions of the Lease, and that Tenant has not violated (and
will not violate) any Covenants. In no event shall the formula for, or amount
of, the Early Termination Amount be considered in determining Fair Market Value.
30. NON-RECOURSE AS TO LANDLORD.
<PAGE>
(a) Anything contained herein to the contrary notwithstanding, any
claim based on or in respect of any liability of Landlord under this Lease shall
be enforced only against the Leased Premises and not against any other assets,
properties or funds of (i) Landlord, (ii) any director, officer, general
partner, shareholder, limited partner, employee or agent of Landlord, or any
general partner of Landlord, or any of its general partners (or any legal
representative, heir, estate, successor or assign of any thereof), (iii) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of its general partners, shareholders, officers, directors,
employees or agents, either directly or through Landlord, or its general
partners, shareholders, officers, directors, employees or agents or any
predecessor or successor partnership or corporation (or other entity), or (iv)
any other Person (including Carey Property Advisors, Carey Fiduciary Advisors,
Inc., W. P. Carey & Co. Inc., and any Person affiliated with any of the
foregoing), or any director, officer, employee, agent or successor of any
thereof.
(b) Nothing in this Paragraph 30 shall be construed as waiving or
limiting any equitable remedies which Tenant may have against Landlord and/or
any of the foregoing Persons by reason of any breach of this Lease by Landlord
and/or such Persons.
31. FINANCING. If Landlord desires to obtain or refinance any Loan,
Tenant shall negotiate in good faith with Landlord concerning any request made
by any Lender or proposed Lender for changes to or modifications of this Lease;
provided no such changes or modifications shall increase Tenant's obligations
under this Lease. In particular, Tenant shall agree, upon request of Landlord,
to supply any such Lender with such notices and information as Tenant is
required to give to Landlord hereunder and to acknowledge that the rights of
Landlord hereunder have been assigned by Landlord to such Lender and to consent
to such financing if such consent is requested by such Lender. Tenant shall
provide any other consent or statement and shall execute any and all other
documents that such Lender reasonably requires in connection with such
financing, including any environmental indemnity agreement and subordination,
non-disturbance and attornment agreement, so long as the same do not adversely
affect any right, benefit or privilege of Tenant under this Lease or materially
increase Tenant's obligations under this Lease; provided, however, that in no
event shall Tenant be obligated to provide any Lender with any confidential or
proprietary information about Tenant or its business. Such subordination,
non-disturbance and attornment agreement shall be in form and substance
reasonably satisfactory to Tenant and may require Tenant to confirm that (a)
Lender and its assigns will not be liable for any misrepresentation, act or
omission of Landlord and (b) Lender and its assigns will not be subject to any
counterclaim, demand or offset which Tenant may have against Landlord.
32. SUBORDINATION. Subject to the provisions of Paragraph 31, this
Lease and Tenant's interest hereunder shall be subordinate to the Tenant
Mortgage and to any Mortgage or other security instrument hereafter placed upon
the Leased Premises by Landlord, and to any and all advances made or to be made
thereunder, to the interest thereon, and all renewals, replacements and
extensions thereof, provided that the holder of any such Mortgage or other
security instrument (other than the
<PAGE>
Tenant Mortgage) enters into a subordination, non-disturbance and attornment
agreement with and reasonably satisfactory to Tenant which recognizes this Lease
and all Tenant's rights hereunder unless and until (i) an Event of Default
exists or (ii) Landlord shall have the right to terminate this Lease pursuant to
any applicable provision hereof.
33. TAX TREATMENT; REPORTING; INTENTION OF PARTIES. Landlord and
Tenant each acknowledge that it is the intention of each of them that this
transaction be a true lease transaction and not a financing transaction,
notwithstanding any formula for the amount to be paid to Landlord if a
rejectable offer is made by Tenant in accordance with the terms of this Lease
and each shall treat this transaction as a true lease for state law purposes and
shall report this transaction as a Lease for Federal income tax purposes. For
Federal income tax purposes each shall report this Lease as a true lease with
Landlord as the owner of the Leased Premises and Equipment and Tenant as the
lessee of such Leased Premises and Equipment including: (1) treating Landlord
as the owner of the property eligible to claim depreciation deductions under
Section 167 or 168 of the Internal Revenue Code of 1986 (the "CODE") with
respect to the Leased Premises and Equipment, (2) Tenant reporting its Rent
payments as rent expense under Section 162 of the Code, and (3) Landlord
reporting the Rent payments as rental income.
34. OPTION TO PURCHASE.
(a) Landlord does hereby give and grant to Tenant the option to
purchase the Leased Premises (i) for a purchase price (the "PURCHASE PRICE")
equal to the greater of (A) the Fair Market Value of the Leased Premises and (B)
the sum of the Landlord's Share of Project Costs and any applicable Prepayment
Premium and (ii) on any date (the "OPTION PURCHASE DATE") during the eleventh
(11th) Lease Year which is mutually agreeable to Landlord and Tenant, but in any
event not sooner than thirty (30) days after the Fair Market Value Date. If
Tenant intends to exercise such option, Tenant shall give written notice to
Landlord to such effect not later than six (6) months prior to the first day of
the eleventh (11th) Lease Year. Promptly upon receipt of such notice by
Landlord, the parties shall commence to determine Fair Market Value.
(b) If Tenant shall exercise the foregoing option to purchase the
Leased Premises, on the later to occur of (i) the Option Purchase Date or
(ii) the date when Tenant has paid the Purchase Price and has satisfied all
other Monetary Obligations, Landlord shall convey the Leased Premises to Tenant
in accordance with Paragraph 20 hereof; provided, that if an Event of Default
has occurred and is continuing on the Option Purchase Date, Landlord, at its
sole option, may terminate Tenant's option to purchase hereunder. If this Lease
shall terminate for any reason prior to the date originally fixed herein for the
expiration of the Term, or if Tenant shall fail to give the aforesaid notice of
intention to purchase, time being of the essence, the option provided in this
Paragraph 35 and any exercise thereof by Tenant shall cease and terminate and
shall be null and void.
<PAGE>
35. OBLIGATION TO PURCHASE. On the expiration date of the Term (or
if such date is not a Business Day, then on the first Business Day immediately
preceding such expiration date) (the "PURCHASE DATE") Tenant shall have an
obligation to purchase the Leased Premises for an amount equal to the positive
difference, if any, between the Fair Market Value of the Leased Premises and the
sum of the original principal amount of the Initial Loan and the Tenant Loan,
and six (6) months prior to such expiration date Landlord and Tenant shall
determine the Fair Market Value of the Leased Premises in accordance with the
terms of Paragraph 29 hereof. On the Purchase Date Landlord shall convey the
Leased Premises to Tenant in accordance with Paragraph 20 hereof.
36. FINANCING MAJOR ALTERATIONS.
(a) Should Tenant, during the Term of this Lease, desire to make
Alterations to any of the Leased Premises which are not readily removable
without causing material damage to the Leased Premises, and which will cost in
excess of $500,000 ("MAJOR ALTERATIONS"), Tenant may, prior to the commencement
of construction of such Major Alterations, request Landlord to reimburse the
costs thereof to Landlord (the "ALTERATION COST") to Tenant, TO WIT: cost of
labor and materials, financing fees, legal fees, survey, title insurance and
other normal and customary loan or construction costs.
(b) Should Landlord agree to reimburse such Alteration Cost, Landlord
and Tenant shall enter into good faith negotiations regarding the execution and
delivery of a written agreement of modification of this Lease, which agreement
shall provide for the following:
(i) payment by Landlord to Tenant of the Alteration Cost within
one hundred twenty (120) days of the date of Landlord's agreement to pay the
Alteration Cost, or in installment payments as agreed, or on the date of
completion of the Major Alterations, whichever shall be later;
(ii) an increase in the annual Basic Rent payable during the
Amortization Period (as hereinafter defined) to an amount sufficient to amortize
the Alteration Cost and the unpaid principal balance of the Note ("TOTAL
FINANCING") over a period (the "AMORTIZATION PERIOD") which shall be the shorter
of (A) twenty-five (25) years or (B) the remainder of the then current Term and,
if Tenant so elects, any additional extension periods provided for herein (so
long as Tenant shall confirm any such extension periods included in the
Amortization Period by a written waiver of its right to give notice of its
intention not to renew this Lease prior to the expiration of such extension
periods), at such rate of interest and upon such other terms as shall be agreed
upon between Landlord and Tenant, but which shall be no less favorable than the
prevailing interest rate and terms for first unsecured loans in a principal
amount equal to the Total Financings for borrowers with credit ratings
equivalent to that Tenant's at that time;
(iii) provide a rate of return to Landlord on Landlord's equity
investment in the Leased Premises equal to that enjoyed by Landlord hereunder
immediately prior to such proposed increase in Basic Rent; and
<PAGE>
(iv) such other changes and amendments to this Lease as may be
necessary and appropriate in view of such payment of the Alteration Cost by
Landlord to Tenant.
Tenant shall pay all Costs incurred by Landlord in connection with any such
modification to this Lease and such financing, including closing costs,
brokerage fees, taxes, recording charges and legal fees and expenses.
(c) If Landlord and Tenant do not reach agreement on Tenant's request
to have Landlord finance the Alteration Costs, Tenant shall, subject to the
provisions of Paragraph 13 of this Lease, have the right to construct the Major
Alterations at Tenant's sole cost and expense. In such event the Major
Alterations shall be Tenant's property unless such Major Alterations are
Alterations to the Leased Premises in which case the Major Alterations shall be
the property of Landlord. The construction of any Major Alterations shall be
performed in accordance with the provisions of Paragraph 13 hereof.
(d) Nothing contained in this Paragraph 36 shall be construed to
modify Paragraph 13 hereof, and the provisions of Paragraph 12 and Paragraph 13
shall apply to all Major Alterations made or constructed hereunder, including
the requirement for Landlord's consent to Alterations.
37. MISCELLANEOUS.
(a) The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease.
(b) As used in this Lease, the singular shall include the plural and
any gender shall include all genders as the context requires and the following
words and phrases shall have the following meanings: (i) "including" shall mean
"including without limitation"; (ii) "provisions" shall mean "provisions, terms,
agreements, covenants and/or conditions"; (iii) "lien" shall mean "lien, charge,
encumbrance, title retention agreement, pledge, security interest, mortgage
and/or deed of trust"; (iv) "obligation" shall mean "obligation, duty,
agreement, liability, covenant and/or condition"; (v) "any of the Leased
Premises" shall mean "the Leased Premises or any part thereof or interest
therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or
interest therein"; (vii) "any of the Improvements" shall mean "the Improvements
or any part thereof or interest therein"; (viii) "any of the Building Systems
Equipment" shall mean "the Building Systems Equipment or any part thereof or
interest therein"; and (ix) "any of the Adjoining Property" shall mean "the
Adjoining Property or any part thereof or interest therein".
(c) Any act which Landlord is permitted to perform under this Lease
may be performed at any time and from time to time by Landlord or any person or
entity designated by Landlord. Each appointment of Landlord as attorney-in-fact
for Tenant hereunder is irrevocable and coupled with an interest. Except as
<PAGE>
otherwise specifically provided herein, Landlord shall have the right, at its
sole option, to withhold or delay its consent whenever such consent is required
under this Lease for any reason or no reason. Time is of the essence with
respect to the performance by Tenant of its obligations under this Lease.
(d) Landlord shall in no event be construed for any purpose to be a
partner, joint venturer or associate of Tenant or of any subtenant, operator,
concessionaire or licensee of Tenant with respect to any of the Leased Premises
or otherwise in the conduct of their respective businesses.
(e) This Lease and any documents which may be executed by Tenant on
or about the effective date hereof at Landlord's request constitute the entire
agreement between the parties and supersede all prior understandings and
agreements, whether written or oral, between the parties hereto relating to the
Leased Premises and the transactions provided for herein. Landlord and Tenant
are business entities having substantial experience with the subject matter of
this Lease and have each fully participated in the negotiation and drafting of
this Lease. Accordingly, this Lease shall be construed without regard to the
rule that ambiguities in a document are to be construed against the drafter.
(f) This Lease may be modified, amended, discharged or waived only by
an agreement in writing signed by the party against whom enforcement of any such
modification, amendment, discharge or waiver is sought.
(g) The covenants of this Lease shall run with the land and bind
Tenant, its successors and assigns and all present and subsequent encumbrancers
and subtenants of any of the Leased Premises, and shall inure to the benefit of
Landlord, its successors and assigns. If there is more than one Tenant, the
obligations of each shall be joint and several.
(h) If any one or more of the provisions contained in this Lease
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(i) This Lease shall be governed by and construed and enforced in
accordance with the Laws of the State.
(j) Landlord agrees that so long as no Event of Default has occurred
and remains continuing, Landlord shall execute and deliver such Landlord lien
waivers as may be reasonably satisfactory to Landlord, in connection with the
financing of any personal property to be owned by Tenant, located at the Leased
Premises and used in connection with the operation of the Tenant's business at
the Leased Premises.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed under seal as of the day and year first above written.
LANDLORD:
<PAGE>
CFP ASSOCIATES, a Kentucky
partnership
By: CFP (MD) QRS 11-30, Inc.,
a Maryland corporation,
general partner
By:
-------------------------
Senior Vice President
By: CFP (MD) QRS 11-33, Inc.,
a Maryland corporation,
general partner
By:
-------------------------
Senior Vice President
TENANT:
CUSTOM FOOD PRODUCTS, INC.,
a California corporation
By:
-------------------------
Chief Financial Officer
<PAGE>
EXHIBIT A
PREMISES
<PAGE>
EXHIBIT B
BUILDING SYSTEMS EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of every
kind and nature whatsoever now or hereafter affixed or attached to or installed
in any of the Leased Premises (except as hereafter provided), including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, power, air cooling, air conditioning, humidification,
sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators, overhead
cranes and garage units, together with all additions thereto, substitutions
therefor and replacements thereof required or permitted by this Lease, but
excluding all personal property and all trade fixtures, machinery, office,
manufacturing and warehouse equipment which are not necessary to the operation,
as buildings, of the buildings which constitute part of the Leased Premises.
<PAGE>
EXHIBIT C
PERMITTED ENCUMBRANCES
1. Special assessments and special taxes, if any, not yet due and payable.
2. Taxes and assessments for 1995 which are a lien, but are not yet due and
payable.
<PAGE>
EXHIBIT D
BASIC RENT SCHEDULE
1. BASIC RENT PRIOR TO THE REFINANCING DATE.
A. Basic Rent shall begin accruing on the Primary Term
Commencement Date. Commencing on the Basic Rent Commencement Date and to and
including the first day of the first calendar month following the earlier to
occur (the "REFINANCING DATE") of (i) the refinancing of the Initial Loan or
(ii) the last day of the fifth (5th) Lease Year, Basic Rent shall be payable
monthly in arrears on each Basic Rent Payment Date in an amount equal to the sum
of (a) 0.0125 multiplied by the weighted average amount advanced by Landlord
from its own funds for Landlord's Share of Project Costs based on the number of
days each advance is outstanding prior to such Basic Rent Payment Date; (b) the
amount of interest and/or interest and principal payable by Landlord on the
Initial Loan for such month; and (c) the amount of interest and/or interest and
principal payable by Landlord on the Tenant Loan for such month ("TENANT
VARIABLE RENT"); provided that from and after the date (the "TENANT LOAN
REFINANCING DATE") on which all or any part of the Tenant Loan is refinanced,
the Tenant Variable Rent shall be an amount equal to one-twelfth (1/12th) of the
amount of principal and interest that Landlord would be required to pay in a
twelve-month period on a hypothetical loan in a principal amount equal to the
outstanding principal balance of the Tenant Loan as of the date immediately
prior to the Tenant Loan Refinancing Date, which hypothetical loan has payment
terms identical to those of the Loan pursuant to which the Tenant Loan is
refinanced. The amount set forth in the foregoing sentence shall, absent
manifest error, be conclusively determined from the books and records of
Landlord.
B. Commencing with the first day of the second (2nd) Lease
Year, the Basic Rent shall be subject to adjustment as provided in subparagraphs
A, C and D of Paragraph 5 below.
2. BASIC RENT FOLLOWING THE REFINANCING DATE. Commencing on the
first day of the first calendar month following the Refinancing Date and
continuing on each Basic Rent Payment Date thereafter until the expiration of
the Term, Basic Rent shall be payable monthly in advance in an amount equal to
the sum of (i) Forty-nine Thousand Five Hundred Twenty-two and 50/100 Dollars
($49,522.50) and (ii) an amount equal to the Tenant Variable Rent for such
month.
The amount set forth in the foregoing sentence shall (i) absent
manifest error, be conclusively determined from the books and records of
Landlord, and (ii) be subject to the adjustments provided for in subparagraphs
B, C and D of Paragraph 5 below.
3. CPI ADJUSTMENTS TO BASIC RENT. The Basic Rent shall be subject
to adjustment, in the manner hereinafter set forth, for increases in the index
known as United States Department of Labor, Bureau of Labor Statistics,
Consumer Price
<PAGE>
Index, All Urban Consumers, United States City Average, All Items, (1982-84=100)
("CPI") or the successor index that most closely approximates the CPI. If the
CPI shall be discontinued with no successor or comparable successor index,
Landlord and Tenant shall attempt to agree upon a substitute index or formula,
but if they are unable to so agree, then the matter shall be determined by
arbitration in accordance with the rules of the American Arbitration Association
then prevailing in New York City. Any decision or award resulting from such
arbitration shall be final and binding upon Landlord and Tenant and judgment
thereon may be entered in any court of competent jurisdiction. In no event will
the Basic Rent as adjusted by the CPI adjustment be less than the Basic Rent in
effect for the one (1) year period immediately preceding such adjustment.
4. EFFECTIVE DATES OF CPI ADJUSTMENTS. As of the first day of the
second (2nd) Lease Year and on the first day of each Lease Year thereafter,
Basic Rent shall be adjusted to reflect increases in the CPI during the most
recent Lease Year immediately preceding each of the foregoing dates (each such
date being hereinafter referred to as the "BASIC RENT ADJUSTMENT DATE").
5. METHOD OF ADJUSTMENT FOR CPI ADJUSTMENT.
A. PRIOR TO REFINANCING DATE. As of each Basic Rent Adjustment
Date occurring prior to the Refinancing Date when the average CPI determined in
clause (i) below exceeds the Beginning CPI (as defined in this Paragraph 5(A)),
the amount of $594,270 shall be multiplied by a fraction, the numerator of which
shall be the difference between (i) the average CPI for the three (3) most
recent calendar months (the "PRIOR MONTHS") ending prior to such Basic Rent
Adjustment Date for which the CPI has been published on or before the
forty-fifth (45th) day preceding such Basic Rent Adjustment Date and (ii) the
Beginning CPI, and the denominator of which shall be the Beginning CPI. An
amount equal to the lesser of (x) eighty percent (80%) of the product of such
multiplication or (y) the product of such multiplication assuming the increase
of 4.5% in the CPI for each one year period shall be added to the Basic Rent in
effect immediately prior to such Basic Rent Adjustment Date. As used herein,
"BEGINNING CPI" shall mean the average CPI for the three (3) calendar months
corresponding to the Prior Months, but occurring one (1) year earlier. If the
average CPI determined in clause (i) is the same or less than the Beginning CPI,
the Basic Rent will remain the same for the ensuing Lease Year.
B. FROM AND AFTER REFINANCING DATE. As of each Basic Rent
Adjustment Date occurring on or after the Refinancing Date when the average CPI
determined in clause (i) below exceeds the Beginning CPI, the Basic Rent in
effect immediately prior to the applicable Basic Rent Adjustment Date shall be
multiplied by a fraction, the numerator of which shall be the difference between
(i) the average CPI for the Prior Months ending prior to such Basic Rent
Adjustment Date for which the CPI has been published on or before the
forty-fifth (45th) day preceding such Basic Rent Adjustment Date and (ii) the
Beginning CPI, and the denominator of which shall be the Beginning CPI. An
amount equal to the lesser of (x) eighty percent (80%) of the product of such
multiplication or (y) the product of such multiplication assuming the increase
of 4.5% in the CPI for each one year period shall be added to the Basic Rent in
effect immediately prior to such Basic
<PAGE>
EXHIBIT D
Rent Adjustment Date. If the average CPI determined in clause (i) is the same
or less than the Beginning CPI, the Basic Rent will remain the same for the
ensuing Lease Year.
C. ADJUSTMENT. Effective as of a given Basic Rent Adjustment
Date, Basic Rent payable under this Lease until the next succeeding Basic Rent
Adjustment Date shall be the Basic Rent in effect after the adjustment provided
for as of such Basic Rent Adjustment Date.
D. NOTICE. Notice of the new annual Basic Rent shall be
delivered to Tenant on or before the tenth (10th) day preceding each Basic Rent
Adjustment Date.
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
(Lender)
The undersigned, CUSTOM FOOD PRODUCTS, INC., a California corporation
("TENANT"), hereby certifies to , a
("LENDER") and/or ("PURCHASER"), as follows:
1. Attached hereto is a true, correct and complete copy of that certain
lease dated as of September, 1994, between CFP ASSOCIATES, a Kentucky
partnership ("LANDLORD"), and Tenant (the "LEASE"), the demised premises of
which ("PREMISES") are located at 3278 Kendall Springs Road in the City of
Owingsville, County of Bath, State of Kentucky, which Premises are more
particularly described in the Lease. The Lease (as attached) represents the
entire agreement between the parties as to the Premises, is now in full force
and effect, and has not been amended, modified or supplemented, except as set
forth in Paragraph 5 below.
2. The term of the Lease commenced on , 19 . Rent commenced to
accrue on , 19 .
3. The undersigned is in occupancy of the Premises.
4. The initial term of the Lease shall expire on ,
19 , with renewal option(s) of a period of years each.
5. The Lease has not been amended, modified, supplemented, extended,
renewed or assigned, except:
.
6. All conditions of the Lease to be performed by Landlord thereunder and
necessary to the enforceability of the Lease have been satisfied, except:
.
7. The amount of the installment of Basic Rent being paid currently is
$ .
8. Tenant is paying the full Basic Rent under the Lease, which Rent has
been paid in full through . No Basic Rent under the Lease has been
paid for more than thirty (30) days in advance of its due date.
9. To the best of the knowledge of the undersigned,
<PAGE>
based on reasonable injury, Tenant has no defense as to its obligations under
the Lease and claims no set-off or counterclaim against Landlord.
10. To the best knowledge of the undersigned, there are no defaults on the
part of Landlord or Tenant under the Lease, and there are no events currently
existing (or with the passage of time, giving of notice or both, which would
exist) which give Tenant the right to cancel or terminate the Lease.
11. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies, except as
provided in the Lease.
12. There are no actions, whether voluntary or otherwise, pending against
the undersigned or any guarantor of the undersigned's obligations under the
Lease pursuant to the bankruptcy or insolvency laws of the United States or any
state thereof.
13. It is Tenant's understanding that the present Landlord of the Premises
is .
14. Tenant's address for notices under the terms of the Lease is: 1117 W.
Olympic Boulevard, P.O. Box 1027, Montebello, California 90640.
15. Tenant hereby acknowledges that Lender intends to make a loan to
Landlord for , that Landlord intends to assign
the Lease to Lender in connection with such financing, and that Lender is
relying upon the representations herein made in funding such loan. Upon such
assignment and upon written request from Lender, Tenant agrees to send all
rents, payments and other amounts due under the Lease and assigned to Lender
pursuant to said financing to such address as may be indicated in writing by
Lender to Tenant. Tenant agrees that no modification, adjustment, revision,
cancellation or renewal of the Lease or amendments thereto shall be effective
unless the written consent of Lender is obtained. Tenant has not received any
notice of any other sale, pledge, transfer or assignment of the Lease or of the
rentals thereunder by Landlord.
16. Tenant shall deliver to Lender a copy of all notices of default or
termination served on or received from Landlord.
17. Lender is hereby given the right to cure Landlord's defaults under the
Lease within thirty (30) days after receipt of written notice by the undersigned
of Landlord's failure so to do; provided, however, that said thirty (30) day
period shall be extended (a) so long as within said thirty (30 day period Lender
has commenced to cure and is proceeding with due diligence to cure said
defaults, or (b) so long as Lender is proceeding with a foreclosure action
against Landlord and will commence to cure and will proceed with due diligence
to cure said defaults upon the resolution of said foreclosure action.
18. Tenant acknowledges that Lender shall assume no liability or
obligations under the Lease, or any renewal thereof, either by virtue of the
assignment thereof or any receipt or collection of rents under the Lease, except
in the event that
<PAGE>
EXHIBIT E
Lender acquires title to the Leased Premies.
19. All provisions of the Lease and the amendments thereto (if any)
referred to above are hereby ratified.
DATED: , 19 "Tenant":
------------ ---
CUSTOM FOOD PRODUCTS, INC.,
a California corporation
By:
---------------------------
Its:
--------------------------
By:
---------------------------
Its:
--------------------------
<PAGE>
SECOND LEASE AMENDMENT
THIS SECOND LEASE AMENDMENT (this "AMENDMENT") is made as of this 31st
day of December, 1996 between CFP ASSOCIATES, a Kentucky partnership
("LANDLORD") with an address c/o W. P. Carey & Co., Inc., 50 Rockefeller Center,
Second Floor, New York, New York 10020, and CUSTOM FOOD PRODUCTS, INC., a
California corporation ("TENANT") with an address at 1117 West Olympic
Boulevard, Montebello, California 90640.
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement
dated as of September 30, 1994, as amended by a certain letter agreement dated
September 30, 1994, and by a certain First Lease Amendment dated as of June 14,
1996 (the "LEASE"), whereby Landlord demised and let to Tenant, and Tenant took
and leased from Landlord, for the term and upon the provisions therein
specified, all right, title and interest of Landlord in and to the Leased
Premises; and
WHEREAS, the parties wish to further amend the Lease; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned thereto in the Lease.
NOW THEREFORE, in consideration of the rents and provisions herein
stipulated to be paid and performed, Landlord and Tenant hereby covenant and
agree as follows:
1. INCORPORATION OF RECITALS. The recitals set forth above are hereby
incorporated as if set forth in their entirety.
2. CERTAIN DEFINITIONS. From and after the date hereof, the following
terms referred to in the Lease shall have the following respective meanings:
"GUARANTY" shall mean that certain Guaranty and Suretyship
Agreement dated as of September 30, 1994 from Guarantor to Landlord, as amended
by that certain First Amendment to Guaranty and Suretyship Agreement dated July
11, 1996 from Guarantor to Landlord, and as amended by that certain Second
Amendment to Guaranty and Suretyship Agreement of even date herewith and that
certain Guaranty and Suretyship Agreement of even date herewith from CFP Group,
Inc. to Landlord.
"INITIAL LENDER" shall mean CFPLOAN (MD) QRS 11-41, Inc., as
assignee of NationsCredit Commercial Corporation (formerly known as Greyrock
Capital Group, Inc.), as Agent, and any successor or assign of CFPLOAN (MD) QRS
11-41, Inc., as the holder of the Initial Loan.
"LEASE" shall mean the Lease, as modified, amended
<PAGE>
and supplemented by this Amendment.
3. EVENTS OF DEFAULT. Paragraph 22(a), clause (xv) of the Lease is
hereby amended by deleting from the second line the phrase "under the Guaranty"
in its entirety and inserting in lieu thereof the phrase "under either
Guaranty".
4. FINANCING. Paragraph 31 of the Lease is hereby amended by adding
the following sentences at the end of such paragraph:
Notwithstanding anything else contained in this Lease to the contrary,
Tenant shall pay for the actual, reasonable, customary and documented costs
incurred by Landlord in connection with the initial refinancing of the Initial
Loan provided, however, that such obligation to pay for such costs shall only
pertain to the initial refinancing of the Initial Loan and provided further that
Tenant shall not be obliged to pay for any such costs to the extent the same
exceed the sum of $100,000. The parties hereto agree that the purchase of the
Initial Loan by CFPLOAN (MD) QRS 11-40, Inc. from NationsCredit Commercial
Corporation (formerly known as Greyrock Capital Group, Inc.) shall not
constitute a refinancing of the Initial Loan for purposes of this Lease,
including without limitation EXHIBIT D hereto.
5. RATIFICATION. As amended, supplemented and modified by this
Amendment, the Lease, including without limitation the provisions of EXHIBIT D,
is hereby ratified and confirmed in all respects.
6. MISCELLANEOUS.
(a) The covenants of this Amendment shall run with the land and bind
Tenant, its successors and assigns and all present and subsequent encumbrancers
and subtenants of any of the Leased Premises, and shall inure to the benefit of
Landlord, its successors and assigns.
(b) This Amendment shall be governed by and construed and enforced in
accordance with the Laws of the State.
(c) This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed shall be deemed to be an original, but all such counterparts shall
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to
be duly executed under seal as of the day and year first above written.
LANDLORD:
CFP ASSOCIATES, a Kentucky
partnership
By: CFP (MD) QRS 11-30, Inc.,
a Maryland corporation,
general partner
By:
---------------------
Title:
------------------
By: CFP (MD) QRS 11-33, Inc.,
a Maryland corporation,
general partner
By:
---------------------
Title:
------------------
TENANT:
CUSTOM FOOD PRODUCTS, INC.,
a California corporation
By:
--------------------------
Title:
-----------------------
<PAGE>
CONSENT OF LENDER
The undersigned, "Lender", by assignment, under that certain Assignment of
Net Lease and Rentals and Construction Agency Agreement dated as of September
30, 1994 given by CFP Associates, hereby consents to the foregoing Second Lease
Amendment.
CFPLOAN (MD) QRS 11-40, INC.
By:
Title:
<PAGE>
September 30, 1994
Custom Food Products, Inc.
1117 West Olympic Blvd.
Montebello, CA 90640
Re: Lease Agreement dated as of September 30, 1994 (the "LEASE") by and
between CFP Associates, a Kentucky partnership ("LANDLORD"), as
landlord, and Custom Food Products, Inc., a California corporation
("Tenant"), as Tenant
Ladies and Gentlemen:
This letter shall serve as Landlord's commitment to purchase the Leased
Premises (as such term is defined in the Lease; capitalized terms used herein
and not otherwise defined herein having the respective meanings assigned thereto
in the Lease) from Tenant after Tenant has purchased the Leased Premises from
Landlord pursuant to Paragraph 35 of the Lease. The purchase price by Landlord
for the Leased Premises (the "PURCHASE PRICE") shall be the same net amount paid
by Tenant pursuant to Paragraph 35 of the Lease. Tenant shall pay or reimburse
Landlord for all Costs incurred by Landlord in connection with such transfer.
Tenant shall convey such title to the Leased Premises as was conveyed to
Tenant, and Landlord (or Landlord's designee) shall accept such title, subject,
however, to the Permitted Encumbrances and only those liens, exceptions and
restrictions on, against or relating to the Leased Premises at the time Tenant
takes title to the Leased Premises pursuant to Paragraph 35 of the Lease.
Landlord's purchase of the Leased Premises shall be completed within five
(5) Business Days of Tenant's purchase thereof and, on the date set for
Landlord's purchase of the Leased Premises, Landlord shall pay to Tenant the
Purchase Price, and Tenant shall deliver to Landlord (or Landlord's designee) a
special warranty deed which describes the premises being conveyed and conveys
the title thereto as provided above and such other instruments as shall be
necessary to transfer the Leased Premises to Landlord or Landlord's designee.
This letter agreement shall be binding upon, and shall inure to the benefit
of, Landlord and Tenant and their respective successors and assigns.
Very truly yours
CFP ASSOCIATES, a Kentucky
partnership
By: CFP (MD) QRS 11-30, Inc.,
a Maryland corporation, general
partner
<PAGE>
By:
----------------------
Senior Vice President
By: CFP (MD) QRS 11-33, Inc., a
Maryland corporation, general
partner
By:
----------------------
Senior Vice President
ACCEPTED AND AGREED
THIS 30th DAY OF SEPTEMBER, 1994
CUSTOM FOOD PRODUCTS, INC.
By:
-----------------------------
Chief Financial Officer
<PAGE>
RSSM DRAFT 5/24/96
AGREEMENT TO PURCHASE AND LEASE REAL ESTATE
by and between
CFP ASSOCIATES,
a Kentucky partnership
and
CUSTOM FOOD PRODUCTS, INC.,
a California corporation,
Dated as of: ________ ___, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Conditions to CFP's Obligation to Close. . . . . . . . . . . . 3
5. Conditions to Custom's Obligation to Close . . . . . . . . . . 6
6. Custom's Covenants, Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . 7
8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Brokerage Commissions. . . . . . . . . . . . . . . . . . . . . 8
10. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 8
11. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . 8
Exhibit "A" - Legal Description of Additional Land
Exhibit "B" - Form of First Lease Amendment
Exhibit "C" - Survey Checklist
Exhibit "D" - Form of Surveyor's Certificate
Exhibit "E" - Form of Warranty Deed
Exhibit "F" - Form of Bill of Sale
Exhibit "G" - Form of Amended and Restated Memorandum
of Lease
Exhibit "H" - Form of Lessee's Certificate
Exhibit "I" - Form of Guarantor's Certificate
Exhibit "J" - Form of First Amendment to Guaranty and
Suretyship Agreement
Exhibit "K" - Form of Consent and Amendment No. 1 to
Loan Agreement
<PAGE>
AGREEMENT TO PURCHASE AND LEASE REAL ESTATE
THIS AGREEMENT TO PURCHASE AND LEASE REAL ESTATE (this "AGREEMENT") made
and entered into as of the day of ________, 1996, by and between CUSTOM
FOOD PRODUCTS, INC., a California corporation having a mailing address at 1117
West Olympic Boulevard, Montebello, California 90640 ("CUSTOM"), and CFP
ASSOCIATES, a Kentucky partnership having a mailing address c/o W. P. Carey &
Co., Inc., 50 Rockefeller Plaza, Second Floor, New York, New York 10020 ("CFP").
W I T N E S S E T H:
WHEREAS, CFP is the owner of real property situate in Owingsville, Bath
County, Kentucky (the "EXISTING LAND"), having constructed thereon certain
improvements (the "EXISTING IMPROVEMENTS") (together with the Existing Land, the
"PROPERTY"), which is leased to Custom pursuant to a Lease Agreement dated as of
September 30, 1994 between CFP, as landlord, and Custom, as tenant (the
"LEASE"); and
WHEREAS, Custom desires to expand the Improvements by constructing on the
Property and on the Additional Land (as hereinafter defined) an addition
containing approximately 10,380 square feet (the "EXPANSION") and, subject to
the terms and conditions of this Agreement, CFP has agreed to purchase certain
real property ("ADDITIONAL LAND") more particularly described in EXHIBIT "A"
hereto adjacent to the Property and the Expansion from Custom and to lease the
Additional Land and the Expansion to Custom; and
WHEREAS, the Additional Land and the Existing Land shall, on or before the
Closing, be consolidated into one single parcel pursuant to all applicable
zoning, land use and subdivision laws, which shall constitute the Consolidated
Land.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. DEFINITIONS. In addition to other words and terms defined elsewhere
in this Agreement, as used herein the following words and terms shall have the
following meanings, respectively, unless the context hereof otherwise clearly
requires:
(a) "Acquisition Fee" shall mean $70,681, which shall be part of the
Purchase Price paid by CFP to Custom.
(b) "Additional Property" shall mean,
<PAGE>
collectively, the Additional Land and the Expansion.
(c) "Architect" shall mean Suhar & Miller, Architects.
(d) "Closing" shall mean the consummation of the purchase and lease
of the Additional Property in accordance with the terms of this Agreement.
(e) "Consolidated Land" shall mean the combination of the land
contained within the legal descriptions of the Existing Land and the Additional
Land so that a consolidated perimeter legal description and survey is created as
a result.
(f) "First Lease Amendment" shall mean an amendment to the Lease to
be executed by CFP and Custom, pursuant to which the Additional Property shall
be subjected to the terms of the Lease, a draft of which is attached hereto as
EXHIBIT "B".
(g) "Force Majeure" shall mean any cause or causes which Custom is
not, despite all reasonable efforts, able to prevent or overcome, including but
not limited to acts of God, strikes, walkouts or other labor disputes, riots,
civil strife, war, acts of a public enemy, lightning, fires, explosions, storms
or floods; but the unavailability of money, unavailability of sources of
financing, a shortage of labor or materials, or changes in market conditions
shall not constitute Force Majeure.
(h) "Guarantor" shall mean CFP Holdings, Inc.
(i) "Lender" shall mean NationsCredit Commercial Corporation,
formerly known as Greyrock Capital Group Inc.
(j) "Permits" shall mean all of the governmental permits, including
licenses and authorizations, required for the ownership and operation of the
Additional Property, including without limitation certificates of occupancy,
building permits, signage permits, site use approvals, zoning certificates,
planning commission approvals, environmental and land use permits and any and
all necessary approvals from state or local authorities.
(k) "Permitted Exceptions" shall mean taxes and assessments which are
a lien but are not yet due and payable, customary utility easements that benefit
and do not interfere with the use of the Additional Property and such other
easements, rights of way, covenants and conditions as may be approved by CFP in
its sole discretion and other matters specified in Schedule B to the Title
Policy.
(l) "Plans" shall mean the plans and specifications prepared by a
licensed architect approved by CFP, and in form and substance satisfactory to
CFP, for the construction of the Expansion.
(m) "Project Cost" shall mean all Direct Costs and
-2-
<PAGE>
Indirect Costs (as those terms are defined in the Lease) incurred with respect
to the acquisition of the Additional Land and the construction of the Expansion.
(n) "Purchase Price" shall mean Purchase Price as defined in SECTION
2.
(o) "Title Company" shall mean First American Title Insurance
Company, acting through its authorized agent, Multi-State Title Agency, Ltd.,
which shall either issue an endorsement to the Title Policy or issue a new title
policy.
(p) "Title Policy" shall mean Policy of Title Insurance No. 0-89383
issued by the Title Company.
2. PURCHASE PRICE. Subject to the terms and conditions set forth in this
Agreement, CFP agrees to purchase the Additional Property for a purchase price
(the "PURCHASE PRICE") equal to the lesser of (a) the sum of $1,500,000 and the
Acquisition Fee and (b) the sum of actual Project Costs and the Acquisition Fee.
3. CLOSING. The Closing of the purchase by CFP of the Additional
Property and the lease thereof to Custom shall take place on a date (the
"CLOSING DATE") that shall be mutually acceptable to CFP and Custom, but in no
event sooner than ten (10) days nor later than twenty (20) days after receipt by
CFP of written notice (the "CLOSING NOTICE") from Custom that each of the
conditions set forth in SECTION 4 hereof has been satisfied or will be satisfied
on the Closing Date, and the Closing shall occur at such time and at such
location as is mutually acceptable to CFP and Custom. In no event, however,
shall the parties be obligated to consummate the transactions contemplated
hereby after July 1, 1996, which date shall be extended for Force Majeure delays
or delays caused by CFP; provided, however, that in no event shall such date be
extended beyond September 1, 1996.
4. CONDITIONS TO CFP'S OBLIGATION TO CLOSE. CFP's obligation to purchase
the Additional Property on the Closing Date is subject to the satisfaction of
the following contingencies and conditions in the manner and within the time
limits herein specified:
(a) There shall exist no uncured Event of Default (as defined in the
Lease) or any event which, with the giving of notice or the passage of time or
both, would constitute an Event of Default.
(b) Custom shall have acquired all Permits for the occupancy and use
of the Expansion, copies of all of which shall be delivered to CFP.
(c) Title to the Additional Property shall be indefeasible and in fee
simple, and shall be consolidated with the Existing Land by a registered
engineer or surveyor and the
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<PAGE>
appropriate survey plats properly filed in the Bath County, Kentucky Clerk's
Office so that the Existing Land and the Additional Land shall be consolidated
into one parcel of land of record, thereby forming the Consolidated Land, and
the foregoing shall be subject only to the Permitted Exceptions.
(d) CFP shall have received an as-built survey for the Expansion and
the Consolidated Land with the seal and signature of a registered engineer or
surveyor, which survey shall include all items set forth on the Survey Checklist
attached hereto as EXHIBIT "C" and which shall, in addition, (a) be certified to
CFP, Lender and to the Title Company, (b) show the location of all easements,
none of which shall be encroached upon by the Expansion to be constructed
thereon or shall interfere with the use of, or access to, the Property or the
Expansion, and (c) shall be accompanied by a certificate from the Surveyor in
the form attached as EXHIBIT "D".
(e) CFP shall have received a duly executed special warranty deed in
recordable form with respect to the Additional Property, together with a
consolidated perimeter legal description for the Consolidated Land attached to
the deed, executed by Custom, subject only to Permitted Exceptions, said deed to
be in the form attached hereto as EXHIBIT "E", and a duly executed bill of sale
with respect to the Expansion in the form attached hereto as EXHIBIT "F".
(f) CFP shall have received an endorsement to the Title Policy or a
new title insurance policy insuring fee simple title in and to the Additional
Land in the amount of the Purchase Price and subject to no exceptions other than
the Permitted Exceptions.
(g) CFP and Custom shall have executed and delivered the First Lease
Amendment and an Amended and Restated Memorandum of Lease in the form attached
hereto as EXHIBIT "G" to be recorded in Bath County, Kentucky, together with a
consolidated perimeter legal description for the Consolidated Land attached
thereto.
(h) CFP shall have received an updated Lessee's Certificate executed
by Custom in the form attached as EXHIBIT "H".
(i) CFP shall have received an updated Guarantor's Certificate
executed by Guarantor, in the form attached as EXHIBIT "I".
(j) CFP shall have received evidence that the insurance coverage
required by the Lease is in full force and effect with respect to the Expansion
and CFP shall have received certificates of insurance insuring CFP as the owner
of the Expansion.
(k) CFP shall have received an environmental site
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<PAGE>
assessment with respect to the Additional Property, which shall show the
Additional Property to be in a condition acceptable to CFP and its counsel, in
their sole and absolute discretion.
(l) CFP shall have received an appraisal of the Additional Property
indicating that the value of the Additional Property is equal to or greater than
the Purchase Price (including the Acquisition Fee).
(m) CFP shall have received an opinion from Custom's counsel, or such
other counsel acceptable to CFP, that the Lease, as supplemented by the First
Lease Amendment and all other documents executed by Custom in connection
therewith constitute the legal, valid and binding obligations of Custom and are
enforceable against Custom in accordance with their terms, and addressing such
other matters as may be reasonably required by CFP and its counsel.
(n) CFP shall have received a certificate from Architect stating that
the Expansion has been completed in accordance with the Plans.
(o) CFP shall have received a list of Project Costs certified to be
true, correct and complete.
(p) CFP shall have received a First Amendment to Guaranty and
Suretyship Agreement from Guarantor in the form attached hereto as EXHIBIT "J",
guaranteeing the obligations of Custom under the Lease as amended by the First
Lease Amendment.
(q) CFP shall have received good standing certificates of Custom
issued by the States of California and Kentucky and an updated certificate of an
officer of Custom certifying to CFP and attaching thereto the articles of
incorporation, bylaws, resolutions and incumbency certificate of Custom.
(r) The representations and warranties of Custom set forth in SECTION
6 hereof shall be true, correct and complete in all material respects on and as
of the Closing Date and CFP shall have received from Custom a certificate to
such effect; PROVIDED, however, that if such representations and warranties are
not true, correct and complete on the Closing Date, then Custom shall have a
period of fourteen (14) days in which to attempt to make such representations
and warranties true and correct and the Closing Date shall be extended by such
period.
(s) CFP shall have received duplicate copies of the closing
statement.
(t) CFP shall have received the approval of its Investment Committee
to the transactions contemplated herein.
(u) There shall be no adverse change in the financial conditions of
Custom from the financial condition
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<PAGE>
reflected in the financial statements dated September 30, 1995.
(v) CFP shall have received the consent of Lender to the construction
by Custom of the Expansion and the purchase of the Additional Property by CFP,
which consent shall be evidenced by the execution and delivery of the Consent
and Amendment No. 1 to Loan Agreement in the form attached hereto as EXHIBIT
"K".
(w) No damage or condemnation shall exist with respect to the
Existing Improvements or the Expansion.
(x) CFP shall have received evidence regarding the proper zoning and
the properly recorded survey plat for the Consolidated Land, and evidence that
the Consolidated Land is separately assessed for AD VALOREM real property taxes
from all other Lands.
5. CONDITIONS TO CUSTOM'S OBLIGATION TO CLOSE. Custom's obligation to
enter into the First Lease Amendment with respect to the Additional Property is
subject to satisfaction of the following conditions:
(a) Custom shall have received the Purchase Price in immediately
available funds less the costs and expenses specified in SECTION 10 hereof.
(b) Custom shall have received duplicate copies of the closing
statement.
(c) CFP and Custom shall have executed and delivered the First Lease
Amendment and the Amended and Restated Memorandum of Lease.
(d) CFP shall have received the consent of Lender to the construction
by Custom of the Expansion and the purchase of the Additional Property by CFP.
6. CUSTOM'S COVENANTS, REPRESENTATIONS AND WARRANTIES. In order to
induce CFP to enter into this Agreement and purchase the Additional Property,
Custom makes the following covenants, agreements, representations and
warranties, all of which shall survive the Closing and the purchase and lease of
the Additional Property:
(a) Custom has or, on or prior to the Closing Date shall have,
obtained all necessary authorizations and consents to enable it to execute and
deliver this Agreement.
(b) Custom has no knowledge of any condition or state of facts which
would preclude, limit or restrict the business operations contemplated, pursuant
to the terms of the Lease, to be conducted by Custom at the Additional Property.
(c) The Additional Property will be constructed in substantial
accordance with (i) the Plans and (ii) applicable
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<PAGE>
building codes, laws and regulations in a good, substantial and workmanlike
manner.
All of the representations, warranties and agreements of Custom set forth
herein and elsewhere in this Agreement shall be true upon the execution of this
Agreement, except as otherwise provided, and shall be deemed to be repeated at
and as of the Closing Date and shall survive the Closing Date.
7. REMEDIES UPON DEFAULT. In the event CFP breaches or defaults under
any of the terms of this Agreement on or prior to any Closing Date, the sole and
exclusive remedy of Custom shall be to compel specific performance of this
Agreement. In the event Custom defaults under any of the terms of this
Agreement on or prior to the Closing Date, CFP shall have no obligation to
purchase the Additional Property. In the event of any breach by either CFP or
Custom of any of their respective obligations hereunder subsequent to any
Closing Date, the nonbreaching party shall have the right to pursue any and all
remedies afforded at law or in equity.
8. NOTICES. All notices, elections, requests and other communication
hereunder shall be in writing and shall be deemed given when delivered in person
or by telecopy (with a hard copy to follow by Federal Express or other reliable
24-hour delivery service) or five (5) business days after being deposited in the
United States mail, postage prepaid, or the next business day after being
deposited with a nationally recognized overnight mail delivery service, and
addressed as follows (or to such other person or at such other address, of which
any party hereto shall have given written notice as provided herein):
If to Custom: CUSTOM FOOD PRODUCTS, INC.
1117 West Olympic Boulevard
Montebello, California 90640
Facsimile: 212-727-0412
with a copy to: James M. Rishwain, Jr., Esquire
Pillsbury, Madison & Sutro LLP
Suite 1200
725 South Figueroa Street
Los Angeles, California 90017
Facsimile: 213-629-1033
If to CFP: CFP ASSOCIATES
c/o W.P. Carey & Co., Inc.
50 Rockefeller Plaza,
Second Floor
New York, New York 10020
Attn: Mr. W. Sean Sovak
Facsimile: 212-977-3022
with a copy to: Ruth S. Perfido, Esquire
Reed Smith Shaw & McClay
435 Sixth Avenue
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<PAGE>
Pittsburgh, PA 15219
Facsimile: 412-288-3022
9. BROKERAGE COMMISSIONS. Custom and CFP each warrant to the other that
no finders or brokers have been involved with the introduction of Custom and CFP
except for W. P. Carey & Co., Inc. and its affiliates, whose fees shall be paid
by Custom from proceeds paid to Custom by CFP. In the event of a breach of the
foregoing warranty by Custom, Custom agrees to save, defend, indemnify and hold
harmless CFP from and against any claims, losses, damages, liabilities and
expenses, including but not limited to attorneys' fees. In the event of a
breach of the foregoing warranty by CFP, CFP agrees to save, defend, indemnify
and hold harmless Custom from and against any claims, losses, damage,
liabilities and expenses, including but not limited to attorneys' fees.
10. COSTS AND EXPENSES. Custom shall pay all reasonable costs and
expenses in connection with the purchase by CFP of the Additional Property,
including without limitation all usual and customary costs and expenses set
forth in a settlement statement with respect to the conveyance of a commercial
property, including without limitation (i) all of the cost of real estate
conveyance tax and other transfer taxes, if any, imposed by state or local
authorities (including those transfer taxes customarily paid by a grantee) and
all recording charges; (ii) costs of removing any lien, assessment or
encumbrance required to be discharged hereunder in order to convey title to the
Additional Property as herein provided; (iii) the cost of the owner's policy of
title insurance and the survey required hereunder; (iv) reasonable legal fees
and expenses of Lender, CFP and Guarantor; and (v) the cost of the environmental
site assessment obtained by CFP; provided, however, that Custom shall not be
responsible to pay CFP's legal fees and expenses in the event that the Closing
does not occur through no fault of Custom.
11. MISCELLANEOUS PROVISIONS.
(a) CAPTIONS. The several headings and captions of the Sections and
subsections used herein are for convenience of reference only and shall in no
way be deemed to limit, define or restrict the substantive provisions of this
Agreement.
(b) ENTIRE AGREEMENT; RECORDING. This Agreement constitutes the
entire agreement of CFP and Custom with respect to the purchase and lease of the
Additional Property, and supersedes any prior or contemporaneous agreement with
respect thereto. No amendment or modification of this Agreement shall be
binding upon the parties unless made in writing and signed by both Custom and
CFP. This Agreement shall not be recorded by either party and, if recorded by
either party, the other party hereto may immediately terminate all of its
obligations under this Agreement, and Custom shall pay CFP's reasonable costs
and attorneys' fees in removing this Agreement of record.
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<PAGE>
(c) TIME OF ESSENCE. Time is of the essence with respect to the
performance of all of the terms, conditions and covenants of this Agreement.
(d) COOPERATION. CFP and Custom shall cooperate fully with each
other to carry out effectively the purchase and lease of the Additional Property
in accordance herewith and the satisfaction and compliance with all of the
conditions and requirements set forth herein, and shall execute such instruments
and perform such acts as may be reasonably requested by either party hereto.
(e) GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws and
customs of the State of Kentucky.
(f) TERMINATION. If not earlier terminated in accordance with its
terms, this Agreement shall terminate on July 1, 1996, and after such date, CFP
shall have no obligation to purchase the Additional Property.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
Purchase and Lease Real Estate as of the date first written above.
CUSTOM FOOD PRODUCTS, INC., a
California corporation
By:
---------------------------
Title:
------------------------
CFP ASSOCIATES, a Kentucky
partnership
By CFP (MD) QRS 11-30, Inc., a
Maryland corporation,
general partner
By:
-------------------------
Title:
---------------------
By CFP (MD) QRS 11-33, Inc., a
Maryland corporation,
general partner
By:
------------------------
Title:
----------------------
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<PAGE>
EXHIBIT A
THE ADDITIONAL LAND
PARCEL B:
ALL THAT CERTAIN parcel of land being known as Parcel "B" in the Division
of Bath County Fiscal Court, D.B. 169, Page 188, Bath County, Kentucky, being
more particularly described as follows:
BEGINNING at a point corner to Parcel "A" in the Division of Bath County
Fiscal Court, said point being in the west right of way line of Kendall Springs
Road;
thence with said right of way line, S 29DEG. 36' 01" W, 308.13 feet to an
iron pin, corner to Leslie Crouch;
thence leaving said right of way line with said Crouch line, the following
seven calls: S 68DEG. 34' 48" W, 53.37 feet to an iron pin;
thence S 84DEG. 26' 45" W, 33.30 feet to an iron pin;
thence N 72DEG. 03' 12" W, 33.41 feet to an iron pin;
thence N 55DEG. 31' 47" W, 40.18 feet to an iron pin;
thence N 26DEG. 54' 58" W, 87.57 feet to an iron pin;
thence N 35DEG. 35' 25" W, 203.24 feet to an iron pin;
thence N 48DEG. 55' 30" W, 425.80 feet to an iron pin;
thence N 47DEG. 27' 05" E, 164.24 feet to an iron pin corner to said
Parcel "A";
thence with said Parcel "A", S 55DEG. 34' 10" E, 306.02 feet;
thence N 34DEG. 25' 35" E, 61.34 feet;
thence S 55DEG. 34' 10" E, 449.52 feet to the point of beginning.
The above described parcel contains 4.790 acres.
PARCEL C:
BEGINNING at an iron pin on the north side of a County gravel road, said
point being at the top of a bluff overlooking Slate Creek; thence North 48
degrees 55 minutes 30 seconds West 71 feet to the low water mark of Slate
Creek; thence with said low
<PAGE>
water mark in a northerly direction North 44 degrees 18 minutes 15 seconds East
438.13 feet to a point in Cintas Northwest property corner; thence leaving Slate
Creek South 55 degrees 34 minutes 10 seconds East 71 feet to an iron pin on top
of the bluff; thence leaving the Cintas property line with the top of bluff the
following calls:
South 36 degrees 07 minutes 49 seconds West 129.59 feet to an iron pin;
thence South 47 degrees 27 minutes 05 seconds West 318.51 feet to the point
of beginning.
Containing approximately 0.7 acre as surveyed by Roy A. Wright L.S. #2808,
April 8, 1996.
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<PAGE>
EXHIBIT B
FIRST LEASE AMENDMENT
THIS FIRST LEASE AMENDMENT (this "AMENDMENT") is made as of this 14th
day of June, 1996, but effective as of July 11, 1996, between CFP ASSOCIATES, a
Kentucky partnership ("LANDLORD") with an address c/o W. P. Carey & Co., Inc.,
50 Rockefeller Center, Second Floor, New York, New York 10020, and CUSTOM FOOD
PRODUCTS, INC., a California corporation ("TENANT") with an address at 1117 West
Olympic Boulevard, Montebello, California 90640.
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement
dated as of September 30, 1994, as amended by a certain letter agreement dated
September 30, 1994 (the "LEASE"), whereby Landlord demised and let to Tenant,
and Tenant took and leased from Landlord, for the term and upon the provisions
therein specified, all right, title and interest of Landlord in and to the
Leased Premises; and
WHEREAS, Tenant has requested that Landlord (i) purchase the
Additional Premises (as hereinafter defined) from Tenant and (ii) lease the
Additional Premises to Tenant; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned thereto in the Lease.
NOW THEREFORE, in consideration of the rents and provisions herein
stipulated to be paid and performed, Landlord and Tenant hereby covenant and
agree as follows:
1. INCORPORATION OF RECITALS. The recitals set forth above are
hereby incorporated as if set forth in their entirety.
2. DEMISE OF ADDITIONAL PREMISES; AMENDMENT. Landlord hereby demises
and lets to Tenant, and Tenant hereby takes and leases from Landlord, for the
term and upon the provisions hereinafter specified, all right, title and
interest of Landlord in and to the following described property: (a) that
certain real property as is more particularly described on EXHIBIT "A-1" hereto,
together with the Appurtenances thereto (the "ADDITIONAL LAND"), which
Additional Land is hereby consolidated with the Land; (b) the buildings,
structures and other improvements now or hereafter constructed on the Land
(collectively, the "ADDITIONAL STRUCTURES"); and (c) the building systems
equipment described on EXHIBIT "B" that are installed or located in or on the
Additional Structures on the date hereof and paid for by Landlord (collectively,
the "ADDITIONAL BUILDING SYSTEMS EQUIPMENT"). In furtherance thereof, the Lease
is hereby amended by the addition of the Additional Land to the Land, the
Additional Structures to the Structures, and the Additional Building Systems
Equipment to
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<PAGE>
the Building Systems Equipment. EXHIBIT "A" to the Lease is hereby deleted and
the legal description attached hereto as EXHIBIT "A-2", which is a consolidated
legal description, is hereby attached to the Lease as EXHIBIT "A".
3. PERMITTED ENCUMBRANCES. The Lease is hereby amended by adding to
the matters set forth on EXHIBIT "C" to the Lease, those matters set forth on
EXHIBIT "C" attached hereto (the "ADDITIONAL PERMITTED ENCUMBRANCES").
4. CERTAIN DEFINITIONS. From and after the date hereof, the
following terms referred to in the Lease shall have the following respective
meanings:
"GUARANTY" shall mean that certain Guaranty and Suretyship
Agreement dated as of September 30, 1994 from Guarantor to Landlord, as amended
by that certain First Amendment to Guaranty and Suretyship Agreement dated July
11, 1996 from Guarantor to Landlord.
"LANDLORD'S MAXIMUM CONTRIBUTION" shall mean $5,700,000.
"LEASE" shall mean the Lease, as modified, amended and
supplemented by this Amendment.
"PROJECT COST" shall mean $5,821,000.00.
5. SECURITY DEPOSIT. Effective as of the date hereof, the following
paragraph is added to the Lease as Paragraph 38 thereto:
38. SECURITY DEPOSIT.
(a) Concurrently with the execution of this Lease,
Tenant shall deliver to Landlord an irrevocable Letter of Credit (the
"LETTER OF CREDIT") in the amount of Two Hundred Fifteen thousand and
No/100 Dollars ($215,000) (the "SECURITY DEPOSIT") issued by a bank
reasonably acceptable to Landlord and in form and substance reasonably
satisfactory to Landlord. The Letter of Credit shall remain in full
force and effect during the Term as security for the payment by Tenant
of the Rent and all other charges or payments to be paid hereunder and
the performance of the covenants and obligations contained herein, and
the Letter of Credit shall be renewed at least thirty (30) days prior
to any expiration thereof. If Tenant fails to renew the Letter of
Credit by such date, TIME BEING OF THE ESSENCE, Landlord shall have
the right at any time after the thirtieth (30th) day before such
expiration date either (i) to draw on the Letter of Credit and to
deposit the Security Deposit in an account for the benefit of Landlord
or (ii) to declare an Event of Default under Section 22(a)(ii). The
Security Deposit shall not be commingled with other funds of Landlord
or other Persons and
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<PAGE>
no interest thereon shall be due and payable to Tenant.
(b) If at any time an Event of Default shall have occurred
and be continuing beyond the applicable grace period, if any, Landlord
shall be entitled, at its sole discretion, to draw on the Letter of Credit
or to withdraw the cash Security Deposit from the above-described account
and to apply the proceeds in payment of (i) any Rent or other charges for
the payment of which Tenant shall be in default, (ii) any expense incurred
by Landlord in curing any Event of Default, and/or (iii) any other sums due
to Landlord in connection with any Event of Default or the curing thereof,
including, without limitation, any damages incurred by Landlord by reason
of such Event of Default. If any portion of the Security Deposit is used,
retained or applied by Landlord for any purpose set forth above, Tenant
shall, within ten (10) days after demand therefor is made by Landlord,
provide to Landlord cash or a Letter of Credit which complies with the
requirements of this Paragraph 38 and is in the original principal amount
thereof.
(c) At the expiration of the Term and so long as no Event
of Default exists the Letter of Credit or the cash Security Deposit, as the
case may be, shall be returned to Tenant.
(d) Should Tenant at any time achieve, whether by itself,
by acquisition or merger (in each case subject to and in accordance with
the provisions of this Lease and the Guaranty) a long term unsecured credit
rating of either "BBB" from Standard & Poor's or "Baa" from Moody's
Investors Services, then Tenant shall no longer be required to maintain the
Security Deposit. In such event and provided that no Event of Default
shall have occurred and remains continuing beyond any applicable grace
period, Landlord shall release the Security Deposit to Tenant.
(e) Landlord shall have the right to designate Lender or
any other holder of a Mortgage as the beneficiary of the Letter of Credit
during the term of the applicable Loan and such Lender shall have all of
the rights of Landlord under this Paragraph 38. Tenant covenants and
agrees to execute such agreements, consents and acknowledgments as may be
requested by Landlord from time to time to change the beneficiary of the
Letter of Credit as hereinabove provided.
6. ALTERATIONS. Effective as of the date hereof, Paragraph 13(a) of
the Lease is amended and restated in its entirety to read as follows:
(a) In addition to Alterations required by Paragraph 12 and
17, Tenant shall have the right without having obtained the prior written
consent of Landlord and Lender, to (i) make
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<PAGE>
any Alterations or series of related Alterations to the Structures for
a cost of not more than Five Hundred Thousand Dollars ($500,000) in
any one instance, or (ii) install Building Systems Equipment, in the
Structures or accessions to the Building Systems Equipment, the cost
of which as to such Building Systems Equipment or series of related
Building Systems Equipment does not exceed Five Hundred Thousand
Dollars ($500,000), subject to adjustment.
The consent of Landlord and Lender shall be required (A) if a Monetary
Event of Default exists, or (B) if the Alterations (or a series of related
Alterations) exceeds Five Hundred Thousand Dollars ($500,000), or (C) if
Tenant desires to remove and not upgrade or replace during the Term any
Improvements, or (D) if Tenant desires to construct upon the Land any
additional Improvements; provided that, with respect to (D) and (E) above,
such consent shall not be unreasonably withheld and shall be deemed given
if no response is received by Tenant within thirty (30) days following
receipt by Landlord and Lender of such request.
7. DELETIONS. The defined terms "Expansion", "Expansion
Improvements" and "Expansion Parcel" are hereby deleted from Paragraph 2 of the
Lease.
8. BASIC RENT. Effective as of the date hereof, EXHIBIT "D" of the
Lease is deleted and the Basic Rent Schedule attached hereto as EXHIBIT "D" is
hereby attached to the Lease as EXHIBIT "D" thereto.
9. RATIFICATION. As amended, supplemented and modified by this
Amendment, the Lease is hereby ratified and confirmed in all respects.
10. MISCELLANEOUS.
(a) The covenants of this Amendment shall run with the land and bind
Tenant, its successors and assigns and all present and subsequent encumbrancers
and subtenants of any of the Leased Premises, and shall inure to the benefit of
Landlord, its successors and assigns.
(b) This Amendment shall be governed by and construed and enforced in
accordance with the Laws of the State.
(c) This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed shall be deemed to be an original, but all such counterparts shall
constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to
be duly executed under seal as of the day and year first above written.
LANDLORD:
CFP ASSOCIATES, a Kentucky
partnership
By: CFP (MD) QRS 11-30, Inc.,
a Maryland corporation,
general partner
By:
---------------------------
Title:
-----------------------
By: CFP (MD) QRS 11-33, Inc.,
a Maryland corporation,
general partner
By:
--------------------------
Title:
------------------------
TENANT:
CUSTOM FOOD PRODUCTS, INC.,
a California corporation
By:
-------------------------------
Title:
----------------------------
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<PAGE>
CONSENT OF LENDER
The undersigned, "Lender" under that certain Assignment of Net Lease and
Rentals and Construction Agency Agreement dated as of September 30, 1994 given
by CFP Associates, hereby consents to the foregoing First Lease Amendment.
NATIONSCREDIT COMMERCIAL CORPORATION
(f/k/a Greyrock Capital Group, Inc.)
By:
--------------------------------
Title:
----------------------------
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<PAGE>
EXHIBIT "A-1"
ADDITIONAL PREMISES
PARCEL B:
ALL THAT CERTAIN parcel of land being known as Parcel "B" in the Division
of Bath County Fiscal Court, D.B. 169, Page 188, Bath County, Kentucky, being
more particularly described as follows:
BEGINNING at a point corner to Parcel "A" in the Division of Bath County
Fiscal Court, said point being in the west right of way line of Kendall Springs
Road;
thence with said right of way line, S 29DEG. 36' 01" W, 308.13 feet to an
iron pin, corner to Leslie Crouch;
thence leaving said right of way line with said Crouch line, the following
seven calls: S 68DEG. 34' 48" W, 53.37 feet to an iron pin;
thence S 84DEG. 26' 45" W, 33.30 feet to an iron pin;
thence N 72DEG. 03' 12" W, 33.41 feet to an iron pin;
thence N 55DEG. 31' 47" W, 40.18 feet to an iron pin;
thence N 26DEG. 54' 58" W, 87.57 feet to an iron pin;
thence N 35DEG. 35' 25" W, 203.24 feet to an iron pin;
thence N 48DEG. 55' 30" W, 425.80 feet to an iron pin;
thence N 47DEG. 27' 05" E, 164.24 feet to an iron pin corner to said
Parcel "A";
thence with said Parcel "A", S 55DEG. 34' 10" E, 306.02 feet;
thence N 34DEG. 25' 35" E, 61.34 feet;
thence S 55DEG. 34' 10" E, 449.52 feet to the point of beginning.
The above described parcel contains 4.790 acres.
PARCEL C:
BEGINNING at an iron pin on the north side of a County gravel road, said
point being at the top of a bluff overlooking Slate Creek; thence North 48
degrees 55 minutes 30 seconds West 71 feet to the low water mark of Slate Creek;
thence with said low water mark in a northerly direction North 44 degrees 18
minutes 15 seconds East 438.13 feet to a point in Cintas Northwest property
corner; thence leaving Slate Creek South 55 degrees 34 minutes 10 seconds East
71 feet to an iron pin on top of the bluff; thence
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<PAGE>
EXHIBIT "A-1"
leaving the Cintas property line with the top of bluff the following calls:
South 36 degrees 07 minutes 49 seconds West 129.59 feet to an iron pin;
thence South 47 degrees 27 minutes 05 seconds West 318.51 feet to the point
of beginning.
Containing approximately 0.7 acre as surveyed by Roy A. Wright L.S. #2808,
April 8, 1996.
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<PAGE>
EXHIBIT "A-2"
LEGAL DESCRIPTION
ALL THAT CERTAIN tract or parcel of land lying north of Kendall Springs
Road near the town of Owingsville in the Bath County Industrial Park, Bath
County, Kentucky and being more particularly described as follows:
BEGINNING at an iron pin in the West right of way line of Kendall Springs
Road, 25 feet from the centerline, also being the Southwest corner of Bath
County Fiscal Court (Misc. Book 2, Page 675) property;
thence with said West right of way line, South 29 degrees 36 minutes 01
seconds West, 527.41 feet to an iron pin corner to Leslie Crouch (Deed Book 126,
Page 387);
Thence leaving said Kendall Springs Road right of way with said Crouch
property line the following seven courses:
South 68 degrees 34 minutes 48 seconds West, 53.37 feet to an iron pin;
thence South 84 degrees 26 minutes 45 seconds West, 33.30 feet to an iron
pin;
thence North 72 degrees 03 minutes 12 seconds West, 33.41 feet to an iron
pin;
thence North 55 degrees 31 minutes 47 seconds West, 40.18 feet to an iron
pin;
thence North 26 degrees 54 minutes 58 seconds West, 87.57 feet to an iron
pin;
thence North 35 degrees 35 minutes 25 seconds West, 203.24 feet to an iron
pin;
thence North 48 degrees 55 minutes 30 seconds West, 425.80 feet to an iron
pin at the top of bluff overlooking Slate Creek,
thence North 48 degrees 55 minutes 30 seconds West, 60.00 feet to an iron
pin as a witness point;
thence North 48 degrees 55 minutes 30 seconds West, 11.00 feet to the low
water mark on the South side of Slate Creek;
thence with said low water mark North 44 degrees 18 minutes 15 seconds East
438.13 feet to a point;
thence leaving low water South 55 degrees 34 minutes 10 seconds East, 11.00
feet to an iron pin as a witness point;
thence South 55 degrees 34 minutes 10 seconds East, 60.00
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<PAGE>
EXHIBIT "A-2"
feet;
thence with said Bath County Fiscal Court, South 55 degrees 34 minutes 10
seconds East, 698.47 feet to the point of beginning.
The above described parcel contains 9.603 acres as surveyed by Roy A.
Wright L.S. #2808, April 8, 1996.
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<PAGE>
EXHIBIT "B"
BUILDING SYSTEMS EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of every
kind and nature whatsoever now or hereafter affixed or attached to or installed
in any of the Leased Premises (except as hereafter provided), including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, power, air cooling, air conditioning, humidification,
sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators, overhead
cranes and garage units, together with all additions thereto, substitutions
therefor and replacements thereof required or permitted by this Lease, but
excluding all personal property and all trade fixtures, machinery, office,
manufacturing and warehouse equipment which are not necessary to the operation,
as buildings, of the buildings which constitute part of the Additional Premises.
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<PAGE>
EXHIBIT "D"
BASIC RENT SCHEDULE
1. BASIC RENT PRIOR TO THE REFINANCING DATE.
A. Basic Rent shall begin accruing on the Primary Term
Commencement Date. Commencing on the Basic Rent Commencement Date and to and
including the first day of the first calendar month following the earlier to
occur (the "REFINANCING DATE") of (i) the refinancing of the Initial Loan or
(ii) the last day of the fifth (5th) Lease Year, Basic Rent shall be payable
monthly in arrears on each Basic Rent Payment Date in an amount equal to the sum
of (a) 0.0125 multiplied by $2,000,000; (b) 0.010417 multiplied by $1,500,000
("EXPANSION RENT"); (c) the amount of interest and/or interest and principal
payable by Landlord on the Initial Loan for such month; and (d) the amount of
interest and/or interest and principal payable by Landlord on the Tenant Loan
for such month ("TENANT VARIABLE RENT"); provided that from and after the date
(the "TENANT LOAN REFINANCING DATE") on which all or any part of the Tenant Loan
is refinanced, the Tenant Variable Rent shall be an amount equal to one-twelfth
(1/12th) of the amount of principal and interest that Landlord would be required
to pay in a twelve-month period on a hypothetical loan in a principal amount
equal to the outstanding principal balance of the Tenant Loan as of the date
immediately prior to the Tenant Loan Refinancing Date, which hypothetical loan
has payment terms identical to those of the Loan pursuant to which the Tenant
Loan is refinanced. The amount set forth in the foregoing sentence shall,
absent manifest error, be conclusively determined from the books and records of
Landlord.
B. Commencing with the first day of the second (2nd) Lease
Year, the Basic Rent shall be subject to adjustment as provided in subparagraphs
A, C and D of Paragraph 5 below.
2. BASIC RENT FOLLOWING THE REFINANCING DATE. Commencing on the
first day of the first calendar month following the Refinancing Date and
continuing on each Basic Rent Payment Date thereafter until the expiration of
the Term, Basic Rent shall be payable monthly in advance in an amount equal to
the sum of (i) Forty-nine Thousand Five Hundred Twenty-two and 50/100 Dollars
($49,522.50), (ii) an amount equal to the Tenant Variable Rent for such month
and (iii) the Expansion Rent in effect on the last day of the calendar month
immediately preceding the Refinancing Date (including any adjustments
attributable thereto pursuant to Paragraph 5 below).
The amount set forth in the foregoing sentence shall (i) absent
manifest error, be conclusively determined from the books and records of
Landlord, and (ii) be subject to the adjustments provided for in subparagraphs
B, C and D of Paragraph 5 below.
<PAGE>
EXHIBIT "D"
3. CPI ADJUSTMENTS TO BASIC RENT. The Basic Rent shall be subject
to adjustment, in the manner hereinafter set forth, for increases in the index
known as United States Department of Labor, Bureau of Labor Statistics, Consumer
Price Index, All Urban Consumers, United States City Average, All Items,
(1982-84=100) ("CPI") or the successor index that most closely approximates the
CPI. If the CPI shall be discontinued with no successor or comparable successor
index, Landlord and Tenant shall attempt to agree upon a substitute index or
formula, but if they are unable to so agree, then the matter shall be determined
by arbitration in accordance with the rules of the American Arbitration
Association then prevailing in New York City. Any decision or award resulting
from such arbitration shall be final and binding upon Landlord and Tenant and
judgment thereon may be entered in any court of competent jurisdiction. In no
event will the Basic Rent as adjusted by the CPI adjustment be less than the
Basic Rent in effect for the one (1) year period immediately preceding such
adjustment.
4. EFFECTIVE DATES OF CPI ADJUSTMENTS. As of the first day of the
second (2nd) Lease Year and on the first day of each Lease Year thereafter,
Basic Rent shall be adjusted to reflect increases in the CPI during the most
recent Lease Year immediately preceding each of the foregoing dates (each such
date being hereinafter referred to as the "BASIC RENT ADJUSTMENT DATE").
5. METHOD OF ADJUSTMENT FOR CPI ADJUSTMENT.
A. PRIOR TO REFINANCING DATE. As of each Basic Rent Adjustment
Date occurring prior to the Refinancing Date when the average CPI determined in
clause (i) below exceeds the Beginning CPI (as defined in this Paragraph 5(A)),
an amount equal to the sum of: (a) $594,270; and (b) $187,500 (i.e. the
Expansion Rent) plus an amount equal to the cumulative CPI increases to Basic
Rent attributable to such $187,500; shall be multiplied by a fraction, the
numerator of which shall be the difference between (i) the average CPI for the
three (3) most recent calendar months (the "PRIOR MONTHS") ending prior to such
Basic Rent Adjustment Date for which the CPI has been published on or before the
forty-fifth (45th) day preceding such Basic Rent Adjustment Date and (ii) the
Beginning CPI, and the denominator of which shall be the Beginning CPI. An
amount equal to the lesser of (x) eighty percent (80%) of the product of such
multiplication or (y) the product of such multiplication assuming the increase
of 4.5% in the CPI for each one year period shall be added to the Basic Rent in
effect immediately prior to such Basic Rent Adjustment Date. As used herein,
"BEGINNING CPI" shall mean the average CPI for the three (3) calendar months
corresponding to the Prior Months, but occurring one (1) year earlier. If the
average CPI determined in clause (i) is the same or less than the Beginning CPI,
the Basic Rent will remain the same for the ensuing Lease Year.
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<PAGE>
EXHIBIT "D"
B. FROM AND AFTER REFINANCING DATE. As of each Basic Rent
Adjustment Date occurring on or after the Refinancing Date when the average CPI
determined in clause (i) below exceeds the Beginning CPI, the Basic Rent in
effect immediately prior to the applicable Basic Rent Adjustment Date shall be
multiplied by a fraction, the numerator of which shall be the difference between
(i) the average CPI for the Prior Months ending prior to such Basic Rent
Adjustment Date for which the CPI has been published on or before the
forty-fifth (45th) day preceding such Basic Rent Adjustment Date and (ii) the
Beginning CPI, and the denominator of which shall be the Beginning CPI. An
amount equal to the lesser of (x) eighty percent (80%) of the product of such
multiplication or (y) the product of such multiplication assuming the increase
of 4.5% in the CPI for each one year period shall be added to the Basic Rent in
effect immediately prior to such Basic Rent Adjustment Date. If the average CPI
determined in clause (i) is the same or less than the Beginning CPI, the Basic
Rent will remain the same for the ensuing Lease Year.
C. ADJUSTMENT. Effective as of a given Basic Rent Adjustment
Date, Basic Rent payable under this Lease until the next succeeding Basic Rent
Adjustment Date shall be the Basic Rent in effect after the adjustment provided
for as of such Basic Rent Adjustment Date.
D. NOTICE. Notice of the new annual Basic Rent shall be
delivered to Tenant on or before the tenth (10th) day preceding each Basic Rent
Adjustment Date.
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<PAGE>
EXHIBIT C
SURVEY CHECKLIST
The following information should be included on the Survey:
1. Scale
2. Date
3. North arrow
4. Legend
5. Encroachments
6. Adjoining street, road highway, alleys, right-of-way lines, names,
right-of-way width, and distance to property.
7. All points of reference should be tied to an identifiable monument or
intersection of streets.
8. Delineate all improvements in place and show their measurements:
(a) Boundaries (all property line deflection points must have an iron
pin set in place). All boundary distances should be expressed in
feet and hundredths of feet, all courses in degrees, minutes and
seconds.
(b) Utilities (including connecting lines to this project from public
utility lines).
(c) Pavement and paved parking area, including size and number of
spaces (please shade edges and show parking space lines), if any.
(d) Walkways, if any (please "dot" concrete).
(e) Ingress and egress (curb cuts and driveways).
(f) Buildings, signs, structures, if any.
9. Building set-back lines shown on property (as defined by local zoning
entity, plat map and/or restrictive covenants) and any other building
restrictions including the volume and page number if recorded.
10. Lot, block or square designation if applicable, and written legal
description by metes and bounds on the survey plat.
11. Location and dimensions (with same information as boundaries) of all
easements or encroachments identified in
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<PAGE>
the title commitment together with complete recording information.
12. Identification of all abutting owners, lot numbers and names of
subdivisions.
13. Section, township and range if applicable.
14. Street address (of each building).
15. Area of land and area of buildings, if any; and distance of buildings,
if any, to boundary of property and to building lines.
16. Vicinity sketch showing closest thoroughfare intersection.
17. The point of beginning of description (labeled on survey).
18. True point of beginning of description (labeled on survey).
19. Certification of "True and Correct" survey by surveyor in form
separately provided.
20. Surveyor's seal or stamp clearly showing registration number.
21. Original surveyor's signature on all copies of survey.
22. Chart of curve data/information to support length of curves used on survey.
23. Curve tangent points indicated on survey lines.
24. Reference baseline for azimuth used.
25. Note whether survey has been balanced and adjusted.
26. Note whether a title report was used in defining easements and other
recordings.
27. Field notes on survey if applicable.
28. Indicate on survey, at all survey line deflections, whether the survey
monument was found or set; such as, "Found Iron Pin" or "Iron Pin
set".
29. State whether or not the property appears in any Flood Insurance
Boundary Map, and if so, further state map number and whether or not
the property appears to be in the "Flood Hazard Area" shown on that
map.
30. Parking spaces, if any, should be shown on survey (they may be shown
by sketch only). Total parking spaces should be shown in survey
notes.
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<PAGE>
Title and/or improvements may necessitate other requirements. The lender may
have additional requirements.
A second sheet to the survey may be added, should it become too crowded or
complex to show everything on one sheet. Both sheets should show buildings,
roads and paved areas.
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<PAGE>
EXHIBIT E
FORM OF WARRANTY DEED
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<PAGE>
EXHIBIT F
BILL OF SALE
to
CFP ASSOCIATES
KNOW ALL MEN BY THESE PRESENTS, that CUSTOM FOOD PRODUCTS, INC., a
California corporation ("SELLER"), for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, to it in hand paid by CFP
ASSOCIATES, a Kentucky partnership ("PURCHASER"), at or before the sealing and
delivery of these presents, the receipt and sufficiency of which is hereby
acknowledged, has granted, bargained, sold, transferred and delivered, and by
these presents does grant, bargain, sell, transfer and deliver unto Purchaser
all and singular the following described machinery and equipment owned by Seller
and located on certain real property (the "LEASED PREMISES") situate in
Owingsville, Kentucky and more particularly described on EXHIBIT "A" attached
hereto and made a part hereof, to wit:
The equipment listed and described on EXHIBIT "B" attached hereto and made
a part hereof (the "EQUIPMENT").
TO HAVE AND TO HOLD the Equipment unto Purchaser, its successors and
assigns, to and for its own proper use and benefit forever.
AND Seller for itself and for its successors and assigns, does hereby
covenant with Purchaser, its successors and assigns, that it is the true and
lawful owner of the Equipment hereby sold, and has full power to sell and convey
the same; that the title so conveyed is clear, free and unencumbered; and
further that it does warrant and will forever defend the same against the claim
or claims of all persons whomsoever claiming or to claim the same or any part
thereof.
IN WITNESS WHEREOF, Seller has caused its corporate name to be hereunto
subscribed and its corporate seal to be hereunto affixed, as of this _____ day
of ____________, 1996.
CUSTOM FOOD PRODUCTS, INC.
By:
-----------------------
Title:
--------------------
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<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
PARCEL B:
ALL THAT CERTAIN parcel of land being known as Parcel "B" in the Division
of Bath County Fiscal Court, D.B. 169, Page 188, Bath County, Kentucky, being
more particularly described as follows:
BEGINNING at a point corner to Parcel "A" in the Division of Bath County
Fiscal Court, said point being in the west right of way line of Kendall Springs
Road;
thence with said right of way line, S 29DEG. 36' 01" W, 308.13 feet to an
iron pin, corner to Leslie Crouch;
thence leaving said right of way line with said Crouch line, the following
seven calls: S 68DEG. 34' 48" W, 53.37 feet to an iron pin;
thence S 84DEG. 26' 45" W, 33.30 feet to an iron pin;
thence N 72DEG. 03' 12" W, 33.41 feet to an iron pin;
thence N 55DEG. 31' 47" W, 40.18 feet to an iron pin;
thence N 26DEG. 54' 58" W, 87.57 feet to an iron pin;
thence N 35DEG. 35' 25" W, 203.24 feet to an iron pin;
thence N 48DEG. 55' 30" W, 425.80 feet to an iron pin;
thence N 47DEG. 27' 05" E, 164.24 feet to an iron pin corner to said
Parcel "A";
thence with said Parcel "A", S 55DEG. 34' 10" E, 306.02 feet;
thence N 34DEG. 25' 35" E, 61.34 feet;
thence S 55DEG. 34' 10" E, 449.52 feet to the point of beginning.
The above described parcel contains 4.790 acres.
PARCEL C:
BEGINNING at an iron pin on the north side of a County gravel road, said
point being at the top of a bluff overlooking Slate Creek; thence North 48
degrees 55 minutes 30 seconds West 71 feet to the low water mark of Slate Creek;
thence with said low water mark in a northerly direction North 44 degrees 18
minutes 15 seconds East
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<PAGE>
438.13 feet to a point in Cintas Northwest property corner; thence leaving Slate
Creek South 55 degrees 34 minutes 10 seconds East 71 feet to an iron pin on top
of the bluff; thence leaving the Cintas property line with the top of bluff the
following calls:
South 36 degrees 07 minutes 49 seconds West 129.59 feet to an iron pin;
thence South 47 degrees 27 minutes 05 seconds West 318.51 feet to the point
of beginning.
Containing approximately 0.7 acre as surveyed by Roy A. Wright L.S. #2808,
April 8, 1996.
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<PAGE>
EXHIBIT B
EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances now
affixed or attached to or installed in any of the Leased Premises (except as
hereafter provided), including all electrical, anti-pollution, heating, lighting
(including hanging fluorescent lighting), incinerating, power, air cooling, air
conditioning, humidification, sprinkling, plumbing, lifting, cleaning, fire
prevention, fire extinguishing and ventilating systems, devices and machinery
and all engines, pipes, pumps, tanks (including exchange tanks and fuel storage
tanks), motors, conduits, ducts, steam circulation coils, blowers, steam lines,
compressors, oil burners, boilers, doors, windows, loading platforms, lavatory
facilities, stairwells, fencing (including cyclone fencing), passenger and
freight elevators, overhead cranes and garage units, together with all additions
thereto, substitutions therefor and replacements thereof required or permitted
by the Lease regarding the Leased Premises between Purchaser, as landlord, and
Seller, as tenant, but excluding all personal property and all trade fixtures,
machinery, office, manufacturing and warehouse equipment which are not necessary
to the operation, as buildings, of the buildings which constitute part of the
Leased Premises.
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<PAGE>
EXHIBIT G
Owingsville, Bath
County, Kentucky
This instrument was prepared by
Patrick E. Sweeney, Esquire
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
- - - --------------------------------------------------------------------
- - - --------------------------------------------------------------------
AMENDED AND RESTATED MEMORANDUM OF LEASE
THIS AMENDED AND RESTATED MEMORANDUM OF LEASE, made as of the ____ day of
________, 1996, between CFP ASSOCIATES, a Kentucky partnership with an address
c/o W.P. Carey & Co., Inc., 620 Fifth Avenue, New York, New York 10020
("LANDLORD"), and CUSTOM FOOD PRODUCTS, INC., a California corporation with an
address at 1117 West Olympic Boulevard, P.O. Box 1027, Montebello, CA 90640
("TENANT").
(1) Pursuant to a Lease Agreement dated as of September 30, 1994, as
amended by a letter agreement dated September 30, 1994 and by a First Lease
Amendment of even date herewith (collectively, the "LEASE"), the terms and
conditions of which are incorporated herein as though set forth in full,
Landlord has demised and let to Tenant its leasehold interest in and to the
following described property (collectively, the "LEASED PREMISES"): (a) the
premises described in EXHIBIT "A" hereto, together with Appurtenances (as
defined in the Lease); (b) the buildings, structures and other improvements to
be constructed on the Land; and (c) the Building Systems Equipment (as defined
in the Lease).
(2) Pursuant to the terms of the Lease, Tenant shall have and hold the
Leased Premises, at the rental and upon the terms and conditions therein stated,
for a primary term (the "PRIMARY TERM") commencing on September 30, 1994 and
ending on the last day of the calendar month in which the Funding Deadline (as
defined in the Lease) occurs (the "PRIMARY TERM EXPIRATION DATE"), and for an
initial term (the "INITIAL TERM", and together with the Primary Term,
collectively, the "TERM") commencing on the first day following the Primary Term
Expiration Date and ending on the last day of the three hundredth (300th)
calendar month next following the date on which the Initial Term commences (the
"INITIAL TERM EXPIRATION DATE"). Provided that if, on or prior to the Initial
Term Expiration Date and the fifth (5th) and tenth (10th) anniversaries of the
Expiration Date (each such date being a "RENEWAL DATE"), the Lease shall have
not been terminated pursuant to any provision thereof, the Term shall be deemed
to
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<PAGE>
have been automatically extended for an additional five (5) years (each a
"RENEWAL TERM"), unless Tenant shall notify Landlord in writing at least four
hundred twenty-five (425) days prior to the next Renewal Date that Tenant is
terminating the Lease as of the next Renewal Date. The Renewal Term shall be
subject to all of the terms and conditions of the Lease. Upon the request of
either party, the other party hereto shall execute a document in recordable form
reflecting any such extension of the Term.
(3) NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT, OR TO
ANYONE HOLDING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO
MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES.
(4) Tenant has the option to purchase the Leased Premises during the
eleventh Lease Year (as defined in the Lease), subject to the terms and
conditions more particularly set forth in the Lease.
(5) Tenant has the right to make or may be required to make certain
rejectable offers to Landlord to purchase the Leased Premises, subject to the
terms and conditions more particularly set forth in the Lease.
(6) On the expiration date of the Term, Tenant has the obligation to
purchase the Leased Premises, subject to the terms and conditions more
particularly set forth in the Lease, and Landlord has the obligation to
repurchase the Leased Premises, subject to the terms and conditions more
particularly set forth in the Lease.
(7) This Amended and Restated Memorandum of Lease is executed for the
purpose of (a) amending and restating in its entirety that certain Memorandum of
Lease dated as of September 30, 1994 and recorded in Lease Book 4, Page 638 in
the Office of the Clerk of Bath County, Kentucky, and (b) recordation in the
Office of the Clerk of Bath County, Kentucky, in order to give notice of all of
the terms, provisions and conditions of the Lease and is not intended, and shall
not be construed, to define, limit or modify the Lease.
(8) This Amended and Restated Memorandum of Lease may be executed in any
number of counterparts and by the different parties hereto on seperate
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Memorandum of Lease as of the day and year first above written.
Signed, sealed and acknowledged CFP ASSOCIATES, a
in the presence of: Kentucky partnership
By: CFP (MD) QRS:11-30, INC.,
a Maryland corporation,
general partner
By:
----------------------------
Senior Vice President
By: CFP (MD) QRS:11-33, INC.,
a Maryland corporation,
general partner
By:
----------------------------
Senior Vice President
Signed, sealed and acknowledged CUSTOM FOOD PRODUCTS, INC.,
in the presence of: a California corporation
By:
-----------------------------
Title:
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<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
ALL THAT CERTAIN tract or parcel of land lying north of Kendall Springs
Road near the town of Owingsville in the Bath County Industrial Park, Bath
County, Kentucky and being more particularly described as follows:
BEGINNING at an iron pin in the West right of way line of Kendall Springs
Road, 25 feet from the centerline, also being the Southwest corner of Bath
County Fiscal Court (Misc. Book 2, Page 675) property;
thence with said West right of way line, South 29 degrees 36 minutes 01
seconds West, 527.41 feet to an iron pin corner to Leslie Crouch (Deed Book 126,
Page 387);
Thence leaving said Kendall Springs Road right of way with said Crouch
property line the following seven courses:
South 68 degrees 34 minutes 48 seconds West, 53.37 feet to an iron pin;
thence South 84 degrees 26 minutes 45 seconds West, 33.30 feet to an iron
pin;
thence North 72 degrees 03 minutes 12 seconds West, 33.41 feet to an iron
pin;
thence North 55 degrees 31 minutes 47 seconds West, 40.18 feet to an iron
pin;
thence North 26 degrees 54 minutes 58 seconds West, 87.57 feet to an iron
pin;
thence North 35 degrees 35 minutes 25 seconds West, 203.24 feet to an iron
pin;
thence North 48 degrees 55 minutes 30 seconds West, 425.80 feet to an iron
pin at the top of bluff overlooking Slate Creek,
thence North 48 degrees 55 minutes 30 seconds West, 60.00 feet to an iron
pin as a witness point;
thence North 48 degrees 55 minutes 30 seconds West, 11.00 feet to the low
water mark on the South side of Slate Creek;
thence with said low water mark North 44 degrees 18 minutes 15 seconds East
438.13 feet to a point;
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<PAGE>
thence leaving low water South 55 degrees 34 minutes 10 seconds East, 11.00
feet to an iron pin as a witness point;
thence South 55 degrees 34 minutes 10 seconds East, 60.00 feet;
thence with said Bath County Fiscal Court, South 55 degrees 34 minutes 10
seconds East, 698.47 feet to the point of beginning.
The above described parcel contains 9.603 acres as surveyed by Roy A.
Wright L.S. #2808, April 8, 1996.
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<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On the ____ day of ________, 1996, before me personally came ___________,
to me known, who being by me duly sworn, did depose and say that he is the
____________ of CFP (MD) QRS:11-30, Inc., the corporation described in and
which executed the above instrument, as general partner of CFP Associates; and
that he signed his name thereto by order of the board of directors of said
corporation.
----------------------------
Notary Public
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<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On the ____ day of ________, 1996, before me personally came __________, to
me known, who being by me duly sworn, did depose and say that he is the
_____________ of CFP (MD) QRS:11-33, Inc., the corporation described in and
which executed the above instrument, as general partner of CFP Associates; and
that he signed his name thereto by order of the board of directors of said
corporation.
-----------------------------
Notary Public
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<PAGE>
STATE OF )
) SS:
COUNTY OF )
On the _____ day of ________, 1996, before me personally came __________
____________________, to me known, who being by me duly sworn, did depose and
say that he is the _________________ of Custom Food Products, Inc., the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
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<PAGE>
EXHIBIT H
LESSEE'S CERTIFICATE
This Lessee's Certificate of CUSTOM FOOD PRODUCTS, INC., a California
corporation ("LESSEE"), is being delivered to CFP ASSOCIATES, a Kentucky
partnership ("LANDLORD"), in connection with a certain First Lease Amendment
dated of even date herewith (the "AMENDMENT"), by and between Landlord and
Lessee, and this Lessee's Certificate updates and supplements that certain
Seller's/Lessee's Certificate dated as of September 30, 1994 (the "ORIGINAL
LESSEE'S CERTIFICATE"), given by Lessee to Landlord in connection with the
execution of the Lease.
A. LESSEE'S REPRESENTATIONS.
Lessee hereby represents and warrants to Landlord, its successors and
assigns, that the representations and warranties of Lessee contained in
Paragraph A of the Original Lessee's Certificate are true and correct as of the
date hereof with respect to the Additional Property (as defined in the
Amendment) the Amendment and the Lessee, as applicable.
B. INDEMNITY.
Lessee shall pay, protect, defend, indemnify and hold harmless
Landlord, its successors and assigns, from and against any and all liabilities,
losses, damages, costs, expenses (including without limitation reasonable
attorneys' fees and expenses), causes of action, suits, claims, demands or
judgments of any nature whatsoever howsoever caused should any representation or
warranty set forth herein prove to have been untrue or inaccurate when made or
arising from any breach by Lessee of any representation or warranty set forth
herein.
C. SUCCESSORS AND ASSIGNS; SURVIVAL OF REPRESENTATIONS.
This Lessee's Certificate shall be binding upon Lessee and each of its
successors and assigns. The representations, warranties, covenants and
indemnifications made by Lessee in this Lessee's Certificate shall survive the
closing of the transaction contemplated by the Amendment.
D. EFFECT OF KNOWLEDGE LIMITATION.
The fact that the representations of Lessee set forth in this Lessee's
Certificate may be limited to the best of Lessee's knowledge shall not be deemed
to modify or alter any provision of the Lease requiring Lessee to indemnify
Landlord.
-1-
<PAGE>
WITNESS the due execution hereof this _____ day of ________, 1996.
ATTEST: CUSTOM FOOD PRODUCTS, INC., a
California corporation
By: By:
---------------------------- -----------------------------
Title: Title:
-------------------------- ---------------------------
-2-
<PAGE>
EXHIBIT I
GUARANTOR'S CERTIFICATE
This Guarantor's Certificate of CFP HOLDINGS, INC., a California
corporation ("GUARANTOR"), is being delivered to CFP ASSOCIATES, a Kentucky
partnership ("LANDLORD"), in connection with a certain First Lease Amendment,
dated of even date herewith (the "AMENDMENT"), by and between Landlord and
Lessee, and this Guarantor's Certificate updates and supplements that certain
Guarantor's Certificate dated as of September 30, 1994 (the "ORIGINAL
GUARANTOR'S CERTIFICATE"), given by Guarantor to Landlord in connection with the
execution of the Lease.
A. GUARANTOR'S REPRESENTATIONS.
Guarantor hereby represents and warrants to Landlord, its successors
and assigns that the representations and warranties of Guarantor contained in
Paragraph A the Original Guarantor's Certificate are true and correct as of the
date hereof with respect to the Guarantor.
B. INDEMNITY.
Guarantor shall pay, protect, defend, indemnify and hold harmless
Landlord, its successors and assigns, from and against any and all liabilities,
losses, damages, costs, expenses (including without limitation reasonable
attorneys' fees and expenses), causes of action, suits, claims, demands or
judgments of any nature whatsoever howsoever caused should any representation or
warranty set forth herein prove to have been untrue or inaccurate when made or
arising from any breach by Guarantor of any representation or warranty set forth
herein.
C. SUCCESSORS AND ASSIGNS; SURVIVAL OF REPRESENTATIONS.
This Guarantor's Certificate shall be binding upon Guarantor and each
of its successors and assigns. The representations, warranties, covenants and
indemnifications made by Lessee in this Guarantor's Certificate shall survive
the closing of the transaction contemplated by the Amendment.
D. EFFECT OF KNOWLEDGE LIMITATION.
The fact that the representations of Guarantor set forth in this
Guarantor's Certificate may be limited to the best of Guarantor's knowledge
shall not be deemed to modify or alter any provision of the Lease requiring
Guarantor to indemnify Landlord.
-1-
<PAGE>
WITNESS the due execution hereof this ____ day of _________, 1996.
ATTEST: CFP HOLDINGS, INC., a
California corporation
By: By:
------------------------ -------------------------
Title: Title:
--------------------- ----------------------
-2-
<PAGE>
EXHIBIT J
FIRST AMENDMENT TO GUARANTY AND SURETYSHIP AGREEMENT
THIS FIRST AMENDMENT TO GUARANTY AND SURETYSHIP AGREEMENT (this
"AMENDMENT") is made as of ________ , 1996, by CFP HOLDINGS, INC., a Delaware
corporation ("GUARANTOR") having its principal offices at 1117 West Olympic
Boulevard, Montebello, California 90640, to CFP ASSOCIATES, a Kentucky
partnership (herein, together with its successors and assigns, called
"LANDLORD") having an address c/o W. P. Carey & Co., Inc., 50 Rockefeller
Center, Second Floor, New York, New York 10020.
W I T N E S S E T H:
WHEREAS, Landlord owns certain real property (the "LAND") together with
certain improvements to be constructed thereon (the "IMPROVEMENTS") and certain
equipment (the "EQUIPMENT") to be installed therein located in Owingsville,
Kentucky and has leased the Land and the Improvements and the Equipment
(collectively, the "LEASED PREMISES") to Custom Food Products, Inc., a
California corporation ("TENANT"), by a certain Lease Agreement dated as of
September 30, 1994, as amended by a certain letter agreement also dated as of
September 30, 1994 (collectively, the "ORIGINAL LEASE"); and
WHEREAS, Tenant is a wholly-owned subsidiary of Guarantor; and
WHEREAS, as a material inducement to Landlord to enter into the Original
Lease, Guarantor executed and delivered a certain Guaranty and Suretyship
Agreement dated as of September 30, 1994 (the "GUARANTY"); and
WHEREAS, Tenant has expanded the Improvements by constructing on the Land
and on the Additional Land (as hereinafter defined) an addition containing
approximately 10,380 square feet (the "EXPANSION") and, subject to the terms and
conditions of a certain Agreement to Purchase and Lease Real Estate dated as of
________ , 1996 (the "PURCHASE AGREEMENT") by and between Landlord and Tenant,
Landlord has agreed to purchase certain real property ("ADDITIONAL LAND") more
particularly described on EXHIBIT "A" to the Purchase Agreement adjacent to the
Property and the Expansion from Custom and to lease the Additional Land and the
Expansion to Custom pursuant to a certain First Lease Amendment of even date
herewith (the "LEASE AMENDMENT") by and between Landlord and Tenant; and
WHEREAS, the execution and delivery of this Amendment by Guarantor is a
material inducement to Landlord to consummate the transactions contemplated by
the Purchase Agreement.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the execution and delivery of the Lease
Amendment and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor, intending to be legally
bound, covenants and agrees with Landlord as follows:
(1) CONSENT; ACKNOWLEDGMENT. Guarantor hereby consents to the
transactions contemplated by the Purchase Agreement and the Lease Amendment, and
acknowledges receipt of fully executed counterparts of the Purchase Agreement
and the Lease Amendment, together with all exhibits and schedules thereto.
(2) AMENDMENT. From and after the date hereof, all references in the
Guaranty to the "Lease" shall collectively mean the Original Lease, as modified,
supplemented and amended by the Lease Amendment. From and after the date
hereof, all references in the Guaranty to the "Certificate" shall collectively
mean the Lessee's Certificate dated as of September 30, 1994, together with the
Lessee's Certificate of even date herewith, in each case given by Tenant to
Landlord.
(3) RATIFICATION. As Amended hereby, the Guaranty is hereby ratified and
confirmed in all respects.
(4) GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Kentucky.
-2-
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Amendment to be executed and
their corporate seal to be hereunto affixed and attested by its officers
thereunto duly authorized.
ATTEST: CFP HOLDINGS, INC.
By: By:
---------------------------- ---------------------------
Title: Title:
------------------------- ------------------------
(Corporate Seal)
-3-
<PAGE>
EXHIBIT K
CONSENT AND AMENDMENT NO. 1 TO LOAN AGREEMENT
CONSENT AND AMENDMENT dated as of July 11, 1996 between CFP Associates (the
"Borrower") and NationsCredit Commercial Corporation (formerly known as Greyrock
Capital Group Inc.) (the "Lender").
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into a Loan Agreement
dated as of September 30, 1994 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement to provide for
amendments to certain Lease Documents in connection with an expansion of
Tenant's food processing facilities located in Owingsville, Kentucky and to make
certain other mutually acceptable changes.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement (including the amendments to the
defined terms and additional defined terms set forth in Section 2 hereof). Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the date hereof refer
to the Agreement as amended hereby.
SECTION 2. AMENDMENT OF SECTION 1.1 OF THE AGREEMENT. Section 1.1 of the
Agreement is amended as follows:
(a) The definition of "Custom Lease" appearing in Section 1.1 of the
Agreement is hereby amended to read as follows:
"Custom Lease" shall mean the Lease Agreement dated as of the date
hereof between Tenant and Borrower as amended by the letter agreement of
even date herewith and the First Lease Amendment dated June 14, 1996, but
effective as of July 11, 1996 and as further amended from time to time with
the consent of the Lender.
(b) The definition of "Existing Custom Credit Agreement" appearing in
Section 1.1 of the Agreement is hereby amended to read as follows:
-1-
<PAGE>
"Existing Custom Credit Agreement" shall mean the Credit Agreement
dated as of March 31, 1993 among Tenant, Parent, the Lenders listed therein
and NationsCredit Commercial Corporation (as successor to US West Financial
Services, Inc.), as Agent, as amended and in effect from time to time.
(c) The definition of "Lease Documents" appearing in Section 1.1 of
the Agreement is amended by adding the words "and the Expansion Lease
Documents" at the end thereof.
(d) Section 1.1 of the Agreement is amended by adding the following
new definitions to appear therein in alphabetical order:
"Parent Guaranty" shall mean the Guaranty and Suretyship Agreement
dated as of September 30, 1994, given by Parent for the benefit of the
Borrower, as amended by a certain First Amendment to Guaranty and
Suretyship Agreement dated as of July 11, 1996 (the "GUARANTY AMENDMENT").
"Expansion Lease Documents" means (i) the Agreement to Purchase and
Lease Real Estate dated as of July 11, 1996 between the Borrower and the
Tenant (the "Expansion Agreement"), (ii) the First Lease Amendment dated as
of June 14, 1996, but effective as of July 11, 1996, between Borrower and
Tenant and (iii) the Lessee's Certificate, the Amended and Restated
Memorandum of Lease and the Guarantor's Certificate, each as executed and
delivered pursuant to the Expansion Agreement.
SECTION 3. SECURITY INTEREST IN LETTER OF CREDIT. The Borrower's
interest in all letters of credit issued to secure the Tenant's obligations
pursuant to Section 38 of the Lease and all amounts paid thereunder and all
proceeds thereof constitute collateral subject to the Lien of the Mortgage and,
in furtherance thereof, the Borrower hereby grants a security interest therein
to the Lender and agrees that all such letters of credit (including all letters
of credit issued in substitution for or exchange of letters of credit previously
delivered) shall be delivered to the Lender in pledge to be held as collateral.
If any letter of credit in the Lender's possession would by its terms expire
undrawn, the Lender shall, prior to the last date on which a drawing is
permitted thereunder, either draw on such letter of credit or return such letter
of credit to the Borrower for drawing, whereupon the amount paid under the
letter of credit in respect of such drawing shall be deposited with the Lender
to be held as collateral for the obligations of the Borrower under the Loan
Documents pursuant to arrangements satisfactory to the Lender.
SECTION 4. CONSENT. The Lender hereby consents to the execution,
delivery and performance by the parties thereto in accordance with the terms
thereof of the Expansion Lease Documents for purposes of the Loan Documents, the
Lease Documents and the
-2-
<PAGE>
Existing Custom Credit Agreement.
SECTION 5. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Consent and Amendment No. 1 is subject to the satisfaction of the following
conditions:
(a) The following documents, in form and substance satisfactory to
Lender in its sole good faith discretion, shall have been duly executed and
delivered:
(i) This Consent and Amendment No. 1;
(ii) An amendment to the Existing Custom Credit Agreement
providing for waivers required to permit the
transactions contemplated by the Expansion Lease
Documents and the issuance of the letter of credit
required by Expansion Lease Documents;
(iii) the Expansion Lease Documents;
(iv) an amendment to the Mortgage in form and substance
satisfactory to the Lender extending the Lien of the
Mortgage to cover the property to be sold by the Tenant
to the Borrower as contemplated by the Expansion Lease
Documents;
(v) each of the title policies (or endorsements thereof),
surveys, deeds, certificates and other documents,
instruments and agreements to be delivered in
satisfaction of the conditions to closing set forth in
Sections 4 and 5 of the Expansion Agreement; and
(vi) the original letter of credit issued pursuant to
Section 38 of the Lease (as amended by Amendment No. 1
to the Lease) together with an undated instrument of
transfer duly executed in blank by the Borrower.
(b) Lender shall have received true, correct and complete executed copies
of resolutions in form and substance satisfactory to Lender from the board of
directors of each of the Tenant, Parent and each general partner of the Borrower
evidencing approval of and authorization to execute the appropriate this Consent
and Amendment No. 1 and the Expansion Lease Documents (collectively, the
"Amendment Documents") and the consummation of the transactions contemplated
hereby and thereby, and indicating the officers of each such corporation who are
authorized to sign the Amendment Documents.
(c) The receipt by the Lender of a certificate signed
-3-
<PAGE>
by duly authorized officers of the Borrower dated the date hereof, to the effect
that: (i) the representations and warranties contained in the Loan Agreement
are true and correct on and as of such date as though made on and as of such
date; (ii) no Default has occurred and is continuing or would result from the
execution, delivery and performance by the parties thereto of the Amendment
Documents; and (iii) all of the conditions to closing set forth in the Amendment
Documents have been satisfied without waiver (except with the prior consent of
the Lender).
(d) The receipt by the Lender of such other documents as it may reasonably
request relating to the existence of the Borrower, the Tenant, the Parent or the
partners of the Borrower, the corporate or other authority for and validity of
the Amendment Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Lender in its sole good faith discretion.
(e) The fact that this Consent and Amendment No. 1 shall have become
effective on or prior to July 31, 1996.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants that:
(a) It has the legal power and authority to execute and deliver the
Amendment Documents, to amend the Loan Agreement as provided therein and to
perform its obligations under the Loan Agreement and under each of the other
Loan Documents to which it is a party.
(b) The execution and delivery of the Amendment Documents and the
amendment of the Loan Agreement as provided therein (i) have been duly
authorized by all requisite partnership and, if required, partner action and
(ii) will not (A) violate (1) any provision of law, statute, rule or regulation,
or of its partnership agreement or the constitutive documents or by-laws of any
partner, (2) any material provisions of any indenture, agreement or other
instrument to which the Borrower is a party or by which it or any of its
property is or may be bound, (B) be in conflict with, result in a breach of or
constitute (alone or with notice of lapse of time or both) a default under any
such indenture, agreement or other instrument or (C) result in the creation or
imposition of any Liens (other than the Liens under the Mortgage) upon any
property or assets of the Borrower.
(c) Each Amendment Document, the Loan Agreement and each other Loan
Document to which the Borrower is a party has been duly executed and delivered
by and constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, except as such enforceability may be
(i) limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application from time to time affecting the rights of creditors
and secured parties and (ii) subject to general principles of equity.
-4-
<PAGE>
(d) No action, consent or approval of, registration or filing with, or any
other action by any governmental authority is or will be required in connection
with the execution, delivery and performance of the Amendment Documents.
(e) No Default or Event of Default has occurred and is continuing under
the Loan Agreement or any other Loan Document, as in effect immediately prior to
and after the effectiveness of the Amendment Documents.
SECTION 7. NO OTHER WAIVERS. Other than as specifically provided therein,
the Amendment Documents shall not operate as a waiver of any right, remedy,
power or privilege of the Lenders under the Loan Agreement or of any other term
or condition of the Loan Documents and no failure or delay by the Lenders in
exercising any right, remedy, power or privilege under any Loan Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
SECTION 8. GOVERNING LAW. THIS CONSENT AND AMENDMENT NO. 1 SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-5-
<PAGE>
SECTION 9. COUNTERPARTS; EFFECTIVENESS. This Consent and Amendment No. 1
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Consent and Amendment No. 1 shall become effective as of the
date hereof when all of the conditions set forth in Section 5 shall have been
satisfied or waived with the consent of all Lenders.
NATIONSCREDIT COMMERCIAL CFP ASSOCIATES, a Kentucky
CORPORATION partnership
By CFP (MD) QRS 11-30, Inc., a
Maryland corporation, general
By: partner
----------------------
Title: By:
------------------- ---------------------------
Title:
----------------------
By CFP (MD) QRS 11-33, Inc., a
Maryland corporation, general
partner
By:
-------------------------
Title:
----------------------
-6-
<PAGE>
Exhibit 12.1
CFP HOLDINGS, INC.
EARNINGS TO FIXED CHARGE RATIO
<TABLE>
<CAPTION>
Predecessor Company CFP Holdings
-------------------------- -------------------------------------------------------------------------
Six Months Six Months
Year Ended Ended Ended Year Ended September Three Months Ended
-------------------------
September 30, March 31, September 30, 30, December 30, December 30,
-----------------------------
1992 1993 1993 1994 1995 1996 1995 1996
------------- ---------- ------------- ----------------------------- -------------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Less) Earnings Before Tax $ (28,834) $ 365 $ 87 $ 1,015 $ 2,886 $ (1,187) $ 820 $ 283
----------- --------- --------- -------- -------- --------- ------- -------
Plus: Fixed Charges
Interest Expense 3,717 1,908 1,457 2,592 2,383 3,182 795 823
1/3 of rent exp 187 108 94 217 208 208 52 52
------------------------- --------- ------------------------------------------------------
TOTAL FIXED CHARGES 3,904 2,014 1,551 2,809 2,589 3,388 847 875
----------- --------- --------- -------- -------------------- ------- -------
Earnings $ (24,930) $ 2,378 $1,638 $ 3,824 $ 5,264 $ 2,201 $ 1,667 $ 1,158
------------------------- --------- ------------------------------------------------------
Ratio (6.38) 1.18 1.06 1.38 2.03 0.65 1.97 1.32
------------------------- -------------------------------------------------------------------------
------------------------- -------------------------------------------------------------------------
Deficiency (20,834) (1,187)
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF CFP HOLDINGS, INC.
o Custom Food Products, Inc., a California Corporation
o QF Acquisition Corp., a Delaware Corporation
<PAGE>
EXHIBIT 24.2
OFFICER'S CERTIFICATE
---------------------
I, Eric Ek, being the duly qualified and appointed Vice President, Chief
Financial Officer and Secretary of CFP Holdings, Inc. (the "Corporation"), do
hereby certify that set forth below is a true and correct copy of
resolutions adopted by the Board of Directors of the Corporation by unanimous
written consent on March 20, 1997, which resolutions have not been rescinded
and remain in full force and effect.
RESOLVED, that the proper officers of this Corporation be, and
each of them hereby is, authorized and directed to prepare a
Registration Statement on Form S-4 and the prospectus included therein,
(the "Registration Statement"), covering the registration under the
Securities Act of the Exchange Notes, and that the proper officers of
this Corporation be, and each of them hereby is, authorized and
directed, in the name and on behalf of this Corporation, to execute, by
power of attorney or otherwise, the Registration Statement, with such
additions, deletions and modifications thereto as the officers executing
the same on behalf of this Corporation shall in their discretion
determine to be necessary or advisable (such determination to be
evidenced conclusively by their execution thereof), to file the
Registration Statement (together with the exhibits thereto) with the
Securities and Exchange Commission and to execute such other documents
and to take such other actions with respect thereto as they shall deem
necessary or advisable in connection with the Exchange Offer; and
RESOLVED, that the proper officers of this Corporation be, and
each of them hereby is, authorized and directed in the name and on behalf
of this Corporation, from time to time to execute, by power of attorney
or otherwise, and to file with the Securities and Exchange Commission,
such amendments to the Registration Statement (together with the
exhibits thereto) as the proper officer or officers of this Corporation
shall in his or their discretion determine to be necessary or advisable
(such determination to be evidenced conclusively by his or their
execution thereof), and to execute such other documents and take such
other actions with respect thereto as the proper officer or officers of
this Corporation shall determine to be necessary or advisable.
/s/ Eric Ek
---------------------------
Eric Ek
Vice President, Chief
Financial Officer and
Secretary
<PAGE>
Exhibit 25
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
__________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
__________________
CFP HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-4413619
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1117 West Olympic Blvd
Montebello, CA 90640
(Address of principal executive offices) (Zip Code)
__________________
11-5/8% Series B Senior Guaranteed Notes Due 2004
(Title of the indenture securities)
==============================================
<PAGE>
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
CFP Holdings, Inc. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. LIST OF EXHIBITS
(CONT'D)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of March 10, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 10th day
of March, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Cynthia Chaney
-------------------------
Assistant Vice President
<PAGE>
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
___________________________
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available for Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
----------
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
----------
TOTAL ASSETS $2,568,176
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
----------
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
----------
TOTAL LIABILITIES $2,413,392
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
----------
TOTAL STOCKHOLDER'S EQUITY 154,784
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,568,176
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
October 24, 1996
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 5/8% SENIOR GUARANTEED NOTES DUE 2004
OF
CFP HOLDINGS, INC.
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
To: United States Trust Company of New York, as Exchange Agent
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER:
United States Trust Company of New United States Trust Company of New United States Trust Company of New
York York York
FOR INFORMATION CALL:
Confirm:
Facsimile
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1997 (the "Prospectus), of CFP Holdings, Inc. (the "Company")
and this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange its 11 5/8%
Senior Guaranteed Notes due 2004 (the "New Notes") for an equal principal amount
of its 11 5/8% Series B Senior Guaranteed Notes due 2004 (the "Old Notes" and,
together with the New Notes, the "Notes"). The terms of the New Notes are
identical in all material respects to the Old Notes, except that the New Notes
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions providing for an increase in
the interest rate on the Old Notes under certain circumstances relating to the
Registration Rights Agreement (as defined in the Prospectus). The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended as provided in the Prospectus, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. Capitalized terms used but not defined
herein have the meanings given to them in the Prospectus.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or an Agent's Message (as defined in the Prospectus) and any other
documents required by this Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Old Notes according to the guaranteed
delivery procedures set forth under the caption "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. See Instruction 5.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
<PAGE>
If the undersigned is a broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), the
undersigned may be deemed to be an "underwriter" under the Securities Act and
the undersigned acknowledges, therefore, that it will deliver a prospectus in
connection with any resale of such New Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF 11 5/8% SENIOR GUARANTEED NOTES DUE 2004
Name(s) and Aggregate Principal Amount
Address(es) of Principal Tendered (must
Registered Holder(s) Amount be in integral
(please fill in, if Certificate Represented by multiples
blank) Number(s) Certificate(s) of $1,000)*
TOTAL
* Unless indicated in the column labeled "Principal Amount Tendered," any tendering
Holder of
Old Notes will be deemed to have tendered the entire aggregate principal amount
represented by
the column labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal
amounts on a
separate signed schedule and affix such schedule to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount. All other tenders must be in
integral
multiples of $1,000.
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY ("DTC") AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER SHARES BY
BOOK-ENTRY TRANSFER) (SEE INSTRUCTION 4):
Name of Tendering Institution________________________________________________
Account No.__________________________________________________________________
Transaction Code Number______________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTION 5):
Name(s) of Registered Holder(s)______________________________________________
Window Ticket Number (if any)________________________________________________
Date of Execution of Notice of Guaranteed Delivery___________________________
Name of Institution which Guaranteed Delivery________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO AND COMPLETE THE FOLLOWING:
Name:________________________________________________________________________
Address:_____________________________________________________________________
______________________________________________________________________
<PAGE>
<TABLE>
<S> <C>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 7, 8 AND 9) (SEE INSTRUCTIONS 7, 8 AND 9)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes in a principal amount not for Old Notes in a principal amount not
tendered, or New Notes issued in tendered, or New Notes issued in
exchange for Old Notes accepted for exchange for Old Notes accepted for
exchange, are to be issued in the name exchange, are to be sent to someone
of someone other than the undersigned. other than the undersigned, or to the
undersigned at an address other than
that shown above.
Issue certificate(s) to: Deliver certificate(s) to:
Name: Name:
(Please (Please Print)
Print) Address:
Address:
(Include Zip Code)
(Include Zip
Code) (Tax Identification or Social Security
No.)
(Tax Identification or Social
Security No.)
</TABLE>
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
full power of substitution (i) to deliver certificates for such Old Notes to the
Company and deliver all accompanying evidences of transfer and authenticity to,
or upon the order of, the Company and (ii) to present such Old Notes for
transfer on the books of the Company, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered hereby
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are acquired by the Company. The undersigned and
any beneficial owner of Old Notes tendered hereby further represent and warrant
that (i) the New Notes acquired by the undersigned and any such beneficial owner
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, (ii) neither the
undersigned nor any such beneficial owner has an arrangement with any person to
participate in the distribution of such New Notes, (iii) neither the undersigned
nor any such beneficial owner nor any such other person is engaging in or
intends to engage in a distribution of such New Notes and (iv) neither the
undersigned nor any such other person is an "affiliate," as defined under Rule
405 promulgated under the Securities Act, of the Company. The undersigned and
each beneficial owner acknowledge and agree that any person who is an affiliate
of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction of the New Notes acquired by such person
and may not rely on the position of the staff of the Securities and Exchange
Commission set forth in the no-action letters discussed in the Prospectus under
the caption "The Exchange Offer-- Purpose and Effect of the Exchange Offer." The
undersigned and each beneficial owner will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the Old
Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
notice (confirmed in writing) or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer because of an invalid tender, the occurrence of certain other
events set forth in the Prospectus or otherwise, any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown below
or at a different address as may be indicated herein under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
<PAGE>
Unless otherwise indicated under "Special Registration Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificates for Old Notes not tendered or
not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange in the name(s) of, and return any
certificates for Old Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and any other documents required by this Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 5.
<PAGE>
<TABLE>
<S> <C>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X Date:
X Date:
Signature(s) of Registered Holder(s) or Authorized Signatory
Area Code and Telephone Number:
THE ABOVE LINES MUST BE SIGNED BY THE REGISTERED HOLDER(S) AS HIS OR HER NAME(S) APPEAR(S)
ON THE OLD NOTES OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY A PROPERLY
COMPLETED BOND POWER FROM THE REGISTERED HOLDER(S), A COPY OF WHICH MUST BE TRANSMITTED WITH
THIS LETTER OF TRANSMITTAL. IF THE OLD NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATE ARE
HELD OF RECORD BY TWO OR MORE JOINT HOLDERS, THEN ALL SUCH HOLDERS MUST SIGN THIS LETTER OF
TRANSMITTAL. IF THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES OR BOND POWERS ARE SIGNED BY A
TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR
OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST (I) SO
INDICATE AND SET FORTH HIS OR HER FULL TITLE BELOW AND (II) UNLESS WAIVED BY THE COMPANY,
SUBMIT EVIDENCE SATISFACTORY TO THE COMPANY OF SUCH PERSON'S AUTHORITY TO SO ACT. SEE
INSTRUCTION 7.
Name(s):
(Please Print)
Capacity:
Address
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 7)
(Authorized Signature)
(Title)
(Name of Firm)
Date: , 199
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. PROCEDURES FOR TENDERING. This Letter of Transmittal or a facsimile
hereof, properly completed and duly executed, or an Agent's Message and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for tendered
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book
Entry Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES AND THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT
REQUESTED, BE USED AND PROPER INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give any such notification, nor shall any of them incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
<PAGE>
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the fourth column of the box entitled "Description of 11 5/8% Senior
Guaranteed Notes due 2004" above. The entire principal amount of any Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered and
a certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
4. BOOK-ENTRY TRANSFER. Any financial institution that is a participant in
DTC's system may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account at DTC in accordance
with DTC's procedures for transfer. However, although delivery of Old Notes may
be effected through book-entry transfer at DTC, this Letter of Transmittal or a
facsimile hereof, or an Agent's Message, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
5. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes and (i) whose Old Notes are not immediately available or (ii) who cannot
deliver their Old Notes, this Letter of Transmittal or an Agent's Message or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date must tender their Old Notes according to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (a) such tender must be
made through an Eligible Institution (as defined below); (b) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, this Letter of Transmittal (or facsimile hereof) or
an Agent's Message together with the certificate(s) representing the Old Notes,
or a Book-Entry Confirmation, and any other required documents will be deposited
by the Eligible Institution with the Exchange Agent; and (c) such properly
completed and executed Letter of Transmittal (or facsimile hereof) or an Agent's
Message, as well as the certificate(s) representing all tendered Old Notes in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter of Transmittal must be received by
the Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." Any Holder who wishes to tender
his or her Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon
request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to
Holders who wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
<PAGE>
6. WITHDRAWAL OF TENDERS. To withdraw a tender of Old Notes in the Exchange
Offer, a written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes into the name of the
persons withdrawing the tender and (iv) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above in Instruction 1, under Procedures for Tendering,
at any time prior to the Expiration Date.
7. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
holder or holders and neither the "Special Delivery Instructions" nor the
"Special Registration Instructions" has been completed, then such holder or
holders need not and should not endorse any tendered Old Notes, nor provide a
separate bond power. In any other case, such holder or holders must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must so indicate when signing, and,
unless waived by the Company, submit evidence satisfactory to the Company of
such person's authority to so act with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 7 must be guaranteed by an Eligible Institution which is a member of
(a) the Securities Transfer Agents Medallion Program, (b) the New York Stock
Exchange Medallion Signature Program or (c) the Stock Exchange Medallion
Program.
<PAGE>
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
if (a) this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered herewith and such holder(s) have not completed the box set
forth herein entitled "Special Registration Instructions" or the box set forth
herein entitled "Special Delivery Instructions" or (b) such Old Notes are
tendered for the account of an Eligible Institution.
8. Special Registration and Delivery Information. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person singing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered in the name of, any person other than the registered holder of the
Old Notes tendered hereby, or if tendered Old Notes are registered in the name
of any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. WAIVER OF CONDITIONS. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange Offer
in the case of any Old Notes tendered.
11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
<PAGE>
IMPORTANT TAX INFORMATION
The Holder is required to give the Exchange Agent the social security number
or employer identification number of the Holder of the Notes. If the Notes are
in more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report.
PAYER'S NAME: CFP HOLDINGS, INC.
<TABLE>
<S> <C> <C>
Name of Holder (if joint, list first and circle the name of
the person or entity whose number you enter in Part I below).
Address (if Holder does not complete, signature below will
constitute a certification that the above address is correct.)
SUBSTITUTE Part I--Please provide your
FORM W-9 TIN in the box at right and Social Security Number
DEPARTMENT OF THE TREASURY certify by signing and or
INTERNAL REVENUE SERVICE dating below. If you do not Employer Identification
have a number, see How to Number
Obtain a "TIN" in the
enclosed Guidelines.
Payer's Request for Taxpayer Part II--For Payees exempt from backup withholding, see
Identification Number (TIN) the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
CERTIFICATION. Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified
by the IRS that you are subject to backup withholding because of underreported interest
or dividends on your tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.)
Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
(DO NOT WRITE IN SPACE BELOW)
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<CAPTION>
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
<S> <C> <C>
</TABLE>
Delivery Prepared By
- - - --------------- Checked By
- - - --------------- Date
- - - ------------------------------
<PAGE>
CFP HOLDINGS, INC.
NOTICE OF GUARANTEED DELIVERY
OF
11 5/8% SENIOR GUARANTEED NOTES DUE 2004
As set forth in the Prospectus dated , 1997 (the "Prospectus"),
of CFP Holdings, Inc. (the "Company") under the caption "The Exchange
Offer--Guaranteed Delivery Procedures," this form must be used to accept the
Company's offer to exchange its 11 5/8% Series B Senior Guaranteed Notes due
2004 (the "New Notes") for an equal principal amount of its 11 5/8% Senior
Guaranteed Notes due 2004 (the "Old Notes"), by Holders who wish to tender their
Old Notes and (i) whose Old Notes are not immediately available or (ii) who
cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message
(as defined in the Prospectus) and any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date. This form must
be delivered by an Eligible Institution by mail or hand delivery or transmitted,
via facsimile, to the Exchange Agent at its address set forth below not later
than the Expiration Date. All capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE AGENT IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT MAIL OR COURIER:
<S> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
FOR INFORMATION CALL:
Confirm:
Facsimile:
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders for exchange to the Company, upon the terms
and subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended
by the Company. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on , 1997, unless the Exchange Offer is extended as provided
in the Prospectus, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
<PAGE>
<TABLE>
<S> <C>
SIGNATURE Principal Amount of Old Notes
Tendered (must be in integral
multiples of $1,000): $
X Date:
X Date: Cerfificate Number(s) of Old Notes (if available):
Signature(s) of Registrant Holder(s) or Authorized
Signatory
Area Code and Telephone Number:
Aggregate Principal Amount
Name(s): Represented by Certificate(s): $
(Please Print)
IF TENDERED OLD NOTES WILL BE DELIVERED BY
BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT
Capacity (full title, if signing in a fidaciary or NO. AND TRANSACTION CODE NUMBER (IF AVAILABLE):
representative capacity):
Account No.
Address: Transaction Number
(Including Zip Code)
Taxpayer Identification or
Social Security No:
</TABLE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated
under the Securities Exchange Act of 1934, as amended, guarantees deposit with
the Exchange Agent of a properly completed and executed Letter of Transmittal
(or facsimile thereof), or an Agent's Message, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer, or confirmation
of the book-entry transfer of such Old Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility described in the Prospectus under the
caption "The Exchange Offer-- Book-Entry Transfer) and other doucments required
by the Letter of Transmittal, all by 5:00 p.m., New York City time, on the third
New York Stock Exchange trading day following the Expiration Date.
<TABLE>
<S> <C>
Name of Eligible Institution: AUTHORIZED SIGNATURE
Address: Name:
- - - ------------------------------------------- Title:
Area Code and Telephone No.: Date:
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE. ACTUAL SURRENDER OF OLD NOTES
MUST BE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF TRANSMITTAL.
<PAGE>
CFP HOLDINGS, INC.
Offer to Exchange up to $115,000,000 of its
11 5/8% Series B Senior Guaranteed Notes due 2004
for any and all of its outstanding
11 5/8% Senior Guaranteed Notes due 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1997, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks, , 1997
Trust Companies and Other Nominees:
CFP Holdings, Inc., a Delaware corporation (the "Company"), is offering,
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1997 (the "Prospectus") and the accompanying Letter of Transmittal
enclosed herewith (which together constitute the "Exchange Offer"), to exchange
its 11 5/8% Series B Senior Guaranteed Notes due 2004 (the "New Notes") for an
equal principal amount of its 11 5/8% Senior Guaranteed Notes due 2004 (the "Old
Notes" and together with the New Notes, the "Notes"). As set forth in the
Prospectus, the terms of the New Notes are identical in all material respects to
the Old Notes, except that the New Notes have been registered under the
Securities Act of 1933, as amended, and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement (as defined in the Prospectus).
Old Notes may be tendered only in integral multiples of $1,000.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE
EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. the Prospectus, dated , 1997;
2. the Letter of Transmittal for your use and for the information of
your clients (facsimile copies of the Letter of Transmittal may be used to
tender Old Notes);
3. a form of letter which may be sent to your clients for whose accounts
you hold Old Notes registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Exchange Offer;
4. a Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. a return envelope addressed to Bankers Trust Company, the Exchange
Agent.
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR
WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE
AS QUICKLY AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(a) certificates representing such Old Notes, or a Book-Entry Confirmation (as
defined in the Prospectus), as the case may be, (b) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, or an Agent's
Message (as defined in the Prospectus) and (c) any other required documents.
<PAGE>
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message and any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth under
the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
The Company will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Notes pursuant to the Exchange Offer.
The Company will, however, upon request, reimburse you for customary clerical
and mailing expenses incurred by you in forwarding any of the enclosed materials
to your clients. The Company will pay or cause to be paid any transfer taxes
payable on the transfer of Notes to it, except as otherwise provided in
Instruction 9 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for copies of the Prospectus and Letter of Transmittal may be directed to the
Exchange Agent at its address set forth in the Prospectus or at
.
Very truly yours,
CFP HOLDINGS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, OR ANY AFFILIATE THEREOF, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
CFP HOLDINGS, INC.
Offer to Exchange up to $115,000,000 of its
11 5/8% Series B Senior Guaranteed Notes Due 2004
for any and all of its outstanding
11 5/8% Senior Guaranteed Notes Due 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1997, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1997 (the
"Prospectus") and a Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by Heartland Wireless Communications,
Inc. (the "Company") to exchange its 11 5/8% Series B Senior Guaranteed Notes
due 2004 (the "New Notes") for an equal principal amount of its 11 5/8% Senior
Guaranteed Notes due 2004 (the "Old Notes" and together with the New Notes, the
"Notes"). As set forth in the Prospectus, the terms of the New Notes are
identical in all material respects to the Old Notes, except that the New Notes
have been registered under the Securities Act of 1933, as amended, and therefore
will not bear legends restricting their transfer and will not contain certain
provisions providing for an increase in the interest rate on the Old Notes under
certain circumstances relating to the Registration Rights Agreement (as defined
in the Prospectus). Old Notes may be tendered only in integral multiples of
$1,000.
The enclosed material is being forwarded to you as the beneficial owner of
Old Notes carried by us for your account or benefit but not registered in your
name. An exchange of any Old Notes may only be made by us as the registered
Holder and pursuant to your instructions. Therefore, the Company urges
beneficial owners of Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such Holder promptly
if they wish to exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to exchange
any or all such Old Notes held by us for your account or benefit, pursuant to
the terms and conditions set forth in the Prospectus and Letter of Transmittal.
We urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to exchange Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1997, UNLESS EXTENDED. The term "Expiration Date"
shall mean 5:00 p.m., New York City time, on , 1997, unless the
Exchange Offer is extended as provided in the Prospectus, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. A tender of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount of
the New Notes for each $1,000 principal amount of the Old Notes, of which
$115,000,000 aggregate principal amount was outstanding as of .
The terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities
Act of 1933, as amended, and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for an
increase in the interest rate on the Old Notes under certain circumstances
relating to the Registration Rights Agreement.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE
"THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on , 1997, unless extended.
<PAGE>
4. The Company has agreed to pay the expenses of the Exchange Offer.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Company will be paid by the Company, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
If you wish us to tender any or all of your Old Notes held by us for your
account or benefit, please so instruct us by completing, executing and returning
to us the attached instruction form. THE ACCOMPANYING LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO
EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR
BENEFIT.
2
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of CFP Holdings,
Inc.
This will instruct you to tender for exchange the aggregate principal amount
of Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms of and conditions set forth in the Prospectus and the
Letter of Transmittal.
Aggregate Principal Amount of Old Notes to be tendered for exchange
$
----------------------------
<TABLE>
<S> <C>
*I (WE) UNDERSTAND THAT IF I (WE) SIGN THIS
INSTRUCTION FORM WITHOUT INDICATING AN AGGREGATE
PRINCIPAL AMOUNT OF OLD NOTES IN THE SPACE ABOVE, ALL
OLD NOTES HELD BY YOU FOR MY (OUR) ACCOUNT WILL BE
TENDERED FOR EXCHANGE. ------------------------------------------------------
------------------------------------------------------
SIGNATURE(S)
------------------------------------------------------
CAPACITY (FULL TITLE), IF SIGNING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
NAME(S) AND ADDRESS, INCLUDING ZIP CODE
DATE: ------------------------------------------------
------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.
</TABLE>
