<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1997.
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEBCO EVANS HOLDING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5142 06-1444203
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
545 STEAMBOAT ROAD
GREENWICH CONNECTICUT 06830
(203)661-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES)
Copies of all communication to:
<TABLE>
<S> <C>
A. PETTER OSTBERG ADAM O. EMMERICH, ESQ.
VICE PRESIDENT WACHTELL, LIPTON, ROSEN & KATZ
NEBCO EVANS HOLDING COMPANY 51 WEST 52ND STREET
545 STEAMBOAT ROAD NEW YORK, NEW YORK 10019
GREENWICH, CONNECTICUT 06830 (212) 403-1000
(203) 661-2500
(NAME, ADDRESS, INCLUDING ZIP CODE AND
TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: Upon
consummation of the Exchange Offer referred to herein.
------------------------
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
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER NOTE(2) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
12 3/8% New Senior Discount Notes
due 2007(1)..................... $100,387,000 54.788% $55,000,000 $16,666.66
==================================================================================================
</TABLE>
(1) This Registration Statement covers both the Prospectus filed hereby in
connection with the exchange offer for the New Notes and the prospectus
filed hereby in connection with certain market-making activities by
affiliates of the Registrant.
(2) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457.
------------------------
THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement covers the registration of an aggregate
principal amount of $100,387,000 of 12 3/8% New Senior Discount Notes due 2007
(the "New Senior Discount Notes" or "New Notes") of Nebco Evans Holding Company.
("NEHC") that may be exchanged for equal principal amounts of NEHC's outstanding
12 3/8% Senior Subordinated Discount Notes due 2007 (the "Senior Discount Notes"
or "New Notes") (the "Exchange Offer"). This Registration Statement also covers
the registration of the New Notes for resale by Donaldson, Lufkin & Jenrette
Securities Corporation in market-making transactions. The complete Prospectus
relating to the Exchange Offer (the "Exchange Offer Prospectus") follows
immediately after this Explanatory Note. Following the Exchange Offer Prospectus
are certain pages of the Prospectus relating solely to such market-making
transactions (the "Market-Making Prospectus"), including alternate front and
back cover pages, an alternate "Available Information" section, a section
entitled "Risk Factors -- Trading Market for the New Notes" to be used in lieu
of the section entitled "Risk Factors -- Absence of Public Market for the New
Notes; Restrictions on Transfers," a new section entitled "Use of Proceeds" and
an alternate section entitled "Plan of Distribution." In addition, the
Market-Making Prospectus will not include the following captions (or the
information set forth under such captions) in the Exchange Offer Prospectus:
"Prospectus Summary -- The Note Offering" and " -- The Exchange Offer", "Risk
Factors -- Exchange Offer Procedures" and "-- Restrictions on Transfer," "The
Exchange Offer", and "Certain Federal Income Tax Consequences of the Exchange
Offer". All other sections of the Exchange Offer Prospectus will be included in
the Market-Making Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED AUGUST 8, 1997
[AMERISERVE LOGO]
OFFER TO EXCHANGE
ALL OUTSTANDING
12 3/8% SENIOR DISCOUNT NOTES DUE 2007
($100,387,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
12 3/8% NEW SENIOR DISCOUNT NOTES DUE 2007
($100,387,000 PRINCIPAL AMOUNT)
OF
NEBCO EVANS HOLDING COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED
Nebco Evans Holding Company, a Delaware corporation ("NEHC"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to an aggregate principal amount of $100,387,000
of its 12 3/8% New Senior Discount Notes due 2007 (the "New Senior Discount
Notes" or "New Notes") for an equal principal amount of its outstanding 12 3/8%
Senior Discount Notes due 2007 (the "Senior Discount Notes" or the "Notes"), in
integral multiples of $1,000. The New Notes will be senior subordinated
unsecured obligations of NEHC and are substantially identical (including
principal amount, interest rate, maturity and redemption rights) to the Notes
for which they may be exchanged pursuant to this offer, except that (i) the
offering and sale of the New Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) holders of
New Notes will not be entitled to certain rights of holders under a Registration
Rights Agreement of NEHC dated as of July 11, 1997 (the "Registration Rights
Agreement"). The Senior Discount Notes have been, and the New Senior Discount
Notes will be, issued under an Indenture dated as of July 11, 1997 (the "Senior
Discount Note Indenture" or the "Indenture"), among NEHC and State Street Bank &
Trust Company, as trustee (the "Senior Discount Note Trustee"). See "Description
of New Notes." There will be no proceeds to NEHC from this offering; however,
pursuant to the Registration Rights Agreement, NEHC will bear certain offering
expenses.
------------------------
SEE "RISK FACTORS," COMMENCING ON PAGE 16, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER NOTES IN THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
(cover page continued)
<PAGE> 4
NEHC will accept for exchange any and all validly tendered Notes on or
prior to 5:00 p.m. New York City time, on , 1997, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date;
otherwise such tenders are irrevocable. State Street Bank & Trust Company will
act as Exchange Agent with respect to the Senior Discount Notes (in such
capacity, the "Exchange Agent") in connection with the Exchange Offer. The
Exchange Offer is not conditioned upon any minimum principal amount of Notes
being tendered for exchange, but is otherwise subject to certain customary
conditions.
The Notes were sold by NEHC on July 11, 1997 in transactions not registered
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act. A portion of the Notes were subsequently resold to
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act and to a limited number of institutional accredited investors in a manner
exempt from registration under the Securities Act. Based on information provided
by the Initial Purchaser, the Company believes no Notes were resold outside the
United States in reliance on Regulation S under the Securities Act. Accordingly,
the Notes may not be reoffered, resold or otherwise transferred in the United
States unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The New Notes are being offered hereunder in order to satisfy certain
obligations of NEHC under the Registration Rights Agreement. See "The Exchange
Offer."
The New Notes will accrete at a rate of 12 3/8% compounded semi-annually to
an aggregate principal amount of $100,387,000 at July 15, 2002. Thereafter, the
New Notes will accrue interest at the rate of 12 3/8% per annum, payable
semiannually on January 15 and July 15 of each year, commencing July 15, 2003.
The New Notes will be redeemable at the option of NEHC, in whole or in part, at
any time on or after July 15, 2002 in cash at the redemption prices set forth
herein, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of redemption. In addition, at any time, NEHC may redeem the New
Notes, in whole but not in part, at the option of NEHC, at a redemption price of
112.375% of the accreted value (determined at the date of redemption), with the
net cash proceeds of a Public Equity Offering. See "Description of the New
Notes -- Optional Redemption," and "Prospectus Summary -- Summary of Terms of
New Notes."
Upon the occurrence of a Change of Control (as defined in the Indenture),
each Holder (as defined herein) of New Notes will have the right to require NEHC
to repurchase all or any part of such Holder's New Notes at an offer price in
cash equal to 101% of the Accreted Value (determined at the date of redemption)
thereof on the date of repurchase (if such date of repurchase is prior to July
15, 2002) or 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and liquidated damages, if any, thereon to the date of
repurchase (if such date of repurchase is on or after July 15, 2002).
"Description of New Notes-Repurchase at the Option of Holders." There can be no
assurance that, in the event of a Change of Control, NEHC would have sufficient
funds to repurchase all New Notes tendered. See "Risk Factors -- Payment Upon a
Change of Control."
The New Notes will be general, unsecured obligations of NEHC, will rank
pari passu in right of payment with all existing and future senior indebtedness
of NEHC and will rank senior in right of payment to all subordinated
indebtedness of NEHC. As indebtedness of NEHC, however, the Notes will be
effectively subordinated to all indebtedness of the Company. As of March 29,
1997, on a pro forma basis, after giving effect to the Acquisition (as defined
herein), the related financings and other transactions described herein,
including, without limitation, the Note Offering and the application of the net
proceeds therefrom, the Notes would have been effectively subordinate to
approximately $728.8 million of indebtedness of the Company.
Based on an interpretation by the staff of the SEC (as defined herein) set
forth in no-action letters issued to third parties, NEHC believes that New Notes
issued pursuant to the Exchange Offer in exchange for Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder which is an "affiliate" of NEHC within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such
(cover page continued)
2
<PAGE> 5
New Notes are acquired in the ordinary course of such holder's business and that
such holder does not intend to participate in the distribution of such New
Notes.
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 the initial resale of such New Notes. The Letter of Transmittal
delivered with this Prospectus 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 Notes where
such Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. NEHC has agreed that for a period of 120
days after the consummation of the Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
Any Holder who tenders in the Exchange Offer with the intention to
participate, or for purpose of participating, in a distribution of the New Notes
cannot rely on the position of the staff of the SEC enunciated in Exxon Capital
Holdings Corporation (available April 13, 1989), or Morgan Stanley & Co., Inc.
(available June 5, 1991) or similar no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale of the New
Notes. Failure to comply with such requirements in such instance may result in
such Holder incurring liability under the Securities Act for which the Holder is
not indemnified by NEHC.
NEHC does not intend to list the New Notes on any securities exchange or to
seek admission thereof to trading in the National Association of Securities
Dealers Automated Quotation System. Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ" or the "Initial Purchaser") has advised NEHC that it intends
to make a market in the New Notes; however, it is not obligated to do so and any
market-making may be discontinued at any time. As a result, NEHC cannot
determine whether an active public market will develop for the New Notes.
ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN
OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE
OFFER, A HOLDER'S ABILITY TO SELL UNTENDERED NOTES COULD BE ADVERSELY AFFECTED.
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF NOTES WILL CONTINUE
TO BE SUBJECT TO THE EXISTING RESTRICTIONS UPON TRANSFER THEREOF AND NEHC WILL
HAVE FULFILLED ONE OF ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT.
HOLDERS OF NOTES WHO DO NOT TENDER THEIR NOTES GENERALLY WILL NOT HAVE ANY
FURTHER REGISTRATION RIGHTS UNDER THE REGISTRATION RIGHTS AGREEMENT OR
OTHERWISE. SEE "THE EXCHANGE OFFER -- CONSEQUENCES OF FAILURE TO EXCHANGE."
The New Notes issued pursuant to this Exchange Offer generally will be
issued in the form of Global New Notes (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company (the "Depository"
or "DTC") and registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in the Global New Notes representing the New Notes will be
shown on, and transfers thereof will be effected through, records maintained by
the Depository and its participants. Notwithstanding the foregoing, Notes held
in certificated form will be exchanged solely for New Notes in certificated
form. After the initial issuance of the Global New Notes, New Notes in
certificated form will be issued in exchange for the Global New Notes only on
the terms set forth in the Indenture. See "Description of New Notes --
Book-Entry, Delivery and Form."
------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NEHC. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE NEW NOTES TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
3
<PAGE> 6
AVAILABLE INFORMATION
NEHC has filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-4 under the Securities Act for the registration
of the New Notes offered hereby (the "Registration Statement"). This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in exhibits and schedules to the Registration Statement as
permitted by the rules and regulations of the SEC. For further information with
respect to NEHC or the New Notes offered hereby, reference is made to the
Registration Statement, including the exhibits and financial statement schedules
thereto, which may be inspected without charge at the public reference facility
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and copies of which may be obtained from the SEC at prescribed rates.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the SEC as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
Such documents and other information filed by NEHC can be inspected and
copied at the public reference facilities of the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 at the website maintained by the SEC
(http://www.sec.gov), and at the regional offices of the SEC located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the SEC, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at its public reference facilities in New York,
New York and Chicago, Illinois at prescribed rates.
NEHC is not currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result of
the offering of the New Notes, NEHC will become subject to the informational
requirements of the Exchange Act. NEHC will fulfill its obligations with respect
to such requirements by filing periodic reports with the Commission. In
addition, NEHC will send to each Holder of New Notes copies of annual reports
and quarterly reports containing the information required to be filed under the
Exchange Act.
So long as NEHC is subject to the periodic reporting requirements of the
Exchange Act, it is required to furnish the information required to be filed
with the SEC to the Trustees and the Holders of the Notes and the New Notes.
NEHC has agreed that, even if it is not required under the Exchange Act to
furnish such information to the SEC, it will nonetheless continue to furnish
information that would be required to be furnished by NEHC by Section 13 of the
Exchange Act to the Trustees and the Holders of the Notes or New Notes as if it
were subject to such periodic reporting requirements.
In addition, NEHC has agreed that, for so long as any of the Notes remain
outstanding, it will make available to any prospective purchaser of the Notes or
Holder of the Notes in connection with any sale thereof, the information
required by Rule 144A(d)(4) under the Securities Act.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
NEHC, 545 STEAMBOAT ROAD, GREENWICH, CONNECTICUT 06830, (203) 661-2500. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST
__, 1997.
4
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, all references in this Prospectus to the NEHC
business and pro forma data give effect to the Transactions described below. An
index of certain defined terms used herein can be found on page 97. Unless the
context indicates or otherwise requires, references in this Prospectus to the
"Company" or "AmeriServe" are to AmeriServe Food Distribution, Inc., its
predecessors and its subsidiaries, and give effect to the acquisition of PFS and
the contribution of The Harry H. Post Company ("Post"), each as described below,
and references to "NEHC" are to Nebco Evans Holding Company, a Delaware
corporation and its subsidiaries.
NEHC
Following the consummation of the Transactions and the HWPI Transaction
(described below), the capital stock of AmeriServe and Holberg Warehouse
Properties, Inc., a Delaware corporation ("HWPI" and, together with AmeriServe,
the "NEHC Subsidiaries") accounts for substantially all of NEHC's assets. NEHC
will conduct substantially all of its business through AmeriServe. HWPI's sole
operation consists of the leasing of two distribution centers to AmeriServe.
THE COMPANY
AmeriServe is North America's largest systems foodservice distributor
specializing in distribution to chain restaurants, the fastest growing segment
of the domestic restaurant industry. The Company is the primary supplier to its
customers of a wide variety of items, including fresh and frozen meat and
poultry, seafood, frozen foods, canned and dry goods, fresh and pre-processed
produce, beverages, dairy products, paper goods, cleaning supplies and
equipment. The Company serves over 30 different restaurant chains and over
26,500 restaurant locations in North America. The Company has had long-standing
relationships with such leading restaurant concepts as Pizza Hut, Taco Bell,
KFC, Wendy's, Burger King, Dairy Queen, Subway and Applebee's. The Company's
strategy is to capitalize on its market leading position, compelling industry
trends and management's extensive experience to: (i) pursue profitable internal
and external growth opportunities; (ii) capitalize on its nationwide network of
distribution centers to increase customer density and regional market
penetration; (iii) continue to provide low cost, superior customer service; and
(iv) maximize operating leverage by pursuing selective acquisitions within the
fragmented foodservice distribution industry. For the 12 months ended March 29,
1997, the Company generated pro forma net sales and Adjusted EBITDA of $4.8
billion and $145.2 million, respectively.
The Company has achieved a record of strong growth in net sales and EBITDA
by successfully implementing this strategy. From 1992 to 1996, exclusive of PFS,
the Company's net sales increased from $293.6 million to $1.3 billion,
representing a compound annual growth rate ("CAGR") of 44.5%. During the same
period, the Company's EBITDA, exclusive of PFS, increased from $6.0 million to
$26.0 million, representing a CAGR of 44.1%. The Company believes it is well
positioned to continue to expand its presence in the systems foodservice
distribution industry as a result of its reputation for providing superior
customer service as well as its ability to provide low cost, efficient services.
The Company believes that it was primarily as a result of these factors that in
January 1997 it was awarded a three-year exclusive contract effective April 1997
to provide foodservice distribution to approximately 2,600 Arby's restaurants.
The Company estimates that this contract, which management believes represents
the single largest customer migration in the systems foodservice distribution
industry, will result in the addition of approximately $325 million of net sales
in the first 12 months of such contract.
On May 23, 1997, in furtherance of its strategy, NEHC entered into an
agreement to acquire PFS, the foodservice distribution business of PepsiCo (the
"Acquisition"). Prior to the Acquisition, PFS was North America's second
largest systems foodservice distributor, serving over 17,000 restaurants in the
Pizza Hut, Taco Bell and KFC restaurant systems. The Company expects to
5
<PAGE> 8
realize significant benefits from the Acquisition, including:(i) enhanced
customer and concept diversification; (ii) increased customer density; (iii)
broadened national and international presence; and (iv) substantial cost savings
and economies of scale. In addition, in connection with the Acquisition, the
Company has entered into the Distribution Agreement whereby it will be the
exclusive distributor of selected products for five years to the approximately
9,800 Pizza Hut, Taco Bell and KFC restaurants in the continental United States
owned by PepsiCo and previously serviced by PFS. These restaurants accounted for
approximately 68% of PFS's 1996 net sales and 44% of the Company's 1996 pro
forma net sales after giving effect to the Arby's contract.
The Company believes it is well positioned to capitalize on the attractive
characteristics of the chain restaurant segment of the foodservice distribution
industry, which include: (i) the high growth rate of the segment, which
experienced an approximately 7.4% net sales CAGR from 1985 to 1995; (ii) the
uniformity of product offerings and consistency of demand by chain restaurant
customers; (iii) the increased focus by chain restaurants on foodservice
distributors that can provide consistent quality, reliable service and value on
a nationwide basis to maintain the chain's uniform standards; and (iv) the
fragmented nature of the industry, which includes over 3,000 foodservice
distribution companies. As the largest systems foodservice distributor serving
chain restaurants, the Company believes it is better positioned than its
competitors to offer consistent quality, reliable service and value on a
national scale in order to accommodate the growth of each customer.
COMPETITIVE ADVANTAGES
The Company believes that it will benefit from the following competitive
advantages:
- Market Leader with a Nationwide Presence. As a result of its national
presence, the Company believes it is one of the few systems foodservice
distributors capable of effectively serving large national accounts. The
Company believes it has significant advantages over smaller, regional
foodservice distributors as a result of its ability to: (i) derive
significant economies of scale in operating and distribution expenses;
(ii) benefit from increased purchasing power; (iii) make significant
investments in advanced technology and equipment, which enhance
productivity and customer service; and (iv) provide superior customer
service on a national scale.
- Low Cost Structure. The Company believes that it is uniquely positioned
to provide distribution services to chain restaurants at attractive
prices while also providing superior customer service. A critical
component of the Company's ability to reduce costs is the Company's
effective management of its warehouse and distribution costs, primarily
as a result of: (i) utilizing fewer, larger distribution centers within
each of its geographic regions; and (ii) maximizing customer density
within each region it serves. Furthermore, the Company has made
significant investments in advanced distribution centers, transportation
equipment and information technology, which enable it to efficiently
serve its customers.
- Stable Customer Base. The Company services over 26,500 restaurant
locations within more than 30 different restaurant concepts. The Company
believes it has among the best relationships with its customers of any
systems foodservice distributor as evidenced by the length and stability
of such relationships. For example, as a result of its ability to
provide high quality service at attractive rates, the Company has
developed long-standing relationships with many of the leading
restaurant concepts, including Dairy Queen (customer for 46 years),
Burger King (customer for 36 years), KFC (customer for 26 years),
Wendy's (customer for 21 years), Pizza Hut (customer for 20 years) and
Taco Bell (customer for 18 years).
- Experienced Management Team. The Company's management team has
extensive experience in the systems foodservice distribution business
and has developed long-standing relationships with franchisees and
senior management of successful concepts. The top four senior executives
of the Company have an average of approximately 24 years of experience
with the Company. In addition, prior to the Acquisition, the Company's
management team has successfully integrated five acquisitions since
1990, representing approximately $1.2 billion in aggregate annual sales.
6
<PAGE> 9
BUSINESS STRATEGY
The Company's objective is to continue to increase net sales and EBITDA by
implementing the following key elements of its business strategy:
- Continue to Pursue Internal and External Growth Opportunities. The
Company intends to continue to grow through a combination of the
development of new business from existing customers, the addition of new
chains, international expansion and selective acquisitions.
Growth From Existing Chains. As the primary foodservice distributor to
most of its customers, the Company expects to benefit from the continued growth
of the domestic chain restaurant industry, the fastest growing sector of the
restaurant industry. From 1985 to 1995, the chain restaurant segment experienced
an approximately 7.4% net sales CAGR, which exceeds the estimated 3.0% CAGR
experienced by the overall restaurant industry. The Company expects to realize
growth from its existing base of customers and concepts primarily due to: (i)
increased traffic within existing restaurants; (ii) the addition of new product
lines; (iii) new restaurant development and restaurant acquisitions by existing
customers; and (iv) the addition of new customers within concepts currently
serviced by the Company.
Growth Through Addition of New Chains. The Company continually monitors
the marketplace for opportunities to expand its portfolio of customers and
concepts. The Company targets (i) chains operating in geographic areas where the
Company could benefit from increased customer density, further enhancing its
operating leverage, and (ii) concepts that could benefit from the Company's
national presence and superior customer service. In April 1997, the Company
began operating under a recently awarded three-year exclusive contract to
provide foodservice distribution to over 2,600 Arby's restaurants nationwide.
The Company estimates that this contract, which management believes represents
the single largest customer migration in the systems foodservice distribution
industry, will result in the addition of approximately $325 million of net sales
in the first 12 months of such contract. In addition, the Company plans to
pursue additional export opportunities and further expand its operations in
international markets. After giving effect to the Acquisition, the Company will
export products from its distribution centers in the United States to
approximately 65 foreign countries.
Pursue Selective Acquisition Opportunities. As North America's largest
systems foodservice distributor serving chain restaurants, the Company believes
it is well positioned to capitalize on the consolidation taking place in the
fragmented foodservice distribution industry. The number of foodservice
distributors has decreased from approximately 3,600 in 1985 to approximately
3,000 in 1997, with a significant increase in the market shares of the largest
distributors. The Company intends to continue to make strategic fold-in
acquisitions in order to augment its operations in existing markets, enhance
customer density and further reduce costs.
- Capitalize on the Benefits of the PFS Acquisition. Management believes
that combining the operations of AmeriServe and PFS will present it with
opportunities to eliminate duplicative costs and realign the Company's
distribution center network to capitalize effectively on economies of
scale and the benefits of higher customer density. Management has
identified approximately $27 million of annual cost savings, which it
believes it can achieve through the elimination of general and
administrative expenses and the consolidation of distribution centers in
certain markets. Following the Acquisition, the Company expects to
reduce the number of current distribution centers from 39 to 29. In
addition, the five-year Distribution Agreement will further secure the
Company's customer base and provide for a long-term contract covering
approximately 44% of the Company's pro forma 1996 net sales after giving
effect to the Arby's contract.
- Continue to Maximize Operating Leverage. As the largest systems
foodservice distributor in North America, the Company pursues a low-cost
operating strategy based primarily on achieving economies of scale in
the areas of warehousing, transportation, general and administrative
functions and management information systems. The Company generates
significant operating leverage by utilizing large distribution centers
strategically located within each of its geographic markets, enabling it
to: (i) service multiple concepts from the same warehouse; (ii) maximize
the density of restaurants
7
<PAGE> 10
served from each facility; (iii) optimize delivery routes; (iv) invest
in advanced technology, which increases operational efficiencies and
enhances customer service; and (v) manage inventory more efficiently.
- Continue to Provide Superior Customer Service. The Company believes it
enjoys a reputation for providing consistent, high quality service based
on its customer focus, its commitment to service excellence and the
depth of its management team. The Company has successfully implemented a
decentralized management structure that enables the Company to respond
quickly and flexibly to local customer needs. The Company typically
interacts with its customers on a daily basis, and generally makes
multiple deliveries to each restaurant each week. The Company measures
its service performance daily by continuously monitoring the accuracy
and promptness of deliveries. The Company's advanced computer systems
are linked to many of its customers' locations, enabling customers to
communicate electronically with the Company, thereby reducing the
Company's administrative costs, and enabling it to respond more
efficiently to customers' needs. In addition, the Company's national
presence allows it to provide consistent and reliable service to
national restaurant concepts with geographically diverse locations.
THE TRANSACTIONS
In connection with the Acquisition, NEHC: (i) consummated the Note Offering
(as defined herein); and (ii) effected the HWPI Transaction (as defined herein)
(collectively, the "NEHC Transactions"). Concurrently, the Company: (i)
consummated the offering of $500.0 million of 10 1/8% Senior Subordinated Notes
due 2007 (the "Subordinated Notes Offering"); (ii) entered into the New Credit
Facility (as defined herein); (iii) established the Accounts Receivable Program
(as defined herein); (iv) received the Equity Contribution (as defined herein);
(v) effected the Preferred Stock Contribution (as defined herein); and (vi)
consummated the Post Contribution (as defined herein) (collectively, the
"AmeriServe Transactions" and, together with the NEHC Transactions, the
"Transactions"). See "The Transactions," "Description of Indebtedness" and
"Certain Relationships and Related Party Transactions."
NEHC's principal executive offices are located at 545 Steamboat Road,
Greenwich, Connecticut 06830 and its telephone number is (203) 661-2500.
THE NOTE OFFERING
THE NOTES.................. The Notes were sold by NEHC on July 11, 1997 and
were subsequently resold to qualified institutional
buyers pursuant to Rule 144A under the Securities
Act, to institutional investors that are accredited
investors in a manner exempt from registration
under the Securities Act and based on information
supplied by the Initial Purchaser, NEHC believes no
sales were made to persons in transactions outside
the United States in reliance on Regulation S under
the Securities Act ("the Note Offering").
REGISTRATION RIGHTS
AGREEMENT.................. In connection with the Note Offering, NEHC entered
into the Registration Rights Agreement, which
grants holders of the Notes certain exchange and
registration rights, which generally terminate upon
the consummation of the Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED......... $100,387,000 in aggregate principal amount of
NEHC's 12 3/8% New Senior Discount Notes due 2007.
THE EXCHANGE OFFER......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of the Notes. As
of the date hereof, $100,387,000
8
<PAGE> 11
aggregate principal amount of Notes are
outstanding. NEHC will issue the New Notes to
Holders on or promptly after the Expiration Date.
EXPIRATION DATE............ 5:00 p.m., New York City time on ,
1997, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
INTEREST ON THE NEW NOTES
AND THE NOTES.............. The New Notes will accrete at a rate of 12 3/8%
compounded semi-annually to an aggregate principal
amount of $100, 387,000 at July 15, 2002.
Thereafter, the New Notes will accrue interest at
the rate of 12 3/8% per annum, payable semiannually
on January 15 and July 15 of each year, commencing
July 15, 2003.
CONDITIONS TO THE
EXCHANGE OFFER............. The Exchange Offer is subject to certain customary
conditions, which may Offer be waived by NEHC. See
"The Exchange Offer -- Conditions."
PROCEDURES FOR
TENDERING NOTES............ Each Holder of Notes wishing to accept the Exchange
Offer must complete, sign and date the relevant
accompanying 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, together with the Notes and any other
required documentation to the relevant Exchange
Agent at the address set forth in the Letter of
Transmittal. The Letter of Transmittal should be
used to tender Notes. By executing the Letter of
Transmittal, each Holder will represent to NEHC
that, among other things, the Holder or the person
receiving such New Notes, whether or not such
person is the Holder, is acquiring the New Notes in
the ordinary course of business and that neither
the Holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New Notes.
In lieu of physical delivery of the certificates
representing Notes, tendering Holders may transfer
Notes pursuant to the procedure for book-entry
transfer as set forth under "The Exchange Offer --
Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... Any beneficial owner whose 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 and delivering its Notes,
either make appropriate arrangements to register
ownership of the 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.
GUARANTEED DELIVERY
PROCEDURES................. Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who
cannot deliver their Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for
9
<PAGE> 12
book-entry transfer) prior to the Expiration Date
must tender their Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer -- Terms of the Exchange Offer."
ACCEPTANCE OF NOTES AND
DELIVERY OF NEW NOTES...... NEHC will accept for exchange any and all Notes
that 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."
FEDERAL INCOME TAX
CONSEQUENCE................ The issuance of the New Notes to Holders of the
Notes pursuant to the terms set forth in this
Prospectus will not constitute an exchange for
federal income tax purposes. Consequently, no gain
or loss would be recognized by Holders of the Notes
upon receipt of the New Notes. See "Certain Federal
Income Tax Consequences of the Exchange Offer."
USE OF PROCEEDS............ There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
EFFECT ON HOLDERS OF
NOTES...................... As a result of the making of this Exchange Offer,
NEHC will have fulfilled certain of its obligations
under the Registration Rights Agreement, and
Holders of Notes who do not tender their Notes will
generally not have any further registration rights
under the Registration Rights Agreement or
otherwise. Such Holders will continue to hold the
untendered notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Indentures, except to
the extent such rights or limitations, by their
terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Notes will continue to be subject to
certain restrictions on transfer. Accordingly, if
any Notes are tendered and accepted in the Exchange
Offer, the trading market for the untendered Notes
could be adversely affected.
EXCHANGE AGENT............. State Street Bank and Trust Company is serving as
exchange agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange Agent."
10
<PAGE> 13
SUMMARY OF TERMS OF NEW NOTES
The form and terms of the New Notes are the same as the form and terms of
the Notes (which they will replace) except that (i) the New Notes have been
registered under the Securities Act, and, therefore, will not bear legends
restricting the transfer thereof and (ii) the Holders of the New Notes generally
will not be entitled to further registration rights under the Registration
Rights Agreement, which rights generally will be satisfied when the Exchange
Offer is consummated. The New Notes will evidence the same debt as the Notes and
will be entitled to the benefits of the Indenture. See "Description of New
Notes"
SECURITIES OFFERED......... $100,387,000 principal amount at maturity of NEHC's
12 3/8% New Senior Discount Notes due 2007.
MATURITY DATE.............. July 15, 2007.
ACCRETION.................. The New Notes will accrete at a rate of 12 3/8%,
compounded semi-annually to an aggregate principal
amount of $100,387,000 at July 15, 2002.
INTEREST RATE.............. The New Notes will accrue cash interest at the rate
of 12 3/8% per annum, payable semi-annually on July
15 and January 15 of each year, commencing January
15, 2003.
RANKING.................... The New Notes will be general unsecured obligations
of NEHC, will rank pari passu in right of payment
to all existing and future senior indebtedness of
NEHC and will rank senior in right of payment to
all subordinated indebtedness of NEHC. As
indebtedness of NEHC, however, the Notes will be
effectively subordinated to all indebtedness of the
Company. As of March 29, 1997, on a pro forma
basis, after giving effect to the Transactions, the
Notes would have been effectively subordinate to
approximately $728.8 million of indebtedness of the
Company. See "Risk Factors -- Holding Company
Structure; Effective Subordination."
OPTIONAL REDEMPTION........ The New Notes will be redeemable at the option of
NEHC, in whole or in part, at any time on or after
July 15, 2002 in cash at the redemption prices set
forth herein, plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of
redemption. In addition, at any time, NEHC may
redeem the New Notes, in whole but not in part, at
the option of NEHC, at a redemption price of
112.375% of the accreted value (determined at the
date of redemption), with the net cash proceeds of
a Public Equity Offering. See "Description of the
New Notes -- Optional Redemption," and "Prospectus
Summary -- Summary of Terms of New Notes."
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each
holder of New Notes will have the right to require
NEHC to repurchase all or any part of such holder's
Notes at an offer price in cash equal to 101% of
the Accreted Value thereof on the date of
repurchase (if such date of repurchase is prior to
July 15, 2002) or 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, thereon to the date
of repurchase (if such date of purchase is on or
after July 15, 2002). See "Description of New
Notes -- Repurchase at the Option of
Holders -- Change of Control." There can be no
assurance that, in the event of a Change of
Control, NEHC would have sufficient funds to
repurchase all New Notes tendered. See "Risk
Factors -- Payment Upon a Change of Control."
11
<PAGE> 14
CERTAIN COVENANTS.......... The Indenture contains certain covenants that
limit, among other things, the ability of NEHC to:
(i) pay dividends, redeem capital stock or make
certain other restricted payments or investments;
(ii) incur additional indebtedness or issue
preferred equity interests; (iii) merge,
consolidate or sell all or substantially all of its
assets; (iv) create liens on assets; and (v) enter
into certain transactions with affiliates or
related persons. See "Description of New
Notes -- Certain Covenants."
FORM AND DENOMINATION...... The certificates representing the New Notes will be
issued in fully registered form, deposited with a
custodian for and registered in the name of a
nominee of the depository in the form of a Global
New Note. Beneficial interests in the certificates
representing the Global New Notes will be shown on,
and transfers thereof will be effected through,
records maintained by the Depositary and its
Participants. See "Book Entry, Delivery and Form."
ORIGINAL ISSUE DISCOUNT.... The New Notes are being issued with original issue
discount for U.S. federal income tax purposes.
Thus, although interest will not be payable on the
Notes prior to July 15, 2002, holders will be
required to include amounts in gross income for
U.S. federal income tax purposes in advance of
receipt of the cash payments to which such income
is attributable. See "Description of Certain
Federal Income Tax Consequences -- Original Issue
Discount."
EXCHANGE OFFER REGISTRATION
RIGHTS................... If any Holder of an aggregate of at least $2.0
million in principal amount of Notes notifies NEHC
within 20 days of the consummation of the Exchange
Offer that (A) such Holder is prohibited by law or
SEC policy from participating in the Exchange
Offer, or (B) such Holder may not resell the New
Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the
Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or
available for such resales by such Holder, or (C)
such Holder is a broker-dealer and holds Notes
acquired directly from NEHC or one of its
respective affiliates, then NEHC will be required
to provide a shelf registration statement (the
"Shelf Registration Statement") to cover resales of
the Notes by the Holders thereof. Notwithstanding
the foregoing, at any time after consummation of
the Exchange Offer, NEHC may allow the Shelf
Registration Statement to cease to be effective and
usable if (i) the Board of Directors of NEHC
determines in good faith that it is in the best
interests of NEHC not to disclose the existence of
or facts surrounding any proposed or pending
material corporate transaction involving NEHC, and
NEHC notifies the Holders within a certain period
of time after the Board of Directors makes such
determination, or (ii) the prospectus contained in
the Shelf Registration Statement contains an untrue
statement of a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading. NEHC will pay certain liquidated
damages to Holders of Notes and Holders of New
Notes if NEHC is not in compliance with its
obligations under the Registration Rights
Agreement. See "Exchange Offer; Registration
Rights."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS."
12
<PAGE> 15
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth summary unaudited pro forma consolidated
balance sheet data at March 29, 1997 and summary unaudited pro forma
consolidated income statement data of NEHC for the fiscal year ended December
28, 1996, for the first quarter of 1996 and 1997 and for the 12 months ended
March 29, 1997. NEHC has a fiscal year ending on the Saturday closest to the end
of the calendar year. Each fiscal year is 52 weeks. PFS had a fiscal year ending
on the last Wednesday in December. Each PFS fiscal year was 52 weeks. The pro
forma consolidated balance sheet data at March 29, 1997 give effect to the
Transactions as if they had occurred on March 29, 1997. The pro forma
consolidated income statement data and other data for the fiscal year ended
December 28, 1996, for the first quarter of 1996 and 1997 and for the 12 months
ended March 29, 1997 give effect to the Transactions as if they had occurred at
the beginning of the period presented. The following information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations", the historical and unaudited pro forma financial
statements of NEHC, the historical financial statements of PFS and the related
notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
TWELVE
FISCAL FIRST QUARTER MONTHS ENDED
YEAR ------------------------- MARCH 29,
1996 1996 1997 1997
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $4,875,479 $1,081,027 $1,055,960 $4,850,412
Gross profit.......................... 488,552 109,003 110,436 489,985
Operating expenses.................... 396,717 93,658 95,802 398,861
Operating income...................... 91,835 15,345 14,634 91,124
OTHER DATA:
EBITDA(1)............................. $ 136,302 $ 25,933 $ 25,937 $ 136,306
Depreciation and amortization......... 44,950 10,588 11,303 45,665
Capital expenditures.................. 41,510 8,106 8,558 41,962
CREDIT RATIOS:
Adjusted EBITDA(2).................... -- -- -- $ 146,506
Cash interest expense(3).............. -- -- -- 71,001
Adjusted EBITDA/cash interest
expense............................ -- -- -- 2.1x
Net debt/Adjusted EBITDA(4)........... -- -- -- 5.0x
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 29, 1997
---------------------
ACTUAL PRO FORMA
-------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 4,060 $ 49,417
Working capital...................................................... 35,866 60,021
Total assets......................................................... 345,848 1,245,850
Long-term debt, including current portion............................ 178,680 783,818
Stockholder's equity................................................. 15,879 110,339
</TABLE>
- ---------------
(1) EBITDA represents operating income plus depreciation and amortization and
excludes one-time non-recurring gains and losses. EBITDA in fiscal 1996 and
the twelve months ended March 29, 1997 excludes net one-time, non-recurring
gains of $0.5 million. EBITDA for fiscal 1996 and the twelve months ended
March 29, 1997 includes an adjustment to reflect $27.5 million of annual
cost savings related to the PFS Acquisition. EBITDA for the first quarter
1996 and 1997 includes an adjustment to reflect $6.9 million of cost savings
related to the PFS Acquisition. EBITDA is calculated after deducting the
discount on the sale of receivables pursuant to the Accounts Receivable
Program. EBITDA is presented because it is a widely accepted financial
indicator used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA is not intended to
represent cash flows for the
13
<PAGE> 16
period, nor has it been presented as an alternative to operating income as
an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. See the historical
and unaudited pro forma financial statements of NEHC, the historical
financial statements of PFS and the related notes thereto included elsewhere
herein.
(2) Adjusted EBITDA represents EBITDA plus (i) fees payable by the Company to
Holberg Industries, Inc. for expenses incurred in its capacity as a holding
company that are attributable to the operations of the Company and its
Restricted Subsidiaries (such payments are subordinated to the Company's
obligations under the Senior Subordinated Notes) and (ii) $6.2 million,
which represents management's estimate of the EBITDA contribution in the
first 12 months of the Company's three-year exclusive contract to provide
foodservice distribution services to Arby's.
(3) Cash interest expense represents total interest expense less amortization of
deferred financing fees and other non-cash interest charges.
(4) Net debt represents total long-term debt, including current portion, less
cash and cash equivalents. The ratio of net debt to Adjusted EBITDA was
calculated based on pro forma net debt as of March 29, 1997, of $734.4
million.
14
<PAGE> 17
SUMMARY SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth summary historical financial data of NEHC
and PFS for the fiscal years 1994, 1995 and 1996, which have been derived from
the audited financial statements of the Company and PFS, respectively. The
financial statements of NEHC were audited by Ernst & Young LLP for fiscal years
1994, 1995 and 1996. The financial statements of PFS were audited by KPMG Peat
Marwick LLP for fiscal years 1994, 1995 and 1996. NEHC has a fiscal year ending
on the Saturday closest to the end of the calendar year. Each fiscal year for
NEHC was 52 weeks. PFS had a 52-53 week fiscal year ending on the last Wednesday
in December. Each fiscal year for PFS was 52 weeks, except 1994, which contained
53 weeks. Data for the first quarters of 1996 and 1997 have been derived from
unaudited financial statements of NEHC and PFS, which, in the opinion of
management, include all adjustments necessary for a fair presentation of the
information. Data at and for the first quarter of 1997 do not purport to be
indicative of results to be expected for the full fiscal year. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the historical and
unaudited pro forma financial statements of NEHC and the historical financial
statements of PFS and related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
------------------------------------ -------------------
NEHC 1994 1995 1996 1996 1997
- ---------------------------------------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $ 358,516 $ 400,017 $1,389,601 $250,922 $335,311
Gross profit.......................... 37,914 40,971 140,466 25,738 34,629
Operating expenses.................... 34,488 36,695 122,430 24,013 33,268
Operating income...................... 3,426 4,276 18,036 1,725 1,361
OTHER DATA:
EBITDA(1)............................. $ 6,710 $ 7,038 $ 27,925 $ 3,402 $ 4,233
Depreciation and amortization......... 3,284 2,762 10,372 1,677 2,872
Capital expenditures.................. 1,331 2,496 12,701 875 2,346
Net cash provided by (used in):
Operating activities............... 4,276 4,505 (2,189) (4,999) (4,046)
Investing activities............... (5,422) (5,574) (99,077) (98,544) (4,837)
Financing activities............... 490 619 102,915 103,020 10,719
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
------------------------------------ -------------------
PFS 1994 1995 1996 1996 1997
- ---------------------------------------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $3,279,837 $3,458,944 $3,422,086 $766,688 $720,524
Gross profit.......................... 326,672 344,777 341,484 77,038 75,682
Operating expenses.................... 239,772 265,305 261,741 60,995 61,225
Operating income...................... 86,900 79,472 79,743 16,043 14,457
OTHER DATA:
EBITDA(1)............................. $ 103,953 $ 98,236 $ 99,573 $ 20,748 $ 19,363
Depreciation and amortization......... 17,053 18,764 19,830 4,705 4,906
Capital expenditures.................. 21,310 25,245 28,771 7,193 6,212
</TABLE>
- ---------------
(1) EBITDA represents operating income plus depreciation and amortization and
excludes one-time non-recurring gains and losses. EBITDA for NEHC in fiscal
1996 excludes net one-time, non-recurring gains of $0.5 million. EBITDA is
presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis
of operating performance. EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to operating income
as an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. NEHC understands
that while EBITDA is frequently used by securities analysts in the
evaluation of companies, EBITDA, as used herein, is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. See the historical
and unaudited pro forma financial statements of NEHC and the historical
financial statements of PFS and the related notes thereto included elsewhere
herein.
15
<PAGE> 18
RISK FACTORS
Holders of the Notes should consider carefully the factors set forth below,
as well as the other information set forth elsewhere in this Prospectus, before
making a decision to tender into the Exchange Offer. This Prospectus includes
forward-looking statements, including statements concerning the Company's
business strategy, operations, cost savings initiatives, economic performance,
financial condition and liquidity and capital resources. Such statements are
subject to various risks and uncertainties. NEHC's actual results may differ
materially from the results discussed in such forward-looking statements because
of a number of factors, including those identified in this "Risk Factors"
section and elsewhere in this Prospectus. See "Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"The Business." The forward-looking statements are made as of the date of this
Prospectus, and NEHC assumes no obligation to update the forward-looking
statements or to update the reasons why actual results could differ from those
projected in the forward-looking statements.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
NEHC will incur substantial indebtedness in connection with the
Transactions and, following the Offering, NEHC will be highly leveraged. On a
pro forma basis after giving effect to the Transactions, the Company would have
had total indebtedness of $783.8 million and stockholders' equity of $110.3
million as of March 29, 1997, and NEHC's ratio of earnings to fixed charges
would have been 1.1x for the year ended December 28, 1996. On a pro forma basis
after giving effect to the Transactions, cash interest expense for the last 12
months ended March 29, 1997 would have been $71.0 million. The Company may incur
additional indebtedness in the future, subject to limitations imposed by the
Indenture and the New Credit Facility. See "Capitalization," "Unaudited Pro
Forma Combined Financial Statements" and "The Transactions -- The Acquisition."
NEHC's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the New Notes) depends
on its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, the management of NEHC believes that NEHC's available cash flow,
together with available borrowings under the Company's New Credit Facility and
other sources of liquidity, including the Accounts Receivable Program, will be
adequate to pay such leases, dividends or other payments to enable NEHC to meet
NEHC's anticipated future requirements for working capital, capital
expenditures, scheduled payments of principal of and interest on its
indebtedness, and interest on the New Notes. However, all or a portion of the
principal payments at maturity on the New Notes may require refinancing. There
can be no assurance that NEHC will generate sufficient cash flow from operations
or that future borrowings will be available in an amount sufficient to enable
NEHC to service its indebtedness, including the New Notes, or to make necessary
capital expenditures, or that any refinancing would be available on commercially
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital Resources
Excluding PFS."
The degree to which NEHC will be leveraged following the Offering could
have important consequences to holders of the New Notes, including, but not
limited to, the following: (i) a substantial portion of NEHC's cash flow will be
required to be dedicated to debt service and will not be available for other
purposes; (ii) NEHC's ability to obtain additional financing in the future could
be limited; (iii) the Indenture will contain financial and restrictive covenants
that limit the ability of NEHC to, among other things, borrow additional funds,
dispose of assets or pay cash dividends. Failure by NEHC to comply with such
covenants could result in an event of default, which, if not cured or waived,
could have a material adverse effect on NEHC. In addition, the degree to which
NEHC is leveraged could prevent it from repurchasing all New Notes tendered to
it upon the occurrence of a Change of Control. See "Description of New Notes
- -- Repurchase at the Option of Holders -- Change of Control," and "The
Transactions -- The Acquisition."
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HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
NEHC is a holding company and does not have any material operations or
assets other than ownership of capital stock of its subsidiaries. Accordingly,
the New Notes will be effectively subordinated to all existing and future
liabilities of NEHC's subsidiaries, including indebtedness under the New Credit
Facility and the New Notes. As of March 29, 1997, on a pro forma basis after
giving effect to the Transactions, the aggregate amount of indebtedness of
NEHC's subsidiaries to which the holders of the New Notes would be effectively
subordinated would have been approximately $728.8 million. In addition, certain
of NEHC's subsidiaries have $150.0 million of additional availability under the
New Credit Facility for future borrowings. NEHC and its subsidiaries may incur
additional indebtedness in the future, subject to certain limitations contained
in the instruments governing their indebtedness.
Any right of NEHC to participate in any distribution of the assets of its
subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the Holders of the New Notes to
participate in the distribution of those assets) will be subject to the prior
claims of the respective subsidiary's creditors. The obligations of NEHC's
subsidiaries under the New Credit Facility are secured by substantially all of
their respective assets. Additionally, NEHC will guarantee AmeriServe's
obligations under the New Credit Facility and such guarantee will be secured by
a first priority pledge of all the capital stock of AmeriServe owned by NEHC.
See "Description of Indebtedness -- New Credit Facility."
LIMITATION ON THE PAYMENT OF FUNDS TO NEHC BY ITS SUBSIDIARIES
NEHC's cash flow, and consequently its ability to pay dividends and to
service debt, including its obligations under the New Notes, is dependent upon
the cash flows of its subsidiaries and the payment of funds by such subsidiaries
to NEHC in the form of loans, dividends or otherwise. NEHC's subsidiaries have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
New Notes or to make any funds available therefor. In addition, the Company's
New Credit Facility and the indenture governing the Company's New Notes will
impose, and agreements entered into in the future may impose, significant
restrictions on the payment of dividends and the making of loans by the Company
to NEHC. Under the New Credit Facility, subject to meeting certain financial
covenants, NEHC's subsidiaries will be permitted to pay dividends to NEHC equal
to the semi-annual interest payments due on the New Notes; provided that upon a
notice of a default or event of default under the New Credit Facility, NEHC's
subsidiaries will be prohibited from paying such dividends until the earlier of
the 180th day following such notice and the date such default or event of
default is cured or waived. Accordingly, repayment of the New Notes may depend
upon the ability of NEHC to effect an offering of capital stock or to refinance
the New Notes.
ASSET ENCUMBRANCES
In connection with the New Credit Facility, NEHC has granted the lenders
thereunder a first priority lien on all of the capital stock of the Company as
security for its guarantee of the Company's obligations under the New Credit
Facility. In the event of a default under the New Credit Facility or such
guarantee, the lenders under the New Credit Facility could foreclose upon the
assets pledged to secure the New Credit Facility, including such capital stock,
and the holders of the New Notes might not be able to receive any payments until
any payment default was cured or waived, any acceleration was rescinded, or the
indebtedness under the New Credit Facility was discharged or paid in full.
KEY CONTRACTS
In January 1997, the Company entered into a three-year agreement, which
became effective April 1997, to become the primary supplier to approximately
2,600 Arby's restaurants nationwide. The Company expects to generate at least
$325 million of annual net sales during the term of the agreement. No assurance
can be given that the Company's contract with Arby's will be renewed upon
expiration, that any renewal of such contract will be on terms as favorable to
the Company as the current contract or that the Company will realize expected
net sales under the existing contract.
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In connection with the Acquisition, the Company and PepsiCo's chain
restaurant businesses have entered into a five-year Distribution Agreement
pursuant to which the Company will be the exclusive distributor of specified
restaurant products purchased by Pizza Hut, Taco Bell and KFC restaurants within
the continental United States, which are owned, directly or indirectly, by
PepsiCo as of the Closing (other than certain specified restaurants) or which
are acquired or built by PepsiCo's chain restaurant businesses during the term
of the Distribution Agreement. On a pro forma basis after giving effect to the
Transactions and after giving effect to the Arby's contract, approximately 44%
of the Company's 1996 net sales would have been generated under the Distribution
Agreement. The Distribution Agreement may be terminated at any time (i) by any
party in the event that the other party breaches any material term and such
breach remains unremedied for a period of 30 calendar days after written notice
of such breach, (ii) by the PepsiCo Chains if the Company is in material breach
of the Distribution Agreement for failure to maintain specified service levels
for a specified period of time or (iii) by either party in the event that the
other party becomes the subject of a bankruptcy, insolvency or other similar
proceeding. See "The Acquisition -- Distribution Agreement."
While exclusive or written arrangements are not typically the basis of
foodservice distribution sales and have not historically been requisite to the
Company's growth, the Distribution Agreement will expire in five years and no
assurance can be given that the Distribution Agreement will be renewed or, if
renewed, whether such renewal will be on terms as favorable as the existing
agreement. Furthermore, no assurance can be given that the Company will be able
to achieve the expected net sales under the current Distribution Agreement.
Gross profit and net pretax profit on certain sales by PFS to Pizza Hut under
the Distribution Agreement are limited.
DEPENDENCE ON CERTAIN CHAINS AND CUSTOMERS
The Company derives substantially all of its net sales from several chain
restaurant concepts. On a pro forma basis after giving effect to the
Transactions, and the Arby's contract, the largest chains serviced by the
Company would have been Pizza Hut, Taco Bell and KFC, representing 28%, 28% and
12% of 1996 net sales, respectively. Adverse developments affecting such chains
or a decision by a corporate owner or franchisor to revoke its approval of the
Company as a distributor could have a material adverse effect on the Company's
operating results.
The Company's customers are generally individual franchisees or
corporate-owned restaurants within such restaurant chains. Although the
corporate owner or franchisor of a chain generally reserves the right to approve
the distributors for its franchisees, each customer generally makes its
selection of a foodservice distributor from an approved group of distributors.
On a pro forma basis after giving effect to the Transactions and after giving
effect to the Arby's contract, the Company's largest customer would have been
PepsiCo, representing 44% of the Company's 1996 net sales. No other customer
accounted for more than 10% of the Company's pro forma net sales in 1996.
Adverse events affecting any of the Company's largest customers, a material
decrease in sales to any such customers or the loss of a major customer through
the acquisition thereof by a company with an internal foodservice distribution
business or otherwise could have a material adverse effect on the Company's
operating results. In addition, the Company's continued growth is dependent in
part on the continued growth and expansion of its customers.
A significant portion of the Company's business is conducted with customers
with which the Company does not have contracts. Such customers could cease doing
business with the Company on little or no notice. The Company's contracts with
its other customers are subject to termination by the customer prior to
expiration of the stated term under circumstances specified in each contract,
including, in some cases, failure to comply with performance reliability
standards. Although the Company is not aware of any issues of non-compliance
that could reasonably be expected to result in termination of any such contracts
prior to expiration of the stated term, and has not been notified by any
customer that it intends to terminate its contract with the Company, there can
be no assurance that historic levels of business from any customer of the
Company will be maintained in the future. See "-- Key Contracts" and "The
Business -- Customers."
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ABILITY TO INTEGRATE ACQUISITIONS
The Company has achieved a significant portion of its growth through
acquisitions and will continue to try to grow in this way. Although each of the
previously acquired companies has a significant operating history, the Company
has a limited history of owning and operating the most recently acquired of
these businesses on a consolidated basis. Holberg Industries, Inc. ("Holberg")
acquired NEBCO Distribution of Omaha, Inc. ("NEBCO") in 1986. NEBCO acquired
Evans Brothers Company ("Evans") in January 1990 and the combined company was
renamed "NEBCO EVANS Distribution, Inc." ("NEBCO EVANS"). NEBCO EVANS acquired
L.L. Distribution Systems Inc. in 1990, Condon Supply Company in 1991, AmeriServ
Food Company ("AmeriServ") in January 1996 and, in April 1997, changed its name
to AmeriServe Food Distribution, Inc. Following the Acquisition, the Company
will have to integrate PFS with its existing business, including its prior
acquisitions. While the Company believes that such integration provides
significant opportunities to reduce costs, there can be no assurance that the
Company will be able to meet performance expectations or successfully integrate
these businesses on a timely basis without disruption in the quality and
reliability of service to its customers or diversion of management resources. In
addition, while the Company has made acquisitions successfully before, the
Acquisition is substantially larger than the Company's prior acquisitions. The
integration of such businesses will also require improvements in the Company's
management information systems. There can be no assurance that such improvements
will be realized on a timely basis.
DEPENDENCE ON KEY PERSONNEL
The Company's and NEHC's success is, and will continue to be, substantially
dependent upon the continued services of its senior management, particularly Mr.
John V. Holten, Chairman and Chief Executive Officer of NEHC and the Company,
and Mr. Raymond E. Marshall, President, Chief Operating Officer and Treasurer of
NEHC and President and Treasurer of the Company. The loss of the services of one
or more members of senior management could adversely affect NEHC's operating
results. The Company has entered into employment agreements with Mr. Marshall
and other members of senior management, and has obtained key-man life insurance
in the amount of $3.0 million on Mr. Marshall. In addition, the Company's
continued growth depends on the ability to attract and retain skilled operating
managers and employees and the ability of its key personnel to manage the
Company's growth and consolidate and integrate its operations. See "Management."
COMPETITION
The foodservice distribution industry is highly competitive. The Company
competes with other systems foodservice distribution companies that focus on
chain restaurants and with broadline foodservice distributors that distribute to
a wide variety of customers. Further, the Company could face increased
competition to the extent that there is an increase in the number of foodservice
distributors specializing in distribution to chain restaurants on a nationwide
basis. See "The Business -- Competition."
CONTROL BY PRINCIPAL STOCKHOLDER
After the consummation of the Transactions, Holberg will indirectly own a
majority of the issued and outstanding capital stock of NEHC. See "Security
Ownership of Certain Beneficial Holders and Management." Holberg and DLJ will
collectively have sufficient voting power to elect the entire Board of Directors
of each of NEHC, and through NEHC, the Company, and thereby exercise control
over the business, policies and affairs of NEHC and the Company, and, in
general, determine the outcome of any corporate transaction or other matters
submitted to stockholders for approval, such as any amendment to the certificate
of incorporation of NEHC (the "Certificate of Incorporation"), the authorization
of additional shares of capital stock, and any merger, consolidation or sale of
all or substantially all of the assets of NEHC, all of which could adversely
affect NEHC and holders of the New Notes.
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PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of New Notes may
require NEHC to repurchase all or a portion of such holder's New Notes at 101%
of the Accreted Value thereof on the date of repurchase (if such date of
repurchase is prior to July 15, 2002) or 101% of the aggregate principal amount
thereof, together with accrued and unpaid interest, if any, and liquidated
damages, if any, to the date of repurchase (if such date of repurchase is on or
after July 15, 2002). In addition, the New Credit Facility will provide that, if
a Change of Control (as defined therein) occurs, it will constitute an event of
default under the New Credit Facility. In the event of such a Change of Control,
the Company would be required to repay the indebtedness outstanding under the
New Credit Facility and the Company may be required to repay the New Notes.
There can be no assurance that the Company and NEHC would have the resources
necessary to repay their respective indebtedness or that a Change of Control
would not have a material adverse effect on the value of the New Notes or the
ability of NEHC to repay the indebtedness under the New Notes. See "Description
of New Notes -- Repurchase at the Option of Holders -- Change of Control" and
"-- Holding Company Structure; Effective Subordination."
FRAUDULENT CONVEYANCE
Management of NEHC believes that the indebtedness represented by the New
Notes is being incurred for proper purposes and in good faith, and that, based
on present forecasts, asset valuations and other financial information, after
the consummation of the Transactions, NEHC will be solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as they
mature. See "-- Substantial Leverage and Debt Service." Notwithstanding
management's belief, however, if a court of competent jurisdiction in a suit by
an unpaid creditor or a representative of creditors (such as a trustee in
bankruptcy or a debtor-in-possession) were to find that, at the time of the
incurrence of such indebtedness, NEHC was insolvent, was rendered insolvent by
reason of such incurrence, was engaged in a business or transaction for which
its remaining assets constituted unreasonably small capital, intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, or intended to hinder, delay or defraud its creditors, and that
the indebtedness was incurred for less than reasonably equivalent value, then
such court could, among other things, (i) void all or a portion of NEHC's
obligations to the holders of the New Notes, the effect of which would be that
the holders of the New Notes may not be repaid in full and/or (ii) subordinate
NEHC's obligations to the holders of the New Notes to other existing and future
indebtedness of NEHC to a greater extent than would otherwise be the case, the
effect of which would be to entitle such other creditors to be paid in full
before any payment could be made on the New Notes.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES; RESTRICTIONS ON TRANSFERS
The Notes are currently owned by a relatively small number of beneficial
owners. The Notes have not been registered under the Exchange Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for the New Notes. The New Notes will constitute a new issue of
securities with no established trading market. Although the New Notes will
generally be permitted to be resold or otherwise transferred by Holders who are
not affiliates of NEHC without compliance with the registration requirements
under the Securities Act, NEHC does not intend to list the New Notes on any
securities exchange or to seek admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. Although DLJ has
advised NEHC that it currently intends to make a market in the New Notes, it is
not obligated to do so and may discontinue such market making at any time
without notice. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time. See "Notice to Investors." In
addition, such market making activity will be subject to the limits imposed by
the Exchange Act. See "Description of New Notes -- Registration Rights;
Liquidated Damages." Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Notes.
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<PAGE> 23
EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for Notes pursuant to the Exchange
Offer will be made only after a timely receipt by the Exchange Agent of such
Notes, a properly completed and duly executed letter of transmittal and all
other required documents. Therefore, Holders of the Notes desiring to tender
such Notes in exchange for New Notes should allow sufficient time to ensure
timely delivery. NEHC is under no duty to give notification of defects or
irregularities with respect to the tenders of Notes for exchange. Notes that are
not tendered or are tendered but not accepted will, following the consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, the registration
rights under the Registration Rights Agreement generally will terminate. In
addition, any Holder of Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the New Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale. Each broker-dealer that receives New 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
the initial resale of such New Notes. To the extent that Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Notes could be adversely affected. See "The Exchange Offer."
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THE EXCHANGE OFFER
The following discussion sets forth or summarizes what the Company believes
are the material terms of the Exchange Offer, including those set forth in the
Letter of Transmittal distributed with this Prospectus. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and are incorporated
by reference herein.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were sold by NEHC on July 11, 1997, and were subsequently resold
to qualified institutional buyers pursuant to Rule 144A under the Securities
Act, to institutional investors that are accredited investors in a manner exempt
from registration under the Securities Act and to certain persons in
transactions outside the United States in reliance on Regulation S under the
Securities Act. In connection with the Note Offering, NEHC entered into the
Registration Rights Agreement, which requires, among other things, that promptly
following the completion of the Acquisition, NEHC: (i) file with the SEC a
registration statement under the Securities Act with respect to an issue of new
Notes of NEHC identical in all material respects to the Notes, (ii) use their
best efforts to cause such registration statement to become effective under the
Securities Act and (iii) upon the effectiveness of that registration statement,
offer to the Holders of the Notes the opportunity to exchange their Notes for a
like principal amount of New Notes, which would be issued without a restrictive
legend and may be reoffered and resold by the holder without restrictions or
limitations under the Securities Act (other than any such holder that is an
"affiliate" of NEHC within the meaning of Rule 405 under the Securities Act). A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The term "Holder"
with respect to the Exchange Offer means any person in whose name the Notes are
registered on the books of NEHC or any other person who has obtained a properly
completed bond power from the registered holder.
Because the Exchange Offer is for any and all Notes, the number of Notes
tendered and exchanged in the Exchange Offer will reduce the principal amount of
Notes outstanding. Following the consummation of the Exchange Offer, Holders of
the Notes who did not tender their Notes generally will not have any further
registration rights under the Registration Rights Agreement, and such Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Notes could be adversely affected. The Notes
are currently eligible for sale pursuant to Rule 144A through the PORTAL System
of the National Association of Securities Dealers, Inc. Because NEHC anticipates
that most holders of Notes will elect to exchange such Notes for New Notes due
to the absence of restrictions on the resale of New Notes under the Securities
Act, NEHC anticipates that the liquidity of the market for any Notes remaining
after the consummation of the Exchange Offer May be substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, NEHC will accept any and all 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 Senior
Discount Notes in exchange for each $1,000 principal amount of outstanding
Senior Discount Notes accepted in the Exchange Offer. Holders may tender some or
all of their Notes pursuant to the Exchange Offer. However, Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Notes except that (i) the New Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the New Notes generally will not be entitled to certain
rights under the Registration Rights Agreement, which rights generally will
terminate upon consummation of the Exchange Offer. The New Notes will evidence
the same debt as the Notes and will be entitled to the benefits of the
Indentures.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the Indentures in connection with the
Exchange Offer. The Company intends to conduct the
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Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder, including Rule 14e-1
thereunder.
NEHC shall be deemed to have accepted validly tendered Notes when, as and
if NEHC has given oral or written notice thereof to the Exchange Agents. The
Exchange Agent will act as agent for the tendering Holders for the purpose of
receiving the New Notes from NEHC.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender 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 Notes pursuant to
the Exchange Offer. NEHC will pay all charges and expenses, other than transfer
taxes in certain circumstances, in connection with the Exchange Offer. See
"-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless NEHC, 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.
To extend the Exchange Offer, NEHC will notify the Exchange Agent of any
extension by oral or written notice, followed by a public announcement thereof
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
NEHC reserves the right, in its reasonable judgment, (i) to delay accepting
any Notes, to extend the Exchange Offer or to terminate the Exchange Offer if
any of the conditions set forth below under "-- Conditions" shall not have been
satisfied, by giving oral 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 NEHC to
constitute a material change, NEHC will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
Holders, and, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, NEHC will extend the Exchange Offer for
five to ten business days if the Exchange Offer would otherwise expire during
such five to ten business-day period.
If NEHC does not consummate the Exchange Offer, or, in lieu thereof, NEHC
does not file and cause to become effective a resale shelf registration for the
New Notes within the time periods set forth herein, liquidated damages will
accrue and be payable on the New Notes either temporarily or permanently. See
"Description of New Notes -- Registration Rights; Liquidated Damages."
INTEREST ON NEW NOTES
The New Senior Discount Notes will not bear interest prior to July 15,
2002. Thereafter, interest will be payable in cash semi-annually on January 15
and July 15 of each year, commencing on January 15, 2003.
PROCEDURES FOR TENDERING
Only a Holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a Holder must complete, sign and date the relevant
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Notes
and any other required documents, to the Exchange Agent so as to be received by
the Exchange Agent at the address set forth below prior to 5:00 p.m., New York
City time, on the Expiration Date. The Letter of Transmittal must be used to
tender Notes.
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Delivery of the Notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to NEHC the
representation set forth below in the second paragraph under the heading
"-- Resale of New Notes."
The tender by a Holder and the acceptance thereof by NEHC will constitute
an agreement between such Holder and NEHC in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF 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. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose 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.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the 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 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Notes listed therein, such 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 Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by NEHC, evidence
satisfactory to NEHC of their authority to so act must be submitted with the
Letter of Transmittal.
NEHC understands that each Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Notes at the Depository for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the Depository's system may make book-entry delivery of the Notes
by causing the Depository to transfer such Notes into the relevant Exchange
Agent's account with respect to the Notes in accordance with the Depository's
procedures for such transfer. Although delivery of the Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Depository,
an appropriate Letter of Transmittal properly completed and duly executed with
any required signature guarantee and all other required documents must in each
case be transmitted to and received or confirmed by the Exchange Agent at its
address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the
Depository does not constitute delivery to the Exchange Agent.
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All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by NEHC in its sole discretion, which determination will be final and
binding. NEHC reserves the absolute right to reject any and all Notes not
properly tendered or any Notes NEHC's acceptance of which would, in the opinion
of counsel for NEHC, be unlawful. NEHC also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Notes. NEHC'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 Notes must be cured within such time as NEHC shall determine. Although NEHC
intends to notify Holders of defects or irregularities with respect to tenders
of Notes, none of NEHC, the Exchange Agents or any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that 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.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose New Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the relevant Exchange Agent or
(iii) who cannot complete the procedures for book-entry transfer, 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 Notes and the principal amount of 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), together with the certificates(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Depository) 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), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Depository) and all
other documents 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 Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of 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 Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Depository to be
credited), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer
25
<PAGE> 28
sufficient to have the Trustee with respect to the Notes register the transfer
of such Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time or receipt) of such notices will be determined by NEHC, whose
determination shall be final and binding on all parties. Any 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 Notes so
withdrawn are validly retendered. Any Notes which have been tendered but which
are not accepted for exchange will be returned to the Holder thereof without
cost to such Holder as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Notes may be retendered
by following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, NEHC shall not be
required to accept for exchange, or to exchange New Notes for, any Notes, and
may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if any law, statute, rule, regulation or
interpretation by the staff of the SEC is proposed, adopted or enacted, which,
in the reasonable judgment of NEHC, might materially impair the ability of NEHC
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to NEHC.
If NEHC determines in its reasonable judgment that any of the conditions
are not satisfied, NEHC may (i) refuse to accept any Notes and return all
tendered Notes to the tendering Holders, (ii) extend the Exchange Offer and
retain all Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of Holders to withdraw such Notes (see
"-- Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, NEHC will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, NEHC will extend the Exchange Offer for a period of five to
ten business days if the Exchange Offer would otherwise expire during such five
to ten business-day period.
EXCHANGE AGENT
State Street Bank & Trust Company will act as Exchange Agent for the
Exchange Offer with respect to the Notes (the "Exchange Agent").
26
<PAGE> 29
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
By Registered or Certified Mail, Overnight Mail or Courier Service or in
Person by Hand:
State Street Bank & Trust Company
777 Main Street, 11th floor
Hartford, CT 06123-0177
Attention: Corporate Trust Administration
By Facsimile:
(860) 986-7920
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by NEHC. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone, facsimile or in person by officers and regular
employees of NEHC and its affiliates.
NEHC has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers or other persons soliciting
acceptances of the Exchange Offer. NEHC, however, will pay the Exchange Agents
reasonable and customary fees for their services and will reimburse them for
their reasonable out-of-pocket expenses in connection therewith and pay other
registration expenses, including fees and expenses of the Trustees, filing fees,
blue sky fees and printing and distribution expenses.
NEHC will pay all transfer taxes, if any, applicable to the exchange of the
Notes pursuant to the Exchange Offer. If, however, certificates representing the
New Notes or the 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 Notes tendered, or if tendered 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 the 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.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Notes,
which is the aggregate principal amount in the case of the Notes, as reflected
in NEHC's accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized in connection with the Exchange
Offer. The expenses of the Exchange Offer will be amortized over the term of the
New Notes.
RESALE OF NEW NOTES
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to third parties, NEHC believes that New Notes issued pursuant to
the Exchange Offer in exchange for New Notes may be offered for resale, resold
and otherwise transferred by any Holder of such New Notes (other than any such
Holder which is an "affiliate" of NEHC within the meaning of Rule 405 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 and such Holder does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of such New Notes. Any Holder who tenders in
the Exchange Offer with the intention to participate, or for the purpose of
participating, in a distribution of the New Notes may not rely on the position
of the staff of the SEC enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989) and Morgan Stanley & Co., Incorporated (available
June 5, 1991), or similar no-action letters, but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement
27
<PAGE> 30
containing the selling security holder's information required by Item 507 or 508
of Regulation S-K of the Securities Act, as applicable. Each broker-dealer that
receives New 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, may be a statutory underwriter and must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes.
By tendering in the Exchange Offer, each Holder will represent to NEHC
that, among other things, (i) the New Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such New Notes, whether or not such person is a Holder, (ii) neither
the Holder nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Notes and (iii) the
Holder and such other person acknowledge that if they participate in the
Exchange Offer for the purpose of distributing the New Notes (a) they must, in
the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the New Notes and cannot rely on the no-action letters referenced
above and (b) failure to comply with such requirements in such instance could
result in such Holder incurring liability under the Securities Act for which
such Holder is not indemnified by NEHC. Further, by tendering in the Exchange
Offer, each Holder that may be deemed an "affiliate" (as defined under Rule 405
of the Securities Act) of NEHC will represent to NEHC that such Holder
understands and acknowledges that the New Notes may not be offered for resale,
resold or otherwise transferred by that Holder without registration under the
Securities Act or an exemption therefrom.
As set forth above, affiliates of NEHC are not entitled to rely on the
foregoing interpretations of the staff of the SEC with respect to resales of the
New Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act. In connection with the Note Offering, NEHC
entered into the Registration Rights Agreement pursuant to which NEHC agreed to
file and maintain, subject to certain limitations, a registration statement that
would allow DLJ to engage in market-making transactions with respect to the
Notes or the New Notes. NEHC has agreed to bear all registration expenses
incurred under such agreement, including printing and distribution expenses,
reasonable fees of counsel, blue sky fees and expenses, reasonable fees of
independent accountants in connection with the preparation of comfort letters,
and SEC and the National Association of Securities Dealers, Inc. filing fees and
expenses.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, NEHC will have fulfilled
one of its obligations under the Registration Rights Agreement, and Holders of
Notes who do not tender their Notes generally will not have any further
registration rights under the Registration Rights Agreement or otherwise.
Accordingly, any Holder of Notes that does not exchange that Holder's Notes for
New Notes will continue to hold the untendered Notes and will be entitled to all
the rights and limitations applicable thereto under the Indentures, except to
the extent that such rights or limitations, by their terms, terminate or cease
to have further effectiveness as a result of the Exchange Offer.
The Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Notes may be resold
only (i) to NEHC (upon redemption thereof or otherwise), (ii) pursuant to an
effective registration statement under the Securities Act, (iii) so long as the
Notes are eligible for resale pursuant to Rule 144A, to a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, (iv) outside the United
States to a foreign person pursuant to the exemption from the registration
requirements of the Securities Act provided by Regulation S thereunder, (v)
pursuant to an exemption from registration under the Securities Act provided by
Rule 144 thereunder (if available), or (vi) to an institutional accredited
investor in a transaction exempt from the registration requirements of the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States. See "Risk Factors -- Restrictions on
Transfer."
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept.
28
<PAGE> 31
Holders of the Notes are urged to consult their financial and tax advisors in
making their own decision on what action to take.
NEHC may in the future seek to acquire untendered Notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. NEHC has no present plans to acquire any Notes that are not tendered
in the Exchange Offer or to file a registration statement to permit resales of
any untendered Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders of the Notes (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. Each Holder of a
Note should consult his, her or its own tax advisor as to the particular tax
consequences of exchanging such Holder's Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
The issuance of the New Notes to Holders of the Notes pursuant to the terms
set forth in this Prospectus will not constitute an exchange for federal income
tax purposes. Consequently, no gain or loss would be recognized by Holders of
the Notes upon receipt of the New Notes, and ownership of the New Notes will be
considered a continuation of ownership of the Notes. For purposes of determining
gain or loss upon the subsequent sale or exchange of the New Notes, a Holder's
basis in the New Notes should be the same as such Holder's basis in the Notes
exchanged therefor. A Holder's holding period for the New Notes should include
the Holder's holding period for the Notes exchanged therefor. The issue price,
and other tax characteristics of the New Notes should be identical to the issue
price, and other tax characteristics of the Notes exchanged therefor.
See also "Description of Certain Federal Income Tax Consequences of an
Investment in the New Notes."
THE TRANSACTIONS
In connection with the Acquisition, NEHC: (i) consummated the Note Offering
and (ii) effected the HWPI Transaction. Concurrently, AmeriServe: (i)
consummated the Subordinated Notes Offering; (ii) entered into the New Credit
Facility; (iii) established the Accounts Receivable Program; (iv) received the
Equity Contribution; (v) effected the Preferred Stock Contribution; and (vi)
consummated the Post Contribution. See "Description of Indebtedness" and
"Certain Relationships and Related Party Transactions."
THE ACQUISITION
Pursuant to an Asset Purchase Agreement (together with the related
agreement covering Canadian assets, the "Asset Purchase Agreement"), dated as of
May 23, 1997, by and between NEHC and PepsiCo, which was assigned to the Company
at the Closing, the Company subject to the terms and conditions contained in the
Asset Purchase Agreement, acquired substantially all of the assets and
properties used or held for use by PFS for $830.0 million in cash, subject to
adjustment, and assumed certain liabilities, including post-closing purchase
price adjustments. See note 2 to the unaudited pro forma financial statements of
NEHC.
29
<PAGE> 32
OLD NEHC NOTE REDEMPTION
DLJ Merchant Banking, L.P. and certain affiliates ("DLJMB") beneficially
own 12 1/2% Senior Secured Notes of NEHC (the "Old NEHC Notes"), with an initial
principal amount of $22.0 million. Orkla ASA ("Orkla") also holds Old NEHC
Notes, with an initial principal amount of $8.0 million. The respective accrued
principal and interest of the Old NEHC Notes held by DLJMB and Orkla as of March
29, 1997 is $25.4 million and $9.3 million, respectively.
In connection with the consummation of the Offering, all of the outstanding
Old NEHC Notes were redeemed with a portion of the proceeds of the Offering.
Substantially all of the balance of the proceeds of the Offering were used to
fund a portion of the Equity Contribution.
EQUITY CONTRIBUTION
In connection with the Acquisition, NEHC contributed $130.0 million of cash
to the Company (the "Equity Contribution"). A portion of such funds were be
raised by NEHC through the sale to DLJ Merchant Banking, L.P. II and Affiliates
("DLJMBII") for aggregate consideration of $115.0 million: (i) $60.0 million
initial liquidation preference of 13 1/2% Senior Exchangeable Preferred Stock
(the "Senior Preferred Stock"); (ii) $55.0 million initial liquidation
preference of 15% Junior Exchangeable Preferred Stock (the "Junior Preferred
Stock"); and (iii) warrants (the "New Warrants") to purchase shares of NEHC
Class A Common Stock ("Warrant Shares") with an exercise price of $0.01 per
Warrant Share, representing the right to acquire an aggregate of up to 22.5% of
the Common Stock of NEHC on a fully diluted basis (the "DLJMB Equity
Investment").
The Senior Preferred Stock will mature in 2009 and will pay dividends
quarterly at a rate of 13 1/2% per annum. The first twenty quarterly dividend
payments will be payable in additional shares of Senior Preferred Stock. The
Senior Preferred Stock will rank senior to all classes of Common Stock of NEHC
and each other class of capital stock or series of preferred stock issued by
NEHC, the terms of which specifically provide that such series will rank junior
to the Senior Preferred Stock or which do not specify their rank ("Junior
Securities"), excluding the NEHC 8% Senior Convertible Preferred Stock, which
will rank pari passu with the Senior Preferred Stock.
The Junior Preferred Stock will mature in 2009 and will pay dividends
quarterly at a rate of 15% per annum. The first twenty quarterly dividend
payments will be payable in additional shares of Junior Preferred Stock. The
Junior Preferred Stock will rank junior to the Senior Preferred Stock and senior
to all classes of Common Stock of NEHC and each other class of capital stock or
series of preferred stock issued by NEHC the terms of which specifically provide
that such series will rank junior to the Junior Preferred Stock or which do not
specify their rank, excluding the NEHC 8% Senior Convertible Preferred Stock,
which will rank senior to the Junior Preferred Stock. Holberg will have the
right to at any time prior to the expiration of 180 days after initial issuance
of the Junior Preferred Stock (provided that a binding commitment of Holberg to
do so has been furnished to DLJMB no later than 90 days after such issuance) to
require DLJMB to sell to Holberg 55% of the Junior Preferred Stock, together
with 29 1/3% of the New Warrants, for cash in an amount, at the date of such
sale, equal to the sum of (x) the liquidation preference of such Junior
Preferred Stock on such date plus (y) an amount sufficient to cause the sum of
(x) and (y) to equal a value that yields an internal rate of return of 25% with
respect to the Junior Preferred Stock and Warrants.
DLJMB, Orkla and the Company are also party to an investors agreement
pursuant to which DLJMB has the right to name two directors to the board of NEHC
and the Company and to approve certain actions by NEHC and its subsidiaries. The
investors agreement also provides for certain restrictions on transfer, rights
of first offer, rights to participate in transfers by other parties, preemptive
rights and other customary matters.
THE POST CONTRIBUTION
In connection with the January 1996 purchase of AmeriServ, the Company
acquired a minority interest in Post Holdings Company ("Post Holdings"), which
owned 93.6% of Post. Post is a systems food distributor with three distribution
centers in the western United States. For the fiscal year ending December 28,
1996,
30
<PAGE> 33
Post generated net sales of $119.4 million and EBITDA of $1.9 million. On
November 25, 1996, NEHC: (i) acquired (a) the Company's ownership interest in
Post Holdings, and (b) Daniel W. Crippen's 50% ownership of Post Holdings and
(ii) merged Post Holdings with and into NEHC with NEHC as the surviving entity.
Mr. Crippen is the Company's Chief Operating Officer and was the President of
Post.
In connection with the Acquisition: (i) the remaining 6.4% of the capital
stock outstanding of Post was acquired from the minority stockholder; (ii) a
dividend of $4.7 million was declared to eliminate the intercompany balance
between Post and NEHC; (iii) all of the capital stock of Post was transferred to
AmeriServ Food Company, a wholly-owned subsidiary of the Company; and (iv)
Post's $9.0 million of outstanding indebtedness was refinanced. AmeriServ Food
Company's investment in NEHC preferred stock of $2.5 million was cancelled
(collectively, the "Post Contribution"). See note 2 to the historical financial
statements of NEHC.
PREFERRED STOCK CONTRIBUTION
In connection with the Acquisition, NEHC contributed to the Company an
aggregate principal amount of $45.0 million of outstanding non-convertible
preferred stock of the Company (the "Preferred Stock Contribution"). See
"Capitalization."
HWPI TRANSACTION
HWPI was owned 55% by Holberg and 45% by the Company. In connection with
the Acquisition, NEHC purchased for $1.5 million Holberg's 55% interest in HWPI.
As a result, NEHC owns 100% of the capital stock of HWPI. HWPI's sole operations
consist of the leasing of two distribution centers, located in Omaha, Nebraska
and Waukesha, Wisconsin, to the Company.
31
<PAGE> 34
The following table sets forth the estimated sources and uses of funds in
connection with the Transactions, assuming that the Transactions occurred on
March 29, 1997 (in millions):
<TABLE>
<S> <C>
SOURCES
-------------------------------------------------------------------
NEHC TRANSACTIONS
Senior Discount Notes due 2007..................................... $ 55.0
DLJMB Equity Investment............................................ 115.0
--------
Total sources............................................ $ 170.0
========
AMERISERVE TRANSACTIONS
New Credit Facility(1)
Revolving Credit Facility........................................ $ 0.0
Term Loans....................................................... 205.0
--------
Total.................................................... 205.0
Accounts Receivable Program(2)..................................... 225.0
Senior Subordinated Notes due 2007................................. 500.0
Equity Contribution................................................ 130.0
--------
Total sources............................................ $1,060.0
========
USE
Equity Contribution................................................ $ 130.0
Redemption of Old NEHC Notes....................................... 34.7
HWPI Acquisition................................................... 1.5
Cash for working capital........................................... 1.3
Estimated expenses................................................. 2.5
--------
Total uses............................................... $ 170.0
========
Cash purchase of PFS assets........................................ $ 830.0
Refinance AmeriServe senior debt................................... 124.8
Refinance other debt............................................... 14.8
Cash for working capital........................................... 43.9
Estimated fees and expenses........................................ 46.5
--------
Total uses............................................... $1,060.0
========
</TABLE>
- ---------------
(1) At Closing, the Company entered into a new $355.0 million senior credit
facility (the "New Credit Facility") by and among Bank of America National
Trust and Savings Association ("Bank of America NT&SA"; in such capacity,
the "Administrative Agent"), and DLJ Capital Funding, Inc. (in such
capacity, the documentation agent; and with the Administrative Agent, the
"Agents") and the other Lenders thereto. BancAmerica Securities, Inc.
("BancAmerica Securities") will serve as the syndication agent. At the
Closing the following amounts were drawn under the New Credit Facility:
$205.0 million of term loans (the "Term Loans"), consisting of: (a) $78.1
million Term Loan A, which matures in six years; (b) $42.3 million of Term
Loan B, which matures in seven years; (c) $42.3 million of Term Loan C,
which matures in eight years; and (d) $42.3 million of Term Loan D, which
matures in nine years. See "Description of Indebtedness -- New Credit
Facility." A $150.0 million revolving credit facility (the "Revolving Credit
Facility") is available as part of the New Credit Facility for working
capital and general corporate purposes, including the issuance of letters of
credit, which were $11.1 million at Closing, subject to the achievement of
certain financial ratios and compliance with certain conditions.
(2) At Closing, the Company entered into a $250.0 million Accounts Receivable
Program (the "Accounts Receivable Program"), approximately $225.0 million of
which was funded at Closing. Under the
32
<PAGE> 35
Accounts Receivable Program, the Company established a wholly-owned, special
purpose bankruptcy-remote subsidiary that purchases from the Company, on a
revolving basis, all trade receivables generated by the Company and/or one
or more of its subsidiaries. See "Description of Indebtedness -- Accounts
Receivable Program."
USE OF PROCEEDS
The net proceeds from the sale of the Notes was approximately $52.5 million
(after deducting discounts and commissions and estimated expenses of the
Offering) and, together with proceeds from the DLJMB Equity Contribution, were
used by NEHC to fund the Equity Contribution, redeem the Old NEHC Notes, and
fund the HWPI Acquisition. Any remaining proceeds will be used for general
corporate purposes.
See "The Transactions -- Sources and Uses of Funds."
33
<PAGE> 36
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the consolidated cash and capitalization of
NEHC as of March 29, 1997 and the pro forma consolidated capitalization of NEHC
as of March 29, 1997, adjusted to reflect the Transactions. This table should be
read in conjunction with the historical and unaudited pro forma financial
statements of NEHC and the related notes thereto included elsewhere herein. See
"The Transactions."
<TABLE>
<CAPTION>
AS OF MARCH 29, 1997
--------------------
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
Cash and cash equivalents................................................ $ 4,060 $ 49,417
Long-term debt (including current portion):
Existing credit facility............................................... 133,824 --
Revolving Credit Facility(1)........................................... -- --
Term Loans(1).......................................................... -- 205,000
Capital lease obligation............................................... 12,500 20,249
Senior Discount Notes due 2007......................................... -- 55,000
Senior Subordinated Notes due 2007..................................... -- 500,000
Senior notes........................................................... 27,009 --
Other.................................................................. 5,347 3,569
-------- --------
Total long-term debt........................................... 178,680 783,818
Stockholder's equity:
Preferred.............................................................. 17,350 132,350
Common................................................................. (1,471) (22,011)
-------- --------
Total stockholder's equity..................................... 15,879 110,339
-------- --------
Total capitalization..................................................... $194,559 $ 894,157
======== ========
</TABLE>
- ---------------
(1) At the Closing, the following amounts were drawn under the New Credit
Facility: (a) $78.1 million Term Loan A, which matures in six years; (b)
$42.3 million of Term Loan B, which matures in seven years; (c) $42.3
million of Term Loan C, which matures in eight years; and (d) $42.3 million
of Term Loan D, which matures in nine years. The undrawn amount of $150.0
million under the Revolving Credit Facility is available for working capital
and general corporate purposes, including the issuance of letters of credit
which were $11.1 million at Closing, subject to the achievement of certain
financial ratios and compliance with certain conditions. See "Description of
Indebtedness -- New Credit Facility."
34
<PAGE> 37
SELECTED NEHC HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial data of NEHC at
and for the fiscal years 1992, 1993, 1994, 1995 and 1996 which have been derived
from the audited financial statements of NEHC, and at and for the first quarters
of 1996 and 1997, which have been derived from the unaudited financial
statements of NEHC. The historical financial statements of NEHC for the fiscal
years 1994, 1995 and 1996 were audited by Ernst & Young LLP. The historical data
of NEHC at and for the first quarter of 1996 and 1997 have been derived from,
and should be read in conjunction with, the unaudited financial statements of
NEHC and the related notes thereto, included elsewhere herein. In the opinion of
management, such interim financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to fairly present
the information presented for such periods. The results of operations for the
first quarter of 1997 are not necessarily indicative of the results of
operations to be expected for the full year. The selected financial data set
forth below should be read in conjunction with "The Transactions," "Summary
Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical financial statements of
NEHC and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................... $293,621 $327,606 $358,516 $400,017 $1,389,601 $250,922 $335,311
Gross profit................................ 33,827 35,153 37,914 40,971 140,466 25,738 34,629
Operating expenses.......................... 30,347 32,054 34,488 36,695 122,430 24,013 33,268
-------- -------- -------- -------- ---------- -------- --------
Operating income............................ 3,480 3,099 3,426 4,276 18,036 1,725 1,361
Interest expense............................ (3,404) (2,759) (3,294) (3,936) (16,423) (3,404) (4,735)
Interest income -- Holberg and affiliate.... 293 150 533 749 528 99 85
Minority interest........................... -- -- -- -- (2,345) -- --
-------- -------- -------- -------- ---------- -------- --------
Income (loss) before income taxes,
extraordinary loss, and cumulative effect
of accounting change...................... 369 490 665 1,089 (204) (1,580) (3,289)
Provision (credit) for income taxes......... 223 172 523 583 1,300 (242) (649)
-------- -------- -------- -------- ---------- -------- --------
Income (loss) before extraordinary loss and
cumulative effect of accounting change.... 146 318 142 506 (1,504) (1,338) (2,640)
Extraordinary loss on early extinguishment
of debt................................... -- (613) -- -- -- -- --
Cumulative effect of change in method of
accounting for income taxes............... -- (495) -- -- -- -- --
-------- -------- -------- -------- ---------- -------- --------
Net income (loss)........................... $ 146 $ (790) $ 142 $ 506 $ (1,504) $ (1,338) $ (2,640)
======== ======== ======== ======== ========== ======== ========
OTHER DATA:
EBITDA(1)................................... $ 6,034 $ 6,195 $ 6,710 $ 7,038 $ 27,925 $ 3,402 $ 4,233
Depreciation and amortization............... 2,554 3,096 3,284 2,762 10,372 1,677 2,872
Capital expenditures........................ 3,446 2,205 1,331 2,496 12,701 875 2,346
Net cash provided by (used in):
Operating activities...................... 10,462 4,680 4,276 4,505 (2,189) (4,999) (4,046)
Investing activities...................... (3,352) (6,556) (5,422) (5,574) (99,077) (98,544) (4,837)
Financing activities...................... (6,462) 2,676 490 619 102,915 103,020 10,719
Ratio of earnings to fixed charges(2)....... 1.1x 1.1x 1.1x 1.2x N/A N/A N/A
BALANCE SHEET DATA:
Cash........................................ $ 882 $ 1,682 $ 1,025 $ 575 $ 2,224 $ 51 $ 4,060
Total assets................................ 68,040 75,265 79,218 77,503 314,946 290,904 345,848
Long-term debt, including current portion... 34,065 34,170 32,160 32,779 164,444 151,733 178,680
Total stockholders' equity.................. 10,212 14,779 17,205 10,157 18,519 15,893 15,879
</TABLE>
- ---------------
(1) EBITDA represents operating income plus depreciation, amortization and
excludes one-time non-recurring gains and losses. EBITDA in fiscal 1996
excludes net one-time, non-recurring gains of $0.5 million. EBITDA is
presented because it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies on the basis
of operating performance. EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to operating
35
<PAGE> 38
income as an indicator of operating performance and should not be considered
in isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. NEHC understands
that, while EBITDA is frequently used by securities analysts in the
evaluation of companies, EBITDA, as used herein, is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. See the historical
and unaudited pro forma financial statements of NEHC and the related notes
thereto included elsewhere herein.
(2) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense,
amortization of deferred finance fees and one-third of the rent expense from
operating leases, which management believes is a reasonable approximation of
the interest factor of the rent. For the fiscal year 1996, the first quarter
of 1996 and the first quarter of 1997, earnings were inadequate to cover
fixed charges by $0.2 million, $1.6 million and $3.3 million, respectively.
36
<PAGE> 39
SELECTED PFS HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial data of PFS at
and for the fiscal years 1992, 1993, 1994, 1995 and 1996, and the first quarters
of 1996 and 1997. The selected historical financial data for the fiscal years
1992, 1993, 1994, 1995 and 1996 have been derived from the audited financial
statements of PFS. The historical financial statements of PFS for the fiscal
years 1992, 1993, 1994, 1995 and 1996 were audited by KPMG Peat Marwick LLP. The
historical data of PFS at and for the first quarters of 1996 and 1997 have been
derived from, and should be read in conjunction with, the unaudited financial
statements of PFS and the related notes thereto, which are included elsewhere
herein. In the opinion of management, such interim financial statements reflect
all adjustments (consisting only of normal and recurring adjustments) necessary
to fairly present the information presented for such periods. The results of
operations for the first quarter of 1997 are not necessarily indicative of the
results of operations to be expected for the full year. The selected financial
data set forth below should be read in conjunction with "The Transactions,"
"Summary Selected Financial Data," "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" and the historical financial
statements of PFS and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR(1) FIRST QUARTER(1)
-------------------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $2,799,673 $3,126,745 $3,279,837 $3,458,944 $3,422,086 $766,688 $720,524
Gross profit.......................... 273,858 304,030 326,672 344,777 341,484 77,038 75,682
Operating expenses.................... 199,796 220,834 239,772 265,305 261,741 60,995 61,225
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income...................... 74,062 83,196 86,900 79,472 79,743 16,043 14,457
Interest expense...................... (9,311) (8,780) (12,934) (17,613) (15,566) (3,597) (3,996)
Income before income taxes............ 64,751 74,416 73,966 61,859 64,177 12,446 10,461
Income tax expense.................... 24,624 28,703 28,874 23,844 24,597 4,874 4,155
---------- ---------- ---------- ---------- ---------- -------- --------
Net income............................ $ 40,127 $ 45,713 $ 45,092 $ 38,015 $ 39,580 $ 7,572 $ 6,306
========== ========== ========== ========== ========== ======== ========
OTHER DATA:
EBITDA(2)............................. $ 87,264 $ 96,872 $ 103,953 $ 98,236 $ 99,573 $ 20,748 $ 19,363
Depreciation and amortization......... 13,202 13,676 17,053 18,764 19,830 4,705 4,906
Capital expenditures.................. 16,246 24,927 21,310 25,245 28,771 7,193 6,212
Ratio of earnings to fixed
charges(3).......................... 5.5x 6.1x 5.2x 3.8x 4.1x 3.7x 3.1x
BALANCE SHEET DATA:
Cash.................................. $ (441) $ 80 $ 174 $ 203 $ 1,625 $ 539 $ (176)
Total assets.......................... 401,168 462,042 479,799 516,288 478,921 492,343 489,802
Long-term debt, including current
portion............................. -- -- -- -- -- -- --
Divisional equity..................... 77,997 100,146 85,707 88,579 93,405 90,567 89,941
</TABLE>
- ---------------
(1) PFS had a 52-53 week fiscal year ending on the last Wednesday in December.
Each fiscal year had 52 weeks, except 1994 contained 53 weeks. Each quarter
presented was 12 weeks.
(2) EBITDA represents operating income plus depreciation, amortization and
excludes one-time non-recurring gains and losses. EBITDA is presented
because it is a widely accepted financial indicator used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance. EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to operating income
as an indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. See the historical
financial statements of PFS and the related notes thereto included elsewhere
herein.
(3) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense,
amortization of deferred finance fees and one-third of the rent expense from
operating leases, which management believes is a reasonable approximation of
the interest factor of the rent.
37
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
AmeriServe is North America's largest systems foodservice distributor
specializing in distribution to chain restaurants, the fastest growing segment
of the domestic restaurant industry. The Company serves over 30 different
restaurant chains and over 26,500 restaurant locations in North America. The
Company has long-standing relationships with such leading restaurant concepts as
Pizza Hut, Taco Bell, KFC, Wendy's, Arby's, Burger King, Dairy Queen, Subway and
Applebee's. Holberg was formed in 1986 to acquire and manage foodservice
distribution businesses. Management believes the Company's history of
successfully identifying and integrating acquisitions helped the Company achieve
its current market position.
Acquisitions prior to the Acquisition of PFS consisted of:
- The acquisition in December 1986 of NEBCO, a regional systems distributor
based in Omaha, Nebraska for $6.0 million. NEBCO had annual sales of
approximately $60 million at the time of such acquisition.
- The acquisition in January 1990 of Evans, a regional systems distributor
based in Waukesha, Wisconsin for $33.9 million. Evans had annual sales of
approximately $115 million at the time of such acquisition.
- The acquisition in December 1990 of L.L. Distribution Systems Inc., a
regional systems distributor based in Plymouth, Minnesota for $10.0
million. L.L. Distribution Systems Inc. had annual sales of approximately
$50 million at the time of such acquisition.
- The acquisition in March 1991 of Condon Supply Company, a regional
systems distributor based in St. Cloud, Minnesota for $3.4 million.
Condon Supply Company had annual sales of approximately $15 million at
the time of such acquisition.
- The acquisition in January 1996 of AmeriServ, a wholesale distributor of
food and other supply items based in Dallas, Texas for a purchase price
of $92.9 million. AmeriServ had annual sales of approximately $940
million at the time of such acquisition.
- The acquisition of Chicago Consolidated Corporation, an operator of
redistribution facilities for dry goods based in Chicago, Illinois for
approximately $2.0 million.
Primarily as a result of these acquisitions, NEHC's net sales increased
from $277.9 million in 1991 to $1.4 billion in 1996. In May 1997, in furtherance
of its growth strategy, the Company entered into an agreement to acquire PFS,
subject to certain conditions. See "The Transactions."
RESULTS OF OPERATIONS OF NEHC
The following financial information presents certain historical financial
information of NEHC, expressed as a percentage of net sales, for the fiscal
years 1994, 1995 and 1996 and for the first quarters of 1996 and 1997.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 10.6 10.2 10.1 10.3 10.3
EBITDA............................................. 1.9 1.8 2.0 1.4 1.3
Operating income................................... 1.0 1.1 1.3 0.7 0.4
</TABLE>
38
<PAGE> 41
First Quarter of 1997 Compared to First Quarter of 1996
AmeriServ was acquired on January 26, 1996. Therefore, the first quarter of
1996 includes only nine weeks of operations related to the acquisition of
AmeriServ.
Net Sales. Net sales increased by $84.4 million, or 33.6%, during the
first quarter of 1997 as compared to the first quarter of 1996. The pro forma
effect of the AmeriServ acquisition accounted for $63.3 million, or 75.0%, of
such increase, and increased account penetration and new store openings
accounted for the remaining $21.1 million, or 25.0%, of such increase. The
increased account penetration in new store openings was principally a result of
successful marketing of the Company's service capabilities and attractive
pricing.
Gross Profit. Gross profit increased by $8.9 million, or 34.5%, during the
first quarter of 1997 as compared to the first quarter of 1996. The increase was
due to the pro forma effect of the AmeriServ acquisition ($6.1 million) and the
increase in sales ($2.8 million). Gross margin remained constant at 10.3% during
the first quarter of 1997 as compared to the first quarter of 1996.
EBITDA. EBITDA increased by $0.8 million, or 24.4%, during the first
quarter of 1997 as compared to the first quarter of 1996. The increase was a
result of the increased gross margin, offset by increased operating costs that
were primarily due to costs related to preparation for the commencement of
service to Arby's. EBITDA margin decreased from 1.4% during the first quarter of
1996 as compared to 1.3% during the first quarter of 1997.
Operating Income. Operating income decreased by $0.4 million, or 21.1%,
during the first quarter of 1997 as compared to the first quarter of 1996. The
decrease was due to increased (i) depreciation resulting from capital projects
and capital expenditures associated with the integration of AmeriServ and (ii)
amortization resulting from goodwill associated with the acquisition of
AmeriServ. Operating income margin decreased from 0.7% during the first quarter
of 1996 to 0.4% during the first quarter of 1997.
Fiscal 1996 Compared to Fiscal 1995
Net Sales. Net sales increased by $989.6 million, or 247.4%, during fiscal
1996 as compared to fiscal 1995. This increase was primarily due to the
acquisition of AmeriServ. The increase in net sales was net of certain account
resignations made during fiscal 1996. The Company regularly reviews the
profitability of its account portfolio, and at times decides to discontinue
relationships with accounts deemed not sufficiently profitable for the Company.
Gross Profit. Gross profit increased by $99.5 million, or 242.8%, during
fiscal 1996 as compared to fiscal 1995. The increase was due to the acquisition
of AmeriServ. Gross margin declined slightly from 10.2% during fiscal 1995 as
compared to 10.1% during fiscal 1996, due to the slightly higher cost of
products purchased by customers added through the AmeriServ acquisition.
EBITDA. EBITDA increased by $20.9 million, or 296.8%, during fiscal 1996
as compared to fiscal 1995. The overall increase was primarily due to the
AmeriServ acquisition. The EBITDA margin increased from 1.8% during fiscal 1995
to 2.0% during fiscal 1996, due to decreased operating costs offset by the
slight decline in gross margin.
Operating Income. Operating income increased by $13.8 million, or 321.8%,
during fiscal 1996 as compared to fiscal 1995. The increase was primarily due to
the increased EBITDA discussed above, offset by an increase in depreciation and
amortization of $7.6 million. The increased amortization and depreciation were a
result of the AmeriServ acquisition and the capital expenditures made by the
Company in 1996. Operating margin increased from 1.1% during fiscal 1995 to 1.3%
during fiscal 1996, due to decreased operating costs at Post.
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales increased by $41.5 million, or 11.6%, during fiscal
1995 as compared to fiscal 1994. This increase was primarily due to new store
openings by existing customers, increased account penetration and expanded
geographical coverage.
39
<PAGE> 42
Gross Profit. Gross profit increased by $3.1 million, or 8.1%, during
fiscal 1995 as compared to fiscal 1994. The increase was due to new store
openings by existing customers, increased account penetration and expanded
geographical coverage, offset by lower gross margins. Gross margin decreased
from 10.6% during fiscal 1994 to 10.2% during fiscal 1995, consistent with
decreases in gross margin throughout the industry at that time.
EBITDA. EBITDA increased by $0.3 million, or 4.9%, during fiscal 1995 as
compared to fiscal 1994. The increase was primarily due to increased gross
profit dollars and lower operating expenses. EBITDA margin decreased from 1.9%
during fiscal 1994 to 1.8% during fiscal 1995 due to the lower gross margin,
offset by a decrease in operating expenses.
Operating Income. Operating income increased by $0.9 million, or 24.8%,
during fiscal 1995 as compared to fiscal 1994. The increase was primarily due to
the $0.3 million increase in EBITDA and a decrease of $0.5 million in
amortization and depreciation expense. As a result, operating income margin
increased from 1.0% during fiscal 1994 to 1.1% during fiscal 1995.
RESULTS OF OPERATIONS OF PFS
The following financial information presents certain historical financial
information of PFS, expressed as a percentage of net sales, for the fiscal years
1994, 1995 and 1996 and for the first quarter of 1996 and 1997.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 10.0 10.0 10.0 10.0 10.5
EBITDA............................................. 3.2 2.8 2.9 2.7 2.7
Operating income................................... 2.6 2.3 2.3 2.1 2.0
</TABLE>
First Quarter 1997 Compared to First Quarter 1996
Net Sales. PFS net sales of $720.5 million declined by $46.2 million, or
6.0%, during the first quarter of 1997 as compared to the first quarter of 1996,
primarily due to higher volumes in the first quarter of 1996 related to sales of
promotional items and lower store volumes in the current period, offset slightly
by an increased market share in the first quarter of 1997.
Gross Profit. Gross profit decreased by $1.4 million, or 1.8%, during the
first quarter of 1997 as compared to the first quarter of 1996, due to the
decrease in revenue during the first quarter of 1997. Gross margin increased
from 10.0% during the first quarter of 1996 to 10.5% during the first quarter of
1997, due to a shift in sales to higher margin products.
EBITDA. EBITDA decreased by $1.4 million, or 6.7%, during the first
quarter of 1997 as compared to the first quarter of 1996, due to the decrease in
revenue during the first quarter of 1997, as well as the impact of both higher
general and administrative expenses for fees incurred to implement a new
computer system and interest charges incurred to prepay a guaranteed cost
casualty program. EBITDA margin remained constant at 2.7% during the first
quarter of 1996 as compared to the first quarter of 1997.
Operating Income. Operating income declined by $1.6 million, or 9.9%,
during the first quarter of 1997 as compared to the first quarter of 1996. The
decrease was due to the revenue shortfall and higher expenses as noted above.
Depreciation expense increased slightly due to the impact of center expansions
completed during the first quarter of 1996. Operating income margin decreased
from 2.1% during the first quarter of 1996 to 2.0% during the first quarter of
1997, due to the lower EBITDA margin and the increased depreciation.
Fiscal 1996 Compared to Fiscal 1995
Net Sales. Net sales decreased by $36.9 million, or 1.1%, during fiscal
1996 as compared to fiscal 1995. This decrease was due to the impact of soft
sales in the equipment segment, which declined by $24.7 million
40
<PAGE> 43
from fiscal 1995. Food and supply revenues declined by $12.2 million during
fiscal 1996 as compared to fiscal 1995, due to soft volumes in our customer
base, offset slightly by increased market share.
Gross Profit. Gross profit decreased by $3.3 million, or 1.0%, during
fiscal 1996 as compared to fiscal 1995, due to the decrease in revenue during
fiscal 1996. Gross margin was consistent with prior year results during fiscal
1996.
EBITDA. EBITDA increased by $1.3 million, or 1.4%, during fiscal 1996 as
compared to fiscal 1995. A favorable performance in distribution, general and
administrative expenses of $2.4 million during fiscal 1995, due to savings
generated from an operations restructuring performed during fiscal 1995 and the
impact of higher bad debt expense during fiscal 1995, contributed to the
increase. These items were partially offset by the gross margin decline
described above. EBITDA margin increased from 2.8% during fiscal 1995 to 2.9%
during fiscal 1996, due to the lower operating expenses.
Operating Income. Operating income increased by $0.3 million, or 0.3%,
during fiscal 1996 as compared to fiscal 1995. This increase was primarily due
to favorable performance in distribution, general and administrative expenses
and other income, largely offset by a decline in gross margin and increased
depreciation expense due to several distribution center expansions and the
relocation of a facility in Southern California. Operating income margin during
fiscal 1996 was consistent with the prior year's margin of 2.3%.
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales increased by $179.1 million, or 5.5%, during fiscal
1995 as compared to fiscal 1994, due to an increase in the number of units
served by an average of almost 1,000 stores, as well as increased product costs.
Strong food and supply sales were offset by soft sales in the equipment segment.
Gross Profit. Gross profit increased by $18.1 million, or 5.5%, during
fiscal 1995 as compared to fiscal 1994, due to the increase in revenue during
fiscal 1995. Gross margin was consistent with prior year results during fiscal
1995.
EBITDA. EBITDA decreased by $5.7 million, or 5.5%, during fiscal 1995 as
compared to fiscal 1994, despite a strong revenue performance, reflecting
increased bad debt expense and reduced leverage on distribution expense due to a
field restructuring during fiscal 1995. EBITDA margin decreased from 3.2% during
fiscal 1994, to 2.8% during fiscal 1995, due to the increased operating
expenses.
Operating Income. Operating income decreased by $7.4 million, or 8.5%,
during fiscal 1995 as compared to fiscal 1994, due to increased distribution,
general and administrative expenses. Depreciation and amortization increased
during fiscal 1995 as compared to fiscal 1994, due to the relocation of a
distribution center and several center expansions. Operating income margin
decreased from 2.6% during fiscal 1994 to 2.3% during fiscal 1995, as a result
of the increased operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Historical
NEHC had $35.9 million of working capital at March 29, 1997 as compared to
$25.8 million at the end of fiscal 1996. The increase of $10.1 million was
primarily due to increased receivables of $6.1 million, increased inventory of
$17.2 million and decreased accrued liabilities of $7.8 million, offset by
increased accounts payable of $27.1 million. The changes in working capital were
due to the increased business needs of the second quarter versus the first
quarter and preparation for the start of service to Arby's.
NEHC had $25.8 million of working capital at December 28, 1996 compared to
$10.5 million of working capital at December 30, 1995. The increase was due to
the working capital required to service the customer base of AmeriServ, which
was acquired on January 25, 1996.
The Company had $10.5 million of working capital at December 30, 1995 as
compared to $10.9 million of working capital at December 31, 1994. The decrease
was due to an increase in accounts payable.
41
<PAGE> 44
During the first quarter of 1997, net cash used in operating activities was
$4.0 million. Net loss was $2.6 million and depreciation and amortization was
$2.9 million. Net cash used in investing activities was $4.8 million. Capital
expenditures were $2.3 million. Net cash provided by financing activities was
$10.7 million.
During the first quarter of 1996, net cash used in operating activities was
$5.0 million. Net loss was $1.3 million and depreciation and amortization was
$1.7 million. Net cash used in investing activities was $98.5 million. Capital
expenditures were $0.9 million. Net cash provided by financing activities was
$103.0 million.
During fiscal 1996, net cash used in operating activities was $2.2 million.
Net loss was $1.5 million and depreciation and amortization was $10.4 million.
Net cash used in investing activities was $99.1 million principally to purchase
AmeriServ. Capital expenditures were $12.7 million. Net cash provided by
financing activities was $102.9 million.
During fiscal 1995, net cash provided by operating activities was $4.5
million. Net income was $0.5 million and depreciation and amortization was $2.8
million. Net cash used in investing activities was $5.6 million. Capital
expenditures were $2.5 million. Net cash provided by financing activities was
$0.6 million.
During fiscal 1994, net cash provided by operating activities was $4.3
million. Net income was $0.1 million and depreciation and amortization was $3.3
million. Net cash used in investing activities was $5.4 million. Capital
expenditures were $1.3 million. Net cash provided by financing activities was
$0.5 million.
Pro Forma
After the Transactions, NEHC's primary capital requirements, on a pro forma
basis, will be for debt service, working capital and capital expenditures. NEHC
believes that cash flow from operating activities, cash and cash equivalents and
borrowings under the New Credit Facility will be adequate to meet NEHC's
short-term and long-term liquidity requirements prior to the maturity of its
long-term indebtedness, although no assurance can be given in this regard. Under
the New Credit Facility, the Revolving Credit Facility will provide $150 million
of revolving credit availability, of which $138.9 million will be available
(after reductions of $11.1 million of letters of credit) for draw after Closing
subject to customary covenants. In addition, the Company may increase the
Accounts Receivable Program, further improving liquidity, although no assurance
can be given that the Receivables will be sufficient to increase the Accounts
Receivable Program. See "Risk Factors -- Substantial Leverage and Debt Service."
The Company estimates that capital expenditures for fiscal 1997 will be
approximately $35 million, which includes maintenance capital expenditures and
various planned and potential projects designed to increase efficiencies and
enhance the Company's competitiveness and profitability. Specifically, such
capital expenditures include the planned distribution center consolidation,
modification and expansion of certain distribution centers, integration and
upgrade of MIS and other general capital improvements.
SEASONALITY AND INFLATION
Historically, AmeriServe's sales and operating results have reflected
seasonal variations. The Company experiences lower net sales and income from
operations in the first and fourth quarters, with the effects being more
pronounced in the first quarter. Additionally, the effect of these seasonal
variations are more pronounced in regions where winter weather is generally more
inclement.
Inflation has not had a significant impact on the Company's operations.
Food price deflation could adversely affect the Company's profitability as a
significant portion of the Company's sales are at prices based on product cost
plus a percentage markup. The Company has not been adversely affected by food
price deflation in recent years.
42
<PAGE> 45
ENVIRONMENTAL MATTERS
Under applicable environmental laws, NEHC may be responsible for
remediation of environmental conditions and may be subject to associated
liabilities (including liabilities resulting from lawsuits brought by private
litigants) relating to its distribution centers and the land on which its
distribution centers are situated, regardless of whether NEHC leases or owns the
stores or land in question and regardless of whether such environmental
conditions were created by NEHC or by a prior owner or tenant.
NEHC believes it currently conducts its business, and in the past has
conducted its business, in substantial compliance with applicable environmental
laws and regulations. In addition, compliance with federal, state and local laws
enacted for protection of the environment has had no material effect on NEHC.
However, there can be no assurance that environmental conditions relating to
prior, existing or future distribution centers or distribution center sites will
not have a material adverse effect on NEHC.
In connection with the Acquisition, NEHC reviewed existing reports and
retained environmental consultants to conduct an environmental audit of PFS's
operations in order to identify conditions that could have material adverse
effects on NEHC. NEHC is in the process of obtaining final reports on the
results of such audit with regard to PFS and does not believe such reports will
reveal any environmental matter that is likely to have a material adverse effect
on NEHC.
43
<PAGE> 46
THE BUSINESS
AmeriServe is North America's largest systems foodservice distributor
specializing in distribution to chain restaurants, the fastest growing segment
of the domestic restaurant industry. The Company is the primary supplier to its
customers of a wide variety of items, including fresh and frozen meat and
poultry, seafood, frozen foods, canned and dry goods, fresh and pre-processed
produce, beverages, dairy products, paper goods, cleaning supplies and
equipment. The Company serves over 30 different restaurant chains and over
26,500 restaurant locations in North America. The Company has had long-standing
relationships with such leading restaurant concepts as Pizza Hut, Taco Bell,
KFC, Wendy's, Burger King, Dairy Queen, Subway and Applebee's. The Company's
strategy is to capitalize on its market leading position, compelling industry
trends and management's extensive experience to: (i) pursue profitable internal
and external growth opportunities; (ii) capitalize on its nationwide network of
distribution centers to increase customer density and regional market
penetration; (iii) continue to provide low cost, superior customer service; and
(iv) maximize operating leverage by pursuing selective acquisitions within the
fragmented foodservice distribution industry. For the 12 months ended March 29,
1997, the Company generated pro forma net sales and Adjusted EBITDA of $4.8
billion and $145.2 million, respectively.
The Company has achieved a record of strong growth in net sales and EBITDA
by successfully implementing this strategy. From 1992 to 1996, exclusive of PFS,
the Company's net sales increased from $293.6 million to $1.3 billion,
representing a CAGR of 44.5%. During the same period, the Company's EBITDA,
exclusive of PFS, increased from $6.0 million to $26.0 million, representing a
CAGR of 44.1%. The Company believes it is well positioned to continue to expand
its presence in the systems foodservice distribution industry as a result of its
reputation for providing superior customer service as well as its ability to
provide low cost, efficient services. The Company believes that it was primarily
as a result of these factors that in January 1997 it was awarded a three-year
exclusive contract effective April 1997 to provide foodservice distribution to
approximately 2,600 Arby's restaurants. The Company estimates that this
contract, which management believes represents the single largest customer
migration in the systems foodservice distribution industry, will result in the
addition of approximately $325 million of net sales in the first 12 months of
such contract.
On May 23, 1997, in furtherance of its strategy, NEHC entered into an
agreement to acquire PFS, the foodservice distribution business of PepsiCo.
Prior to the Acquisition, PFS was North America's second largest systems
foodservice distributor, serving over 17,000 restaurants in the Pizza Hut, Taco
Bell and KFC restaurant systems. The Company expects to realize significant
benefits from the Acquisition, including: (i) enhanced customer and concept
diversification; (ii) increased customer density; (iii) broadened national and
international presence; and (iv) substantial cost savings and economies of
scale. In addition, in connection with the Acquisition, the Company has entered
into the Distribution Agreement, whereby it will be the exclusive distributor of
selected products for five years to the approximately 9,800 Pizza Hut, Taco Bell
and KFC restaurants in the continental United States owned by PepsiCo and
previously serviced by PFS. These restaurants accounted for approximately 68% of
PFS's 1996 net sales and 44% of the Company's 1996 pro forma net sales after
giving effect to the Arby's contract.
The Company believes it is well positioned to capitalize on the attractive
characteristics of the chain restaurant segment of the foodservice distribution
industry, which include: (i) the high growth rate of the segment, which
experienced an approximately 7.4% net sales CAGR from 1985 to 1995; (ii) the
uniformity of product offerings and consistency of demand by chain restaurant
customers; (iii) the increased focus by chain restaurants on foodservice
distributors that can provide consistent quality and reliable service on a
nationwide basis to maintain the chain's uniform standards; and (iv) the
fragmented nature of the industry, which includes over 3,000 foodservice
distribution companies. As the largest systems foodservice distributor serving
chain restaurants, the Company believes it is better positioned than its
competitors to offer consistent quality, reliable service and value on a
national scale in order to accommodate the growth of each customer.
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<PAGE> 47
FOODSERVICE DISTRIBUTION INDUSTRY
Generally
The foodservice distribution business involves the purchasing, receiving,
warehousing, marketing, selecting, loading and transportation of fresh and
frozen meat and poultry, seafood, frozen foods, canned and dry goods, fresh and
pre-processed produce, beverages, dairy products, paper goods, cleaning
supplies, equipment and other supplies from manufacturers and vendors to a broad
range of enterprises, including restaurants, cafeterias, nursing homes,
hospitals, other health care facilities and schools (but generally does not
include supermarkets and other retail grocery stores). The United States
foodservice distribution industry was estimated to generate $123 billion in
sales in 1996.
Within the foodservice distribution industry, there are two primary types
of distributors: broadline foodservice distributors and specialist foodservice
distributors, such as the Company. Broadline foodservice distributors service a
wide variety of customers including both independent and chain restaurants,
schools, cafeterias and hospitals. Broadline distributors may purchase and
inventory as many as 25,000 different food and food-related items. Customers
utilizing broadline foodservice distributors typically purchase inventory from
several distributors. Specialist foodservice distributors may be segregated into
three categories: product specialists, which distribute a limited number of
products (such as produce or meat); market specialists, which distribute to one
type of restaurant (such as Mexican); and systems specialists, which focus on
one type of customer (such as chain restaurants or health care facilities).
Systems specialists, such as the Company, typically serve as a single source of
supply for their customers. In addition, chain restaurant foodservice
distributors are less vulnerable to customer migrations because much of their
inventory is proprietary to the restaurant concept. Also, broadline foodservice
distributors generally rely on sales representatives who must call on customers
regularly. Systems' distributors, however, regularly process orders
electronically without the need for a sales representative's involvement.
Systems Specialty -- Chain Restaurants
The Company operates as a systems distributor that specializes in servicing
chain restaurants. The chain restaurant segment represents a significant portion
of the foodservice distribution industry, with 1996 industry sales in this
segment estimated by NEHC to be approximately $103 billion at the retail level
and approximately $44 billion at the distributor level. In addition, retail
sales in this segment are estimated to have grown at a CAGR of approximately
7.4% from 1985 to 1995, reflecting both the growth of existing chain restaurants
and the introduction of new chain restaurant concepts. The chain restaurant
market at the retail level is projected to grow from $103 billion in 1996 to
$162 billion by 2005, representing a ten-year inflation adjusted CAGR of
approximately 5%.
NEHC believes a significant factor influencing growth in the systems
distribution market share segment is the ability of the systems distributor to
provide consistently high quality and reliable distribution services at
competitive prices, which has resulted in customers' forming long-term
relationships with their systems distributor in order to tailor specific
programs that meet the particular needs of the customer while creating operating
and cost efficiencies for both the customer and the systems distributor.
NEHC believes that systems distributors are better able to service chain
restaurants than broadline distributors because NEHC believes systems
distributors are often able to offer their customers a higher quality of service
at a lower cost. Given the uniformity of product offerings and the consistency
of demand of chain restaurants, a systems distributor has the opportunity to
reduce its overall costs and consequently those of its customers through
purchasing and holding fewer SKUs in inventory than a broadline distributor.
This reduces both the inbound and outbound freight costs through higher volumes
and larger drop sizes and provides more efficient and reliable distribution
schedules, thereby reducing labor costs of both the systems distributor and its
customer. In addition, systems distributors generally require a smaller sales
force than broadline distributors. NEHC believes that the uniformity of product
offerings, frequency of deliveries and magnitude of volumes allow a systems
distributor to chain restaurants to significantly improve net asset turnover as
compared to a broadline distributor. In addition, management believes that the
larger systems distributors have the volume and scale to offer chain restaurants
an opportunity to further reduce their costs
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<PAGE> 48
through value-added services, such as procurement of nonproprietary items and
in-bound freight logistics management. In addition, larger systems distributors
can invest in technology and business processes, such as electronic order entry,
to reduce the cost of distributing to the restaurants.
NEHC believes that the Company has the leading market share in the chain
restaurant foodservice distribution segment. The foodservice distribution
industry remains highly fragmented and continues to experience significant
consolidation. The number of foodservice distributors has decreased from
approximately 3,600 in 1985 to approximately 3,000 in 1997, with a significant
increase in the market shares of the largest distributors. NEHC anticipates that
further consolidation may take place in this segment and intends that the
Company will be a leading participant in any such further consolidation.
BUSINESS STRATEGY
The Company's objective is to continue to grow net sales and EBITDA by
implementing the following key elements of its business strategy:
- Continue to Pursue Internal and External Growth Opportunities. The
Company intends to continue to grow through a combination of the
development of new business from existing customers, the addition of new
chains, international expansion and selective acquisitions.
Growth From Existing Chains. As the primary foodservice distributor to
most of its customers, the Company expects to benefit from the continued growth
of the domestic chain restaurant industry, the fastest growing sector of the
restaurant industry. From 1985 to 1995, the chain restaurant segment experienced
an approximately 7.4% net sales CAGR, which exceeds the estimated 3.0% CAGR
experienced by the overall restaurant industry. The Company expects to realize
growth from its existing base of customers and concepts primarily due to: (i)
increased traffic within existing restaurants; (ii) the addition of new product
lines; (iii) new restaurant development and restaurant acquisitions by existing
customers; and (iv) the addition of new customers within concepts currently
serviced by the Company.
Growth Through Addition of New Chains. The Company continually monitors
the marketplace for opportunities to expand its portfolio of customers and
concepts. The Company targets (i) chains operating in geographic areas where the
Company could benefit from increased customer density, further enhancing its
operating leverage, and (ii) concepts that could benefit from the Company's
national presence and superior customer service. In April 1997, the Company
began operating under a recently awarded three-year exclusive contract to
provide foodservice distribution to over 2,600 Arby's restaurants nationwide.
The Company estimates that this contract, which management believes represents
the single largest customer migration in the systems foodservice distribution
industry, will result in the addition of approximately $325 million of net sales
in the first 12 months of such contract. In addition, the Company plans to
pursue additional export opportunities and further expand its operations in
international markets. After giving effect to the Acquisition, the Company
exports products from its distribution centers in the United States to
approximately 65 foreign countries.
Pursue Selective Acquisition Opportunities. As North America's largest
systems foodservice distributor serving chain restaurants, the Company believes
it is well positioned to capitalize on the consolidation taking place in the
fragmented foodservice distribution industry. The number of foodservice
distributors has decreased from approximately 3,600 in 1985 to approximately
3,000 in 1997, with a significant increase in the market shares of the largest
distributors. The Company intends to continue to make strategic fold-in
acquisitions in order to augment its operations in existing markets, enhance
customer density and further reduce costs.
- Capitalize on the Benefits of the PFS Acquisition. Management believes
that combining the operations of AmeriServe and PFS will present it with
opportunities to eliminate duplicative costs and realign the Company's
distribution center network to effectively capitalize on economies of
scale and the benefits of higher customer density. Management has
identified approximately $27 million of annual cost savings, which it
believes it can achieve through the elimination of general and
administrative expenses and the consolidation of distribution centers in
certain markets. Following the
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<PAGE> 49
Acquisition, the Company expects to reduce the number of current
distribution centers from 39 to 29. In addition, the five-year
Distribution Agreement will further secure the Company's customer base
and provide for a long-term contract covering approximately 44% of the
Company's pro forma 1996 net sales after giving effect to the Arby's
contract.
- Continue to Maximize Operating Leverage. As the largest systems
foodservice distributor in North America, the Company pursues a low-cost
operating strategy based primarily on achieving economies of scale in
the areas of warehousing, transportation, general and administrative
functions and management information systems. The Company generates
significant operating leverage by utilizing large distribution centers
strategically within each of its geographic markets, enabling it to: (i)
service multiple concepts from the same warehouse; (ii) maximize the
density of restaurants served from each facility; (iii) optimize
delivery routes; (iv) invest in advanced technology, which increases
operational efficiencies and enhances customer service; and (v) manage
inventory more efficiently.
- Continue to Provide Superior Customer Service. The Company believes it
enjoys a reputation for providing consistent, high quality service based
on its customer focus, its commitment to service excellence and the
depth of its management team. The Company has successfully implemented a
decentralized management structure that enables the Company to respond
quickly and flexibly to local customer needs. The Company typically
interacts with its customers on a daily basis, and generally makes
multiple deliveries to each restaurant each week. The Company measures
daily its service performance by continuously monitoring the accuracy
and promptness of deliveries. The Company's advanced computer systems
are linked to many of its customers' locations, enabling customers to
communicate electronically with the Company, thereby reducing the
Company's administrative costs, and enabling it to more efficiently
respond to customers' needs. In addition, the Company's national
presence allows it to provide consistent and reliable service to
national restaurant concepts with geographically diverse locations.
CONCEPT
The Company's customers are generally individual franchisees or
corporate-owned restaurants of chain restaurant concepts. The Company's
customers include over 30 restaurant concepts with over 26,500 restaurant
locations. The corporate owner or franchisor of the restaurant concept generally
reserves the right to designate one or more approved foodservice distributors
within a geographic region, and each franchisee is typically allowed to select
its foodservice distributor from such approved list.
Concept Mix and Concentration
On a pro forma basis after giving effect to the Transactions and the Arby's
contract, the Company's net sales in 1996 to its largest restaurant concepts
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF 1996 NET SALES
--------------------------------
PRO FORMA
CONCEPT AMERISERVE PFS COMBINED
------------------------------------------------------- ---------- --- ---------
<S> <C> <C> <C>
Pizza Hut restaurants(1)............................... 43% 28%
Taco Bell restaurants(2)............................... 43% 28%
KFC restaurants(3)..................................... 7% 14% 12%
Wendy's restaurants.................................... 30% 10%
Arby's restaurants..................................... 17% 6%
Burger King restaurants................................ 14% 5%
</TABLE>
- ---------------
(1) PepsiCo-owned Pizza Hut restaurants accounted for approximately 17.4% of pro
forma combined net sales.
(2) PepsiCo-owned Taco Bell restaurants accounted for approximately 18.3% of pro
forma combined net sales.
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<PAGE> 50
(3) PepsiCo-owned KFC restaurants accounted for approximately 7.9% of pro forma
combined net sales.
On a pro forma basis after giving effect to the Transactions and to the
Arby's contract, aggregate sales to PepsiCo Chains would have represented 44% of
the Company's 1996 net sales. No other single customer accounted for more than
10% of the Company's pro forma net sales in fiscal 1996. See "Risk Factors --
Dependence on Certain Chains and Customers."
Length of Customer Relationships
The Company has enjoyed long and successful relationships with its
customers that, in many cases, date back to the initial start-up of the
concept's operations. The following table illustrates concepts that are serviced
by the Company and the number of years the Company has serviced customers within
these concepts:
<TABLE>
<CAPTION>
YEARS AS A
CONCEPT CUSTOMER
--------------------------------------------------------------- ----------
<S> <C>
Dairy Queen.................................................... 46
Burger King.................................................... 36
KFC............................................................ 26
Wendy's........................................................ 21
Pizza Hut...................................................... 20
Taco Bell...................................................... 18
Applebee's..................................................... 8
Subway......................................................... 6
</TABLE>
The Distribution Agreement entered into with PepsiCo will provide the
Company with exclusive distribution rights for certain restaurant products to
approximately 9,800 Pizza Hut, Taco Bell and KFC restaurants for a five-year
term. Historically, PFS has had great success retaining business with
restaurants formerly owned by PepsiCo that have been refranchised. The
increasing penetration of franchise restaurants and the strong refranchising
retention rate have resulted in an overall net increase in restaurants served
every year. PFS's high level of customer satisfaction is a direct result of
management's emphasis on customer service. PFS's field level management is
responsible for maintaining and reinforcing long-standing partnerships with the
Pizza Hut, Taco Bell and KFC restaurants.
In January 1997, the Company entered into a three-year agreement, which
became effective April 1997, to become the primary supplier to approximately
2,600 Arby's restaurants nationwide. Management believes this to be the single
largest customer migration in the systems foodservice distribution business. The
Company services these restaurants together with three other cooperating
distributors. The cooperating distributors currently serve Arby's restaurants
located outside the Company's pre-Acquisition primary service territory. NEHC
expects the Company to generate at least $325 million of net sales during the
first 12 months of the Distribution Agreement. See "Risk Factors -- Key
Contracts."
OPERATIONS AND DISTRIBUTION
The Company's operations generally can be categorized into three business
processes: product replenishment, product storage and order fulfillment. Product
replenishment involves the management of logistics from the vendors through the
delivery of products to the Company's distribution centers. Product storage
involves the warehousing and rotation of temperature-controlled inventory at the
distribution centers pending sale to customers. Order fulfillment involves all
activities from customer order placement and selecting and loading through
delivery from the distribution centers to the restaurant location. Supporting
these processes is the Company's nationwide network of distribution centers, its
fleet of approximately 900 tractors and 1,200 trailers and its management
information systems. Substantially all the Company's products are purchased,
stored and delivered in sealed cases, that the Company does not open or alter.
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<PAGE> 51
Product Replenishment
While the Company is responsible for purchasing products to be delivered to
its customers, chain restaurants typically approve the vendors and negotiate the
price for their proprietary products. The Company determines the distribution
centers that will warehouse products for each customer and the quantities in
which such products will be purchased. Order quantities for each product are
systematically determined for each distribution center, taking into account both
recent sales history and projected customer demand. The distribution centers
selected to serve a customer are based on the location of the restaurants to be
serviced.
The Company works with its chain customers in order to optimize
transportation from vendor locations to distribution centers. By utilizing the
collective demand of its customers for inbound transportation, its existing
fleet of trucks, and its expertise in managing transportation, the Company can,
in many instances, offer its customers inbound transportation on a more
economical basis than the vendors that have traditionally provided such
services. NEHC believes the Company can offer its customers lower inbound
transportation costs through (i) the use of the Company's delivery fleet to
backhaul products, and (ii) the consolidation of products from more than one
vendor or for use by more than one customer to increase truckloads and brokering
freight to third-party carriers with whom the Company has negotiated lower
transportation rates.
Product Storage
The Company currently warehouses approximately 1,100 to 5,500 SKUs
(excluding the redistribution and equipment distribution centers) for its
customers at 36 facilities in 30 metropolitan areas. Upon receipt of the product
at the distribution centers, the product is inspected and stored in pallets, in
racks or in bulk in the appropriate temperature-controlled environment. Products
stored at the distribution centers are generally not reserved for a specific
customer. Rather, customer orders are filled from the common inventory at the
relevant distribution center. The Company's computer systems continuously
monitor inventory levels in an effort to maintain optimal levels, taking into
account required service levels, buying opportunities and capital requirements.
Each distribution center contains ambient, refrigerated (including cool docks)
and frozen space, as well as offices for operations, sales and customer service
personnel and a computer network, accessing systems at other distribution
centers and the Company's corporate support centers.
A majority of the Company's distribution centers are between 100,000 to
200,000 square feet with approximately 20% refrigerated storage space, 30%
frozen storage space and 50% dry storage area. The Company uses sophisticated
logistics programs to strategically locate new distribution centers in areas
near key highways with specific consideration given to the proximity of
customers and suppliers. The Company also employs consultants in distribution
center layout and product flow to design the distribution center with the
objective of maximizing product throughput. The Company estimates that each
distribution center can effectively service customers within a 350 mile radius,
although the Company's objective is to service customers within a 150 mile
radius.
Order Fulfillment
The Company places a significant emphasis on providing high quality service
in order fulfillment. By providing high quality service and reliability, NEHC
believes that the Company can reduce the number of reorders and redeliveries,
reducing costs for both the Company and its customers. Each restaurant places
product orders based on recent usage, estimated sales and existing restaurant
inventories. The Company uses its management information systems to continually
update routes and delivery times with each customer in order to lower
fulfillment costs. Product orders are placed with the Company one to three times
a week either through the Company's customer service representatives or through
electronic transmission using specially designed software. Many of the
restaurants served by the Company transmit product orders electronically.
Once ordered by the customer, products are picked and labeled at each
distribution center, and the products are generally placed on a pallet for the
loading of outbound trailers. Delivery routes are scheduled to both fully
utilize the trailer's load capacity and minimize the number of miles driven in
order to exploit the cost benefit of customer density.
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<PAGE> 52
Fleet
The Company operates a fleet of approximately 900 tractors and 1,200
trailers. The Company leases approximately 300 of the tractors from General
Electric Capital Corp. pursuant to full-service leases that include maintenance,
licensing and fuel tax reporting. The Company owns approximately 600 tractors
and approximately 800 trailers. The remaining trailers are leased under similar
full-service leases from a variety of leasing companies. Lease terms average six
years for new tractors and nine years for new trailers.
Most of the Company's vehicles contain onboard computers. The computers
assist in managing fleet operations and provide expense controls, automated
service level data collection and real-time driver feedback, thereby enhancing
the Company's service level to customers. Data from the onboard computers are
loaded into the routing software after each route in order to continually
optimize the route structure. Substantially all of the Company's trailers
contain three temperature-controlled compartments, which allow the Company to
simultaneously deliver frozen food, refrigerated food and dry goods.
Management Information Systems
AmeriServe and PFS currently operate with different computer systems.
AmeriServe utilizes a variety of personal computer and IBM AS/400-based software
applications. PFS also operates with a variety of applications, the core of
which are mainframe-based. Both companies have invested significantly in their
systems, and both consider their systems to be among the leaders in the
industry. Programs in use include various customized and special-purpose
applications, such as warehouse management tools, remote order entry, automated
replenishment, delivery routing, and onboard computers for delivery trucks.
Following the Acquisition, the Company intends to replace its core
applications with software from J.D. Edwards in order to integrate the systems
of AmeriServe and PFS. This conversion process is expected to take 18 to 24
months to complete and will result in all of the Company's distribution centers
operating with the same computer systems and the same operating policies and
practices.
Procurement, Logistics and Re-Distribution
The Company procures a wide range of food, paper and cleaning products for
ultimate distribution to its chain restaurant customers. These products include
fresh and frozen meat and poultry, seafood, frozen foods, canned and dry goods,
fresh and pre-processed produce, beverages, dairy products, paper goods,
cleaning supplies and equipment. The Company is also exclusively responsible for
the inventory management of these items for its customers. The Company also
operates two re-distribution centers for the purpose of purchasing slow-moving
inventory items and consolidating these items into full truckload shipments to
the Company's distribution centers nationally, as well as to customers outside
the Company. The re-distribution division has been approved as a national
consolidation point for Burger King, Dairy Queen, Arby's, KFC, Taco Bell, Pizza
Hut and several other chains. The major benefits of consolidation are: (i)
effective reduction of inbound freight costs; and (ii) increased distributor
inventory turns, providing optimal quantity purchase opportunities and
optimizing the inventory management of both the Company's distribution centers
and the chain customers. The Company also offers re-distribution services to
customers outside of the continental United States.
The Company operates a freight logistics division for the purpose of
achieving the lowest landed costs to its distribution centers through the review
of purchase orders generated at the various distribution centers. The Company
generates freight savings through leveraged purchasing, with key carriers
operating in defined traffic lanes. This division also provides logistical
services to a substantial number of customers outside of the Company on a fee
basis. Current inbound purchase orders controlled by this division exceed 2,500
truckloads monthly. Further, the Company operates a nationally registered common
carrier fleet of temperature-controlled tractor-trailer units. This division
serves as a "core-carrier" to several national food manufacturers and is an
integral part of the Company's inbound freight logistics initiative.
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<PAGE> 53
MARKETING AND CUSTOMER SERVICE
The Company employs national and regional marketing representatives who
service existing customers, as well as focus on developing new customers from
among other restaurant concepts. Additionally, each division President and
certain members of senior management are active in maintaining relationships
with current and potential customers. The Company compensates its sales and
marketing representatives under various compensation plans, which combine a base
pay with an incentive bonus.
The Company's customer service activities are highly customized to the
unique needs of each customer. Each customer has a dedicated account manager who
is responsible for overseeing all of a customer's needs and coordinating the
services provided to such customer. In order to manage problem resolution, the
Company tracks customer calls to ensure that appropriate action and follow-up
occur. The Company's representatives travel frequently to the customer's
restaurant or office for regularly scheduled meetings and key project reviews to
ensure close coordination between the Company and the customer.
A key component of the Company's marketing plan is the use of customized
information systems to improve customer service, and to assist the customer in
the daily operation of its business. The Company utilizes on-line order entry
inventory systems, which permit the Company to simultaneously take orders,
compare the order to previous orders, track and replenish inventory and schedule
the delivery. In addition to placing orders, certain customers may also access
their own accounts, and inventory information, and print copies of order
acknowledgments, invoices and account statements. This electronic data
interchange system provides certain customers with access to the Company's
information systems at their convenience and enables the Company to accept
orders 24 hours a day, seven days a week. The electronic data interchange not
only allows for greater efficiencies, but also produces reduced administrative
expenses and fewer ordering errors. NEHC believes that this system provides
customers with superior value-added services, which strengthens the relationship
between the Company and its customers and creates certain competitive strengths.
COMPETITION
The foodservice distribution industry is highly competitive. Competitors
include other systems distribution companies focused on the chain restaurants
and captive, multi-unit franchisor-owned distribution companies and broadline
foodservice distributors.
The Company competes directly with other systems specialists that target
chain restaurant concepts. The Company's principal competitors are ProSource,
Inc., Sysco Corporation's Sygma division, Marriott Distribution Services Inc.,
Alliant Foodservice Inc. and MBM Corp. The Company also competes with regional
and local distributors in the foodservice industry, principally for business
from franchisee-owned chain restaurants. National and regional chain restaurant
concepts typically receive service from one or more systems distributors.
Distributors are appointed or approved to service these concepts and/or their
franchisees on either a national or regional basis. NEHC believes that
distributors in the foodservice industry compete on the bases of quality,
reliability of service and price. Because a number of the Company's customers
prefer a distributor that is able to service their restaurants on a nationwide
basis, NEHC believes that the Company is in a strong position to retain and
compete for national chain restaurant customers and concepts. NEHC believes that
restaurant management, in general, is reluctant to change distributors or use
multiple distributors if service and prices are satisfactory. Accordingly, the
ability to provide quality service and deliver the products in a timely,
dependable manner is the key to building, as well as maintaining, customer
relationships. NEHC believes the Company has an excellent reputation as a prompt
and reliable systems foodservice distributor with competitive prices.
Opportunities for growth by gaining access to new chains typically occur at
the expense of a competitor and are awarded in a bid or negotiation situation,
in which large blocks of business are awarded to the most efficient distributor.
NEHC believes that a key competitive advantage is continuously pursuing a
strategy of being the low-cost provider of distribution and other value-added
services within the industry. See "Risk Factors -- Competition."
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<PAGE> 54
LITIGATION
From time to time NEHC and/or the Company are involved in litigation
relating to claims arising out of their normal business operations. Neither NEHC
nor the Company is currently engaged in any legal proceedings that are expected,
individually or in the aggregate, to have a material adverse effect on NEHC or
the Company.
REGULATORY MATTERS
NEHC and the Company are subject to a number of federal, state and local
laws, regulations and codes, including those relating to the protection of human
health and the environment, compliance with which has required, and will
continue to require, capital and operating expenditures. NEHC believes that it
and the Company are in compliance, in all material respects, with all such laws,
regulations and codes. Neither NEHC nor the Company, however, is able to predict
the impact of any changes in the requirements or mode of enforcement of these
laws, regulations and codes on their operating results.
EMPLOYEES
NEHC has no paid employees. As of March 27, 1997, after giving effect to
the Acquisition, the Company had approximately 5,100 full-time employees,
approximately 500 of whom were employed in corporate support functions and
approximately 4,600 of whom were warehouse, transportation, sales, and
administrative staff at the distribution centers. As of such date, approximately
275 of the Company's employees were covered by two collective bargaining
agreements. One such collective bargaining agreement, covering approximately 200
employees will expire in January 1998. The other such collective bargaining
agreement, covering approximately 75 employees, will expire at the end of
November 1998. The Company has not experienced any significant labor disputes or
work stoppages and believes that its relationships with its employees are good.
Substantially all full-time employees who are over age 21 and have completed one
year of service with the Company are eligible to participate in the Company's
401(k) plans.
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<PAGE> 55
FACILITIES
NEHC currently operates 39 distribution centers located throughout the
United States and Canada as follows:
<TABLE>
<CAPTION>
AMERISERVE PFS
- ------------------------------------------------- -------------------------------------------------
APPROXIMATE APPROXIMATE
LOCATION SQUARE FEET LEASED/OWNED LOCATION SQUARE FEET LEASED/OWNED
- ----------------------- ----------- ------------ ----------------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Albuquerque, NM........ 65,000 Leased Albany, NY............. 104,000 Leased
Canton, MS............. 80,500 Leased Arlington, TX.......... 105,600 Leased
Charlotte, NC.......... 158,500 Owned Charlotte, NC.......... 91,771 Leased
Denver, CO............. 119,000 Leased Columbus, OH........... 143,903 Leased
Fort Worth, TX......... 113,000 Leased Denver, CO............. 74,360 Leased
Gainesville, FL........ 53,000 Leased Gulfport, MS........... 63,792 Leased
Grand Rapids, MI....... 180,000 Leased Houston, TX............ 69,800 Leased
Hebron, KY............. 124,000 Leased Indianapolis, IN....... 115,200 Leased
Jacksonville, FL....... 119,600 Leased Indianapolis, IN(3).... 180,100 Leased
Lemont, IL(1).......... 105,000 Leased Jonesboro, GA.......... 124,076 Leased
Madison, WI(1)......... 123,000 Leased Lenexa, KS............. 105,600 Leased
Norcross, GA........... 169,900 Owned Manassas, VA........... 100,337 Owned
Omaha, NE.............. 105,000 Owned Memphis, TN............ 70,750 Leased
Orlando, FL(2)......... 268,000 Leased Milwaukee, WI.......... 123,185 Leased
Plymouth, MN........... 104,200 Leased Mississauga, Ontario... 53,487 Leased
Salt Lake City, UT..... 31,000 Leased Mt. Holly, NJ.......... 126,637 Leased
Waukesha, WI(4)........ 196,000 Leased Novi, MI............... 72,830 Leased
Oklahoma City, OK...... 52,500 Leased
Orlando, FL............ 115,240 Leased
Ontario, CA............ 201,454 Leased
Portland, OR........... 81,815 Leased
Stockton, CA........... 105,000 Leased
Tempe, AZ.............. 67,660 Leased
</TABLE>
- ---------------
(1) Re-distribution facilities
(2) Under construction
(3) PFS restaurant equipment distribution center
(4) Capital lease
Within five years of December 31, 1996, two of the Company's distribution
center leases are due to expire. NEHC believes that the Company will be able to
renew expiring leases at reasonable rates in the future. NEHC believes that the
Company's existing distribution centers, together with planned modifications and
expansions, provide sufficient space to support the Company's expected expansion
over the next several years.
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<PAGE> 56
THE ACQUISITION
Pursuant to the Asset Purchase Agreement, which NEHC assigned to the
Company at Closing (with the Canadian agreement being assigned to a Canadian
subsidiary of the Company at Closing), the Company acquired substantially all of
the assets and properties used or held for use by PFS for a price of $830.0
million in cash, subject to adjustment, and assumed certain liabilities.
The Asset Purchase Agreement contains customary representations and
warranties from PepsiCo with respect to the assets and liabilities of PFS.
PepsiCo has agreed to indemnify NEHC and its affiliates, including the Company,
for any loss (i) resulting from any breach of any such representation, warranty
or agreement made by PepsiCo, provided, however, that such indemnity is limited
to cover only losses in excess of $3.0 million in the aggregate; or (ii)
resulting from or arising out of any liability or obligation not expressly
assumed by the Company pursuant to the Asset Purchase Agreement. The Company has
agreed to indemnify PepsiCo and its affiliates for any loss resulting from any
breach of any representation, warranty or agreement made by the Company pursuant
to the Asset Purchase Agreement or the operation of PFS by the Company after the
Closing. PepsiCo has agreed to refrain from actively and directly soliciting any
officer, manager or key employee of the Company without the prior written
consent of the Company for the 12 months following the Closing.
On July 11, 1997, pursuant to the Asset Purchase Agreement, the Company and
its affiliates, on the one hand, and PepsiCo and its affiliates, on the other
hand, authorized Chase Manhattan Bank, N.A., as escrow agent (the "Escrow
Agent"), to deliver all of the documents to be delivered by such party at the
Closing. The Company also delivered the amount due under the escrow agreement
entered into on June 11, 1997. The transactions effected at the Closing were
effected without any further act or instrument of either party.
DISTRIBUTION AGREEMENT
Upon consummation of the Acquisition, the Company was assigned and assumed
the Sales and Distribution Agreement (the "Distribution Agreement") dated as of
May 6, 1997, as amended as of May 29, 1997, by and among PFS and PepsiCo's chain
restaurant businesses (the "PepsiCo Chains"). The Distribution Agreement
provides that the Company will be the exclusive distributor of specified
restaurant products purchased by the Pizza Hut, Taco Bell and KFC restaurants
within the continental United States, which are owned by the PepsiCo Chains as
of the Closing (other than certain specified restaurants), or which are acquired
or built by the PepsiCo Chains during the term of the Distribution Agreement.
The Distribution Agreement will continue to cover restaurants refranchised by
PepsiCo (other than KFC restaurants) for the five-year term. Additionally, the
Distribution Agreement provides that the Company will be an approved distributor
of specified restaurant products sold to all Pizza Hut, Taco Bell and KFC
restaurants, whether franchised or owned by the PepsiCo Chains, in the United
States, Canada or the countries to which PFS currently exports restaurant
products from its distribution centers in the United States. The Distribution
Agreement will be effective from the Closing and through the fifth anniversary
of the Closing, unless renewed or extended by mutual agreement of the parties.
The Distribution Agreement may be terminated at any time (i) by any party in the
event that the other party breaches any material term and such breach remains
unremedied for a period of 30 calendar days after written notice of such breach
from the nonbreaching party, (ii) by the PepsiCo Chains if the Company is in
material breach of the Distribution Agreement for failure to maintain specified
service levels for a specified period, or (iii) by either party in the event
that the other party becomes the subject of a bankruptcy, insolvency or other
similar proceeding. See "Risk Factors -- Key Contracts."
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<PAGE> 57
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of August 1, 1997,
with respect to each person who is an executive officer, a significant employee,
or director of NEHC:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------------- --- ------------------------------------------
<S> <C> <C>
John V. Holten................................. 40 Director, Chairman and Chief Executive
Officer
John R. Evans.................................. 57 Director and Vice Chairman
Raymond E. Marshall............................ 47 Director, President, Chief Operating
Officer and Treasurer
Donald J. Rogers............................... 37 Chief Financial Officer and Vice President
Gunnar E. Klintberg............................ 48 Director
A. Petter Ostberg.............................. 35 Vice President and Secretary
Leif F. Onarheim............................... 62 Director
Peter T. Grauer................................ 51 Director
Benoit Jamar................................... 42 Director
Daniel Crippen................................. 45 Director
</TABLE>
John V. Holten. Mr. Holten has served as Chairman and Chief Executive
Officer of Holberg since its inception in 1986. Mr. Holten was Managing Director
of DnC Capital Corporation, a merchant banking firm in New York City, from 1984
to 1986. Mr. Holten received his M.B.A. from Harvard University in 1982 and he
graduated from the Norwegian School of Economics and Business Administration in
1980.
John R. Evans. Mr. Evans has been in the foodservice distribution industry
for nearly forty years, all of which have been with the Company or its
predecessors. Mr. Evans became President of Evans in 1971, and was named Chief
Executive Officer of the combined company when Evans merged with NEBCO in 1990.
Along with building Evans from its infancy, Mr. Evans has played an active
leadership role in the industry. Mr. Evans obtained his degree from Spencerian
College and serves on the Board of Directors of each of M&I Northern Bank,
Aerial Company, Inc., AFI Inc., and AmeriServe.
Raymond E. Marshall. Mr. Marshall has 27 years of foodservice distribution
experience, including 24 years with the Company or its predecessors. Mr.
Marshall progressed through management positions in virtually all areas of NEBCO
before being named President and Chief Executive Officer in 1980. In 1989, at
the time of the merger between NEBCO and Evans, Mr. Marshall was named President
and Chief Operating Officer of NEBCO EVANS. He took on his new position as
President of AmeriServe in April 1996. Mr. Marshall earned his PMD from Harvard
Business School in 1980 after attending the University of Omaha and serves on
the Board of Directors of each of NEHC, AmeriServe and Independent Distributors
of America ("IDA").
Daniel W. Crippen. Mr. Crippen has spent the last 20 years in the
foodservice distribution business with Post. In addition, Mr. Crippen was
appointed to his present position at AmeriServe in April 1997. He is Chairman of
the Board of Directors of IDA. Mr. Crippen received his B.A. from Augustana
College in Rock Island, Illinois in 1973 and is a certified public accountant.
Donald J. Rogers. Mr. Rogers joined AmeriServe in March 1993 after
spending five years with Holberg. While at Holberg, Mr. Rogers worked closely
with AmeriServe's management on a variety of projects. Before joining Holberg,
Mr. Rogers held financial analyst positions at The Dun & Bradstreet Corporation
and Keypoint Financial Corporation and spent three years in a management
training program at Metropolitan Life Insurance Company. Mr. Rogers earned an
M.B.A. from UCLA Graduate School of Management in 1987 and his B.S. degree from
The Wharton School, University of Pennsylvania in 1982.
Gunnar E. Klintberg. Mr. Klintberg has served as Vice Chairman of Holberg
since its inception in 1986. Mr. Klintberg was a Managing Partner of DnC Capital
Corporation, a merchant banking firm in New York
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<PAGE> 58
City, from 1983 to 1986. From 1975 to 1983, Mr. Klintberg held various
management positions with the Axel Johnson Group, headquartered in Stockholm,
Sweden. Mr. Klintberg headed up the Axel Johnson Group's headquarters in Moscow
from 1976 to 1979 and served as assistant to the President of Axel Johnson
Group's $1 billion operation in the U.S., headquartered in New York City, from
1979 to 1983. Mr. Klintberg received his undergraduate degree from Dartmouth
College in 1972 and a degree in Business Administration and Economics from the
University of Uppsala, Sweden in 1974.
A. Petter Ostberg. Mr. Ostberg joined Holberg in 1994 and was appointed as
Chief Financial Officer in 1997. Prior to joining Holberg, Mr. Ostberg held
various finance positions from 1990 to 1994 with New York Cruise Lines, Inc.,
including Group Vice President, Treasurer and Secretary. Prior to joining New
York Cruise Lines, Inc., Mr. Ostberg was General Manager of Planter Technology
Ltd. in Mountain View, California, and from 1985 to 1987, Mr. Ostberg was a
Financial Analyst with Prudential Securities, Inc. in New York. Mr. Ostberg
received a B.A. in International Relations and Economics from Tufts University
in 1985, and an M.B.A. from Stanford University Graduate School of Business in
1989.
Leif F. Onarheim. Mr. Onarheim is one of Norway's leading industrialists
and for the last 4 years held the position as president of Norway's largest
business school. He is currently Vice Chairman of the Board of the Norwegian
School of Management. In 1996, Mr. Onarheim was elected chairman of NHO, the
country's largest association of business and industry. From 1980 to 1992 Mr.
Onarheim served as CEO of Nora Industries. When Nora merged with Orkla
Borregaard to form the Orkla Group in 1991, Onarheim briefly served as the new
group's Chairman. The Orkla Group is one of Scandinavia's largest branded goods
company with production facilities in the US, Germany, Poland and England. Mr.
Onarheim is a graduate of the Norwegian School of Business and Economics in
Bergen, Norway. He serves as Chairman of the Board of Directors of H. Aschehoug
& Co. publishers, Norwegian Fair, Netcom ASA and Narvesen ASA, Vice Chairman of
Saga Petroleum ASA and is a board member with Wilhelm Wihelmsen Ltd. (shipping).
He has been a director of AmeriServe since 1986 and a director of Holberg since
1997.
Peter T. Grauer. Mr. Grauer has been a Managing Director of DLJ Merchant
Banking, Inc. since September 1992. From April 1989 to September 1992, he was
Co-Chairman of Grauer & Wheat, Inc., an investment firm specializing in
leveraged buyouts. Prior thereto Mr. Grauer was a Senior Vice President of
Donaldson, Lufkin & Jenrette Securities Corporation. Mr. Grauer serves on the
Board of Directors of each of Doane Products Co. and Total Renal Care, Inc.
Benoit Jamar. Mr. Jamar is a Managing Director in the Mergers &
Acquisitions group at Donaldson, Lufkin & Jenrette Securities Corporation. Prior
to joining Donaldson, Lufkin & Jenrette Securities Corporation in 1989, he
worked at Lehman Brothers in its financial restructuring group. Mr. Jamar is a
director of the Company.
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<PAGE> 59
EXECUTIVE COMPENSATION
NEHC has no paid employees. The following table sets forth the information
for 1996 with regard to compensation for services rendered in all capacities to
the Company by the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers"). Information set forth in the table reflects compensation
earned by such individuals for services with the Company or its respective
subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER
ANNUAL ALL OTHER
COMPEN- COMPEN-
FISCAL SALARY BONUS SATION SATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($) ($)(2)
- ---------------------------------------- ------ -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
John V. Holten.......................... 1996 -- -- -- --
Chairman and Chief 1995 -- -- -- --
Executive Officer 1994 -- -- -- --
Raymond E. Marshall..................... 1996 273,793 265,000(3) -- 11,600
President and 1995 212,492 109,220 -- 10,400
Treasurer 1994 202,000 64,000 -- 6,800
Daniel W. Crippen....................... 1996 246,764 265,076 -- 9,659
Chief Operating Officer 1995 202,538 129,464 -- 9,788
1994 202,250 295,284 -- 9,394
Donald J. Rogers........................ 1996 158,529 125,000(3) 33,000 (4) 11,600
Chief Financial Officer 1995 115,671 45,000 33,000 (4) 10,400
and Vice President 1994 106,050 15,000 34,000 (4) 6,800
John R. Evans........................... 1996 263,000 -- -- 4,800
Vice Chairman 1995 262,832 -- -- 4,800
1994 262,600 -- -- 4,800
</TABLE>
The Company will pay an annual management fee to Holberg for management
services. The amount of this fee is not set or allocated with respect to any
particular employee's compensation from Holberg.
- ---------------
(1) The amounts shown in this column include amounts contributed by the Company
to its 401(k) plan under a contribution matching program.
(2) The amounts shown in this column reflect premiums paid by the Company on
behalf of Named Executive Officers for whole life insurance policies and
annuities to which the Named Executive Officers are entitled to the cash
surrender value.
(3) These amounts include discretionary cash bonuses paid by Holberg for
services provided during 1995 in connection with the acquisition of
AmeriServ Food Company.
(4) This amount reflects forgiveness by the Company of a portion of a $100,000
relocation assistance loan.
DIRECTOR COMPENSATION
Directors of NEHC do not receive compensation for serving on NEHC's Board
of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee in fiscal 1996. The
Company intends to form a Compensation Committee in fiscal 1997. The members of
such committee have not yet been determined. During fiscal 1996, no executive
officer of NEHC served as a member of the Compensation Committee of another
entity.
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<PAGE> 60
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Marshall's current employment agreement with the Company provides for a
three year term, scheduled to lapse on Jan. 1, 1998, with default annual
renewals, and an annual base salary of $210,000, which will increase for 1997 to
$285,000 plus an annual bonus to be determined by the Chairman of the Board of
Directors after considering the Company's Reported Operating Profit, plus
participation in any employee benefit plans sponsored by the Company. Mr.
Marshall agrees not to disclose confidential information for so long as such
information remains competitively sensitive. During the term of the employment
agreement and for one year after its termination, Mr. Marshall agrees not to
render services to, or have any ownership interest in, any business which is
competitive with the Company. Mr. Marshall's employment agreement does not
contain any change of control provisions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of NEHC Common Stock by (i) each person known to the Company to own
beneficially more than 5% of any class of NEHC Common Stock, (ii) each director
of the Company, (iii) each Named Executive Officer of the Company and (iv) all
executive officers and directors of the Company, as a group. All information
with respect to beneficial ownership has been furnished to the Company by the
respective stockholders of NEHC. Except as otherwise indicated in the footnotes,
each beneficial owner has the sole power to vote and to dispose of all shares
held by such holder.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OUTSTANDING
- ----------------------------------------- -------------------------------------- -----------
<S> <C> <C>
Nebco Evans Distributors, Inc.
("NED")................................ 6,508 shares of Class A Common Stock 100%(+)
1,733 shares of Class B Common Stock 100%(+)
Orkla.................................... (1)
DLJMB.................................... Warrants to purchase 3,682 shares of
Class A Common Stock 36.1%(++)
Warrants to purchase 981 shares of
Class B Common Stock 36.1%(++)
John V. Holten........................... (2)
Daniel W. Crippen........................ (3)
John R. Evans............................ --
Peter T. Grauer.......................... (4)
Benoit Jamar............................. (4)
Gunnar E. Klintberg...................... (5)
Raymond E. Marshall...................... (6)
Leif F. Onarheim......................... (7)
Donald J. Rogers......................... (8)
</TABLE>
- ---------------
(+) Computed with respect to the currently outstanding shares of Class A and
Class B Common Stock of NEHC, and without taking into account any options
or convertible interests of NEHC.
(++) Computed with respect to the currently outstanding shares of Class A and
Class B Common Stock of NEHC and the warrants held by DLJMB, but without
taking into account any other options or convertible interests of NEHC.
(1) Orkla owns approximately 7% of the outstanding common stock of NED, and has
an additional interest in the common stock of NED of approximately 8%
through certain warrants to purchase such common stock. In addition, Orkla
owns approximately 30% of the outstanding common stock of Holberg (which
itself owns the balance of the common stock of NED not owned directly by
Orkla and has an additional interest in the common stock of NED of
approximately 75% through certain preferred stock convertible
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<PAGE> 61
into common stock), and an additional interest in the common stock of Holberg of
approximately 17% through certain preferred stock convertible into common stock.
The warrant and convertible interests described in this note have been computed
based upon the outstanding common shares of NED and Holberg, without taking
into account any options or convertible interests of NED or Holberg. Orkla
also has certain contractual rights as to NED and NEHC pursuant to an
Amended and Restated Investors Agreement among DLJMB, NEHC, NED, Holberg
and Orkla.
(2) Mr. Holten owns all of the outstanding common stock of the corporate parent
of Holberg, which entity owns approximately 70% of the outstanding common
stock of Holberg, and an additional interest in the common stock of Holberg
of approximately 25% through certain preferred stock convertible into
common stock. As noted above, Holberg owns approximately 93% of the
outstanding NED common stock and has an additional interest through certain
preferred stock convertible into common stock. The convertible interests
described in this note have been computed based upon the outstanding common
shares of Holberg and NED, without taking into account any options or
convertible interests of Holberg or NED.
(3) Mr. Crippen owns shares of a series of convertible preferred stock of NEHC
that, if converted, would result in his ownership of approximately 1.6% of
the outstanding common stock of NEHC, taking into account the actually
outstanding shares and the warrants held by DLJMB.
(4) Messrs. Grauer and Jamar are Managing Directors of DLJ, and may be
considered to have beneficial ownership of the interests of DLJMB in the
Company and NEHC. Messrs. Grauer and Jamar disclaim such beneficial
ownership.
(5) Mr. Klintberg is an officer and director of NED and certain of its
corporate parents, but disclaims beneficial ownership of any of the shares
owned by NED.
(6) Mr. Marshall has an interest of 5% in NED through certain options that have
been granted to him by NED. Such interest has been computed based upon the
outstanding common shares of NED, without taking into account any options
or convertible interests of NED.
(7) Mr. Onarheim has an interest of less than 1% in NED through certain options
that have been granted to him by NED. Such interest has been computed based
upon the outstanding common shares of NED, without taking into account any
options or convertible interests of NED. Mr. Onarheim has also had a long
affiliation with Orkla and acts as Orkla's representative on the Board of
Directors of the Company and NEHC, but disclaims beneficial ownership of
any interests held by Orkla.
(8) Mr. Rogers has an indirect interest of less than 1% in NEHC and the Company
through certain options that have been granted to him as an indirect
corporate shareholder of NEHC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
DLJMB, an affiliate of DLJ, and certain of its affiliates beneficially own
approximately 36.1% of the common stock of NEHC. Peter T. Grauer, a principal of
DLJ, is a member of the Board of Directors of NEHC and the Company; Benoit
Jamar, a principal of DLJ, became a member of the Board of Directors of NEHC and
the Company as of Closing. Further, DLJ Capital Funding, Inc., an affiliate of
DLJ, is acting as documentation agent in connection with the New Credit Facility
for which it is receiving certain customary fees and expenses. In addition, DLJ
received a merger advisory fee of $4.0 million in cash from the Company upon
consummation of the Transactions.
Holberg has received investment banking fees from the Company and its
affiliates in connection with certain prior transactions, and received a $4.0
million merger advisory fee upon consummation of the Transactions. In addition,
it is expected that the Company will pay Holberg a management fee of
approximately $4.0 million annually for 1997 and subsequent years. See
"Management -- Executive Compensation."
The Company leases a warehouse and office facility in Waukesha, Wisconsin
from an affiliated partnership owned by certain former shareholders of an
acquired company, including Mr. John Evans, for approximately $810,000 per year
through May 31, 2008.
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<PAGE> 62
With the January 1996 acquisition of AmeriServ, the Company acquired a
minority interest in Post Holdings, a 93.6% owner of Post. On November 25, 1996
NEHC acquired: (i) the Company's ownership interest in Post Holdings; and (ii)
Daniel W. Crippen's 50% ownership of Post Holdings. In connection with this
transaction, Mr. Crippen, the Company's Chief Operating Officer, received $4.4
million ($2.0 million cash and $2.4 million in NEHC 8% Senior Convertible
Preferred Stock) in exchange for his 50% equity interest in Post Holdings.
The Company participates in a self-insured group casualty (including
workers compensation and auto liability) risk program with an affiliate, which
determines the insurance expenses to be allocated to the Company. The Company
and Holberg also periodically engage in bi-lateral interest-bearing loans and
advances. See Note 11 to the Company's historical financial statements included
elsewhere herein.
In connection with the Acquisition, NEHC, pursuant to the Equity
Contribution, contributed $130.0 million of cash to the Company. This
contribution was financed in part through NEHC's sale of debt and equity
securities, as well as warrants to purchase NEHC Common Stock, to affiliates of
DLJ.
The debt and equity securities sold by NEHC to affiliates of DLJ consisted
of NEHC senior secured discount notes, senior exchangeable preferred stock,
junior exchangeable preferred stock and warrants to purchase shares of NEHC
Class A Common Stock (representing the right to acquire an aggregate of up to
22.5% of the common stock of NEHC).
Bank of America NT&SA, an affiliate of BancAmerica Securities, is an agent
and lender under the Company's existing credit facility and will receive
proceeds from the financing transactions described herein in connection with the
repayment of loans under such credit facility. See "Use of Proceeds." Bank of
America NT&SA will be an agent and lender under the New Credit Facility. It is
expected that BancAmerica Securities will receive an arrangement fee in
connection with the New Credit Facility and will be the syndication agent and an
agent with respect to the Accounts Receivable Program for which, in each case,
it is receiving certain customary fees and expenses.
In connection with the Transactions, DLJMB committed that in the event the
Notes were not sold in the Offering, it would (i) purchase senior discount notes
in an aggregate principal amount of $15 million and (ii) exchange all of the Old
NEHC Notes held by DLJMB for Notes with an aggregate principal amount equal to
the accreted value of the Old NEHC Notes so exchanged. Also in connection with
the Transactions, each of Bank of America NT&SA and an affiliate of DLJ
committed to provide certain financing in the amount of $350 million in the
event the Senior Subordinated Notes were not sold at or prior to the time of the
Acquisition. Bank of America NT&SA and such affiliate of DLJ received certain
customary fees in connection with such commitment. In the event the Senior
Subordinated Notes were not sold at or prior to the time of the Acquisition, the
balance of the funds which would otherwise have been provided by the offering of
the Senior Subordinated Notes were be provided under the New Credit Facility.
See "The Transactions," and "Plan of Distribution."
DESCRIPTION OF INDEBTEDNESS
The following sets forth information concerning the Company's indebtedness
expected to be outstanding immediately following the consummation of the
Transactions.
ACCOUNTS RECEIVABLE PROGRAM
In connection with the Acquisition, the Company entered into the Accounts
Receivable Program. The Accounts Receivable Program is structured as an
off-balance sheet financing for accounting purposes.
Under the Accounts Receivable Program, the Company established AmeriServe
Funding Corporation ("AmeriServe Funding"), a wholly-owned, special purpose
bankruptcy-remote subsidiary that will acquire, on a revolving basis, all of the
trade receivables (the "Receivables") generated by the Company and/or one or
more of its subsidiaries. The purchase by AmeriServe Funding will be financed
through the transfer to a newly formed master trust, AmeriServe Master Trust
(the "Trust"), of the Receivables and the issuance of a series
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<PAGE> 63
of certificates by the Trust representing an undivided interest in the assets of
the Trust. The certificates will be purchased by any of Bank of America, a
commercial paper conduit administered by Bank of America NT&SA, and/or a group
of banks (all of the foregoing, collectively, referred to as the "Banks").
While the level of proceeds ultimately available under the Accounts
Receivable Program will be subject to the Banks' and BancAmerica Securities' due
diligence regarding the origination, servicing and performance of the accounts
receivable, it is expected that the Accounts Receivable Program will be
available in an amount up to $250.0 million, provided, however, that until the
Company can satisfy certain reporting requirements, not more than $225.0 million
will be available. The Accounts Receivable Program will be available to
AmeriServe Funding for five years from the Closing, subject to early termination
in accordance with the terms of the transaction documents.
All of the Receivables will be transferred on a daily basis to AmeriServe
Funding. The purchase price for the Receivables conveyed to AmeriServe Funding
shall be a dollar amount equal to the aggregate unpaid balance of the
Receivables less a discount specified in the transaction documents. AmeriServe
Funding may also pay the purchase price for such Receivables by increasing the
principal amount of notes payable by it to the Company and subsidiaries of the
Company rather than paying cash for such Receivables. Certain of the Receivables
will be transferred by the Company to AmeriServe Funding as a contribution of
capital rather than as a sale. AmeriServe Funding (and the Trust, in turn) will
obtain first priority, perfected ownership interest in the Receivable, and any
related security and proceeds thereof. The Company will serve as the initial
master servicer of the Accounts Receivable Program.
The Banks' yield on their Invested Amount will be based on either LIBOR or
a Base Rate plus a margin. The "Invested Amount" generally will be calculated as
the sum of the purchase prices paid by the Banks from time to time for undivided
interests in the Receivables in the Trust, reduced by the aggregate amount of
distributions made to the Banks on account of principal. As of March 29, 1997,
the Banks' yield would have been 6.875%.
After the Closing, a non-usage fee of 3/8 of 1% per annum on a daily
average of (i) the aggregate commitments of the Banks under the Accounts
Receivable Program minus (ii) the Invested Amount will be payable by AmeriServe
Funding monthly in arrears.
Prior to termination of the Banks' commitment under the Accounts Receivable
Program, AmeriServe Funding may cause the Trust to sell undivided interests in
the Receivables to the Banks from time to time so long as certain conditions are
satisfied, including, without limitation, that after giving effect to such sale,
the Invested Amount (less amounts held in certain Trust accounts) would not
exceed the Base Amount. The "Base Amount" generally will be equal to the result
of (a)(i) the Net Eligible Receivables, times (ii) 100% minus the Applicable
Reserve Ratio, minus (b) the Carrying Cost Receivables Reserve. The "Net
Eligible Receivables" generally will be calculated as the aggregate unpaid
balance of Receivables held by the Trust that satisfy certain eligibility
criteria, less unapplied cash held by the Trust, less funds not yet made
available by lockbox banks holding collections on Receivables, less the
aggregate amount of excess concentrations of Receivables as specified in the
transaction documents. The "Applicable Reserve Ratio" will be calculated
consistent with the trade receivable rating methodology of Standard & Poor's
and/or Duff & Phelps, will incorporate specified loss reserve ratios and
dilution reserve ratios, and will be subject to a floor of 15%. The "Carrying
Cost Receivables Reserve" generally will be calculated to reflect interest
payable to the Banks, the servicing fee payable from the Assets of the Trust,
certain accrued and unpaid expenses and certain additional amounts based on
day's sales outstanding.
The Accounts Receivable Program contains customary conditions, including,
without limitation, delivery of true sale and non-consolidation opinions. In
addition, BancAmerica Securities shall be satisfied that structural enhancements
are in place so that the Accounts Receivable Program satisfies, at a minimum,
the "BBB" rating criteria of Standard & Poor's and/or Duff & Phelps. The
Accounts Receivable Program also contains customary termination events,
including, without limitation, bankruptcy or insolvency of the Company or
AmeriServe Funding, cross-acceleration to other material indebtedness of the
Company and Receivables performance triggers.
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NEW CREDIT FACILITY
At the Closing, the Company entered into the New Credit Facility, pursuant
to which the Company has available a new revolving credit facility (the
"Revolving Credit Facility"), and four term loan facilities ("Term Loan A,"
"Term Loan B," "Term Loan C" and "Term Loan D" and, collectively, the "Term
Loans"). At the Closing, the following amounts were drawn under the New Credit
Facility: $205.0 million consisting of: (a) aggregate principal amount $78.1
million, Term Loan A, which matures in six years; (b) aggregate principal amount
$42.3 million, Term Loan B, which matures in seven years; (c) aggregate
principal amount $42.3 million, Term Loan C, which matures in eight years; and
(d) aggregate principal amount $42.3 million, Term Loan D, which matures in nine
years. The undrawn amount of $150.0 million under the Revolving Credit Facility
is available for working capital and general corporate purposes, including the
issuance of letters of credit, which were approximately $12 million at Closing,
subject to the achievement of certain financial ratios and compliance with
certain conditions.
Term Loan A will amortize by approximately $3.3 million in year two,
approximately $16.3 million in year three, and approximately $19.5 million in
each of years four, five and six. Term Loan B, Term Loan C and Term Loan D will
each have amortization of approximately $0.4 million per annum, beginning in
year two, with the remainder due in four equal quarterly installments ending on
the respective maturity dates.
The initial interest rate for borrowings under the Revolving Credit
Facility and the Term A Loan will be, at the option of the Company, LIBOR plus
2.50% or the Base Rate plus 1.25%. For the Term B, Term C and Term D Loans, the
exact spreads over LIBOR or the Base Rate, as the case may be, will be
determined at or before Closing based on market conditions. The initial interest
rate for the Term B Loan will be, at the option of the Company, LIBOR plus 3.00%
or the Base Rate plus 1.75%. The interest rate for the Term C Loan will be, at
the option of the Company, LIBOR plus 3.25% or the Base Rate plus 2.00%. The
rate for the Term D Loan will be, at the option of the Company, LIBOR plus 3.50%
or the Base Rate plus 2.25%. The initial rates for borrowings under the
Revolving Credit Facility and the Term A Loan will remain in effect until
December 31, 1997, at which time they may be reduced according to a pricing grid
to be negotiated. The Company may elect interest periods of one, two, three or
six months for LIBOR borrowings. Calculation of interest shall be on the basis
of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case
may be, in the case of the Base Rate Loans based on the Administrative Agent's
"reference rate") and interest shall be payable at the end of each interest
period and, in any event, at least every three months or 90 days, as the case
may be. The "Base Rate" is the higher of (i) the Administrative Agent's
reference rate and (ii) the Federal Funds Effective Rate plus one-half of 1%.
LIBOR will at all times include statutory reserves to the extent actually
incurred.
NEHC and all domestic subsidiaries of the Company have guaranteed
indebtedness under the New Credit Facility (the "Guarantors"). All extensions of
credit under the New Credit Facility to the Company and guaranties of
subsidiaries of the Company are secured by all existing and after-acquired
personal property (other than accounts receivable transferred in connection with
the Accounts Receivable Program or any securitization refinancing of the
Accounts Receivable Program) of the Company and its subsidiaries, including all
outstanding capital stock of the Company and of all of its domestic
subsidiaries, 65% of outstanding capital stock of the Company's foreign
subsidiaries and any intercompany debt obligations, and, subject to exceptions
to be agreed upon, all existing and after-acquired real property fee and
leasehold interests. NEHC's guaranty is secured by a pledge of all outstanding
capital stock of the Company. With certain exceptions to be agreed upon, NEHC,
the Company and its subsidiaries are prohibited from pledging any of their
assets other than under the New Credit Facility.
Within 90 days of the Closing, the Company is required to obtain interest
rate protection by interest rate swaps, caps or other agreements satisfactory to
the Agents against increases in the interest rates with respect to a notional
amount of at least $150.0 million and for a period of at least three years.
Interest rate swaps or other hedging agreements provided by any Lender or
affiliate of any Lender will be equally and ratably secured by the collateral
described above and covered by the guarantees described above.
Under the New Credit Facility, the letter of credit fee will be 2.50% per
annum for standby letters of credit, which will be shared by all Lenders, and an
additional 0.25% per annum to be retained by the issuing
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bank for issuing the standby letters of credit, based upon the amount available
for drawing under outstanding standby letters of credit. There will be
adjustments, after December 31, 1997, in the letter of credit fees described
above, according to a to be determined pricing grid acceptable to the Agents,
the Arranger and the Company.
Indebtedness under the New Credit Facility may be prepaid in whole or in
part without premium or penalty (subject in some cases to related breakage) and
the Lenders' commitments relative thereto reduced or terminated upon such notice
and in such amounts as may be agreed upon. Voluntary prepayments of the Term
Loans will be applied ratably among Term Loan A, Term Loan B, Term Loan C and
Term Loan D and shall be applied pro rata to scheduled amortization payments.
Notwithstanding the foregoing, in the case of any voluntary prepayment to be
applied to Term Loan B, Term Loan C or Term Loan D, the Company will be entitled
to elect to offer the holders of such term loans the opportunity to waive the
right to receive the amount of such voluntary prepayment. In the event any such
holders elect to waive such right, 50% of the amount, which otherwise would have
been applied as such voluntary prepayment of the applicable Term Loans of such
holders, shall be applied to the prepayment of Term Loan A, and 50% of such
amount shall be retained by the Company.
The Company will be required to make the following mandatory prepayments
(subject to certain exceptions and basket amounts to be set forth in the New
Credit Facility): (a) with respect to asset sales, prepayments in an amount
equal to 100% of (i) the net after-tax cash proceeds of the sale or other
disposition of any property or assets of AmeriServe or any of its subsidiaries
other than net cash proceeds of sales or certain other dispositions in the
ordinary course of business, or (ii) the net after-tax cash proceeds in excess
of $275 million from the sale or other disposition of receivables payable upon
receipt; (b) with respect to debt financings of the Company or any of its
subsidiaries, prepayments in an amount equal to 100% of the net cash proceeds
received from such debt financings (excluding, among other things, the New
Senior Subordinated Notes), payable upon receipt; (c) with respect to equity
offerings of the Company or any of its subsidiaries, prepayments in an amount
equal to 50% of the net cash proceeds received from the issuance of such equity
securities, payable upon receipt; and (d) with respect to excess cash flow (to
be defined in the New Credit Facility), prepayments in an amount equal to 75% of
such excess cash flow, payable within 90 days of fiscal year-end, reducing to
50% of such excess cash flow after the outstanding aggregate principal amount of
Term Loans has been repaid to 50% of the Term Loans outstanding on the Closing.
All mandatory prepayments will be applied first to reduce the Term Loans
outstanding to the full extent thereof and thereafter to the permanent reduction
of the commitments under the Revolving Credit Facility. All mandatory
prepayments shall be applied ratably between Term Loan A, Term Loan B, Term Loan
C and Term Loan D and to scheduled amortization payments of the Term Loans as
follows: (a) with respect to asset sale proceeds, excess cash flow and equity
offerings, prepayment amount applied pro rata to all remaining scheduled
amortization payments; and (b) with respect to debt financings, prepayment
amount applied to remaining scheduled amortization payments in inverse order of
maturity. Notwithstanding the foregoing, in the case of any mandatory prepayment
to be applied to Term Loan B, Term Loan C or Term Loan D, the Company may elect
to offer the holders of such term loans the opportunity to waive the right to
receive the amount of such mandatory prepayment. In the event any such holders
elect to waive such right, 50% of the amount that would otherwise have been
applied as such mandatory prepayment of the applicable term loans of such
holders shall be applied to the prepayment of Term Loan A and 50% of such amount
shall be retained by the Company.
The New Credit Facility contains customary and appropriate representations
and warranties, including without limitation those relating to due organization
and authorization, no conflicts, financial condition, no material adverse
changes, title to properties, liens, litigation, payment of taxes, no material
adverse agreements, compliance with laws, environmental liabilities and full
disclosure.
The New Credit Facility includes customary conditions to all borrowings
which include requirements relating to prior written notice of borrowing, the
accuracy of representations and warranties, and the absence of any default or
potential event of default, and will otherwise be customary and appropriate for
financings of this type.
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The New Credit Facility also contains customary affirmative and negative
covenants (including, where appropriate, certain exceptions and baskets to be
mutually agreed upon), including but not limited to furnishing information and
limitations on other indebtedness, liens, investments, guarantees, restricted
payments, restructuring and reserve costs, mergers and acquisitions, sales of
assets, capital expenditures, leases, and affiliate transactions. The New Credit
Facility also contains financial covenants, including without limitation, those
relating to: minimum interest coverage; minimum fixed charge coverage; and
maximum leverage.
Events of default under the New Credit Facility are usual and customary,
including without limitation, those relating to: (a) non-payment of interest,
principal or fees payable under the New Credit Facility; (b) non-performance of
certain covenants; (c) cross default to other material debt of the Company and
its subsidiaries; (d) bankruptcy or insolvency; (e) judgments in excess of
specified amounts; (f) impairment of security interests in collateral; (g)
invalidity of guarantees; (h) materially inaccurate or false representations or
warranties; and (i) change of control.
DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued pursuant to the same indenture (the
"Indenture") among NEHC and State Street Bank and Trust Company, as trustee (the
"Trustee"), under which the Notes were issued. See "Notice to Investors." The
terms of the New Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The New Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of the material provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture and the Registration Rights Agreement, including the
definitions therein of certain terms used below. Copies of the Indenture and
Registration Rights Agreement are available as set forth below under
"-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions."
The New Notes will rank pari passu in right of payment to all senior
Indebtedness of NEHC and will rank senior in right of payment to all
subordinated Indebtedness of NEHC. As obligations of a holding company, the
Notes will be effectively subordinated to all obligations of the Subsidiaries of
NEHC, including the Senior Subordinated Notes and New Senior Subordinated Notes
and borrowings under the New Credit Facility. See "Risk Factors -- Holding
Company Structure; Effective Subordination."
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be limited in aggregate principal amount to $100,387,000
at maturity and will mature on July 15, 2007. No cash interest will be payable
on the New Notes prior to January 15, 2003. Interest on the New Notes will
accrue at the rate of 12 3/8% per annum and will be payable semi-annually in
arrears on July 15 and January 15 of each year, commencing on January 15, 2003,
to Holders of record on the immediately preceding July 1 and January 1. Interest
on the New Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from January 15, 2003. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium and Liquidated Damages, if any, and interest on the New Notes
will be payable at the office or agency of NEHC maintained for such purpose
within the City and State of New York or, at the option of NEHC, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the New Notes at their respective addresses set forth in the register
of Holders of New Notes; provided that all payments of principal, premium and
Liquidated Damages, if any, and interest with respect to New Notes the Holders
of which have given wire transfer instructions to NEHC will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the Holders thereof. Until otherwise designated by NEHC, NEHC's office or
agency in New York will be the office of the Trustee maintained for such
purpose. The New Notes will be issued in denominations of $1,000 and integral
multiples thereof.
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OPTIONAL REDEMPTION
The New Notes will not be redeemable at NEHC's option prior to July 15,
2002. Thereafter, the New Notes will be subject to redemption at any time at the
option of NEHC, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on July 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2002.............................................. 106.188%
2003.............................................. 104.125%
2004.............................................. 102.063%
2005 and thereafter............................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time NEHC may redeem the New Notes,
in whole but not in part, at the option of NEHC, at a redemption price of
112.375% of the Accreted Value (determined at the date of redemption), with the
net cash proceeds of a Public Equity Offering; provided that such redemption
shall occur within 45 days of the date of the closing of such Public Equity
Offering.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed at any time, selection
of New Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
New Notes are listed, or, if the New Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no New Notes of $1,000 or less shall be redeemed in part. Notices
of redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of New Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any New
Note is to be redeemed in part only, the notice of redemption that relates to
such New Note shall state the portion of the principal amount thereof to be
redeemed. A new New Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original New Note. New Notes called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on New Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
NEHC is not required to make mandatory redemption or sinking fund payments with
respect to the New Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of New Notes will
have the right to require NEHC to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's New Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the Accreted Value thereof on the date of purchase (if such date of
purchase is prior to July 15, 2002) or 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (if such date of purchase is on or after July 15, 2002)
(the "Change of Control Payment"). Within 30 days following any Change of
Control, NEHC will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
New Notes on the date specified in such notice, which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. NEHC will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder
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to the extent such laws and regulations are applicable in connection with the
repurchase of the New Notes as a result of a Change of Control.
On the Change of Control Payment Date, NEHC will, to the extent lawful, (1)
accept for payment all New Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all New Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
New Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of New Notes or portions thereof being purchased by
NEHC. The Paying Agent will promptly mail to each Holder of New Notes so
tendered the Change of Control Payment for such New Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new New Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new New Note will be
in a principal amount of $1,000 or an integral multiple thereof. NEHC will
publicly announce the results of the Change of Control Offer on, or as soon as
practicable after, the Change of Control Payment Date.
Due to Change of Control repayment provisions in certain indebtedness of
NEHC's Subsidiaries and the existence of a Change of Control event of default in
the New Credit Facility, it is unlikely that NEHC would be able to repurchase
all of the New Notes upon the occurrence of a Change of Control. See "Risk
Factors -- Change of Control." In addition, the New Notes will rank pari passu
in right of payment with other senior Indebtedness of NEHC. The ability of NEHC
to redeem all of the New Notes upon a Change of Control may also be limited by
restrictions on the ability of NEHC's Subsidiaries to pay dividends to NEHC.
Finally, the New Notes will be effectively subordinated to Obligations of
Subsidiaries of NEHC, including with respect to Change of Control Payments. See
"-- General."
The Change of Control provision of the Indenture could have the effect of
deterring certain acquisition proposals which would constitute a Change of
Control even if such acquisition might be beneficial to certain Holders of New
Notes, as well as restricting the ability of NEHC to obtain additional financing
in the future.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the New Notes to require that NEHC
repurchase or redeem the New Notes in the event of a takeover, recapitalization
or similar transaction.
NEHC will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by NEHC and purchases all
New Notes validly tendered and not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of NEHC and its Subsidiaries taken as a whole. Although there is a
developing body of case law interpreting the phrase "substantially all," there
is no precise established definition of that phrase under applicable law.
Accordingly, the ability of a Holder of New Notes to require NEHC to repurchase
such New Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of NEHC and its Subsidiaries taken as
a whole to another Person or group may be uncertain.
Asset Sales
The Indenture provides that NEHC will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale other than transfers of
Receivables to a Receivables Subsidiary in connection with a Receivables
Transaction unless (i) NEHC (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by NEHC or such Restricted Subsidiary is in the
form of cash; provided that the amount of (x) any liabilities (as shown on
NEHC's or such Restricted Subsidiary's most recent balance sheet) of NEHC or any
Restricted
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Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases NEHC or such Restricted Subsidiary from further liability and (y)
any securities, notes or other obligations received by NEHC or any such
Restricted Subsidiary from such transferee that are converted by NEHC or such
Restricted Subsidiary into cash within 180 days (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
NEHC may apply such Net Proceeds, at its option, to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other long-term assets, in each case, in a Permitted
Business. Pending the final application of any such Net Proceeds, NEHC may
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $20.0 million,
NEHC will be required to make an offer to all Holders of New Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of New Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the Accreted Value thereof on the date of purchase (if such
date of purchase is prior to July 15, 2002) or 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (if such date of purchase is on or after July 15, 2002),
in each case in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of New Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, NEHC may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
New Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the New Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that, from and after the date of the Indenture NEHC
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of NEHC's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving NEHC) or to the direct or indirect holders of
NEHC's or any of its Restricted Subsidiaries' Equity Interests in their capacity
as such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of NEHC); (ii) purchase, redeem or otherwise
acquire or retire for value (including without limitation, in connection with
any merger or consolidation involving NEHC) any Equity Interests of NEHC or any
direct or indirect parent of NEHC; (iii) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness of NEHC that is pari passu with or subordinated to the New Notes
(other than the Notes), except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) NEHC would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by NEHC and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments
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permitted by clause (ii) of the next succeeding paragraph), is less than
the sum of (i) 50% of the Consolidated Net Income of NEHC for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the end of NEHC's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by
NEHC from the issue or sale since the date of the Indenture of Equity
Interests of NEHC (other than Disqualified Stock) or of Disqualified Stock
or debt securities of NEHC that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of NEHC and other than
Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) if any Unrestricted Subsidiary (A) is redesignated as
a Restricted Subsidiary, the fair market value of such redesignated
Subsidiary (as determined in good faith by the Board of Directors) as of
the date of its redesignation or (B) pays any cash dividends or cash
distributions to NEHC or any of its Restricted Subsidiaries, 50% of any
such cash dividends or cash distributions made after the date of the
Indenture.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of NEHC in exchange for, or out of the net cash proceeds of the substantially
concurrent sale or issuance (other than to a Restricted Subsidiary of NEHC) of,
other Equity Interests of NEHC (other than any Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of pari passu or subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of NEHC to the holders of its Equity Interests on a pro rata basis;
(v) the declaration or payment of dividends to Holberg for expenses incurred by
Holberg in its capacity as a holding company that are attributable to the
operations of NEHC and its Restricted Subsidiaries, including, without
limitation, (a) customary salary, bonus and other benefits payable to officers
and employees of Holberg, (b) fees and expenses paid to members of the Board of
Directors of Holberg, (c) general corporate overhead expenses of Holberg, (d)
foreign, federal, state or local tax liabilities paid by Holberg, (e)
management, consulting or advisory fees paid to Holberg not to exceed $1.0
million in any fiscal year, and (f) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of NEHC or Holberg
held by any member of NEHC's (or any of its Restricted Subsidiaries') management
pursuant to any management equity subscription agreement or stock option
agreement in effect as of the date of the Indenture; provided, however, the
aggregate amount paid pursuant to the foregoing clauses (a) through (f) does not
exceed $10.0 million in any fiscal year; (vi) Investments in any Person (other
than NEHC or a Wholly-Owned Restricted Subsidiary) engaged in a Permitted
Business in an amount not to exceed $7.0 million; (vii) other Investments in
Unrestricted Subsidiaries having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (vii) that are at that
time outstanding, not to exceed $3.0 million; (viii) Permitted Investments; (ix)
payments to Holberg pursuant to the tax sharing agreement among Holberg and
other members of the affiliated corporations of which Holberg is the common
parent; (x) non-cash accretions to the liquidation value of shares of Senior
Exchangeable Preferred Stock and shares of Junior Exchangeable Preferred Stock,
and any payment in kind dividends with respect to any of the foregoing; (xi) any
exchange of shares of Senior Exchangeable Preferred Stock and Junior
Exchangeable Preferred Stock for 13 1/2% Subordinated Exchange Debentures due
2009, or 15% Subordinated Exchange Debentures due 2009, as the case may be,
pursuant to the terms of the Senior Exchangeable Preferred Stock or Junior
Exchangeable Preferred Stock, as the case may be; or (xii) other Restricted
Payments in an aggregate amount not to exceed $15.0 million.
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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by the Company be
transferred to or held by an Unrestricted Subsidiary. For purposes of making
such determination, all outstanding Investments by NEHC and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation (as determined in good faith by
the Board of Directors). Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by NEHC or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined in good faith by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee; such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $10.0 million. Not later than the date of making any Restricted
Payment, NEHC shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that NEHC will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that NEHC will not issue any Disqualified Stock and will not permit
any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that NEHC may incur Indebtedness (including Acquired Debt) or issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for NEHC's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Restricted Subsidiaries of NEHC of term
Indebtedness under the New Credit Facility; provided that the aggregate
principal amount of all term Indebtedness outstanding under the New Credit
Facility after giving effect to such incurrence does not exceed the
aggregate amount of term Indebtedness borrowed under the New Credit
Facility on July 11, 1997 less the aggregate amount of all repayments,
optional or mandatory, of the principal of any term Indebtedness under the
New Credit Facility (other than repayments that are immediately reborrowed)
that have been made since July 11, 1997; provided that the foregoing
proviso shall not limit the principal amount of Permitted Refinancing
Indebtedness that may be incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i);
(ii) the incurrence by the Restricted Subsidiaries of NEHC of
revolving Indebtedness and letters of credit pursuant to the New Credit
Facility; provided that the aggregate principal amount of all revolving
Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Restricted
Subsidiaries of NEHC thereunder) outstanding under the New Credit Facility
after giving effect to such incurrence does not exceed $150.0 million;
provided that the foregoing
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proviso shall not limit the principal amount of Permitted Refinancing
Indebtedness that may be incurred to refinance or replace any Indebtedness
incurred pursuant to this clause (ii);
(iii) the incurrence by NEHC and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by NEHC and its Restricted Subsidiaries of
Indebtedness represented by the New Notes, the New Senior Subordinated
Notes and the New Senior Subordinated Note Guarantees;
(v) the incurrence by NEHC or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of NEHC or
such Restricted Subsidiary (whether through the direct purchase of assets
or the Capital Stock of any Person owning such Assets), in an aggregate
principal amount not to exceed $150.0 million;
(vi) the incurrence by NEHC or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by NEHC or one of its Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by NEHC or one of
its Subsidiaries; provided further that the principal amount (or accreted
value, as applicable) of such Indebtedness, together with any other
outstanding Indebtedness incurred pursuant to this clause (vi), does not
exceed $7.0 million;
(vii) the incurrence by NEHC or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness that was
permitted by the Indenture to be incurred;
(viii) the incurrence by NEHC or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among NEHC and any of its Wholly-Owned
Restricted Subsidiaries; provided, however, that (i) if NEHC is the obligor
on such Indebtedness and the payee is not a Subsidiary Guarantor, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the New Notes and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than NEHC or a Wholly Owned
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either NEHC or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by NEHC or such Restricted Subsidiary, as
the case may be;
(ix) the incurrence by NEHC or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
currency risk or interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(x) the guarantee by NEHC or any of its Restricted Subsidiaries of
Indebtedness of NEHC or a Restricted Subsidiary of NEHC that was permitted
to be incurred by another provision of this covenant;
(xi) the incurrence by NEHC's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of NEHC;
(xii) Asset Sales in the form of Receivables Transactions;
(xiii) Indebtedness incurred by NEHC or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation to letters of credit in respect to workers' compensation claims
or self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
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(xiv) Indebtedness arising from agreements of NEHC or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, asset to a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided that the maximum aggregate liability
of all such Indebtedness shall at no time exceed 50% of the gross proceeds
actually received by NEHC and its Restricted Subsidiaries in connection
with such disposition;
(xv) obligations in respect of performance and surety bonds and
completion guarantees provided by NEHC or any Restricted Subsidiary in the
ordinary course of business;
(xvi) any incurrence of Indebtedness permitted by clause (xi) of the
exceptions to the covenant described above under the caption "-- Restricted
Payments";
(xvii) guarantees incurred in the ordinary course of business in an
aggregate principal amount not to exceed $7.0 million at any time
outstanding; and
(xviii) the incurrence by NEHC or any of its Restricted Subsidiaries
of additional Indebtedness, including Attributable Debt incurred after the
date of the Indenture, in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (xviii), not to exceed $30.0
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xviii) above or
is entitled to be incurred pursuant to the first paragraph of this covenant,
NEHC shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Liens
The Indenture provides that NEHC will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind securing trade payables or
Indebtedness of NEHC that is subordinate to or pari passu with the Notes (other
than Permitted Liens) upon any of their property or assets, now owned or
hereafter acquired.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that NEHC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to NEHC or any of its Restricted Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or measured
by, its profits, or (b) pay any indebtedness owed to NEHC or any of its
Restricted Subsidiaries, (ii) make loans or advances to NEHC or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to
NEHC or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on July 11, 1997, (b) the New Credit Facility as in effect as of July 11,
1997, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive in the
aggregate (as determined by the Credit Agent in good faith) with respect to such
dividend and other payment restrictions than those contained in the New Credit
Facility as in effect on July 11, 1997, (c) the Indenture and the New Notes, (d)
any applicable law, rule, regulation or order, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by NEHC or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness
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was incurred in connection with or in contemplation of such acquisition), 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, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (f) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) Permitted Refinancing Indebtedness, provided that the
material restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced, (i) contracts for the
sale of assets, including without limitation customary restrictions with respect
to a Subsidiary pursuant to an agreement that has been entered into for the sale
or disposition of all or substantially all of the Capital Stock or assets of
such Subsidiary, and (j) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that NEHC may not consolidate or merge with or into
(whether or not NEHC is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another corporation, Person or
entity unless (i) NEHC is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than NEHC) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than NEHC) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of NEHC under the New Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of NEHC with or into a Wholly-Owned
Restricted Subsidiary of NEHC, NEHC or the entity or Person formed by or
surviving any such consolidation or merger (if other than NEHC), or to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made will, 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, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that NEHC will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction")
involving consideration in excess of $5.0 million unless (i) such Affiliate
Transaction is on terms that are no less favorable to NEHC or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by NEHC or such Restricted Subsidiary with an unrelated Person and
(ii) NEHC delivers to the Trustee (a) with respect to any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate consideration in
excess of $7.5 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving either aggregate consideration in excess of $15.0 million or an
aggregate consideration in excess of $10.0 million where there are no
disinterested members of the Board of Directors, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that the following shall not be deemed Affiliate
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Transactions: (p) any transaction permitted by the Amended and Restated
Investors Agreement dated on or about July 11, 1997, as the same may be from
time to time amended, provided that no such amendment materially affects the
Notes, (q) any employment agreement entered into by NEHC or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of NEHC or such Restricted Subsidiary, (r) transactions
between or among NEHC and/or its Restricted Subsidiaries, (s) Permitted
Investments and Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments," (t)
customary loans, advances, fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees or consultants of NEHC or any of
its Restricted Subsidiaries, (u) annual management fees paid to Holberg not to
exceed $5.0 million in any one year, (v) transactions pursuant to any contract
or agreement in effect on the date of the Indenture as the same may be amended,
modified or replaced from time to time so long as any such amendment,
modification or replacement is no less favorable to NEHC and its Restricted
Subsidiaries than the contract or agreement as in effect on the Issue Date or is
approved by a majority of the disinterested directors of NEHC, (w) transactions
between NEHC or its Restricted Subsidiaries on the one hand, and Holberg on the
other hand, involving the provision of financial or advisory services by
Holberg; provided that fees payable to Holberg do not exceed the usual and
customary fees for similar services, (x) transactions between NEHC or its
Restricted Subsidiaries on the one hand, and Donaldson, Lufkin & Jenrette
Securities Corporation or its Affiliates ("DLJ") on the other hand, involving
the provision of financial, advisory, placement or underwriting services by DLJ;
provided that fees payable to DLJ do not exceed the usual and customary fees of
DLJ for similar services, (y) the insurance arrangements between NEHC and its
Subsidiaries and an Affiliate of Holberg that are not less favorable to NEHC or
any of its Subsidiaries than those that are in effect on the date hereof
provided such arrangements are conducted in the ordinary course of business
consistent with past practices, and (z) payments under the tax sharing agreement
among Holberg and other members of the affiliated group of corporations of which
it is the common parent.
Sale and Leaseback Transactions
The Indenture provides that NEHC will not, and will not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that NEHC may, and may permit its Restricted Subsidiaries to, enter
into a sale and leaseback transaction if (i) NEHC could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to the covenant described above under the
caption "-- Incurrence of Additional Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "-- Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and NEHC, to the
extent it receives the proceeds of such transactions, applies the proceeds of
such transaction in compliance with, the covenant described above under the
caption "-- Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Wholly-Owned Restricted
Subsidiaries
The Indenture provides that NEHC (i) will not, and will not permit any
Wholly-Owned Restricted Subsidiary of NEHC to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly-Owned Subsidiary of NEHC to
any Person (other than NEHC or a Wholly-Owned Restricted Subsidiary of NEHC),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under the caption
"-- Asset Sales," and (ii) will not permit any Wholly-Owned Restricted
Subsidiary of NEHC to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to NEHC or a Wholly-Owned Restricted Subsidiary
of NEHC.
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Business Activities
NEHC will not, and will not permit any Restricted Subsidiary to, engage in
any business other than a Permitted Business, except to such extent as would not
be material to NEHC and its Restricted Subsidiaries taken as a whole.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any New Notes are outstanding, NEHC
will furnish to the Holders of Notes (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 NEHC were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by NEHC's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
NEHC were required to file such reports. In addition, whether or not required by
the rules and regulations of the Commission, NEHC will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, NEHC
has agreed that, for so long as any New Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the New Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when due
of the principal of or premium, if any, on the New Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
NEHC to comply with the provisions described under the captions "-- Change of
Control," "-- Asset Sales," or "-- Merger, Consolidation, or Sale of Assets";
(iv) failure by NEHC for 30 days after notice from the Trustee or at least 25%
in principal amount of the New Notes then outstanding to comply with the
provisions described under the captions "-- Restricted Payments" or
"-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (v) failure by
NEHC for 60 days after notice from the Trustee or at least 25% in principal
amount of the New Notes then outstanding to comply with any of its other
agreements in the Indenture or the New Notes; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by NEHC or any of its
Subsidiaries (or the payment of which is guaranteed by NEHC or any of its
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $15.0 million or more; (vii)
failure by NEHC or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; and (viii) certain events of bankruptcy or insolvency with
respect to NEHC or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding New Notes
may declare all the New Notes to be due and payable immediately. Upon such
declaration, the principal of (or, if prior to July 15, 2002, the Accreted Value
of), premium, if any, and accrued and unpaid interest on the New Notes shall be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to NEHC or any of its Subsidiaries all outstanding New Notes will become
due and payable without further action or notice. Holders of the New Notes may
not enforce the Indenture or the New
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Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding New Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the New Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of NEHC with the
intention of avoiding payment of the premium that NEHC would have had to pay if
NEHC then had elected to redeem the New Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the New Notes. If an Event of Default occurs prior to July 15,
2002 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of NEHC with the intention of avoiding the prohibition on redemption of
the New Notes prior to July 15, 2002, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the New Notes.
The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the New Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the New Notes.
NEHC is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and NEHC is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of NEHC, as
such, shall have any liability for any obligations of NEHC under the New Notes,
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of New Notes by accepting a New Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the New Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
NEHC may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding New Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding New Notes to
receive payments in respect of the principal of, premium and Liquidated Damages,
if any, and interest on such New Notes when such payments are due from the trust
referred to below, (ii) NEHC's obligations with respect to the New Notes
concerning issuing temporary New Notes, registration of New Notes, mutilated,
destroyed, lost or stolen New Notes and the maintenance of an office or agency
for payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and NEHC's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, NEHC may, at its option and at any time, elect to have the
obligations of NEHC and the Subsidiary Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the New Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the New Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
NEHC must irrevocably deposit with the Trustee, in trust, for the benefit of the
Holders of the New Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium and Liquidated Damages, if any, and interest on
the outstanding New Notes on the stated maturity or on the
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applicable redemption date, as the case may be, and NEHC must specify whether
the New Notes are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, NEHC shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) NEHC has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding New Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal 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 Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, NEHC shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Holders of the outstanding New Notes 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; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which NEHC or any of its
Subsidiaries is a party or by which NEHC or any of its Subsidiaries is bound;
(vi) NEHC must have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) NEHC must deliver
to the Trustee an Officers' Certificate stating that the deposit was not made by
NEHC with the intent of preferring the Holders of New Notes over the other
creditors of NEHC with the intent of defeating, hindering, delaying or
defrauding creditors of NEHC or others; and (viii) NEHC must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and NEHC may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. NEHC is not required to transfer or exchange any New Note selected
for redemption. Also, NEHC is not required to transfer or exchange any New Note
for a period of 15 days before a selection of New Notes to be redeemed.
The registered Holder of a New Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the New Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the New Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, New Notes), and any existing default
or compliance with any provision of the Indenture or the New Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding New Notes (including consents obtained in connection with a tender
offer or exchange offer for New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder): (i) reduce the
principal amount of New Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any New Note or alter the provisions with respect to the redemption of the
New Notes (other than provisions relating to the covenants described above under
the caption "-- Repurchase at the Option of Holders");
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(iii) reduce the rate of or change the time for payment of interest on any New
Note; (iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the New Notes (except a rescission of
acceleration of the New Notes by the Holders of at least a majority in aggregate
principal amount of the New Notes and a waiver of the payment default that
resulted from such acceleration); (v) make any New Note payable in money other
than that stated in the New Notes; (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of New
Notes to receive payments of principal of or premium, if any, or interest on the
New Notes; (vii) waive a redemption payment with respect to any New Note (other
than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of New
Notes, NEHC and the Trustee may amend or supplement the Indenture or the New
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated New Notes in addition to or in place of certificated New Notes,
to provide for the assumption of NEHC's obligations to Holders of New Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of New Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of NEHC, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding New
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of New Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to NEHC, 545 Steamboat
Road, Greenwich, Connecticut 06830; Attention: Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes initially being issued in exchange for the Notes generally
will be represented by one or more fully-registered global notes without
interest coupons (collectively, "Global New Notes"). Notwithstanding the
foregoing, Notes held in certificated form will be exchanged solely for New
Notes in certificated form as discussed below. The Global New Note will be
deposited upon issuance with The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Except as set forth below, the Global New Note may be transferred, in whole and
not in part, only to another nominee of the DTC or to a successor of the DTC or
its nominee. See "-- Exchange of Book-Entry New Notes for Certificated Notes."
The New Notes may be presented for registration of transfer and exchange at
the offices of the Registrar.
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Depository Procedures
DTC has advised NEHC that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of Participants. The Participants include securities brokers and
dealers (including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised NEHC that pursuant to procedures established by it,
(i) upon deposit of the Global New Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of Global New Notes and (ii) ownership of such interests in the Global
New Notes will be shown on, and the transfer ownership thereof will be effected
only through, records maintained by DTC (with respect to Participants) or by
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global New Notes).
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NEW NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on a Global New Note registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture,
NEHC and the Trustee will treat the persons in whose names the New Notes,
including the Global New Notes, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of NEHC, the Trustee nor any agent of NEHC or the
Trustee has or will have any responsibility or liability for (i) any aspect of
DTC's records or any Participant's or Indirect Participant's records relating to
or payments made on account of beneficial ownership interests in the Global New
Notes, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global New Notes or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants.
DTC has advised NEHC that its current practice, upon receipt of any payment
in respect of securities such as the New Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global New Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of New Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or NEHC. Neither NEHC nor the Trustee
will be liable for any delay by DTC or its Participants in identifying the
beneficial owners of the New Notes, and NEHC and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
as the registered owner of the New Notes for all purposes.
DTC has advised NEHC that it will take any action permitted to be taken by
a holder of New Notes only at the direction of one or more Participants to whose
account DTC interests in the Global New Notes are credited and only in respect
of such portion of the aggregate principal amount of the New Notes as to which
such Participant or Participants have given direction. However, if there is an
Event of Default under the New Notes, DTC reserves the right to exchange Global
New Notes for legended New Notes in certificated form, and to distribute such
New Notes to its Participants.
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The information in this section concerning DTC and its book-entry system
has been obtained from sources that NEHC believes to be reliable, but NEHC takes
no responsibility for the accuracy thereof.
Although DTC, has agreed to the foregoing procedures to facilitate
transfers of interests in the Global New Notes among Participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. None of NEHC, the Initial
Purchaser or the Trustee will have any responsibility for the performance by DTC
or its Participants or indirect Participants of its obligations under the rules
and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated New Notes
A Global New Note is exchangeable for definitive New Notes in registered
certificated form if (i) DTC (x) notifies NEHC that it is unwilling or unable to
continue as depositary for the Global New Note and NEHC thereupon fails to
appoint a successor depositary or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) NEHC, at its option, notifies the
Trustee in writing that it elects to cause the issuance of the New Notes in
certificated form or (iii) there shall have occurred and be continuing to occur
a Default or an Event of Default with respect to the New Notes. In addition,
beneficial interests in a Global New Note may be exchanged for certificated New
Notes upon request but only upon at least 20 days' prior written notice given to
the Trustee by or on behalf of DTC in accordance with customary procedures. In
all cases, certificated New Notes delivered in exchange for any Global New Note
or beneficial interest therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
Subject to the restrictions on the transferability of the New Notes
described in "Risk Factors -- Restrictions on Transfer," a New Note in
definitive form will be issued (i) in the Exchange Offer solely in exchange for
certificated Notes or (ii) following the Exchange Offer, upon the resale, pledge
or other transfer of any New Note or interest therein to any person or entity
that does not participate in the Depository. The exchange of certificated notes
in the Exchange Offer may be made only by presentation of the notes, duly
endorsed, together with a duly completed Letter of Transmittal and other
required documentation as described under "The Exchange Offer -- Procedures for
Tendering" and "-- Guaranteed Delivery Procedures." Transfers of certificated
New Notes may be made only by presentation of New Notes, duly endorsed, to the
Trustees for registration of transfer on the Note Register maintained by the
Trustees for such purposes.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
CERTIFICATED NEW NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global New Note may, upon request to the Trustee, exchange such beneficial
interest for New Notes in the form of Certificated New Notes. Upon any such
issuance, the Trustee is required to register such Certificated New Notes 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) NEHC notifies the Trustee in
writing that the DTC is no longer willing or able to act as a depositary and
NEHC is unable to locate a qualified successor within 90 days or (ii) NEHC, at
its option, notifies the Trustee in writing that it elects to cause the issuance
of New Notes in the form of Certificated New Notes under the Indenture, then,
upon surrender by the Global New Note Holder of its Global New Note, New Notes
in such form will be issued to each person that the Global New Note Holder and
the DTC identify as being the beneficial owner of the related Notes.
Neither NEHC nor the Trustee will be liable for any delay by the Global New
Note Holder or the DTC in identifying the beneficial owners of New Notes and
NEHC and the Trustee may conclusively rely on, and will be protected in relying
on, instructions from the Global New Note Holder or the DTC for all purposes.
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SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Notes
represented by the Global New Note (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available next day funds to the accounts specified by the Global New Note
Holder. With respect to Certificated New Notes, NEHC will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, 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. NEHC expects that secondary trading in the
Certificated New Notes will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
NEHC and the Initial Purchaser entered into the Registration Rights
Agreement on the Closing Date. Pursuant to the Registration Rights Agreement,
NEHC agreed to file with the Commission the Exchange Offer Registration
Statement of which this Prospectus is a part on the appropriate form under the
Securities Act with respect to the New Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, NEHC will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. If any Holder of Transfer Restricted
Securities notifies NEHC prior to the 20th day following consummation of the
Exchange Offer that (i) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (ii) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (iii) that it is a
broker-dealer and owns Notes acquired directly from NEHC or an affiliate of
NEHC, NEHC will file with the Commission a Shelf Registration Statement to cover
resales of the Notes by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. NEHC will use its best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted Securities"
means each Note until (i) the date on which such Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Note for a
New Note, the date on which such New Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Act.
The Registration Rights Agreement provides among other things, that
(i)unless the Exchange Offer would not be permitted by applicable law or
Commission policy, NEHC will commence the Exchange Offer and use its best
efforts to issue on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission,
New Notes in exchange for all Notes tendered prior thereto in the Exchange Offer
and (ii) if obligated to file the Shelf Registration Statement, NEHC will use
its best efforts to file the Shelf Registration Statement with the Commission on
or prior to 45 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 120 days
after such obligation arises. If (a) fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) fails to consummate the
Exchange Offer within 30 business days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then NEHC will pay Liquidated
Damages to each Holder of Notes, with respect to the first 90-day period
immediately following the
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occurrence of the first Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of Notes held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 principal amount of Notes. All accrued
Liquidated Damages will be paid by NEHC on each Damages Payment Date to the
Global Note Holder by wire transfer of immediately available funds or by federal
funds check and to Holders of Certificated Notes by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses if
no such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to NEHC
(as described in the Registration Rights Agreement) in order to participate in
the Exchange Offer and 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 their Notes included in the Shelf
Registration Statement and benefit from the provisions regarding Liquidated
Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accreted Value" means, for each $1,000 face amount of Notes, as of any
date of determination prior to July 15, 2002, the sum of (i) the initial
offering price of each Note and (ii) that portion of the excess of the principal
amount of each Note over such initial offering price which shall have been
accreted thereon through such date, such amount to be so accreted on a daily
basis and compounded semi-annually on each July 15 and January 15 at the rate of
12 3/8% per annum from the date of issuance of the Notes through the date of
determination.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices and other than a Receivables Transaction
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of NEHC and its Restricted Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "-- Change of Control" and/or the provisions described above
under the caption "-- Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and (ii) the issue or sale by NEHC or
any of its Restricted Subsidiaries of Equity Interests of any of NEHC's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $3.0 million or (b) for net proceeds in excess of $3.0
million. Notwithstanding the foregoing: (i) a transfer of assets by NEHC to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
NEHC or to another Wholly Owned Restricted Subsidiary, (ii) an issuance
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of Equity Interests by a Wholly Owned Restricted Subsidiary to NEHC or to
another Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "-- Restricted
Payments" will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the New Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition and (vi)
securities quoted by the Nasdaq National Market or listed on a United States,
Canadian or Western European national securities exchange.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of NEHC and its Subsidiaries taken as a whole to
any "person" (as such term is used in Section 13(d)(3) of the Exchange Act)
other than the Principals or their Related Parties (as defined below), (ii) the
adoption of a plan relating to the liquidation or dissolution of NEHC, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of NEHC
(measured by voting power rather than number of shares), (iv) the first day on
which a majority of the members of the Board of Directors of NEHC are not
Continuing Directors or (v) NEHC consolidates with, or merges with or into, any
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, NEHC, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of NEHC is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of NEHC outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such issuance).
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) projected
quantifiable improvements in operating results (on an annualized basis) due to
cost reductions calculated in accordance with Article 11 of Regulation S-X under
the Securities Act and evidenced by (A) in the case of cost reductions of less
than $10.0 million, an Officers' Certificate delivered to the Trustee and (B) in
the case of cost reductions of $10.0 million or more, a resolution of the Board
of Directors set forth in an Officers' Certificate delivered to the Trustee,
minus (vi) non-cash items increasing such Consolidated Net Income for such
period. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to NEHC by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iv) the cumulative effect of a change in accounting principles shall
be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to NEHC or one of its Restricted
Subsidiaries for purposes of the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock" and shall be
included for purposes of the covenant described under the caption "Restricted
Payments" only to the extent of the amount of dividends or distributions paid in
cash to NEHC or one of its Restricted Securities.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of
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such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups (other
than write-ups resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of NEHC who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agent" means the Bank of America, in its capacity as Administrative
Agent for the lenders party to the New Credit Facility, or any successor thereto
or any person otherwise appointed.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the New Notes mature; provided, however,
that any Capital Stock that would not qualify as Disqualified Stock but for
change of control provisions shall not constitute Disqualified Stock if the
provisions are not more favorable to the holders of such Capital Stock than the
provisions described under "-- Change of Control" applicable to the Holders of
the New Notes.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of NEHC and its Subsidiaries
(other than Indebtedness under the New Credit Facility) in existence on the date
of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of NEHC, times (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that NEHC or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the
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Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by NEHC or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Global Notes" means the Rule 144A Global Note, the Regulation S Temporary
Global Notes and the Regulation S Permanent Global Notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such 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 currency rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to NEHC or to the creditors of
NEHC, as such, or to the assets of NEHC, or (ii) any liquidation, dissolution,
reorganization or
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winding up of NEHC, whether voluntary or involuntary, and involving insolvency
or bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of NEHC.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If NEHC or any Restricted Subsidiary of NEHC sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of NEHC such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of NEHC, NEHC shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Restricted Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "-- Restricted Payments."
"Junior Exchangeable Preferred Stock" means the 15% Junior Exchangeable
Preferred Stock Due 2009 of NEHC.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by NEHC or any of
its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Facility, dated as of the
date of the Indenture, by and among AmeriServe and Bank of America, providing
for up to $150.0 million of revolving credit borrowings and $205.0 million of
term credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither NEHC nor any
of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the New Notes
being offered hereby) of
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NEHC or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of NEHC or
any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any of the businesses and any other businesses
related to the businesses engaged in by NEHC and its respective Restricted
Subsidiaries on the date of the Indenture.
"Permitted Investments" means (a) any Investment in NEHC or in a Wholly
Owned Restricted Subsidiary of NEHC that is engaged in a Permitted Business; (b)
any Investment in Cash Equivalents; (c) any Investment by NEHC or any Restricted
Subsidiary of NEHC in a Person, if as a result of such Investment (i) such
Person becomes a Wholly Owned Restricted Subsidiary of NEHC that is engaged in a
Permitted Business or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, NEHC or a Wholly Owned Restricted Subsidiary of NEHC that is
engaged in a Permitted Business; (d) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of NEHC; (f) loans and advances made after the
date of the Indenture to Holberg Industries, Inc. not to exceed $12.0 million at
any time outstanding; and (g) other Investments made after the date of the
Indenture in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $12.0
million.
"Permitted Liens" means (i) Liens securing Indebtedness under the New
Credit Facility that was permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of NEHC; (iii) Liens on property of a Person existing at the
time such Person is merged into or consolidated with NEHC or any Restricted
Subsidiary of NEHC, provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with NEHC; (iv) Liens
on property existing at the time of acquisition thereof by NEHC or any
Restricted Subsidiary of NEHC, provided that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of NEHC or any
Restricted Subsidiary of NEHC with respect to obligations that do not exceed
$7.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by NEHC or such Restricted
Subsidiary, and (ix) Liens on assets of Unrestricted Subsidiaries that (A)
secure Non-Recourse Debt of Unrestricted Subsidiaries or (B) are incurred in
connection with a Receivables Transaction.
"Permitted Refinancing Indebtedness" means any Indebtedness of NEHC or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of NEHC or any of its Restricted Subsidiaries; provided that: (i)
except for Indebtedness used to extend, refinance, renew, replace, defease or
refund the New Credit Facility, the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses
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incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the New Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the New Notes on terms at least as favorable to the Holders
of New Notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by NEHC or by the Restricted Subsidiary who
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Principals" means Holberg Industries, Inc., John V. Holten, Orkla, ASA,
Nebco Evans Distributors, Inc., DLJ Merchant Banking, L.P., DLJ International
Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc.,
DLJ Merchant Banking Partners II, L.P., DLJ Merchant Banking Partners II-A,
L.P., DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJ
Diversified Partners - A, L.P., DLJ Millennium Partners, L.P., DLJ Millennium
Partners - A, L.P., DLJMB Funding II, Inc., DLJ First ESC LLC, DLJ EAB Partners,
L.P. and UK Investment Plan 1997 Partners.
"Public Equity Offering" means a public offering of Equity Interests (other
than Disqualified Stock) of (i) NEHC or (ii) Holberg.
"Receivables" means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable incurred in the ordinary course of business,
including, without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services, no matter how
evidenced, whether or not earned by performance, (iii) all rights to any goods
or merchandise represented by any of the foregoing after creation of the
foregoing, including, without limitation, returned or repossessed goods, (iv)
all reserves and credit balances with respect to any such accounts receivable or
account debtors, (v) all letters of credit, security or guarantees for any of
the foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (vii) all collection or deposit accounts relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.
"Receivables Subsidiary" means an Unrestricted Subsidiary exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, that (i) at no time shall NEHC and its Subsidiaries have more than one
Receivables Subsidiary and (ii) all Indebtedness or other borrowings of such
Unrestricted Subsidiary shall be Non-Recourse Debt.
"Receivables Transaction" means (i) the sale or other disposition to a
third party of Receivables or an interest therein, or (ii) the sale or other
disposition of Receivables or an interest therein to a Receivables Subsidiary
followed by a financing transaction in connection with such sale or disposition
of such Receivables (whether such financing transaction is effected by such
Receivables Subsidiary or by a third party to whom such Receivables Subsidiary
sells such Receivables or interests therein); provided that in each of the
foregoing, NEHC or its Subsidiaries receive at least 80% of the aggregate
principal amount of any Receivables financed in such transaction.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Notes" means the Regulation S Temporary Global Notes
or the Regulation S Permanent Global Notes as applicable.
"Regulation S Permanent Global Notes" means the permanent global notes that
are deposited with and registered in the name of the Depository or its nominee,
representing a series of Notes sold in reliance on Regulation S.
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"Regulation S Temporary Global Notes" means the temporary global notes that
are deposited with and registered in the name of the Depositary or its nominee,
representing a series of Notes sold in reliance on Regulation S.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that is deposited
with and registered in the name of the Depository or its nominee, representing a
series of Notes sold in reliance on Rule 144A.
"Senior Exchangeable Preferred Stock" means the 13 1/2% Senior Exchangeable
Preferred Stock Due 2009 of NEHC.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means all direct and indirect Restricted
Subsidiaries of the Senior Subordinated Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with NEHC or any Restricted Subsidiary of NEHC
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to NEHC or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of NEHC; (c)
is a Person with respect to which neither NEHC nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of NEHC or any of its Restricted
Subsidiaries; and (e) has at least one director on its board of directors that
is not a director or executive officer of NEHC or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director or
executive officer of NEHC or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Certain Covenants -- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted
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Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of NEHC as of such
date (and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," NEHC shall be in default of such covenant). The
Board of Directors of NEHC may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of NEHC of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall be permitted only if (i) such Indebtedness is permitted under the covenant
described under the caption "Certain Covenants Incurrence of Indebtedness and
Issuance of Preferred Stock," and (ii) no Default or Event of Default would be
in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain U.S. federal income tax
considerations relevant to the purchase, ownership and disposition of the New
Notes by the holders thereof. This summary does not purport to be a complete
analysis of all the potential federal income tax effects relating to the
purchase, ownership and disposition of the New Notes. There can be no assurance
that the U.S. Internal Revenue Service will take a similar view of such
consequences. Further, the discussion does not address all aspects of taxation
that may be relevant to particular purchasers in light of their individual
circumstances (including the effect of any foreign, state or local laws) or to
certain types of purchasers (including dealers in securities, insurance
companies, financial institutions, persons that hold New Notes that are a hedge
or that are hedged against currency risks or that are part of a straddle or
conversion transaction, persons whose functional currency is not the U.S. dollar
and tax-exempt entities) subject to special treatment under U.S. federal income
tax laws. The discussion below assumes that the New Notes are held as capital
assets.
The discussion of the U.S. federal income tax consequences set forth below
is based upon currently existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), judicial decisions, and administrative
interpretations. Because individual circumstances may differ, each prospective
purchaser of the New Notes is strongly urged to consult its own tax advisor with
respect to its particular tax situation and the particular tax effects of any
state, local, non-U.S. or other tax laws and possible changes in the tax laws.
As used herein, the term "U.S. Holder" means a beneficial owner of a New
Note who or which is for U.S. federal income tax purposes either (i) a citizen
or resident of the U.S., (ii) a corporation, partnership or other entity created
or organized in or under the laws of the U.S. or of any political subdivision
thereof, (iii) an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source or (iv) a trust if a court within the
U.S. is able to exercise primary supervision over the administration of the
trust and one or more U.S. fiduciaries have the authority to control all
substantial decisions of the trust. The term also includes certain former
citizens of the U.S. whose income and gain on the New Notes will be subject to
U.S. taxation. As used herein, the term "U.S. Alien Holder" means a beneficial
owner of a New Note that is not a U.S. Holder.
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ORIGINAL ISSUE DISCOUNT
The New Notes will be issued with original issue discount for U.S. federal
income tax purposes. U.S. Holders holding the New Notes will be required to
include original issue discount in gross income as it accrues, on a
constant-yield basis, regardless of their method of tax accounting. This means
that each U.S. Holder may be required to include amounts in gross income without
a corresponding receipt of cash attributable to such gross income. The amount of
original issue discount on the New Notes will be the excess of the stated
redemption price at maturity over the issue price of the New Notes. The issue
price of the New Notes will be the first price at which a substantial amount of
New Notes is sold (other than to an underwriter, placement agent or wholesaler).
The stated redemption price at maturity of a debt instrument is the total of all
payments to be made on the instrument other than payments of qualified stated
interest. Qualified stated interest includes only interest that is
unconditionally payable at least annually at a single fixed rate during the
entire term of the New Notes. None of the interest on the New Notes will be
qualified stated interest, and all of the interest payable on the New Notes will
be included in the stated redemption price at maturity.
U.S. Holders of the New Notes must include in gross income, as interest,
the daily portions of original issue discount each day during the taxable year
on which the New Notes were held. The daily portions of original issue discount
will be determined by allocating to each day in each accrual period the ratable
portion of the original issue discount allocable to that period. (The accrual
periods may be of any length and may vary in length over the term of a debt
instrument, provided that each accrual period is no longer than one year and
each scheduled payment of interest or principal occurs on either the final day
or the first day of an accrual period.) The original issue discount allocable to
an accrual period will equal the product of the adjusted issue price of the New
Notes at the beginning of the accrual period and the New Notes' yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period). Original
issue discount allocable to a final accrual period is the difference between the
amount payable at maturity and the adjusted issue price at the beginning of the
final accrual period. Special rules will apply for calculating original issue
discount for an initial short period. The adjusted issue price of the New Notes
at the start of any accrual period will be the issue price of the New Notes,
increased by the amount of original issue discount that accrued in all previous
accrual periods and decreased by the amount of any payments previously made on
the New Notes and any payment made on the first day of the current accrual
period. Because the U.S. Holders of the New Notes will include original issue
discount in income as it accrues, actual payments of cash interest on the New
Notes will not trigger any additional interest income to the U.S. Holders. Under
these rules, a U.S. Holder will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods. NEHC is
required to provide information returns stating the amount of original issue
discount accrued on New Notes held of record by persons other than corporations
and other exempt holders.
SALE OR OTHER TAXABLE DISPOSITION OF NEW NOTES
A U.S. Holder of a New Note will have a tax basis in the New Notes equal to
such U.S. Holder's purchase price of the New Note, increased by the amount of
original issue discount on the New Note that is included in the U.S. Holder's
gross income and decreased by payments of cash interest on the New Note received
by the U.S. Holder.
A U.S. Holder of a New Note will generally recognize gain or loss on the
sale, redemption or other taxable disposition of the New Note equal to the
difference (if any) between the amount realized from such sale, redemption or
disposition and the U.S. Holder's adjusted tax basis in the New Note. Such gain
or loss will generally be long-term capital gain or loss if the New Note has
been held for more than one year.
A U.S. Holder will recognize no gain or loss on the exchange of a Note for
a New Note pursuant to the Exchange Offer
OPTIONAL REDEMPTION; REPURCHASE AT THE OPTION OF HOLDERS
Under certain circumstances, NEHC has the right to redeem the Notes prior
to July 15, 2007. See "Description of New Notes -- Optional Redemption."
Moreover, upon a Change of Control, holders of New
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Notes will have the right to require the Company to repurchase their New Notes.
See "Description of New Notes -- Repurchase at the Option of Holders -- Change
of Control."
The presence of such options may affect the calculation of original issue
discount, among other things. The relevant Treasury Regulations provide that,
solely for purposes of the accrual of original issue discount, an issuer of a
debt instrument having an option or combination of options to redeem the debt
instrument prior to its stated maturity date will be presumed to exercise such
option or options in a manner that minimizes the yield on the debt instrument.
Conversely, a holder having an option to elect repayment of the debt instrument
prior to its stated maturity date or a combination of such options will be
presumed to exercise such option or options in a manner that maximizes the yield
on the debt instrument. If the exercise of such option or options to redeem the
debt instrument prior to its stated maturity date or to elect repayment of the
debt instrument prior to its stated maturity date actually occurs or does not
occur, contrary to the presumption made under the Treasury Regulations (a
"change of circumstances"), then, solely for purposes of the accrual of original
issue discount, the debt instrument is treated as reissued on the date of the
change in circumstances for an amount equal to its adjusted issue price on that
date.
APPLICABLE HIGH-YIELD DISCOUNT OBLIGATIONS
If the New Notes are considered to have "significant original issue
discount" and if the yield of the New Notes is at least five percentage points
above the applicable federal rate, for the calendar month in which the New Notes
are issued, NEHC will not be able to deduct for tax purposes any original issue
discount accruing with respect thereto until such interest is actually paid. In
addition, in that event, if the yield of the New Notes is more than six
percentage points above the applicable federal rate, then (i) a portion of such
interest corresponding to the yield in excess of six percentage points above the
applicable federal rate will not be deductible by NEHC at any time, and (ii) a
corporate holder may be entitled to treat the interest that is not deductible as
a dividend to the extent of the earnings and profits of NEHC, which dividend may
then qualify for the dividends-received deduction. In such event, corporate
holders should consult their tax advisors concerning the availability of the
dividends-received deduction.
TAX CONSEQUENCES TO U.S. ALIEN HOLDERS
Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning backup withholding:
(a) payments of principal or interest on the New Note (including
original issue discount) by the NEHC or any paying agent to a beneficial
owner of a New Note that is a U.S. Alien Holder, as defined above, will not
be subject to U.S. federal withholding tax, provided that, in the case of
interest, (i) such holder does not own, actually or constructively, 10% or
more of the total combined voting power of all classes of stock of NEHC
entitled to vote, (ii) such Holder is not, for U.S. federal income tax
purposes, a controlled foreign corporation related, directly or indirectly,
to NEHC through stock ownership, (iii) such Holder is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code, and (iv) the
certification requirements under Section 871(h) or Section 881(c) of the
Code and Treasury Regulations thereunder (summarized below) are met;
(b) a U.S. Alien Holder of a New Note will not be subject to U.S.
federal income tax on gains realized on the sale, exchange or other
disposition of such New Note, unless (i) such Holder is an individual who
is present in the U.S. for 183 days or more in the taxable year of sale,
exchange or other disposition, and certain other conditions are met; (ii)
such gain is effectively connected with the conduct by such Holder of a
trade or business in the U.S. and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the U.S. Alien
Holder or (iii) the U.S. Alien Holder is subject to tax pursuant to the
Code provisions applicable to certain U.S. expatriates; and
(c) a New Note held by an individual who is not a citizen or resident
of the U.S. at the time of his death will not be subject to U.S. federal
estate tax as a result of such individual's death, provided that, at the
time of such individual's death, the individual does not own, actually or
constructively, 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and payments
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with respect to such New Note would not have been effectively connected
with the conduct by such individual of a trade or business in the U.S.
Sections 871(b) and 881(c) of the Code and current Treasury Regulations
thereunder require that, in order to obtain the exemption from withholding tax
described in paragraph (a) above, either (i) the beneficial owner of a New Note
must certify, under penalties of perjury, to the Company or paying agent, as the
case may be, that such owner is a U.S. Alien Holder and must provide such
owner's name and address, and U.S. taxpayer identification number, if any, or
(ii) a securities clearing organization, bank or other financial institution
that holds customers securities in the ordinary course of its trade or business
(a "Financial Institution") and holds the New Note on behalf of the beneficial
owner thereof must certify, under penalties of perjury, to NEHC or paying agent,
as the case may be, that such certificate has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and must furnish the payor with a copy thereof. A certificate described in this
paragraph is effective only with respect to payments of interest made to the
certifying U.S. Alien Holder after delivery of the certificate in the calendar
year of its delivery and the two immediately succeeding calendar years. Under
temporary U.S. Treasury Regulations, such requirement will be fulfilled if the
beneficial owner of a New Note certifies on Internal Revenue Service Form W-8,
under penalties of perjury, that it is a U.S. Alien Holder and provides its name
and address, and any Financial Institution holding the New Note on behalf of the
beneficial owner files a statement with the withholding agent to the effect that
it has received such a statement from the beneficial owner (and furnishes the
withholding agent with a copy thereof).
Recently proposed Treasury Regulations (the "Proposed Regulations") would
provide alternative methods for satisfying the certificate requirement described
above. The Proposed Regulations also would require, in the case of New Notes
held by a foreign partnership, that (x) the certification be provided by the
partners rather than by the foreign partnership and (y) the partnership provide
certain information, including a United States taxpayer identification number. A
look-through rule would apply in the case of tiered partnerships. The Proposed
Regulations are proposed to be effective for payments made after December 31,
1997. There can be no assurance that the Proposed Regulations will be adopted or
as to the provisions that they will include if and when adopted in temporary or
final form.
If a U.S. Alien Holder of a New Note is engaged in a trade or business in
the U.S., and if interest on the New Note, or gain realized on the sale,
exchange or other disposition of the New Note, is effectively connected with the
conduct of such trade or business and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the U.S. Alien
Holder, the U.S. Alien Holder, although exempt from U.S. withholding tax, will
generally be subject to regular U.S. income tax on such interest or gain in the
same manner as if it were a U.S. Holder. In lieu of the certificate described in
the preceding paragraph, such a holder will be required to provide NEHC a
properly executed Internal Revenue Service Form 4224 in order to claim an
exemption from withholding tax. In addition, if such U.S. Alien Holder is a
foreign corporation, it may be subject to an additional branch profits tax equal
to 30% (or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments. For purposes of the branch profits tax, interest on and any gain
recognized on the sale, exchange or other disposition of a New Note will be
included in the earnings and profits of such U.S. Alien Holder if such interest
or gain is effectively connected with the conduct by the U.S. Alien Holder of a
trade or business in the U.S. The Treasury has promulgated proposed regulations
with respect to withholding that are proposed to be effective for payments of
income after December 31, 1997, which, if finalized, would change some of the
withholding reporting requirements described above, subject to certain
grandfathering provisions.
BACKUP WITHHOLDING
Under current U.S. federal income tax law, a 31% backup withholding tax
requirement applies to certain payments of interest on, and the proceeds of a
sale, exchange or redemption of, the New Notes.
Backup withholding will generally not apply with respect to payments made
to certain exempt recipients, such as corporations or other tax-exempt entities.
In the case of a non-corporate U.S. Holder, backup withholding will apply only
if such holder (i) fails to furnish its TIN, which, for an individual, would be
his
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Social Security number, (ii) furnishes an incorrect TIN, (iii) is notified by
the Internal Revenue Service that it has failed to properly report payments of
interest and dividends or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that it has furnished a correct TIN and has not been
notified by the Internal Revenue Service that it is subject to backup
withholding for failure to report interest and dividend payments.
In the case of a U.S. Alien Holder, under current Treasury Regulations,
backup withholding will not apply to payments made by NEHC or any paying agent
thereof on a New Note if such holder has provided the required certification
under penalties of perjury that it is not a U.S. Holder (as defined above) or
has otherwise established an exemption, provided in each case that NEHC or such
paying agent, as the case may be, does not have actual knowledge that the payee
is a U.S. Holder.
Under current Treasury Regulations, if payments on a New Note are made to
or through a foreign office of a custodian, nominee or other agent acting on
behalf of a beneficial owner of a New Note, such custodian, nominee or other
agent acting will not be required to apply backup withholding to such payments
made to such beneficial owner. However, under proposed Treasury Regulations,
backup withholding may apply if such custodian, nominee or other agent has
actual knowledge that the payee is a U.S. Holder.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a New Note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, under proposed
Treasury Regulations, backup withholding may apply if such broker has actual
knowledge that the payee is a U.S. Holder. In the case of proceeds from a sale
of a New Note by a U.S. Alien Holder paid to or through the foreign office of a
U.S. broker or a foreign office of a foreign broker that is (i) a controlled
foreign corporation for U.S. tax purposes or (ii) a person 50% or more of whose
gross income for the three-year period ending with the close of the taxable year
preceding the year of payment (or for the part of that period that the broker
has been in existence) is effectively connected with the conduct of a trade or
business within the U.S., information reporting is required unless the broker
has documentary evidence in its files that the payee is not a U.S. person and
certain other conditions are met, or the payee otherwise establishes an
exemption. Payments to or through the U.S. office of a broker will be subject to
backup withholding and information reporting unless the holder certifies, under
penalties of perjury, that it is not a U.S. Holder and that certain other
conditions are met or otherwise establishes an exemption.
Holders of New Notes should consult their tax advisors regarding the
application of backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available. Any amounts withheld from payment under the backup
withholding rules will be allowed as a credit against a Holder's U.S. federal
income tax liability and may entitle such holder to a refund; provided that the
required information is furnished to the Internal Revenue Service.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO THE PROSPECTIVE HOLDER OF THE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR NON-U.S. INCOME
TAX LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
("Participating Broker-Dealer") pursuant to the Exchange Offer must acknowledge
that it will deliver a Prospectus in connection with the initial sales of such
New Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with the sales
of New Notes received in exchange for Notes where such Notes were acquired as a
result of market-making activities or other trading activities. NEHC has agreed
that it will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale and
Participating Broker-Dealers shall be authorized to deliver this prospectus for
a period not exceeding 120 days after the Expiration Date. In
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<PAGE> 97
addition, until , 1997 90 days after the date of this Prospectus),
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
NEHC will not receive any proceeds from any sales of the New Notes by
participating Broker-Dealers. New Notes received by Participating 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 at 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 Participating Broker-Dealer that resells the New Notes that were
received by it for its own account pursuant to the Exchange Offer. Any broker or
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 may 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, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal. See "The Exchange
Offer."
DLJMB, an affiliate of DLJ, and certain of its affiliates beneficially own
approximately 36.1% of the common stock of NEHC. Peter T. Grauer, a principal of
DLJ, is a member of the Board of Directors of NEHC and the Company; Benoit
Jamar, a principal of DLJ, became a member of the Board of Directors of NEHC and
the Company as of the Closing. Further, DLJ Capital Funding, Inc., an affiliate
of DLJ, is acting as documentation agent in connection with the New Credit
Facility, for which it received certain customary fees and expenses. In
addition, DLJ received a merger advisory fee of approximately $4.0 million in
cash from the Company upon consummation of the Transactions.
In connection with the Transactions, an affiliate of DLJ has received
customary fees in connection with their agreement to finance a portion of the
purchase price for PFS to the extent the Company cannot arrange alternative
financing for the Acquisition prior to the Closing.
See "Certain Relationships and Related Party Transactions."
LEGAL MATTERS
Certain legal matters in connection with the New Notes offered hereby will
be passed upon for NEHC by Wachtell, Lipton, Rosen & Katz, New York, New York.
EXPERTS
The consolidated financial statements of NEHC at December 30, 1995 and
December 28, 1996 and for each of the three years in the period ended December
28, 1996 appearing in this Prospectus and in the Registration Statement, and the
financial statement schedule for each of the three years in the period ended
December 28, 1996 included in the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement, and are included
herein in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of PFS (A Division of PepsiCo, Inc. Held For Sale)
as of December 27, 1995 and December 25, 1996 and for each of the years in the
three-year period ended December 25, 1996 appearing in this Prospectus and in
the Registration Statement have been audited by KPMG Peat Marwick LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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The consolidated statements of operations, stockholders' equity, and cash
flows of AmeriServ Food Company for each of the two years in the period ended
December 30, 1995 appearing in this Prospectus and in the Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
CHANGE IN COMPANY'S ACCOUNTANT
Prior to the acquisition by the Company of AmeriServ, the Company's
principal independent auditors were Deloitte & Touche LLP ("Deloitte & Touche").
At the time of its acquisition by the Company the principal independent auditors
for AmeriServ were Ernst & Young LLP ("Ernst & Young"). In July 1996 the Company
invited both Deloitte & Touche and Ernst & Young to submit proposals to act as
principal independent auditors to the Company. On or about October 1, 1996, the
Company notified Deloitte & Touche that Deloitte & Touche had been dismissed as
the Company's principal accountants. On October 1, 1996, the Company selected
and retained Ernst & Young as the Company's principal independent auditors for
the Company's 1996 fiscal year. The Company's Board of Directors approved of
this change.
Deloitte & Touche's reports on the Company's financial statements, which
financial statements were prepared on a private entity basis and not in
accordance with the requirements of Regulation S-X, for the fiscal years ended
December 31, 1994 and December 30, 1995 did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or procedure, or accounting principles. During the fiscal years
ended December 31, 1994 and December 30, 1995 and through October 1, 1996 there
were no disagreements with Deloitte & Touche, as described in Item
304(a)(1)(iv), nor were there any events that would be "reportable events"
pursuant to Item 304(a)(1)(v) of Regulation S-K.
The Company's financial statements, which financial statements have been
presented on a basis which will comply with the requirements of Regulation S-X
for the fiscal years ended December 31, 1994 and December 30, 1995 included in
this Prospectus have been audited by Ernst & Young.
As required pursuant to Item 304 of Regulation S-K, filed as Exhibit 16.1
hereto is a letter from Deloitte & Touche addressed to the Securities and
Exchange Commission (the "SEC") stating that Deloitte & Touche agrees with the
statements in the first and fourth sentences of the first paragraph and the
statements in the second paragraph (and has no basis to agree or disagree with
the other statements) of this section.
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INDEX OF CERTAIN DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Accounts Receivable Program........ 32
Acquisition........................ 5
Administrative Agent............... 32
Affiliate Transaction.............. 72
Agents............................. 32
AmeriServ.......................... 19
AmeriServe......................... 5
AmeriServe Funding................. 60
AmeriServe Transactions............ 8
Applicable Reserve Ratio........... 61
Asset Purchase Agreement........... 29
BancAmerica Securities............. 32
Bank of America NT&SA.............. 32
Banks.............................. 61
Base Amount........................ 61
Base Rate.......................... 62
CAGR............................... 5
Calculation Date................... 85
Carrying Cost Receivable Reserve... 61
Certificate of Incorporation....... 19
change of circumstances............ 92
Change of Control Offer............ 65
Change of Control Payment.......... 65
Change of Control Payment Date..... 65
Code............................... 90
Commission......................... 96
Company............................ 5
Covenant Defeasance................ 75
Depository......................... 3
Distribution Agreement............. 54
DLJ................................ 3
DLJMB.............................. 30
DLJMB Equity Investment............ 30
DLJMBII............................ 30
DTC................................ 3
EBITDA............................. 13
Effectiveness Target Date.......... 80
Equity Contribution................ 30
ERISA.............................. 87
Escrow Agent....................... 54
Euroclear.......................... 5
Evans.............................. 19
Exchange Act....................... 4
<CAPTION>
PAGE NO.
--------
<S> <C>
Exchange Offer..................... 1
Financial Institution.............. 93
foreign purchasers................. 85
Global Notes....................... 85
Guarantors......................... 62
Holberg............................ 19
HWPI............................... 5
IDA................................ 55
Indebtedness....................... 85
Indenture.......................... 1
Indirect Participants.............. 78
Initial Purchaser.................. 3
Invested Amount.................... 61
Junior Preferred Stock............. 30
Junior Securities.................. 30
Legal Defeasance................... 75
Named Executive Officers........... 57
NEBCO.............................. 19
NEBCO EVANS........................ 19
NED................................ 58
NEHC............................... 1
NEHC Subsidiaries.................. 5
NEHC Transactions.................. 8
Net Eligible Receivables........... 61
New Credit Facility................ 32
New Notes.......................... 1
New Warrants....................... 30
Notes.............................. 1
Old NEHC Notes..................... 30
Orkla.............................. 30
Participants....................... 70
Payment Default.................... 74
PepsiCo............................ 1
PepsiCo Chains..................... 54
Post............................... 5
Post Contribution.................. 31
Post Holdings...................... 30
Preferred Stock Contribution....... 31
Proposed Regulations............... 93
Receivables........................ 60
reference rate..................... 49
Registration Default............... 80
Registration Rights Agreement...... 1
</TABLE>
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<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Regulation S Permanent Global
Notes............................ 88
Revolving Credit Facility ......... 32
Rule 144A Global Note.............. 89
Securities Act..................... 1
Senior Preferred Stock............. 30
Shelf Registration Statement....... 12
Subordinated Notes Offering........ 8
Term Loan A........................ 62
Term Loan B........................ 62
PAGE NO.
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<S> <C>
Term Loan C........................ 62
Term Loan D........................ 62
Term Loans......................... 32
Transactions....................... 8
Trust.............................. 60
Trustee............................ 64
U.S. Alien Holder.................. 90
U.S. Holder........................ 90
Warrant Shares..................... 30
</TABLE>
98
<PAGE> 101
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEBCO EVANS HOLDING COMPANY
Unaudited Pro Forma Consolidated Balance Sheet as of March 29, 1997................. P-3
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of March 29, 1997........ P-4
Unaudited Pro Forma Consolidated Statement of Income for the Fiscal Year 1996....... P-6
Unaudited Pro Forma Consolidated Statement of Income for the First Quarter of
1997............................................................................. P-7
Unaudited Pro Forma Consolidated Statement of Income for the First Quarter of
1996............................................................................. P-8
Notes to Unaudited Pro Forma Consolidated Statements of Income for Fiscal Year 1996,
First Quarter of 1997 and First Quarter of 1996.................................. P-9
</TABLE>
P-1
<PAGE> 102
NEBCO EVANS HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth the Unaudited Pro Forma Consolidated Balance Sheet
and the Unaudited Pro Forma Consolidated Statements of Income of Nebco Evans
Holding Company, in each case giving effect to the Transactions as if such
Transactions had been consummated on March 29, 1997 (in the case of the
Unaudited Pro Forma Consolidated Balance Sheet) and at the beginning of the
earliest period presented (in the case of the Unaudited Pro Forma Consolidated
Statements of Income). The Unaudited Pro Forma Consolidated Financial Statements
of NEHC do not purport to present the financial position or results of
operations of NEHC had the transactions assumed herein occurred on the dates
indicated, nor are they necessarily indicative of the results of operations
which may be expected to occur in the future.
P-2
<PAGE> 103
NEBCO EVANS HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 29, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PRO FORMA
NEHC HWPI PFS ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 4,060 $ -- $ 176 $ 45,181(3) $ 49,417
Accounts receivable........................ 86,538 -- 284,116 (225,000)(4) 145,654
Inventories................................ 69,436 -- 95,806 165,242
Other current assets....................... 15,654 1,020 21,109 (17,634)(1) 20,149
-------- ------- -------- --------- ----------
Total current assets..................... 175,688 1,020 401,207 (197,453) 380,462
Property and equipment, net.................. 37,648 11,559 88,247 (7,397)(1) 120,057
(10,000)(2)
Other assets:
Goodwill................................... 103,145 -- 218 588,846(2) 692,209
Other...................................... 29,367 -- 130 26,600(3) 53,122
(2,000)(3)
(225)(5)
(750)(6)
-------- ------- -------- --------- ----------
$345,848 $ 12,579 $489,802 $ 397,621 $1,245,850
======== ======= ======== ========= ==========
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt....... $ 2,597 $ 99 $ 397 $ (933)(3) $ 2,160
Accounts payable........................... 125,895 36 177,688 (48,445)(1) 255,174
Due to PepsiCo............................. -- -- 123,429 (123,429)(1) --
Accrued liabilities........................ 11,330 -- 69,041 (43,164)(1) 63,107
11,000(3)
14,900(2)
-------- ------- -------- --------- ----------
Total current liabilities................ 139,822 135 370,555 (190,071) 320,441
Non-current liabilities...................... 14,064 750 29,254 (25,006)(1) 33,412
15,100(2)
(750)(6)
Long-term debt:
Existing credit facilities................. 133,824 -- -- (133,824)(3) --
Senior notes............................... 27,009 -- -- (27,009)(3) --
Term Loans................................. -- -- -- 205,000(3) 205,000
Senior Discount Notes due 2007............. -- -- -- 55,000(3) 55,000
Senior Subordinated Notes due 2007......... -- -- -- 500,000(3) 500,000
Other...................................... 15,250 11,218 52 (4,862)(3) 21,658
-------- ------- -------- --------- ----------
Total long-term debt..................... 176,083 11,218 52 594,305 781,658
-------- ------- -------- --------- ----------
Total liabilities................... 329,969 12,103 399,861 393,578 1,135,511
-------- ------- -------- --------- ----------
Stockholder's equity:
Preferred.................................. 17,350 -- 115,000(5) 132,350
Common..................................... (1,471) 476 -- (1,725)(5) (22,011)
(9,600)(3)
(2,000)(3)
(7,691)(3)
Divisional................................. -- -- 89,941 (89,941)(5) --
-------- ------- -------- --------- ----------
Total stockholder's equity............... 15,879 476 89,941 4,043 110,339
-------- ------- -------- --------- ----------
$345,848 $ 12,579 $489,802 $ 397,621 $1,245,850
======== ======= ======== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet
P-3
<PAGE> 104
NEBCO EVANS HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 29, 1997
(IN THOUSANDS)
Adjustments to reflect the Acquisition (the final purchase price allocation
will be based upon a final determination of the fair values of the net assets
acquired):
(1) Represents the elimination of assets and liabilities which will
not be acquired or assumed in the Acquisition. The reduction in other
current assets represents prepaid workers' compensation expense ($7,356)
and deferred taxes ($10,278). The reduction to property and equipment
($7,397) represents leasehold improvements and data center equipment at
facilities being retained by PepsiCo. The reduction in accounts payable
($48,445) represents certain accounts payable incurred by PFS as a division
of PepsiCo which will be paid by PepsiCo. The Due to PepsiCo ($123,429)
entry represents the net payable due to PepsiCo in connection with
operating activities, which will not be an obligation of the Company. The
reduction in accrued liabilities ($43,164) primarily represents income and
other taxes to be paid by PepsiCo. The reduction in non-current liabilities
represents deferred compensation and rent expense ($11,404) to be retained
by PepsiCo, deferred income tax liabilities of PepsiCo ($3,602) and
postretirement benefit obligations of PFS ($10,000) not assumed by the
Company.
(2) Records excess of cost over fair value of assets acquired
resulting from the preliminary purchase price allocation as follows (the
final purchase price is subject to a negotiated price adjustment for
working capital):
<TABLE>
<S> <C>
Cash purchase price............................................... $830,000
Post-closing purchase price adjustment............................ 8,000
Fees and expenses................................................. 15,800
Total purchase price.............................................. 853,800
Purchase price allocated to:
Historical net assets of PFS less assets and liabilities not
transferred.................................................. 304,954
Leasehold improvements in duplicate facilities.................. (10,000)
Additional liabilities.......................................... (30,000)
--------
Subtotal..................................................... 264,954
--------
Excess of cost over fair value of net assets acquired............. $588,846
========
</TABLE>
The additional liabilities of $30,000 represent the current ($14,900)
and non-current ($15,100) accruals for costs to be incurred by the Company
related to the termination of redundant administrative and operating
employees ($9,100); lease termination costs in connection with the closing
of facilities which will not be used by the Company ($19,800) and certain
other costs to exit PFS activities ($1,100).
P-4
<PAGE> 105
NEBCO EVANS HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(3) Represents the following:
<TABLE>
<S> <C>
Proceeds under the New Credit Facility............................ $205,000
Proceeds from the Offering........................................ 55,000
Proceeds from the Subordinated Note Offering...................... 500,000
Proceeds from DLJMB Equity Investment............................. 115,000
--------
$875,000
========
Use of Proceeds:
Reduction of existing indebtedness:
Current maturities of long-term debt............................ $ 933
Existing credit facilities...................................... 133,824
Senior notes.................................................... 34,700
Other........................................................... 4,862
Equity Contribution to AmeriServe to partially finance the
Acquisition..................................................... 130,000
Deferred financing fees and offering costs........................ 26,600
One time commitment and securitization fees expensed at closing... 9,600
Acquisition of remaining 55% interest in HWPI..................... 1,500
Cash for working capital.......................................... 45,181
Partially finance the Acquisition (excludes $11 million payable
subsequent to Closing).......................................... 487,800
--------
$875,000
========
</TABLE>
In connection with the reduction of existing indebtedness, $2,000 of
deferred financing costs were written off.
(4) Represents the sale of accounts receivable ($370,654) to a
special-purpose entity owned by the Company for $225,000 in cash
pursuant to the Accounts Receivable Program, and a $145,654 undivided
interest in the accounts receivable trust.
(5) Adjustments to stockholder's equity:
<TABLE>
<S> <C>
Sale of NEHC Senior Preferred Stock............................... $ 60,000
Sale of NEHC Junior Preferred Stock............................... 55,000
Represents the elimination of the divisional equity of PFS in
purchase accounting............................................. (89,941)
Extraordinary loss on redemption of senior notes.................. (7,691)
Non-capitalized expenses associated with the Transactions......... (9,600)
Write-off of deferred financing costs............................. (2,000)
Acquisition of HWPI............................................... (1,725)
--------
Increase in stockholder's equity................................ $ 4,043
========
</TABLE>
(6) To eliminate intercompany balances.
P-5
<PAGE> 106
NEBCO EVANS HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL ACQUISITION OF PRO FORMA
NEHC HWPI PFS AMERISERV(9) ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $1,389,601 $ 500 $3,422,086 $ 63,292 $ -- $4,875,479
Cost of goods sold............. 1,249,135 -- 3,080,602 57,190 -- 4,386,927
---------- ------ ---------- ------- -------- ----------
Gross profit................... 140,466 500 341,484 6,102 -- 488,552
---------- ------ ---------- ------- -------- ----------
Operating expenses:
Distribution, selling and
administrative............. 112,541 (831) 241,911 6,660 (11,100)(1) 352,250
(16,400)(2)
15,469(6)
4,000(4)
Depreciation................. 5,523 331 19,830 158 (1,000)(3) 24,842
Amortization................. 4,849 31 -- 507 14,721(7) 20,108
Integration costs............ 3,800 -- -- -- -- 3,800
Gain on sale of assets....... (4,283) -- -- -- -- (4,283)
---------- ------ ---------- ------- -------- ----------
Total operating expenses....... 122,430 (469) 261,741 7,325 5,690 396,717
---------- ------ ---------- ------- -------- ----------
Operating income............... 18,036 969 79,743 (1,223) (5,690) 91,835
Interest expense............... 15,895 1,182 15,566 846 47,500(5) 80,989
Minority interest.............. 2,345 -- -- -- -- 2,345
---------- ------ ---------- ------- -------- ----------
Income (loss) before income
taxes........................ (204) (213) 64,177 (2,069) (53,190) 8,501
Provision for income taxes..... 1,300 -- 24,597 17 (22,599)(8) 3,315
---------- ------ ---------- ------- -------- ----------
Net income (loss).............. $ (1,504) $ (213) $ 39,580 $ (2,086) $ (30,591) $ 5,186
========== ====== ========== ======= ======== ==========
OTHER DATA:
EBITDA......................... $ 27,925 $1,331 $ 99,573 $ (558) $ 8,031 $ 136,302
Depreciation and
amortization................. 10,372 362 19,830 665 13,721 44,950
Capital expenditures........... 12,701 -- 28,771 38 -- 41,510
</TABLE>
See accompanying notes to unaudited pro forma consolidated statements of income.
P-6
<PAGE> 107
NEBCO EVANS HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER 1997
------------------------------------------------------------------
HISTORICAL HISTORICAL HISTORICAL PRO FORMA
NEHC HWPI PFS ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............................. $ 335,311 $ 125 $ 720,524 $ -- $1,055,960
Cost of goods sold..................... 300,682 -- 644,842 -- 945,524
-------- ----- -------- -------- ----------
Gross profit........................... 34,629 125 75,682 -- 110,436
-------- ----- -------- -------- ----------
Operating expenses:
Distribution, selling and
administrative.................... 30,396 (208) 56,319 (2,775)(1) 84,499
(4,100)(2)
3,867(6)
1,000(4)
Depreciation......................... 1,837 93 4,906 (250)(3) 6,586
Amortization......................... 1,035 2 3,680(7) 4,717
-------- ----- -------- -------- ----------
Total operating expenses............... 33,268 (113) 61,225 1,422 95,802
-------- ----- -------- -------- ----------
Operating income....................... 1,361 238 14,457 (1,422) 14,634
Interest expense....................... 4,650 294 3,996 11,307(5) 20,247
-------- ----- -------- -------- ----------
Income (loss) before income taxes...... (3,289) (56) 10,461 (12,729) (5,613)
Provision (credit) for income taxes.... (649) -- 4,155 (5,695)(8) (2,189)
-------- ----- -------- -------- ----------
Net income (loss)...................... $ (2,640) $ (56) $ 6,306 $ (7,034) $ (3,424)
======== ===== ======== ======== ==========
OTHER DATA:
EBITDA................................. $ 4,233 $ 333 $ 19,363 $ 2,008 $ 25,937
Depreciation and amortization.......... 2,872 95 4,906 3,430 11,303
Capital expenditures................... 2,346 -- 6,212 -- 8,558
</TABLE>
See accompanying notes to unaudited pro forma consolidated statements of income.
P-7
<PAGE> 108
NEBCO EVANS HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER 1996
----------------------------------------------------------------------------------
HISTORICAL HISTORICAL HISTORICAL ACQUISITION OF PRO FORMA
NEHC HWPI PFS AMERISERV(9) ADJUSTMENTS PRO FORMA
---------- ---------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $ 250,922 $125 $ 766,688 $ 63,292 $ -- $1,081,027
Cost of goods sold............. 225,184 -- 689,650 57,190 -- 972,024
-------- ---- -------- ------- ------- ----------
Gross profit................... 25,738 125 77,038 6,102 -- 109,003
-------- ---- -------- ------- ------- ----------
Operating expenses:
Distribution, selling and
administrative............ 22,336 (208) 56,290 6,660 (2,775)(1) 83,070
(4,100)(2)
3,867(6)
1,000(4)
Depreciation................. 973 104 4,705 158 (250)(3) 5,690
Amortization................. 704 7 -- 507 3,680(7) 4,898
-------- ---- -------- ------- ------- ----------
Total operating expenses....... 24,013 (97) 60,995 7,325 1,422 93,658
-------- ---- -------- ------- ------- ----------
Operating income............... 1,725 222 16,043 (1,223) (1,422) 15,345
Interest expense............... 3,305 296 3,597 -- 13,049(5) 20,247
-------- ---- -------- ------- ------- ----------
Income (loss) before income
taxes........................ (1,580) (74) 12,446 (1,223) (14,471) (4,902)
Provision (credit) for income
taxes........................ (242) -- 4,874 -- (6,544)(8) (1,912)
-------- ---- -------- ------- ------- ----------
Net income (loss).............. $ (1,338) $(74) $ 7,572 $ (1,223) $(7,927) $ (2,990)
======== ==== ======== ======= ======= ==========
OTHER DATA:
EBITDA......................... $ 3,402 $333 $ 20,748 $ (558) $ 2,008 $ 25,933
Depreciation and
amortization................. 1,677 111 4,705 665 3,430 10,588
Capital expenditures........... 875 -- 7,193 38 -- 8,106
</TABLE>
See accompanying notes to unaudited pro forma consolidated statements of income.
P-8
<PAGE> 109
NEBCO EVANS HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(1) Represents net cost reductions in accordance with the terms of the Asset
Purchase Agreement for the following items:
<TABLE>
<CAPTION>
FIRST QUARTER
FISCAL ------------------
1996 1996 1997
------- ------- -------
<S> <C> <C> <C>
Reduction in lease expense for existing PFS facilities
being retained by PepsiCo............................. $ 4,100 $ 1,025 $ 1,025
Net reduction in data processing costs charged by
PepsiCo to PFS under the terms of a one year data
processing service contract........................... 4,100 1,025 1,025
Reduction of employee retirement expense due to the
termination of pension and retirement plans of
PepsiCo, net of amounts to be paid under AmeriServe's
plans................................................. 1,900 475 475
Compensation of certain PFS employees retained by
PepsiCo............................................... 1,000 250 250
------- ------ ------
Net cost savings........................................ $11,100 $ 2,775 $ 2,775
======= ====== ======
</TABLE>
(2) Represents the following initiatives in accordance with the Company's
business plan to integrate PFS:
<TABLE>
<CAPTION>
FIRST QUARTER
FISCAL ------------------
1996 1996 1997
------- ------- -------
<S> <C> <C> <C>
Payroll reductions for the elimination of duplicative
administrative personnel.............................. $ 7,000 $ 1,750 $ 1,750
Reduction in warehouse facilities and operating
personnel............................................. 6,800 1,700 1,700
Reduction of marketing personnel........................ 2,600 650 650
------- ------ ------
Net cost savings........................................ $16,400 $ 4,100 $ 4,100
======= ====== ======
</TABLE>
(3) Represents reduction of $1,000 annually in depreciation expense as a result
of the closure of certain distribution centers.
(4) Represents an annual management fee of $4,000 to be paid by the Company to
Holberg Industries, Inc. in accordance with the management agreement.
(5) Represents the change in interest expense related to the Transactions:
<TABLE>
<CAPTION>
PRINCIPAL FIRST QUARTER
AMOUNT FISCAL -------------------
OF DEBT 1996 1996 1997
--------- -------- ------- -------
<S> <C> <C> <C> <C>
Recording of pro forma interest:
Term Loans at rates from 8.375% to
9.375%............................... $ 205,000 $18,124.. $ 4,531 $ 4,531
New Senior Discount Notes due 2007 at
12.375%.............................. 55,000 7,017 1,754 1,754
New Senior Subordinated Notes due 2007
at 10.125%........................... 500,000 50,625 12,656 12,656
Letters of credit....................... 12,000 300 75 75
Other debt.............................. 346 86 86
Capital leases at 9.0%.................. 1,606 402 402
------- -------
Interest expense........................ 78,018 19,504 19,504
Amortization of deferred financing
costs................................ 2,971 743 743
------- -------
Total interest expense.................... 80,989 20,247 20,247
Less: historical interest................. (33,489) (7,198) (8,940)
------- -------
Pro forma interest adjustment............. $ 47,500 $13,049 $11,307
======= =======
</TABLE>
P-9
<PAGE> 110
NEBCO EVANS HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
(IN THOUSANDS)
(6) Represents the discount of $15,469 annually and $3,867 quarterly on the sale
of accounts receivable pursuant to the Accounts Receivable Program ($225,000
at a rate of 6.875%).
(7) Represents the amortization of goodwill incurred in connection with the
Acquisition of $14,721 annually and $3,680 quarterly, assuming a 40-year
amortization period.
(8) Represents adjustments to reconcile income taxes to an effective income tax
rate of 39%.
(9) Represents AmeriServ net sales and expenses for the month of January 1996
prior to its acquisition by AmeriServe on January 26, 1996.
P-10
<PAGE> 111
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NEBCO EVANS HOLDING COMPANY
Report of Ernst & Young LLP, Independent Auditors.................................. F-2
Consolidated Balance Sheets as of December 30, 1995 and December 28, 1996, and as
of March 29, 1997 (unaudited)................................................... F-3
Consolidated Statements of Income for each of the three fiscal years in the period
ended December 28, 1996, and for the three month periods ended March 30, 1996
and March 29, 1997 (unaudited).................................................. F-4
Consolidated Statements of Stockholder's Equity for each of the three fiscal years
in the period ended December 28, 1996, and for the three month period ended
March 29, 1997 (unaudited)...................................................... F-5
Consolidated Statements of Cash Flows for each of the three fiscal years in the
period ended December 28, 1996, and for the three month periods ended March 30,
1996 and March 29, 1997 (unaudited)............................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
PFS
Report of KPMG Peat Marwick LLP, Independent Auditors.............................. F-17
Balance Sheets as of December 27, 1995 and December 25, 1996, and as of March 19,
1997 (unaudited)................................................................ F-18
Statements of Income for each of the years in the three year period ended December
25, 1996, and for the three month periods ended March 20, 1996 and March 19,
1997 (unaudited)................................................................ F-19
Statements of Divisional Equity for each of the years in the three year period
ended December 25, 1996, and for the three month period ended March 19, 1997
(unaudited)..................................................................... F-20
Statements of Cash Flows for each of the years in the three year period ended
December 25, 1996, and for the three month periods ended March 20, 1996 and
March 19, 1997 (unaudited)...................................................... F-21
Notes to Financial Statements...................................................... F-22
AMERISERV FOOD COMPANY
Report of Ernst & Young LLP, Independent Auditors.................................. F-27
Consolidated Statements of Operations for each of the two fiscal years in the
period ended December 30, 1995.................................................. F-28
Consolidated Statements of Stockholders' Equity (Deficit) for each of the two
fiscal years in the period ended December 30, 1995.............................. F-29
Consolidated Statements of Cash Flows for each of the two fiscal years in the
period ended December 30, 1995.................................................. F-30
Notes to Consolidated Financial Statements......................................... F-31
</TABLE>
F-1
<PAGE> 112
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Nebco Evans Holding Company
We have audited the accompanying consolidated balance sheets of Nebco Evans
Holding Company (the Company) as of December 30, 1995 and December 28, 1996, and
the related consolidated statements of income, stockholder's equity and cash
flows for each of the three years in the period ended December 28, 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 30, 1995 and December 28, 1996, and consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 28, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 6, 1997
F-2
<PAGE> 113
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28, MARCH 29,
1995 1996 1997
------------ ------------ ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 575 $ 2,224 $ 4,060
Accounts receivable, less allowance for doubtful accounts
of $1,170, $5,336 and $5,225, respectively............. 25,127 80,474 86,538
Other receivables......................................... 2,234 4,104 4,098
Inventories............................................... 15,230 52,246 69,436
Due from Holberg.......................................... 623 3,793 5,134
Prepaid expenses and other current assets................. 707 4,333 6,422
------- -------- --------
Total current assets.............................. 44,496 147,174 175,688
Property and equipment, net................................. 6,912 35,772 37,648
Other assets:
Intangible assets, net.................................... 20,189 126,212 125,576
Note receivable from Holberg.............................. 3,516 3,516 3,516
Other noncurrent assets................................... 2,390 2,272 3,420
------- -------- --------
$ 77,503 $314,946 $ 345,848
======= ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ -- $ 3,389 $ 2,597
Accounts payable.......................................... 32,751 98,700 125,763
Accrued liabilities....................................... 1,232 19,276 11,462
------- -------- --------
Total current liabilities......................... 33,983 121,365 139,822
Noncurrent liabilities...................................... 584 14,007 14,064
Long-term debt.............................................. 32,779 136,196 149,074
Subordinated loans.......................................... -- 24,859 27,009
Commitments
Stockholder's equity:
Senior preferred stock, $.01 par value; 600 shares
authorized and outstanding, $15,872 liquidation
value.................................................. -- 15,000 15,000
8% Senior preferred stock, $.01 par value; 300 shares
authorized, 235 shares outstanding, $2,374 liquidation
value.................................................. -- 2,350 2,350
Preferred stock, $50,000 par value; 150 shares authorized
and outstanding at December 30, 1995................... 7,500 -- --
Preferred stock, $25,000 par value; 400 shares authorized,
300 shares outstanding at December 30, 1995............ 7,500 -- --
Common stock, $10 par value; 2,000 shares authorized, 600
shares outstanding at December 30, 1995................ 6 -- --
Class A voting common stock, $.01 par value; 30,000 shares
authorized, 6,508 shares outstanding................... -- -- --
Class B nonvoting common stock, $.01 par value; 20,000
shares authorized, 1,733 shares outstanding............ -- -- --
Additional paid-in capital................................ -- 7,522 7,522
Accumulated deficit....................................... (4,849) (6,353) (8,993)
------- -------- --------
Total stockholder's equity........................ 10,157 18,519 15,879
------- -------- --------
$ 77,503 $314,946 $ 345,848
======= ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 114
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------------ -----------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
------------ ------------ ------------ --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................ $358,516 $400,017 $1,389,601 $ 250,922 $ 335,311
Cost of goods sold................... 320,602 359,046 1,249,135 225,184 300,682
-------- -------- ---------- -------- --------
Gross profit......................... 37,914 40,971 140,466 25,738 34,629
Distribution, selling and
administrative expenses............ 34,488 36,695 122,430 24,013 33,268
-------- -------- ---------- -------- --------
Operating income..................... 3,426 4,276 18,036 1,725 1,361
Other income (expense):
Interest expense................... (3,294) (3,936) (16,423) (3,404) (4,735)
Interest income -- Holberg and
affiliate....................... 533 749 528 99 85
Minority interest.................. -- -- (2,345) -- --
-------- -------- ---------- -------- --------
(2,761) (3,187) (18,240) (3,305) (4,650)
-------- -------- ---------- -------- --------
Income (loss) before income taxes.... 665 1,089 (204) (1,580) (3,289)
Provision (credit) for income
taxes.............................. 523 583 1,300 (242) (649)
-------- -------- ---------- -------- --------
Net income (loss).................... $ 142 $ 506 $ (1,504) $ (1,338) $ (2,640)
======== ======== ========== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 115
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SENIOR SENIOR
PREFERRED PREFERRED PREFERRED PREFERRED ADDITIONAL
STOCK, STOCK, STOCK, STOCK, COMMON PAID-IN ACCUMULATED
$25,000 SERIES $10,000 SERIES $50,000 SERIES $25,000 SERIES STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- -------------- ------ ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January
2, 1994........ $ -- $ -- $ 7,500 $ 5,000 $ 6 $ 5,068 $(2,795) $14,779
Issuance of 100
shares of
preferred
stock........ -- -- -- 2,500 -- -- -- 2,500
Dividends on
preferred
stock........ -- -- -- -- -- (1,200) -- (1,200)
Contribution of
capital...... -- -- -- -- -- 984 -- 984
Net income..... -- -- -- -- -- -- 142 142
------- ------ ------- ------- --- ------- ------- -------
Balance, December
31, 1994....... -- -- 7,500 7,500 6 4,852 (2,653) 17,205
Dividends:
Preferred
stock...... -- -- -- -- -- -- (2,494) (2,494)
Common
stock...... -- -- -- -- -- (6,086) (208) (6,294)
Contribution of
capital...... -- -- -- -- -- 1,234 -- 1,234
Net income..... -- -- -- -- -- -- 506 506
------- ------ ------- ------- --- ------- ------- -------
Balance, December
30, 1995....... -- -- 7,500 7,500 6 -- (4,849) 10,157
Formation of
NEHC......... 15,000 -- (7,500) (7,500) (6) 6 -- --
Issuance of 235
shares of
preferred
stock........ -- 2,350 -- -- -- -- -- 2,350
Issuance of
common stock
warrants..... -- -- -- -- -- 7,516 -- 7,516
Net loss....... -- -- -- -- -- -- (1,504) (1,504)
------- ------ ------- ------- --- ------- ------- -------
Balance, December
28, 1996....... 15,000 2,350 -- -- -- 7,522 (6,353) 18,519
Net loss
(unaudited)... -- -- -- -- -- -- (2,640) (2,640)
------- ------ ------- ------- --- ------- ------- -------
Balance, March
29, 1997
(unaudited).... $ 15,000 $2,350 $ -- $ -- $ -- $ 7,522 $(8,993) $15,879
======= ====== ======= ======= === ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 116
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------------ ---------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
------------ ------------ ------------ --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................... $ 142 $ 506 $ (1,504) $ (1,338) $ (2,640)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and
equipment........................................... 1,786 1,463 5,523 973 1,837
Amortization of intangible assets..................... 1,498 1,299 4,849 704 1,035
Deferred income taxes................................. (465) 48 -- -- --
Contribution of capital............................... 984 1,234 -- -- --
Other................................................. 83 131 -- -- --
Minority interest in subsidiary....................... -- -- 2,345 -- --
Gain on sale of property.............................. -- -- (4,652) -- --
Interest accreted on subordinated loans............... -- -- 4,193 786 1,254
Changes in assets and liabilities, net of effect of
businesses acquired:
Accounts receivable................................. (3,567) (1,645) (5,510) (4,771) (6,064)
Other receivables................................... (69) (645) (350) (535) 6
Inventories......................................... 237 (5) (5,657) (9,191) (17,190)
Prepaid expenses and other assets................... (261) (2,425) 1,173 835 939
Accounts payable.................................... 2,831 5,035 7,030 8,391 27,063
Accrued liabilities................................. 1,077 (393) (7,083) (2,520) (6,919)
Noncurrent liabilities.............................. -- -- 1,669 (3,488) 57
Other............................................... -- (98) 2,125 5,155 (3,424)
------- ------- -------- -------- --------
Net cash provided by (used in) operating activities..... 4,276 4,505 4,151 (4,999) (4,046)
------- ------- -------- -------- --------
INVESTING ACTIVITIES
Businesses acquired, net of cash acquired............... -- -- (96,765) (94,411) --
Expenditures for property and equipment................. (1,331) (2,496) (12,701) (875) (2,346)
Proceeds from disposals of property and equipment....... 14 22 9,699 -- --
Net change in amounts due from/to Holberg............... (1,365) (1,690) (3,170) (1,378) (1,341)
Net increase in deposits with affiliates................ (2,720) (315) (2,480) (1,880) (1,150)
Expenditures for intangible and other assets............ (20) (1,095) -- -- --
------- ------- -------- -------- --------
Net cash used in investing activities................... (5,422) (5,574) (105,417) (98,544) (4,837)
------- ------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of subordinated loans............ -- -- 22,484 22,484 --
Proceeds from issuance of warrants...................... -- -- 7,516 7,516 --
Proceeds from issuance of preferred stock............... 2,500 -- -- -- --
Net increase in borrowings under revolving line of
credit................................................ 15 4,635 116,708 110,332 11,433
Repayments of long-term debt............................ (2,025) (4,016) (43,793) (37,312) (714)
------- ------- -------- -------- --------
Net cash provided by financing activities............... 490 619 102,915 103,020 10,719
------- ------- -------- -------- --------
Net increase (decrease) in cash......................... (656) (450) 1,649 (524) 1,836
Cash at beginning of period............................. 1,681 1,025 575 575 2,224
------- ------- -------- -------- --------
Cash at end of period................................... $ 1,025 $ 575 $ 2,224 $ 51 $ 4,060
======= ======= ======== ======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest............................................ $ 3,100 $ 3,622 $ 10,683 $ 1,415 $ 3,663
Income taxes, net of refunds........................ 406 332 1,256 121 325
Businesses acquired:
Fair value of assets acquired....................... $ -- $ -- $ 210,357 $187,907 $ --
Cash paid........................................... -- -- (96,765) (94,411) --
------- ------- -------- -------- --------
Liabilities assumed................................. $ -- $ -- $ 113,592 $ 93,496 $ --
======= ======= ======== ======== ========
Supplemental noncash investing and financing activities:
Payment of dividends to reduce deposits and advances
with Holberg and affiliate.......................... $ 1,200 $ 8,788 $ -- $ -- $ --
Property and equipment purchased with capital leases
(included in long-term debt)........................ -- -- 13,363 3,112 1,367
</TABLE>
See accompanying notes.
F-6
<PAGE> 117
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 1996
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Nebco Evans Holding Company (NEHC) was formed on January 25, 1996 as a
result of NEBCO EVANS Distributors, Inc. (NEDI) contributing all of its common
and preferred stock in NEBCO EVANS Distribution, Inc. to NEHC. NEDI was created
as a result of the shareholders of NEBCO EVANS Distribution, Inc. contributing
all their ownership interest to NEDI during December 1995.
Nature of Operations
NEHC has two subsidiaries: AmeriServe Food Distribution, Inc. (AmeriServe)
(formerly known as NEBCO EVANS Distribution, Inc.) (100% owned) and Harry H.
Post, Inc. (Post) (93.6% owned) (collectively, the Company). The Company,
through its subsidiaries, is a system foodservice distributor specializing in
distribution to chain restaurants. The Company distributes a wide variety of
items, including fresh and frozen meat and poultry, frozen foods, canned and dry
goods, fresh and pre-processed produce, beverages, dairy products, paper goods,
cleaning and other supplies and small equipment.
The majority of revenues arise from sales to franchisees and/or franchisers
of several national limited-menu restaurant concepts. One customer represented
approximately 10% of consolidated net sales for the year ended December 28,
1996. The Company's accounts receivable generally are unsecured.
The Company is a wholly owned subsidiary of NEDI, which is a majority owned
subsidiary (92.9%) of Holberg Industries, Inc. (Holberg). Holberg Industries,
Inc., is a diversified service company with subsidiaries operating within the
food distribution and parking services industries in North America.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Fiscal Year
The Company has elected a 52-53-week fiscal year ending on the Saturday
nearest to December 31. The fiscal years ended December 31, 1994 (fiscal 1994),
December 30, 1995 (fiscal 1995) and December 28, 1996 (fiscal 1996) are 52-week
periods.
Inventories
Inventories, which consist of purchased goods held for sale, are stated at
the lower of cost (determined on a first-in, first-out basis) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets, using either the straight-line or
double-declining balance method. Amortization of leasehold improvements is
recorded over the respective lease terms or useful lives of the assets,
whichever is shorter.
F-7
<PAGE> 118
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amortization of assets under capital leases is included in depreciation expense.
Useful lives for amortization and depreciation calculations are as follows:
<TABLE>
<CAPTION>
DESCRIPTION LIFE
-------------------------------------------------------------- -------------
<S> <C>
Buildings and improvements.................................... 5 -- 40 years
Delivery and automotive equipment............................. 3 -- 9 years
Warehouse equipment........................................... 5 -- 12 years
Furniture, fixtures and equipment............................. 5 -- 10 years
</TABLE>
During 1995, the Company completed a review of the estimated useful lives
of its property and equipment. The Company determined that, as a result of
preventative maintenance programs and improved product quality, actual useful
lives for certain assets were generally longer than the useful lives originally
estimated. Therefore, the Company extended the estimated useful lives of certain
categories of equipment, effective January 1, 1995. The effect of this change in
estimate reduced depreciation expense for the year ended December 30, 1995 by
$514,000 and increased net income by $308,000.
Goodwill and Other Intangibles
Costs in excess of the net identifiable assets of businesses acquired are
amortized on a straight line basis over periods not to exceed 40 years. Customer
lists and other intangible assets acquired in business acquisitions, deferred
financing costs and other intangibles are being amortized using primarily the
straight-line method over their respective estimated useful lives, which
generally range from 3 to 40 years. The Company periodically reviews the
carrying value of goodwill and other intangibles to assess recoverability and
other than temporary impairments by comparing the estimated future undiscounted
cash flows associated with the asset to the asset's carrying amount.
Revenue Recognition
Revenue from the sale of the Company's products is recognized upon shipment
to the customer.
Income Taxes and Tax Sharing Agreement
The Company is part of a consolidated group for income tax purposes and,
accordingly, has a tax-sharing agreement with Holberg which requires the Company
to make tax sharing payments to Holberg for those entities within the Company's
consolidated subgroup that have taxable income. Income taxes have been provided
as if the Company were a separate taxpayer.
Deferred income tax assets or liabilities are recognized for the estimated
future tax effects attributable to temporary differences, including operating
loss carryforwards. The currently enacted statutory rate is used to estimate
differences between the financial statement and income tax bases of inventories,
property and equipment, intangible assets, certain accrued liabilities and
allowances and net operating losses. Because of the Company's prior operating
losses in certain of the Company's taxable entities, a valuation allowance has
been established to offset the entire amount of the net deferred tax assets.
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.
F-8
<PAGE> 119
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value Information
The Company believes the carrying value of its financial instruments
(notes, accounts and other receivables, accounts payable and long-term debt) are
a reasonable estimate of the fair value of these instruments. Related party
financial instruments are recorded at cost.
Reclassifications
Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform to the 1996 presentation. In addition, the 1994 and 1995
financial statements have been restated to conform to the requirements of the
Securities and Exchange Commission Staff Accounting Bulletin Number 55.
Interim Financial Data
The unaudited consolidated balance sheet as of March 29, 1997, and the
related consolidated statements of income and cash flows for the three-month
periods ended March 30, 1996 and March 29, 1997 and the consolidated statement
of stockholder's equity for the three months ended March 29, 1997, have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of adjustments of a normal and
recurring nature) considered necessary for a fair presentation of the financial
position and results of operations have been included. Operating results for the
three-month period ended March 29, 1997, are not necessarily indicative of the
results that might be expected for the year ending January 3, 1998.
2. ACQUISITIONS AND DISPOSITIONS
On January 25, 1996, AmeriServe acquired the common and preferred stock of
AmeriServ Food Company (AmeriServ), a system foodservice distributor
specializing in distribution of food and supplies to chain restaurants. The
total cash outlay for the acquisition, including all direct costs, was $92.9
million. Of this amount, $44 million related to the retirement of all of
AmeriServ's existing bank debt and accrued interest, which occurred concurrently
with the closing of the purchase transaction. The transaction was financed
through the issuance of $22.5 million of subordinated notes and $7.5 million of
warrants by NEHC (see Note 6), as well as borrowings under a new Credit
Agreement.
The acquisition has been accounted for under the purchase method;
accordingly, its results are included in the consolidated financial statements
from the acquisition date. The purchase price was allocated based on the
estimated fair values of identifiable intangible and tangible assets acquired
and liabilities assumed at the acquisition date. The excess of the purchase
price over the net assets acquired was $85 million and has been recorded as
goodwill, which is being amortized on a straight-line basis over 40 years.
The following unaudited pro forma results of operations for the years ended
December 30, 1995 and December 28, 1996 assume the acquisition of AmeriServ
occurred at the beginning of each fiscal year (in thousands):
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Net sales........................................... $1,224,200 $1,445,000
Net loss............................................ 7,134 3,400
</TABLE>
This pro forma information does not purport to be indicative of the results
that actually would have been obtained if the combined operations had been
conducted during the periods presented and is not intended to be a projection of
future results.
F-9
<PAGE> 120
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At the time of the acquisition, AmeriServe and AmeriServ held ownership
interests of 20% and 18%, respectively, in the outstanding common stock of
Chicago Consolidated Corporation (CCC). CCC operates redistribution facilities
that sell dry goods to independent wholesale distributors. In March 1996,
AmeriServe acquired 49% of CCC's outstanding common stock for $1.5 million in
cash, bringing the consolidated ownership interest in CCC to approximately 87%.
The acquisition has been accounted for under the purchase method. AmeriServe had
accounted for its original 20% investment in CCC under the cost method. The
operating results of CCC are not significant to the consolidated results of the
Company.
At the time of the acquisition, AmeriServ effectively owned approximately
50% of the outstanding common stock of Post. AmeriServ controlled the operations
of Post and accordingly, included the accounts of Post in its consolidated
financial statements. In November 1996, NEHC issued 235 shares of 8% senior
preferred stock, par value $0.01 per share, and $2,012,500 of cash to the
minority owner of Post and increased its ownership interest to 93.6%.
At the time of the acquisition, both AmeriServe and AmeriServ owned
minority interests in the common stock of Independent Distributors of America
(IDA), a nonprofit cooperative providing purchasing services to AmeriServe and
AmeriServ as well as other foodservice distributors. As a result of the
acquisition, on a consolidated basis, the Company owns 40% of the outstanding
stock of IDA and accounts for approximately 75% of IDA's purchasing activity.
The operating results of IDA are not significant to the consolidated results of
the Company.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land................................................ $ -- $ 1,479
Buildings and improvements.......................... 2,379 10,115
Delivery and automotive equipment................... 6,322 17,422
Warehouse equipment................................. 2,604 4,803
Furniture, fixtures and equipment................... 3,413 12,213
Construction in progress............................ -- 2,412
------- -------
14,718 48,444
Less accumulated depreciation and amortization...... 7,806 12,672
------- -------
$ 6,912 $35,772
======= =======
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Goodwill, less accumulated amortization of $2,823
and $5,341........................................ $17,187 $ 103,877
Customer lists, deferred financing costs and other
intangibles, less accumulated amortization of
$6,076 and $8,371................................. 3,002 22,335
------- --------
$20,189 $ 126,212
======= ========
</TABLE>
F-10
<PAGE> 121
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit facility under Bank Credit
Agreement......................................... $21,779 $ 77,374
Term loans under Credit Agreement................... 11,000 45,000
Other notes payable................................. -- 6,034
------- --------
32,779 128,408
Capital lease obligations (see Note 8).............. -- 11,177
------- --------
32,779 139,585
Less current maturities............................. -- 3,389
------- --------
$32,779 $ 136,196
======= ========
</TABLE>
The weighted average interest rates on the outstanding bank borrowings at
December 30, 1995 and December 28, 1996, were 8.61% and 7.99%, respectively.
AmeriServe paid Holberg a guarantee fee of $180,000, $180,000 and $14,000 in
1994, 1995 and 1996, respectively.
In January 1996, in connection with the AmeriServ acquisition (see Note 2),
AmeriServe refinanced its borrowings under a new Credit Agreement. The new
credit facility provided for borrowings of $25,000,000 and $20,000,000 under a
Term A and Term B loan, respectively, and up to $85,000,000 under a revolving
credit facility.
In March 1997, the Credit Agreement was amended. The Amended and Restated
Credit Agreement (Current Agreement), provides for borrowings of $20,000,000 and
$30,000,000 under a Term A and Term B loan, respectively. The amount available
under the revolving credit facility was increased to $100,000,000. Borrowings
under the revolving credit facility are limited to percentages of eligible
accounts receivable and inventories, as defined, and are reduced for letters of
credit outstanding ($8,536,000 outstanding at December 28, 1996). The revolving
credit facility expires on January 25, 2001. The term loans mature in annual
installments through 2002. In addition, mandatory prepayments are required based
on excess cash flow, as defined, and proceeds from sales of assets or issuances
of shares of equity.
Depending on leverage ratios, as defined in the Current Agreement, interest
on the revolving credit facility and the Term A loan is payable at LIBOR plus
.75% to 2.5% or an alternate reference rate plus 0% to 1.25% as selected by
AmeriServe. Interest on the Term B loan is payable at LIBOR plus 2.75% to 3.00%
or an alternate reference rate plus 1.5% to 1.75%, as selected by AmeriServe.
The alternate rate is the higher of the federal funds rate plus .50% and the
prime rate, as defined. A commitment fee of .25% to .50% is payable on the
unutilized revolving line of credit.
Borrowings under the Current Agreement are collateralized by substantially
all the assets of AmeriServe. The Current Agreement contains various restrictive
covenants with respect to additional borrowings, acquisitions and dispositions
of assets, rental liabilities, dividends, transactions with affiliates and
certain financial ratios and requirements.
Other notes payable represent indebtedness assumed in the acquisition of
AmeriServ and consist primarily of subordinated term notes payable to former
stockholders of companies acquired by AmeriServ. These notes mature in 1999 and
bear interest ranging from 8.5% to 10.0%.
In February 1996, AmeriServe entered into an interest rate swap agreement
under which AmeriServe receives a variable rate on a notional amount of
$30,000,000 based on three-month LIBOR and pays a fixed
F-11
<PAGE> 122
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rate of 5.05% through March 1, 1999. In March 1996, AmeriServe entered into two
additional interest rate swap agreements under which AmeriServe receives a
variable rate on a notional amount of $30,000,000 based on three-month LIBOR and
pays a fixed rate of 5.995% through March 26, 1999. The swap agreements
effectively change a portion of AmeriServe's interest rate exposure from a
floating rate to a fixed rate. In August 1996, the Company entered into an
interest rate cap agreement on a notional amount of $5,000,000. The interest
rate cap sets the maximum LIBOR rate at 9% through August 1999. The initial cost
of the interest rate cap agreement is amortized over the term of the agreement.
The counterparties to the interest rate swap agreements are large financial
institutions. Credit loss from counterparty nonperformance is not anticipated.
Net settlements are accrued over the term of the swap agreements as an
adjustment to interest expense.
Post has a revolving line of credit agreement with a financial institution
limited to the lesser of $12,650,000 or an amount based upon eligible
receivables and inventory, as defined. Amounts outstanding are secured by Post's
receivables, inventory, property and equipment and general intangibles. The
amount outstanding at December 31, 1996 under the revolving line of credit was
$8,274,000. Outstanding amounts on the revolving line of credit are due January
26, 1999 and bear interest at either 1.5% above the base rate, equal to the
higher of the prime rate or the latest published annualized rate on 90-day
dealer commercial paper, or 3.75% above the three or six month LIBOR rate, as
chosen by Post. The effective interest rate was 9.75% at December 28, 1996.
Amounts outstanding under the revolving line of credit have been excluded from
current liabilities at December 28, 1996 as Post intends that at least that
amount will remain outstanding during 1997.
Post is required to meet various financial and non-financial covenants
under the credit agreement, including capital expenditures, interest, fixed
charge, net worth, working capital ratio and EBITDA covenants.
In May 1997, the revolving line of credit agreement was amended whereby the
maximum commitment was increased from $12,650,000 to $20,000,000 and the LIBOR
rate option was decreased to 3.5% above the three or six month LIBOR rate.
Aggregate annual principal payments (excluding capital leases) required as
of December 28, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------------------------------
<S> <C>
1997.............................................................. $ 933
1998.............................................................. 7,968
1999.............................................................. 17,107
2000.............................................................. 6,450
2001.............................................................. 80,625
Thereafter........................................................ 15,325
--------
$128,408
========
</TABLE>
6. SUBORDINATED LOANS
In connection with the AmeriServ acquisition, NEHC received $30 million in
exchange for $22.5 million of 12.5% subordinated notes and warrants, valued at
$7.5 million, to purchase up to an aggregate of 1,389 shares of Class A common
stock and 370 shares of Class B common stock. The face value of the subordinated
notes is $30 million and the interest is accreted to increase the purchase price
of the notes to the stated principal. In addition, interest on the notes is paid
in kind by increasing the face amounts of the notes. The notes are due January
26, 2006 or upon an initial public offering of common stock, whichever comes
first. The warrants expire January 26, 2006.
F-12
<PAGE> 123
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCKHOLDERS' EQUITY
The senior nonconvertible preferred stock has a liquidation preference of
$25,000 per share and cumulative dividends at a rate of $1,563 per share. The 8%
senior convertible, nonvoting preferred stock has a liquidation preference of
$10,000 per share and cumulative dividends at a rate of $800 per share.
Accumulated dividends in arrears at December 28, 1996 are $896,000.
8. LEASE COMMITMENTS
The Company has noncancelable commitments under both capital and long-term
operating leases, primarily for office and warehouse facilities, transportation
and office equipment. The leases often contain fixed escalation features,
purchase and renewal options and provisions for payment of certain expenses by
the Company. Rent expense was approximately $5,408,000, $5,709,000 and
$15,384,000 (including contingent rentals based on miles driven) for the years
ended December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
The Company leases a warehouse and office facility in Waukesha, Wisconsin
from an affiliated partnership owned by certain former shareholders of an
acquired Company for approximately $810,000 per year through May 31, 2008.
On February 9, 1995, Holberg Warehouse Properties, Inc. (HWPI), an
affiliate of Holberg, exercised AmeriServe's option to purchase a leased
warehouse and office facility in Omaha, Nebraska. AmeriServe will lease the
facility from HWPI for a fixed term of 13 years. Under the terms of the lease,
rent is $500,000 for the first 5-year period of the lease, and includes fixed
escalation provisions for the 8 years thereafter. The lease contains no renewal
or purchase options and AmeriServe is responsible for all facility expenses. In
connection with the lease, AmeriServe paid HWPI a security deposit of $750,000,
which is included in other noncurrent assets in the accompanying consolidated
balance sheets.
Property and equipment include the following amounts under capital leases
at December 28, 1996 (in thousands):
<TABLE>
<S> <C>
Delivery and automotive equipment.................................. $ 9,876
Furniture, fixtures and equipment.................................. 3,487
-------
13,363
Less accumulated amortization...................................... 1,831
-------
Property and equipment under capital leases, net................... $11,532
=======
</TABLE>
F-13
<PAGE> 124
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of aggregate future minimum lease payments
(excluding contingent rentals) required under terms of the aforementioned leases
at December 28, 1996 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING LEASES LEASES
---------------------------------------------------------------- ------- ---------
<S> <C> <C>
1997............................................................ $ 3,764 $ 9,873
1998............................................................ 2,815 10,326
1999............................................................ 2,481 10,316
2000............................................................ 2,073 9,098
2001............................................................ 1,663 8,070
Thereafter...................................................... 3,683 69,724
------- --------
Total........................................................... 16,479 $ 117,407
========
Less amount representing interest............................... 5,302
-------
Present value of net minimum lease commitments.................. $11,177
=======
</TABLE>
9. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal..................................... $ 908 $437 $1,100
State....................................... 80 98 200
------ ------ ------
988 535 1,300
Deferred...................................... (465) 48 --
------ ------ ------
$ 523 $583 $1,300
====== ====== ======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the federal statutory rate of 34% to income (loss) before income taxes, as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Provision (credit) at statutory rate.......... $226 $370 $ (69)
State income taxes, net of federal tax
benefit..................................... 53 66 129
Nondeductible goodwill........................ 167 167 758
Other, net.................................... 77 (20) 482
------ ----- - ------
Provision for income taxes.................... $523 $583 $1,300
====== ====== ======
</TABLE>
F-14
<PAGE> 125
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the Company's deferred income tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment................................... $ 380 $ 369
Intangible assets other than nondeductible goodwill...... 582 8,499
Other.................................................... 38 --
------ --------
Total deferred tax liabilities................... 1,000 8,868
Deferred income tax assets:
Allowances and reserves.................................. 682 3,516
Accrued liabilities...................................... 321 10,521
Federal net operating loss carryforwards................. -- 10,971
Other.................................................... 136 --
------ --------
1,139 25,008
Valuation allowance for deferred tax assets.............. (139) (16,140)
------ --------
Total deferred tax assets........................ 1,000 8,868
------ --------
Net deferred tax asset..................................... $ -- $ --
====== ========
</TABLE>
Under the Company's tax sharing agreement with Holberg, no current tax
benefit is provided for those entities within the Company with current operating
losses. As of December 28, 1996, the Company has net operating loss
carryforwards of $28,000,000, including $11,000,000 of losses incurred by
AmeriServ prior to its acquisition, which are subject to limitation under
Sections 382 and 1504 of the Internal Revenue Code. Under those Sections, after
a change of control, which occurred on January 25, 1996, with respect to
AmeriServ, no more than approximately $2,000,000 of operating loss carryforwards
incurred by AmeriServ prior to that date will be available annually and only to
the extent of future separate taxable income of AmeriServ during the permitted
carryover period.
The $11,000,000 separate return net operating loss carryforwards of
AmeriServ will expire in 2007 to 2010. The $17,000,000 balance of net operating
loss carryforwards of the Company will expire in 2011. As of its acquisition by
the Company, AmeriServ had net operating losses and other deferred tax benefits
(the Acquired Tax Attributes) of $46,000,000, which was entirely offset by a
valuation reserve. Goodwill will be reduced to the extent of any tax benefit
realized from the Acquired Tax Attributes.
10. BENEFIT PLANS
AmeriServe and its subsidiaries have four 401(k) retirement savings plans
covering substantially all union and nonunion employees under which eligible
participants may elect to contribute a specified percentage of their earnings,
subject to certain limitations. AmeriServe matches the contributions of
participating employees on the basis of percentages specified in the respective
plans. At its discretion, AmeriServe may also elect to make a profit-sharing
contribution to the nonunion plans. AmeriServe contributions charged to
operations under the plans was approximately $67,000, $109,000 and $515,000 for
the years ended December 31, 1994, December 30, 1995 and December 28, 1996,
respectively.
Post has developed a defined contribution plan under Section 401(k) of the
Internal Revenue Code utilizing the multiemployer 401(k) savings plan of
AmeriServe. Employees age twenty one or older are eligible to participate in the
plan. Post matches employee contributions quarterly, at the target rate of 50%
on the first 2% and 25% on the next 2% of employee contributions. Post
contributed $36,000 to the plan for the period from January 26, 1996 through
December 28, 1996.
F-15
<PAGE> 126
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER RELATED-PARTY TRANSACTIONS
The current amounts due from/to Holberg represent interest-bearing advances
which are made in the normal course of business as part of the cash management
strategy of Holberg. The note receivable from Holberg bears interest at 5% and
is due January 1, 2007.
AmeriServe participates in a self-insured group casualty (including
workers' compensation and auto liability) risk program with an affiliate, which
determines the insurance expenses to be allocated to AmeriServe. In fiscal year
1994 and 1995, the affiliate paid $1,694,000 and $1,128,000 of AmeriServe's
casualty insurance expense, respectively. In addition, the affiliate paid
$378,000 of the health insurance expenses of AmeriServe in 1995. These payments
have been charged to operations and reflected as contributed capital in the
accompanying consolidated financial statements. In connection with the insurance
program, AmeriServe placed a deposit with an affiliate for insurance collateral
purposes of $2,480,000 as of December 28, 1996, which is included in prepaid
expenses and other current assets in the accompanying 1996 consolidated balance
sheet.
During 1995, distribution, selling and administrative expenses included
$554,000 for certain expenses, including salary, severance, relocation and
computer systems costs, which arose as a result of initiatives directed by
Holberg.
Interest income from Holberg and an affiliate of approximately $533,000,
$749,000 and $528,000 in fiscal 1994, 1995 and 1996, respectively, represents
interest on the advances and note receivable from Holberg and interest on the
insurance deposits with an affiliate, less the guarantee fee to Holberg.
12. SUBSEQUENT EVENT
On May 23, 1997, NEHC entered into a definitive agreement to acquire, in an
asset purchase transaction, the U.S. and Canadian operations of the PFS division
of PepsiCo, Inc. PFS is engaged in the distribution of food products and
supplies to franchised and company-owned restaurants in PepsiCo, Inc.'s Pizza
Hut, Taco Bell and KFC systems. PepsiCo has announced its intentions to pursue a
spin-off of its restaurant operations. The U.S. and Canadian operations of PFS
posted revenues of $3.4 billion for the fiscal year ended December 28, 1996. The
cash purchase price of $830 million will be financed through a combination of
debt and preferred stock issuances. The transaction closed on July 11, 1997, at
which time NEHC assigned its interest in the agreement to AmeriServe.
F-16
<PAGE> 127
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
The Management of PFS
(A Division of PepsiCo, Inc. Held for Sale):
We have audited the accompanying balance sheets of PFS (A Division of
PepsiCo, Inc. Held for Sale) as of December 27, 1995 and December 25, 1996, and
the related statements of income, divisional equity, and cash flows for each of
the years in the three-year period ended December 25, 1996. These financial
statements are the responsibility of the management of PFS. 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 audits 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 PFS as of December 27, 1995
and December 25, 1996, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 25, 1996, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Dallas, Texas
April 18, 1997
F-17
<PAGE> 128
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 25, MARCH 19,
1995 1996 1997
------------ ------------ ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................. $ 203 $ 1,625 $ 176
Receivables:
Franchisees and licensees, net of allowance for
doubtful accounts of $11,941 in 1995 and $7,733 in
1996............................................... 115,004 117,729 117,449
Affiliates............................................ 206,658 162,485 166,667
Inventories........................................... 101,767 94,418 95,806
Prepaid expenses and other current assets............. 1,877 4,690 10,831
Deferred income taxes (note 7)........................ 10,105 10,629 10,278
-------- -------- --------
Total current assets............................... 435,614 391,576 401,207
Property and equipment, net (notes 3 and 6)............. 80,351 87,017 88,247
Other assets............................................ 323 328 348
-------- -------- --------
$516,288 $478,921 $ 489,802
======== ======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable -- trade............................. $196,695 $170,611 $ 177,688
Accrued liabilities (note 7).......................... 79,512 79,728 69,438
Advances from Parent and affiliates, net (note 4)..... 122,957 108,257 123,429
-------- -------- --------
Total current liabilities.......................... 399,164 358,596 370,555
Other liabilities and deferred credits (notes 6 and
9).................................................... 23,449 22,400 25,704
Deferred income taxes (note 7).......................... 5,096 4,520 3,602
Divisional equity (note 4).............................. 88,579 93,405 89,941
Commitments (note 6)....................................
-------- -------- --------
$516,288 $478,921 $ 489,802
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE> 129
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
YEARS ENDED ---------------------
------------------------------------------ MARCH 20, MARCH 19,
DECEMBER 27, DECEMBER 25, 1996 1997
1995 1996 --------- ---------
------------ ------------
DECEMBER 28, (52 WEEKS) (52 WEEKS)
1994
------------
(53 WEEKS)
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales:
Affiliates (note 4).................. $2,378,963 $2,463,464 $2,292,423 $ 523,510 $ 459,522
Franchisees and licensees............ 905,874 999,988 1,136,201 244,459 262,896
---------- ---------- ---------- -------- --------
3,284,837 3,463,452 3,428,624 767,969 722,418
Less discounts and allowances........ 5,000 4,508 6,538 1,281 1,894
---------- ---------- ---------- -------- --------
Net sales......................... 3,279,837 3,458,944 3,422,086 766,688 720,524
---------- ---------- ---------- -------- --------
Costs and expenses:
Cost of sales and operating.......... 3,155,422 3,331,866 3,297,381 739,470 694,570
General and administrative (notes 4,
6 and 8).......................... 37,515 47,606 44,962 11,175 11,497
---------- ---------- ---------- -------- --------
3,192,937 3,379,472 3,342,343 750,645 706,067
---------- ---------- ---------- -------- --------
Income from operations............ 86,900 79,472 79,743 16,043 14,457
Interest expense to Parent (note 4).... 12,934 17,613 15,566 3,597 3,996
---------- ---------- ---------- -------- --------
Income before income taxes........ 73,966 61,859 64,177 12,446 10,461
Provision for income taxes (note 7).... 28,874 23,844 24,597 4,874 4,155
---------- ---------- ---------- -------- --------
Net income........................ $ 45,092 $ 38,015 $ 39,580 $ 7,572 $ 6,306
========== ========== ========== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE> 130
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
STATEMENTS OF DIVISIONAL EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Divisional equity at December 29, 1993......................................... $100,146
Transfers to Advances from Parent and affiliates, net (note 4)................. (59,531)
Net income..................................................................... 45,092
--------
Divisional equity at December 28, 1994......................................... 85,707
Transfers to Advances from Parent and affiliates, net (note 4)................. (35,143)
Net income..................................................................... 38,015
--------
Divisional equity at December 27, 1995......................................... 88,579
Transfers to Advances from Parent and affiliates, net (note 4)................. (34,754)
Net income..................................................................... 39,580
--------
Divisional equity at December 25, 1996......................................... 93,405
Transfers to Advances from Parent and affiliates, net (note 4) (unaudited)..... (9,770)
Net income (unaudited)......................................................... 6,306
--------
Divisional equity at March 19, 1997 (unaudited)................................ $ 89,941
========
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE> 131
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED TWELVE WEEKS ENDED
-------------------------------------------- ----------------------
DECEMBER 28, DECEMBER 27, DECEMBER 25, MARCH 20, MARCH 19,
1994 1995 1996 1996 1997
------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
(53 WEEKS) (52 WEEKS) (52 WEEKS) (UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows -- operating activities:
Net income....................... $ 45,092 $ 38,015 $ 39,580 $ 7,572 $ 6,306
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization................ 17,053 18,764 19,830 4,705 4,906
Loss on sale of property and
equipment................... 1,788 2,324 1,065 -- --
Deferred income taxes......... (6,800) (3,075) (1,100) 408 (567)
Change in assets and
liabilities:
Receivables................. (22,614) (22,051) 41,448 15,765 (3,902)
Inventories................. 4,839 (5,046) 7,349 4,091 (1,388)
Accounts payable............ 9,524 (2,347) (26,084) (12,400) 7,077
Accrued liabilities......... 13,105 (4,672) 216 (12,251) (10,290)
Other....................... 2,730 7,668 (3,867) (3,978) (2,857)
-------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities............. 64,717 29,580 78,437 3,912 (715)
-------- -------- -------- -------- --------
Cash flows -- investing activities:
Additions to property and
equipment..................... (21,310) (25,245) (28,771) (7,193) (6,212)
Proceeds from sale of property
and equipment................. 1,047 857 1,210 1,481 76
-------- -------- -------- -------- --------
Net cash used for
investing activities... (20,263) (24,388) (27,561) (5,712) (6,136)
-------- -------- -------- -------- --------
Cash flows -- financing activities
-- (repayment of)/ additions to
advances from Parent and
affiliates, net.................. (44,360) (5,163) (49,454) 2,136 5,402
-------- -------- -------- -------- --------
Net increase (decrease) in cash.... 94 29 1,422 336 (1,449)
Cash at beginning of period........ 80 174 203 203 1,625
-------- -------- -------- -------- --------
Cash at end of period.............. $ 174 $ 203 $ 1,625 $ 539 $ 176
======== ======== ======== ======== ========
</TABLE>
During 1994, 1995, and 1996 PFS made the following transfers to Parent
through the intercompany account:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
State income tax.............................. $ 4,135 $ 3,808 $ 3,475
======= ======= =======
Federal income tax............................ $18,876 $19,887 $18,800
======= ======= =======
Interest on advances.......................... $12,994 $17,613 $15,566
======= ======= =======
Divisional equity reclassifications........... $59,531 $35,143 $34,754
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 132
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1995 AND DECEMBER 25, 1996
(IN THOUSANDS)
(1) GENERAL AND BASIS OF PRESENTATION
PFS (A Division of PepsiCo, Inc. Held for Sale) ("PFS") operates as a
division of PepsiCo, Inc. ("Parent") and has no separate legal status or
existence. In January 1997, the Parent announced its intent to spin off its
restaurant business. Concurrent with this announcement, the Parent also
announced that it would explore the possible sale of PFS. The accompanying
financial statements present the business of PFS which is being held for sale.
Accordingly, they include only the assets, liabilities and results of operations
of the PFS business to be sold. The principal nature of this business is to
provide food, equipment, and supply items primarily to Taco Bell, Pizza Hut and
KFC restaurants, which restaurants are either owned or franchised by the Parent
in both the United States and Canada. The Division also has other transactions
with the Parent and affiliates of the Parent ("Affiliates") (notes 4, 5, 7, 8
and 9). PFS' fiscal year ends on the last Wednesday in December and, as a
result, a fifty-third week is added every five or six years. The fiscal year
ended December 28, 1994 consisted of 53 weeks.
The financial statements of the Company as of March 19, 1997 and for the
periods ended March 20, 1996 and March 19, 1997 are unaudited, but in the
opinion of management reflect all adjustments (consisting only of normal
recurring accruals) which are necessary for a fair statement of the results of
the interim periods presented. Results for interim periods are not necessarily
indicative of the results to be expected for a full year or for periods which
have been previously reported.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Inventories
Inventories are valued at the lower of cost, as determined by the first-in,
first-out ("FIFO") method, or net realizable value.
(b) Income Taxes
PFS is included in the consolidated federal income tax return of the
Parent. For financial reporting purposes, federal income taxes are computed on a
separate return basis. State income taxes are computed at a composite rate (6.3%
in 1994 and 5.8% in 1995 and 1996) based upon actual taxes incurred by the
Parent on behalf of the Division.
PFS accounts for income taxes using the asset and liability method. Under
the asset and liability method of accounting for income taxes, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(c) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization are calculated on a straight-line basis over the
estimated useful lives of the assets, generally 3 to 10 years.
F-22
<PAGE> 133
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Use of Estimates
The preparation of the 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.
(3) PROPERTY AND EQUIPMENT
Property and equipment at December 27, 1995 and December 25, 1996 is
summarized as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land................................................... $ 756 $ 756
Transportation equipment............................... 81,741 87,039
Warehouse and office equipment......................... 33,654 38,916
Buildings and leasehold improvements................... 38,490 46,651
Construction in progress............................... 2,656 2,937
Leased computer and material handling equipment........ 5,712 5,750
-------- --------
163,009 182,049
Less accumulated depreciation and amortization......... 82,658 95,032
-------- --------
$ 80,351 $ 87,017
======== ========
</TABLE>
(4) RELATED PARTY TRANSACTIONS
Transactions with the Parent include utilization of cash management
services under which net cash balances of PFS are transferred to or provided by
the Parent daily. In addition, the Parent provides payments under its incentive
compensation plans to certain key employees of PFS.
The Parent provides certain corporate general and administrative services
to PFS, including legal, treasury and benefits administration, among others. The
Company believes the inclusion of the costs of these services would not have a
material impact on the accompanying financial statements.
In 1994, 1995 and 1996, respectively, approximately 29%, 28% and 27% of the
gross sales of PFS were to restaurants owned by Pizza Hut, Inc., 31%, 31% and
28% of gross sales were to restaurants owned by Taco Bell Corp., and 13%, 11%
and 12% of gross sales were to restaurants owned by KFC Corporation.
PFS and the Parent have agreed to reclassify amounts between advances and
divisional equity in order to maintain a preestablished debt to equity ratio, as
defined, as part of the agreements between PFS and Pizza Hut, Inc. and its
franchisees.
Advances from Parent and Affiliates bear interest at the prime rate (8.25%
at December 25, 1996) and are not subject to stated repayment terms.
Accordingly, such advances are classified as current liabilities in the
accompanying balance sheets. The carrying amount of Advances from the Parent and
Affiliates at December 27, 1995 and December 25, 1996 approximates the fair
value since the borrowings bear interest at current market rates.
(5) PROFIT LIMITATION
"Gross profit" and "net pretax profit" on certain sales of PFS to Pizza Hut
restaurants, as defined in the agreements with Pizza Hut, Inc. and its
franchisees, are limited to amounts not to exceed 14% and 2.5% of
F-23
<PAGE> 134
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
sales, respectively. Such limitations apply only to sales of food, paper
products, and similar restaurant supplies and exclude other nonfood items such
as furnishings, interior and exterior decor items, and equipment. As a result of
the profit limitation, sales are reported net of $3,039, $4,449 and $5,249 in
1994, 1995 and 1996, respectively, for distributions to Pizza Hut, Inc. and its
franchisees.
(6) LEASE COMMITMENTS
PFS occupies warehouse and office facilities under noncancellable operating
lease agreements expiring at various dates through 2006. Most of the leases
contain renewal options for periods ranging from one to five years, with rentals
generally equal to those stated for the initial term of the lease.
PFS also rents transportation equipment under operating leases which
provide for both short-term and long-term rentals.
Rental expense for the years ended December 28, 1994, December 27, 1995 and
December 25, 1996 is summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Transportation equipment:
Fixed rentals............................... $ 336 $ 409 $ 442
Variable rentals............................ 2,173 1,776 1,059
Warehouse and office space.................... 8,110 8,531 10,252
Equipment..................................... 3,993 2,773 2,947
------- ------- -------
$14,612 $13,489 $14,700
======= ======= =======
</TABLE>
The future minimum rental commitments as of December 25, 1996 for all
noncancellable operating transportation, warehouse, office, and other equipment
leases are as follows:
<TABLE>
<S> <C>
1997............................................................. $10,783
1998............................................................. 9,493
1999............................................................. 8,110
2000............................................................. 6,986
2001............................................................. 7,020
Thereafter....................................................... 17,027
-------
$59,419
=======
</TABLE>
PFS leases computer equipment and material handling equipment under capital
lease arrangements. The minimum lease payments as of December 25, 1996 for the
remainder of the lease periods are as follows:
<TABLE>
<S> <C>
1997................................................................ $692
1998................................................................ 118
-----
--
Total minimum lease payments........................................ 810
Less amount representing interest................................... 22
-----
--
Present value of net minimum lease payments......................... 788
Less current obligations............................................ 673
-----
--
Long-term obligations............................................... $115
=======
</TABLE>
F-24
<PAGE> 135
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Included in property and equipment as of December 25, 1996 are assets
recorded under capital leases as follows:
<TABLE>
<S> <C>
Computer and material handling equipment......................... $ 5,750
Less accumulated amortization.................................... 5,114
-------
$ 636
=======
</TABLE>
(7) INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal..................................... $29,875 $24,227 $23,127
State....................................... 5,799 2,692 2,570
Deferred:
Federal..................................... (5,780) (2,639) (846)
State....................................... (1,020) (436) (254)
------- ------- -------
$28,874 $23,844 $24,597
======= ======= =======
</TABLE>
The differences between the statutory and effective federal income tax
rates are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Statutory federal rate........................ 35% 35% 35%
State income tax, net of federal benefit...... 4 4 4
-- -- --
Effective rate........................... 39% 39% 39%
-- -- --
</TABLE>
Federal income taxes currently payable to the Parent of $35,714 at December
27, 1995 and $36,441 at December 25, 1996 are included in accrued liabilities in
the accompanying balance sheets.
The primary components of deferred taxes result from accelerated
depreciation methods, bad debt provisions and the deferral of certain expenses
related to postretirement benefits for tax purposes.
(8) RETIREMENT PLANS
PFS participates in two defined benefit noncontributory pension plans for
salaried and nonsalaried employees (the "Plans") which are administered directly
or indirectly by the Parent. Substantially all employees of the Division are
covered by these Plans.
Generally, benefits for salaried and nonsalaried employees are based on
years of service and the employees' highest consecutive five-year average annual
earnings. The Parent funds the Plans in amounts not less than the minimum
statutory funding requirements nor more than the maximum amount which can be
deducted for federal income tax purposes by the Parent. The Plans' assets
consist principally of equity securities, government and corporate debt
securities, and other fixed income obligations. Capital stock of the Parent
accounted for approximately 24% and 22% of the total market value of the
domestic Parent sponsored Plans' assets for 1995 and 1996.
PFS was charged pension expense of $1,211, $1,174 and $2,374 in 1994, 1995
and 1996, respectively.
F-25
<PAGE> 136
PFS
(A DIVISION OF PEPSICO, INC. HELD FOR SALE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
PFS participates in a postretirement benefit plan administered by the
Parent. The plan provides postretirement health care and life insurance benefits
to eligible retired U.S. employees. Employees who have 10 years of service and
attain age 55 while in service with the Division are eligible to participate in
the postretirement benefit plan. The plan in effect through 1994 was largely
noncontributory and was not funded. PFS accrues the cost of postretirement
benefits over the years employees provide services to the date of their full
eligibility for such benefits.
Postretirement benefit expense amounted to $919, $481 and $1,047 in 1994,
1995 and 1996, respectively. The liability for postretirement benefits of $8,967
at December 25, 1995 and $9,962 at December 27, 1996 is included in other
liabilities and deferred credits in the accompanying balance sheets.
Effective in 1994, certain features of the plan were amended to expand
retiree cost-sharing provisions and limit the Division's share of future
increases in health care costs.
F-26
<PAGE> 137
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
AmeriServ Food Company
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of AmeriServ Food Company (the Company) for
the years ended December 31, 1994 and December 30, 1995. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of the Company for the years ended December 31, 1994 and December 30, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
March 22, 1996
F-27
<PAGE> 138
AMERISERV FOOD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net sales.......................................................... $873,309 $939,096
Operating expenses:
Cost of sales, including delivery and warehouse expenses......... 841,408 907,597
Selling, general, and administrative............................. 19,314 20,209
Depreciation..................................................... 2,778 2,768
Amortization of goodwill and covenants not to compete............ 888 677
Losses of divested operations.................................... 313 --
-------- --------
Total operating expenses................................. 864,701 931,251
-------- --------
Income from operations............................................. 8,608 7,845
Other expense:
Interest expense................................................. 6,442 7,465
Interest expense, related parties................................ 226 216
Amortization of financing costs.................................. 236 302
Other expense, net............................................... 28 1,472
-------- --------
Income (loss) before minority interest............................. 1,676 (1,610)
Minority interest.................................................. 4 (2)
-------- --------
Income (loss) before income taxes.................................. 1,680 (1,612)
Income tax provision............................................... 108 270
-------- --------
Income (loss) before extraordinary items........................... 1,572 (1,882)
Extraordinary gain on early extinguishment of debt................. 312 --
-------- --------
Net income (loss).................................................. $ 1,884 $ (1,882)
======== ========
</TABLE>
See accompanying notes.
F-28
<PAGE> 139
AMERISERV FOOD COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK PAID-IN ACCUMULATED
PAR VALUE CAPITAL DEFICIT TOTAL
--------- ---------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1994...................... $25 $ 8,742 $ (17,032) $(8,265)
Contribution of dividend promissory notes and
accrued interest to equity................. -- 5,678 -- 5,678
Accretion of redemption value of Series A
Redeemable Preferred Stock................. -- -- (1,125) (1,125)
Net income.................................... -- -- 1,884 1,884
--- ------- -------- -------
Balance at December 31, 1994.................... 25 14,420 (16,273) (1,828)
One for ten reverse stock split............... (22) 22 -- --
Accretion of redemption value of Series A
Redeemable Preferred Stock................. -- -- (675) (675)
Net loss...................................... -- -- (1,882) (1,882)
--- ------- -------- -------
Balance at December 30, 1995.................... $ 3 $ 14,442 $ (18,830) $(4,385)
=== ======= ======== =======
</TABLE>
See accompanying notes.
F-29
<PAGE> 140
AMERISERV FOOD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................................. $ 1,884 $ (1,882)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation..................................................... 2,778 2,768
Amortization of goodwill and covenants not to compete............ 888 677
Amortization of financing costs.................................. 236 302
Other non-cash expenses.......................................... -- 1,079
Deferred income tax provision.................................... (347) 45
Provision for doubtful accounts.................................. 410 181
Minority interest................................................ (4) 2
Extraordinary gain............................................... (312) --
Changes in operating assets and liabilities:
Accounts and other receivables................................ (3,116) (664)
Inventories................................................... (5,929) (2,880)
Prepaid expenses and other.................................... (1,272) (730)
Accounts payable.............................................. 10,143 7,228
Accrued liabilities........................................... 67 (844)
--------- ---------
Net cash provided by operating activities.......................... 5,426 5,282
INVESTING ACTIVITIES
Acquisitions of businesses......................................... (1,625) --
Capital expenditures for property, plant, and equipment............ (1,263) (3,030)
Proceeds from sale of property, plant, and equipment............... 71 112
Other.............................................................. 190 (229)
--------- ---------
Net cash used in investing activities.............................. (2,627) (3,147)
FINANCING ACTIVITIES
Borrowings under line of credit agreements......................... 929,724 960,744
Repayments under line of credit agreements......................... (933,505) (958,785)
Proceeds from long-term debt....................................... 5,896 --
Repayments of long-term debt....................................... (6,855) (3,617)
Maturity of certificates of deposit................................ 1,620 --
Proceeds from issuance of Series A Redeemable Preferred Stock...... 2,000 --
Other.............................................................. (1,335) (490)
--------- ---------
Net cash used in financing activities.............................. (2,455) (2,148)
--------- ---------
Net increase (decrease) in cash.................................... 344 (13)
Cash at beginning of year.......................................... 502 846
--------- ---------
Cash at end of year................................................ $ 846 $ 833
========= =========
Supplemental disclosure of cash flow information -- Cash paid for
interest......................................................... $ 6,526 $ 7,097
</TABLE>
See accompanying notes.
F-30
<PAGE> 141
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 1994 AND DECEMBER 30, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Disposition
AmeriServ Food Company (the Company or AmeriServ) was formed in September
1989 and was majority owned by J. Lewis Partners, L.P. (Lewis Partners). On
January 26, 1996, all of the Company's outstanding stock (common and preferred)
was acquired by AmeriServe Food Distribution, Inc. (formerly NEBCO EVANS
Distribution, Inc.) (NEBCO). In conjunction with the acquisition, the Company's
revolving line of credit, its term notes payable to five co-lenders, and its
note to Signal Capital Corporation were paid off. The Company continues to
operate as a wholly-owned subsidiary of NEBCO with NEBCO providing any working
capital needed for the Company's operations.
The consolidated financial statements of the Company include the accounts
of the Company and the following subsidiaries:
<TABLE>
<CAPTION>
SUBSIDIARY OWNERSHIP
------------------------------------------------------------------ ---------
<S> <C>
Post Holding Company and subsidiary (Post)........................ 50%
Delta Transportation, Ltd. (Delta)................................ 100%
</TABLE>
The Company was formed through a series of acquisitions. Interstate
Distributors, Inc. (IDI), and The Sonneveldt Company (Sonneveldt) represent
holding companies formed for the purpose of acquiring the respective operating
subsidiaries. Lewis Partners acquired a 70% ownership interest in Sonneveldt and
an 81% ownership interest in IDI on December 19, 1988, and August 1, 1989,
respectively. In 1989, Lewis Partners transferred its ownership interests in
these two entities to the Company in exchange for shares of the Company's common
stock. Concurrent with the transfer of Lewis Partners' ownership interests in
the subsidiaries to the Company, the Company acquired the remaining 30% minority
interest in Sonneveldt by exchanging shares of the Company's common stock for
the minority interest holders' shares of Sonneveldt. The Company acquired Post
Holding Company (Post) in 1989, First Choice Food Distributors, Inc. (FCF), in
1990, Alpha Distributors, Ltd., Delta Transportation, Ltd., and Omega
Distributions Services, Ltd. (collectively Alpha), and Food Service Systems
(FSS) in 1991. The Company merged FSS into IDI in December 1992.
On January 11, 1994, the Company completed a series of transactions
including a private equity offering, a corporate restructuring, and a
refinancing of the majority of the Company's debt. As a part of these
transactions, the Company purchased the 19% minority interest in IDI, and
simultaneously merged all of its subsidiaries into AmeriServ, except Post and
Delta Transportation, Ltd. (Delta), which were not merged for regulatory
reasons.
Nature of Operations
The Company, through its divisions and subsidiaries, is a system
foodservice distributor specializing in distribution to chain restaurants. The
Company distributes a wide variety of items, including fresh and frozen meat and
poultry, frozen foods, canned and dry goods, fresh and pre-processed produce,
beverages, dairy products, paper goods, cleaning and other supplies and small
equipment. At December 30, 1995, the Company served approximately 4,300
restaurant locations within 38 different restaurant chains (or "concepts") in 38
states, Mexico and the Caribbean from 14 distribution centers in the United
States.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-31
<PAGE> 142
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Upon consolidation, all intercompany accounts,
transactions, and profits have been eliminated.
Fiscal Year
The Company's fiscal year is the 52- or 53-week period ending on the
Saturday closest to December 31. The fiscal years ended December 31, 1994
(fiscal 1994) and December 30, 1995 (fiscal 1995) are 52-week periods.
Inventories
Merchandise inventories are valued at the lower of cost (first-in,
first-out method) or market.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is computed
over the estimated useful lives of the assets, using either the straight-line or
double-declining balance method. Amortization of leasehold improvements is
recorded over the respective lease terms or useful lives, whichever are shorter;
and assets recorded under capital leases are amortized over the respective lease
terms. Amortization of capital leases is included in depreciation expense.
Useful lives for amortization and depreciation calculations are as follows:
<TABLE>
<S> <C>
5 -- 40
Buildings and improvements.................................... years
5 -- 9
Delivery and automotive equipment............................. years
5 -- 12
Warehouse equipment........................................... years
5 -- 10
Furniture, fixtures, and equipment............................ years
</TABLE>
Other Assets
Goodwill represents the excess of the purchase prices over the fair values
of net assets of acquired businesses and is amortized over 40 years using the
straight-line method. On January 11, 1994, the Company purchased the remaining
minority interest in IDI resulting in additional goodwill of $1,160. The
carrying value of goodwill is reviewed if the facts and circumstances suggest it
may be impaired. If this review indicates that goodwill may not be recoverable,
as determined based on the estimated future undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill is reduced by the estimated shortfall.
The costs of covenants not to compete, incurred in connection with
acquisitions, are being amortized over the lives of the respective covenants
(three to five years) using the straight-line method. Deferred financing costs
are being amortized over the terms of the respective agreements, generally three
to five years, using the straight-line method, which does not differ
significantly from the interest method.
Federal Income Taxes
The Company and its subsidiaries (excluding Post) file a consolidated
federal income tax return. Under federal tax regulations, Post is required to
file a separate consolidated federal income tax return.
Losses of Divested Operations
In fiscal 1994, the Company incurred losses of $313, consisting of costs
incurred to close the two remaining FSS distribution facilities. The majority of
these expenses were related to operating, legal,
F-32
<PAGE> 143
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
severance, and shut-down costs associated with the decision to close these
facilities. The closing and divesting of these operations was deemed necessary
due to continued operating losses with respect to these two facilities.
Other Expenses, Net
In fiscal 1995, other expense, net, of $1,472 in the consolidated statement
of operations, included expenses of $827 related to an attempted public offering
of the Company's common stock, and an accrual of $600 representing payments due
under contract to two former owners of a company acquired by AmeriServ in 1988.
As the two former owners are no longer involved in the business, these amounts
have been written off.
2. LEASES
The Company leases warehouse facilities and certain transportation
equipment under operating leases expiring at various dates through 1999. Minimum
annual rental commitments under noncancelable operating leases are as follows at
December 30, 1995:
<TABLE>
<S> <C>
1996............................................................... $ 8,233
1997............................................................... 7,509
1998............................................................... 6,604
1999............................................................... 5,134
2000............................................................... 3,700
Thereafter 5,887
-------
$37,067
=======
</TABLE>
Rent expense for fiscal 1994 and 1995 was approximately $9,363 and $11,243,
respectively. Under certain truck leases, various subsidiaries of the Company
are obligated to pay contingent rentals based on miles driven each period.
The Madison, Wisconsin, warehouse facility lease grants the Company an
option to purchase the warehouse facility at any time during the initial or
extended lease terms for $6,000. Additionally, the lease grants the lessors a
put option to require the Company to purchase the warehouse facility for $6,000
should the Company either default on future monthly rental payments or fail to
exercise, or not be entitled under the terms of the lease to exercise, any of
its options to extend the initial 10-year term of the lease.
The Company leases operating facilities and certain delivery and warehouse
equipment under capital lease agreements. The leases are for various terms
through 2002, with interest payable at rates ranging from 10 to 12.75%. The
facilities are leased from a partnership, which is partially owned by
stockholders of the Company. Payments representing principal on the facility
leases totaled $133 and $150 in fiscal 1994 and 1995, respectively. The Company
is required to pay real estate and other occupancy costs under the leases.
3. STOCK COMPENSATION PLAN
In 1991, the Company adopted a Stock Compensation Plan (the Plan), which
became effective on December 31, 1991. The Plan covers the issuance of incentive
and nonqualified stock options and restricted stock grants to directors and key
employees of the Company and its subsidiaries. The Plan is administered by a
committee (the Committee) appointed by the Company's Board of Directors. The
Committee generally has the authority to fix the terms and numbers of options to
be granted and to determine the employees or other parties who will receive the
options and the grants. The number of shares that may be issued under the Plan
shall not exceed 56. Incentive stock options granted by the Committee shall
expire on the date determined by the Committee, but in no event shall any
incentive stock option expire later than 10 years after the grant date. The
exercise price per share for shares issued pursuant to the exercise of incentive
stock options shall not be
F-33
<PAGE> 144
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
less than the fair market value of common stock at the time of the grant of the
option. All options granted will expire between January 1, 2002, and January 11,
2004.
Common share stock options outstanding at December 31, 1994, and December
30, 1995, are as follows adjusted for a 1 for 10 reverse stock split effective
September 1, 1995 (in thousands except per share data):
<TABLE>
<CAPTION>
NUMBER OF PRICE PER OPTIONS
SHARES SHARE EXERCISABLE
--------- --------------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1994.... 23 $53.33 -- $93.33 23
Outstanding at December 30, 1995.... 24 $53.33 -- $93.33 24
</TABLE>
4. INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Current:
Federal.......................................... $ 72 $ --
State............................................ 383 289
---- ---
Total current...................................... 455 289
Deferred-Federal................................... (347) (19)
---- ---
Total deferred..................................... (347) (19)
---- ---
$ 108 $270
==== ===
</TABLE>
A reconciliation of the Company's income tax provision calculated at
federal statutory rates to the provision for income taxes reported is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Federal statutory tax rate (34%) applied to income
(loss) before taxes.............................. $ 571 $ (548)
Net operating losses not benefited................. -- 267
Benefit of net operating loss carryovers........... (827) --
AMT credit not benefited........................... 72 --
State income taxes................................. 383 289
Tax return settlements............................. (347) --
Amortization of goodwill........................... 124 124
Meals and entertainment............................ 97 119
Other.............................................. 35 19
----- -----
$ 108 $ 270
===== =====
</TABLE>
At December 30, 1995, the Company has consolidated net operating loss
carryforwards of $8,707 for federal income tax purposes that expire in years
2004 through 2009. Additionally, at December 30, 1995, Post has net operating
loss carryforwards of $1,360, which are available to offset Post's separate
taxable income. The Company establishes a valuation allowance for its deferred
tax assets until, based on available evidence, it is more likely than not that a
portion or all of the deferred tax assets will be realized.
F-34
<PAGE> 145
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Section 382 of the 1986 Internal Revenue Code provides for limitations on
the utilization of net operating loss carryovers subsequent to certain ownership
changes. If the Company experiences an ownership change, as defined under
Section 382, the availability of its net operating loss carryovers may be
limited.
5. OTHER RELATED PARTY TRANSACTIONS
The Company and its subsidiaries incurred monitoring and acquisition fees
of $415 to Lewis Partners for management advisory, investment banking, and
acquisition services during both fiscal 1994 and 1995.
6. CAPITAL STOCK
Effective November 10, 1994, the Board of Directors approved a
three-for-four reverse stock split and effective September 1, 1995, the Board of
Directors approved a one-for-ten reverse stock split. All references to stock
related data has been restated to reflect the effect of the splits.
The Board of Directors of the Company is authorized, without action by the
stockholders, to divide authorized preferred stock into one or more series and
to fix, for each series, the number of shares, powers, designations,
preferences, relative rights, qualifications, limitations, and restrictions. The
Company is authorized to issue 500 shares of Preferred Stock with a par value of
$0.01. The Company issued 45 shares of $.01 par value non-voting preferred
shares designated as Series A Redeemable Preferred Stock for $4,500. The
Preferred Stock is convertible into shares of common stock at a rate of 2.5
shares of common for each share of Series A Redeemable Preferred Stock. The
holders of shares of Series A Redeemable Preferred Stock are entitled to receive
dividends as declared by the Board of Directors from time to time. The Series A
Redeemable Preferred Stock is redeemable in whole at any time or from time to
time in part, at the option of the Company, at a redemption price of $125.00 per
share, with such redemption price increasing by 12% per year commencing on
January 1, 1995, and being increased by a per share amount equal to any then
declared but unpaid dividends. The redemption of the Series A Redeemable
Preferred Stock is mandatory on December 31, 2003, or earlier in the event of an
initial public offering, sale of the Company or merger, consolidation, or other
form of business combination in which the Company is not the surviving entity.
In the event of any form of liquidation of the Company, the holders of the
Series A Redeemable Preferred Stock hold preference over all other forms of
capital stock at an amount equal to $100.00 per share with the amount increasing
by 12% per year compounded annually. Commencing on January 1, 1995, this amount
is further increased by a per share amount equal to any then declared but unpaid
dividends.
Under the terms of an agreement with two of the Company's stockholders, the
Company must obtain an affirmative vote by at least one of the directors, if
any, nominated by each of the two stockholders and Lewis Partners, prior to the
consummation of any of the following events: (i) the issuance by the Company or
any subsidiary of any shares of its capital stock or other equity securities or
options, rights, or warrants; (ii) a transfer, as defined, by the Company of any
of the shares of capital stock of Post currently owned by it; (iii) the approval
of any amendments to the Certificate of Incorporation of the Company or its
subsidiaries; (iv) the merger, consolidation, liquidation, or dissolution of the
Company or any of its subsidiaries or the sale or other disposition of all, or
substantially all, of the assets of the Company or its subsidiaries; (v) the
declaration or payment of any dividend on or distribution to holders of the
common equity stock of the Company or any subsidiary that is not wholly owned by
the Company; or (vi) the amendment, modification, supplementation, or
termination of various agreements currently in effect or hereinafter to be
executed by the stockholders.
In connection with the acquisition of Sonneveldt and the related financing
obtained, a warrant was issued to Signal Capital Corporation to purchase 25% of
the common stock of the Company's former subsidiary for an aggregate exercise
price of $0.25. The warrant was exercisable upon issuance. As a part of the
refinancing and restructuring completed January 11, 1994 (Note 9), the warrant
was purchased by the Company for $100.
F-35
<PAGE> 146
AMERISERV FOOD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CONCENTRATIONS OF CREDIT RISK
The Company and its subsidiaries perform periodic credit evaluations of its
customers' financial conditions and generally do not require collateral.
Franchiser-owned and franchisee-owned stores of three national limited-menu
concepts accounted for approximately 40%, 10%, and 10% in 1994 and 40%, 11%, and
10% in fiscal 1995 of the Company's consolidated revenues. One customer
represented approximately 15% and 14% of consolidated revenues for fiscal 1994
and 1995, respectively.
8. EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have two benefit plans, the AmeriServ
401(k) Savings Plan and The Sonneveldt Company 401(k) Plan. The AmeriServ 401(k)
Plan covers all hourly and salaried employees of AmeriServ and its subsidiaries,
except those covered in The Sonneveldt Plan. The Sonneveldt Company 401(k) Plan
covers all hourly warehouse and transportation employees of a former subsidiary,
The Sonneveldt Company. Under the plans, participants may elect to defer up to
15% of compensation, and the Company matches a portion of the participant's
salary deferral, up to plan-specified maximums. The Company's contributions to
the plans totaled $389 and $323 in fiscal 1994 and 1995, respectively.
9. REFINANCING
On January 11, 1994, the Company entered into a series of transactions that
resulted in capital contributions of $10,178, the refinancing of a majority of
the Company's debt, and the restructuring of the Company's corporate
organization.
The Company issued 45 shares of Series A Redeemable Preferred Stock for
$4,500 (Note 6). The consideration for these shares was a combination of cash
and the contribution of the Company's $2,500 promissory note payable to Lewis
Partners. Additionally, the stockholders of the Company, as a group, contributed
the $5,000 balance of the dividend promissory notes, together with accrued
interest of $678 thereon, to the Company in the form of additional paid-in
capital.
In fiscal 1994, the Company recognized a $313 extraordinary gain as a
result of the refinancing of its revolving credit notes payable and certain term
notes payable. The Company purchased the warrants in a subsidiary from one
lender for less than book value, generating a $275 gain, prepaid a note
obtaining a $263 discount in exchange for early extinguishment, and repaid
several issues of debt before the due date resulting in $225 in prepayment
penalties.
The corporate structure of the Company was also simplified with the merger
of all the Company's subsidiaries, except Post and Delta, into the Company. The
mergers were also consummated on January 11, 1994.
F-36
<PAGE> 147
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NEHC OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NEHC SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
The Company........................... 5
Risk Factors.......................... 16
The Exchange Offer.................... 22
Certain Federal Income Tax
Consequences of the Exchange
Offer............................... 29
The Transactions...................... 29
Use of Proceeds....................... 33
Capitalization........................ 34
Selected NEHC Historical Financial
Data................................ 35
Selected PFS Historical Financial
Data................................ 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
The Business.......................... 44
The Acquisition....................... 54
Management............................ 55
Security Ownership of Certain
Beneficial Holders and Management... 58
Certain Relationships and Related
Party Transactions.................. 59
Description of Indebtedness........... 60
Description of New Notes.............. 64
Description of Certain Federal Income
Tax Consequences.................... 90
Plan of Distribution.................. 94
Legal Matters......................... 95
Experts............................... 95
Change in Company's Accountant........ 96
Index of Certain Defined Terms........ 97
Index to Unaudited Pro Forma Financial
Statements.......................... P-1
Index to Historical Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
$100,387,000
NEBCO EVANS HOLDING COMPANY
---------------------------------
OFFER TO EXCHANGE
---------------------------------
12 3/8% NEW SENIOR DISCOUNT NOTES
DUE 2007
, 1997
======================================================
<PAGE> 148
PAGES TO BE USED IN MARKET-MAKING PROSPECTUS
<PAGE> 149
[ALTERNATE COVER FOR MARKET-MAKING PROSPECTUS]
[AMERISERVE LOGO]
NEBCO EVANS HOLDING COMPANY
12 3/8% NEW SENIOR DISCOUNT NOTES DUE 2007
------------------------
The 12 3/8% New Senior Discount Notes due 2007 (the "New Senior Discount
Notes" or "New Notes") were issued in exchange for the 12 3/8% Senior Discount
Notes due 2007 (the "Senior Discount Notes" or "Notes") by Nebco Evans Holding
Company ("NEHC"), a Delaware corporation. See "Description of New Notes."
The New Notes accrete at a rate of 12 3/8% compounded semi-annually to an
aggregate principal amount of $100,387,000 at July 15, 2002. Thereafter, the New
Notes will accrue interest at the rate of 12 3/8% per annum, payable
semiannually on January 15 and July 15 of each year, commencing July 15, 2003.
The New Notes are redeemable at the option of NEHC, in whole or in part, at any
time on or after July 15, 2002 in cash at the redemption prices set forth
herein, plus accrued and unpaid interest and liquidated damages, if any, thereon
to the date of redemption. In addition, at any time, NEHC may redeem the New
Notes, in whole but not in part, at the option of NEHC, at a redemption price of
112.375% of the accreted value (determined at the date of redemption), with the
net cash proceeds of a Public Equity Offering. See "Description of the New
Notes -- Optional Redemption," and "Prospectus Summary -- Summary of Terms of
New Notes."
Upon the occurrence of a Change of Control, each Holder (as defined herein)
of New Notes will have the right to require NEHC to repurchase all or any part
of such Holder's New Notes at an offer price in cash equal to 101% of the
Accreted Value (determined at the date of redemption) thereof on the date of
repurchase (if such date of repurchase is prior to July 15, 2002) or 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of repurchase (if such date of
repurchase is on or after July 15, 2002). "Description of New Notes-Repurchase
at the Option of Holders." There can be no assurance that, in the event of a
Change of Control, NEHC would have sufficient funds to repurchase all New Notes
tendered. See "Risk Factors -- Payment Upon a Change of Control."
The New Notes are general, unsecured obligations of NEHC, rank pari passu
in right of payment with all existing and future senior indebtedness of NEHC and
rank senior in right of payment to all subordinated indebtedness of NEHC. As
indebtedness of NEHC, however, the Notes are effectively subordinated to all
indebtedness of the Company. As of March 29, 1997, on a pro forma basis, after
giving effect to the acquisition, the related financings and other transactions
described herein, including, without limitation, the Offering and the
application of the net proceeds therefrom, the Notes would have been effectively
subordinate to approximately $728.8 million of indebtedness of the Company.
------------------------
SEE "RISK FACTORS," COMMENCING ON PAGE [ ], FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE NEW NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is to be used by Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") in connection with the offers and sales in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. The Company does not intend to list the New Notes on any
securities exchange or to seek admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. DLJ has advised
the Company that it intends to make a market in the New Notes; however, it is
not obligated to do so and any market-making may be discontinued at any time.
The Company will receive no portion of the proceeds of the sale of the New Notes
and will bear expenses incident to the registration thereof.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 150
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
No dealer, salesperson or other person has been authorized to give
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by NEHC or DLJ. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the New Notes offered hereby, nor does it constitute an offer to sell
or the solicitation of an offer to buy any of the New Notes to any person in any
jurisdiction in which it is unlawful to make such an offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that the information
contained herein is correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
NEHC has filed with the Securities and Exchange Commission ("SEC") a
Registration Statement on Form S-4 under the Securities Act for the registration
of the New Notes offered hereby (the "Registration Statement"). This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in exhibits and schedules to the Registration Statement as
permitted by the rules and regulations of the SEC. For further information with
respect to NEHC or the New Notes offered hereby, reference is made to the
Registration Statement, including the exhibits and financial statement schedules
thereto, which may be inspected without charge at the public reference facility
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and copies of which may be obtained from the SEC at prescribed rates.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the SEC as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
Upon the effectiveness of the Registration Statement, NEHC became subject
to the information requirements of the Securities Exchange Act of 1934 (the
"Exchange Act"), and in accordance therewith will file reports and other
information with the SEC. Such reports and other information filed by NEHC can
be inspected and copied at the public reference facilities of the SEC at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at the Website
(http://www.sec.gov.) maintained by the SEC, and the regional offices of the SEC
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
its public reference facilities in New York, New York and Chicago, Illinois at
prescribed rates.
So long as NEHC is subject to the periodic reporting requirements of the
Exchange Act, it is required to furnish the information required to be filed
with the SEC to (i) State Street Bank and Trust Company as trustee (the "Senior
Discount Note Trustee"), under the Indenture dated as of July 11, 1997 (the
"Senior Discount Note Indenture") among the Company and the Senior Discount Note
Trustee, pursuant to which the outstanding 12 3/8% Senior Discount Notes due
2007 of the Company (the "Senior Discount Notes") were, and the New Senior
Discount Notes will be, issued and (ii) the holders of the Notes and the New
Notes. NEHC has agreed that, even if they are not required under the Exchange
Act to furnish such information to the SEC, they will nonetheless continue to
furnish information that would be required to be furnished by NEHC by Section 13
of the Exchange Act to the Trustees and the holders of the Notes or New Notes as
if they were subject to such periodic reporting requirements.
In addition, NEHC has agreed that for so long as any of the Notes remain
outstanding, they will make available to any prospective purchaser of the Notes
or Holder of the Notes in connection with any sale thereof, the information
required by Rule 144A(d)(4) under the Securities Act.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
AMERISERVE FOOD DISTRIBUTION, INC., 17975 WEST SARAH LANE, SUITE 100,
BROOKFIELD, WISCONSIN 53045, (414) 792-9300. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST , 1997.
A-2
<PAGE> 151
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
TRADING MARKET FOR THE NEW NOTES
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes or the
ability of the Holders of the New Notes to sell their New Notes or the price at
which such Holders may be able to sell their New Notes. If such market were to
develop, the New Notes could trade at prices that may be higher or lower than
their initial offering price depending on many factors, including prevailing
interest rates, NEHC's operating results and the market for similar securities.
Although it is not obligated to do so, DLJ intends to make a market in the New
Notes. Any such market-making activity may be discontinued at any time, for any
reason, without notice at the sole discretion of DLJ. No assurance can be given
as to the liquidity of or the trading market for the New Notes.
DLJ may be deemed to be an affiliate of NEHC and, as such, may be required
to deliver a prospectus in connection with its market-making activities in the
New Notes. Pursuant to the Registration Rights Agreement, NEHC agreed to use its
respective best efforts to file and maintain a registration statement that would
allow DLJ to engage in market-making transactions in the New Notes for up to 120
days from the date on which the Exchange Offer is consummated. NEHC has agreed
to bear substantially all the costs and expenses related to such registration
statement.
A-3
<PAGE> 152
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
USE OF PROCEEDS
This Prospectus is delivered in connection with the sale of the New Notes
by DLJ in market-making transactions. NEHC will not receive any of the proceeds
from such transactions.
A-4
<PAGE> 153
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
PLAN OF DISTRIBUTION
This Prospectus is to be used by DLJ in connection with offers and sales of
the New Notes in market-making transactions effected from time to time. DLJ may
act as a principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be made
at prevailing market prices at the time of sale, at prices related thereto or at
negotiated prices.
DLJMB, an affiliate of DLJ, and certain of its affiliates beneficially own
approximately 36.1% of the common stock of NEHC. Peter T. Grauer, a principal of
DLJ, is a member of the Board of Directors of NEHC and the Company; Benoit
Jamar, a principal of DLJ, became a member of the Board of Directors of NEHC and
the Company as of Closing. Further, DLJ Capital Funding, Inc., an affiliate of
DLJ, is acting as documentation agent in connection with the New Credit Facility
for which it is receiving certain customary fees and expenses. In addition, DLJ
received a merger advisory fee of $4.0 million in cash from the Company after
consummation of the Transactions. DLJ has informed NEHC that it does not intend
to confirm sales of the New Notes to any accounts over which it exercises
discretionary authority without the prior specific written approval of such
transactions by the customer.
NEHC has been advised by DLJ that, subject to applicable laws and
regulations, DLJ currently intend to make a market in the New Notes following
completion of the Exchange Offer. However, DLJ is not obligated to do so and any
such market-making may be interrupted or discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act. There can be no assurance
that an active trading market will develop or be sustained. See "Risk
Factors -- Trading Market for the New Notes."
DLJ has provided investment banking services to the Company in the past and
may provide such services and financial advisory services to the Company in the
future. DLJ acted as purchasers in connection with the initial sale of the Notes
and received an underwriting discount of approximately $2.2 million in
connection therewith. See "Certain Relationships and Related Party
Transactions."
DLJ and NEHC have entered into the Registration Rights Agreement with
respect to the use by DLJ of this Prospectus. Pursuant to such agreement, NEHC
agreed to bear all registration expenses incurred under such agreement, and NEHC
agreed to indemnify the Initial Purchasers against certain liabilities,
including liabilities under the Securities Act.
A-5
<PAGE> 154
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NEHC OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NEHC SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................
The Company...........................
Risk Factors..........................
The Exchange Offer....................
Certain Federal Income Tax
Consequences of the Exchange
Offer...............................
The Transactions......................
Use of Proceeds.......................
Capitalization........................
Selected NEHC Historical Financial
Data................................
Selected PFS Historical Financial
Data................................
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................
The Business..........................
The Acquisition.......................
Management............................
Security Ownership of Certain
Beneficial Holders and Management...
Certain Relationships and Related
Party Transactions..................
Description of Indebtedness...........
Description of New Notes..............
Description of Certain Federal Income
Tax Consequences....................
Plan of Distribution..................
Legal Matters.........................
Experts...............................
Change in Company's Accountant........
Index of Certain Defined Terms........
Index to Unaudited Pro Forma Financial
Statements..........................
Index to Historical Financial
Statements..........................
</TABLE>
======================================================
======================================================
$100,387,000
NEBCO EVANS HOLDING COMPANY
12 3/8% NEW SENIOR DISCOUNT NOTES
DUE 2007
--------------------
PROSPECTUS
--------------------
, 1997
======================================================
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL"), provides that a corporation (in its original certificate of
incorporation or an amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise or perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provisions 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 stockbrokers,
(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 DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
the director derived an improper personal benefit. Article VIII, Section 1 of
the Company's Certificate of Incorporation limits the liability of directors
thereof to the extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties to which they may be made parties by reason of their being or
having been directors, officers, employees or agents and shall so indemnify such
persons if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interest of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. Article VIII, Section 2(a) of the Certificate of
Incorporation of the Company provides that the Company shall indemnify its
officers, directors, employees and agents to the full extent permitted by
Delaware law.
Article VIII, Section 2(a) of the Company's Certificate of Incorporation
also provides that the Company shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the Board. Any rights to indemnification
conferred in Section 2 are contract rights, and include the right to be paid by
the Company the expenses incurred in defending any such proceeding in advance of
its final disposition, except that, if the DGCL requires, the payment of such
expenses incurred by a director or officer in such capacity in advance of final
disposition shall be made only upon delivery to the Company of an undertaking by
or on behalf of such director or officer, to repay all amounts so advanced if it
is ultimately determined that such director or officer is not entitled to be
indemnified under Section 2 or otherwise. By action of the board of directors,
the Company may extend such indemnification to employees and agents of the
Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Purchase Agreement, by and among NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, dated as of July 9, 1997.
2.2 Asset Purchase Agreement between PepsiCo, Inc. and Nebco Evans Holding Company.
2.3 Distribution Agreement by and among PFS, Pizza Hut, Inc., Taco Bell Corp., Kentucky
Fried Chicken Corporation and Kentucky Fried Chicken of California, Inc.*
3.1 Certificate of Incorporation of NEHC.
3.2 By-Laws of NEHC.
4.1 Indenture, dated as of July 11, 1997, by and among NEHC and State Street Bank and
Trust Company, with respect to the New Senior Discount Notes.
4.2 Form of New Senior Discount Note.
</TABLE>
II-1
<PAGE> 156
<TABLE>
<C> <S>
5.1 Opinion of Wachtell, Lipton, Rosen & Katz.*
10.1 Registration Rights Agreement, dated as of July 11, 1997, by and among NEHC and
Donaldson, Lufkin & Jenrette Securities Corporation.
10.2 Second Amended and Restated Credit Agreement, dated as of July 11, 1997 among the
Company, Bank of America National Trust and Savings Association, as Administrative
Agent, Donaldson, Lufkin & Jenrette Securities Corporation, as Documentation Agent,
Bank of America National Trust and Savings Association as Letter of Credit Issuing
Lender, the Other Financial Institutions Party thereto and BancAmerica Securities,
Inc. as Arranger.
10.3 Stock Purchase Agreement, dated as of July 11, 1997, between NEHC and DLJ Merchant
Banking, II, L.P.
12.1 Statements re computation of ratios.
16.1 Letter from Deloitte & Touche LLP.
21.1 Subsidiaries of NEHC.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Ernst & Young LLP.
23.6 Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).*
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of State Street
Bank and Trust Company under the Trust Indenture Act of 1939.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal for the 12 3/8% New Senior Discount Notes due 2007.
99.2 Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
99.3 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedule.
II-2
<PAGE> 157
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(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 most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(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.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) 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.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 158
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 August 8, 1997.
NEBCO EVANS HOLDING COMPANY
By /s/ RAYMOND E. MARSHALL
------------------------------------
Raymond E. Marshall
President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Raymond E. Marshall, Petter Ostberg and Donald J.
Rogers, and each of them, his attorney-in-fact with power of substitution for
him in any and all capacities, to sign any amendments, supplements, subsequent
registration statements relating to the offering to which this Registration
Statement relates, or other instruments he deems necessary or appropriate, and
to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact or his substitute may 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 by the following persons in the
capacities and on August 8, 1997.
<TABLE>
<CAPTION>
NAME TITLE
- -------------------------------------------- ---------------------------------------------
<S> <C>
/s/ RAYMOND E. MARSHALL President, Chief Operating Officer,
- -------------------------------------------- Treasurer and Director
Raymond Marshall
/s/ DONALD J. ROGERS Chief Financial Officer and Vice President
- --------------------------------------------
Donald J. Rogers
/s/ DANIEL W. CRIPPEN Director
- --------------------------------------------
Daniel W. Crippen
/s/ JOHN R. EVANS Director
- --------------------------------------------
John R. Evans
/s/ JOHN V. HOLTEN Chief Executive Officer and Director
- --------------------------------------------
John V. Holten
/s/ PETER T. GRAUER Director
- --------------------------------------------
Peter T. Grauer
/s/ BENOIT JAMAR Director
- --------------------------------------------
Benoit Jamar
/s/ GUNNAR E. KLINTBERG Director
- --------------------------------------------
Gunnar E. Klintberg
/s/ LEIF F. ONARHEIM Director
- --------------------------------------------
Leif F. Onarheim
</TABLE>
II-4
<PAGE> 159
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Nebco Evans
Holding Company as of December 30, 1995 and December 28, 1996, and for each of
the three years in the period ended December 28, 1996, and have issued our
report thereon dated August 6, 1997 (included elsewhere in this Registration
Statement). Our audit also included the financial statement schedule for each of
the three years in the period ended December 28, 1996, listed in Item 21(b) of
this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, 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
Milwaukee, Wisconsin
August 6, 1997
II-5
<PAGE> 160
SCHEDULE II
NEBCO EVANS HOLDING COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER ACQUIRED AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS BALANCE(2) DEDUCTIONS(1) OF YEAR
- --------------------------------- ---------- ------------ -------- ---------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Deducted from asset accounts
Allowance for doubtful
accounts.................. $1,142 $ 359 $ -- $ -- $ (61) $ 1,440
====== ====== === ====== ===== ======
Reserve for inventory
obsolescence.............. $ 50 $ 5 $ -- $ -- $ -- $ 55
====== ====== === ====== ===== ======
Year ended December 30, 1995:
Deducted from asset accounts
Allowance for doubtful
accounts.................. $1,440 $ 134 $ -- $ -- $(404) $ 1,170
====== ====== === ====== ===== ======
Reserve for inventory
obsolescence.............. $ 55 $ -- $ -- $ -- $ -- $ 55
====== ====== === ====== ===== ======
Year ended December 28, 1996:
Deducted from asset accounts
Allowance for doubtful
accounts.................. $1,170 $ 1,306 $ -- $3,385 $(525) $ 5,336
====== ====== === ====== ===== ======
Reserve for inventory
obsolescence.............. $ 55 $ 344 $ -- $ 430 $ (51) $ 778
====== ====== === ====== ===== ======
</TABLE>
- ---------------
(1) Represents uncollectible accounts written off, net of recoveries.
(2) Balance of acquired company at date of acquisition.
II-6
<PAGE> 161
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
2.1 Purchase Agreement, by and among NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, dated as of July 9, 1997.
2.2 Asset Purchase Agreement between PepsiCo, Inc. and Nebco Evans Holding Company.
2.3 Distribution Agreement by and among PFS, Pizza Hut, Inc., Taco Bell Corp., Kentucky
Fried Chicken Corporation and Kentucky Fried Chicken of California, Inc.*
3.1 Certificate of Incorporation of NEHC.
3.2 By-Laws of NEHC.
4.1 Indenture, dated as of July 11, 1997, by and among NEHC and State Street Bank and
Trust Company, with respect to the New Senior Discount Notes.
4.2 Form of New Senior Discount Note.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz.*
10.1 Registration Rights Agreement, dated as of July 11, 1997, by and among NEHC and
Donaldson, Lufkin & Jenrette Securities Corporation.
10.2 Second Amended and Restated Credit Agreement, dated as of July 11, 1997 among the
Company, Bank of America National Trust and Savings Association, as Administrative
Agent, Donaldson, Lufkin & Jenrette Securities Corporation, as Documentation Agent,
Bank of America National Trust and Savings Association as Letter of Credit Issuing
Lender, the Other Financial Institutions Party thereto and BancAmerica Securities,
Inc. as Arranger.
10.3 Stock Purchase Agreement, dated as of July 11, 1996, between NEHC and DLJ Merchant
Banking, II, L.P.
12.1 Statements re computation of ratios.
16.1 Letter from Deloitte & Touche LLP
21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Ernst & Young LLP.
23.6 Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).*
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of State Street
Bank and Trust Company under the Trust Indenture Act of 1939.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal for the 12 3/8% New Senior Discount Notes due 2007.
99.2 Guidelines for Certification of Taxpayer Indentification Number on Substitute Form
W-9.
99.3 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
II-7
<PAGE> 1
Exhibit 2.1.0
EXECUTION COPY
================================================================================
Nebco Evans Holding Company
--------------------------------------
$100,387,000
12 3/8% Senior Discount Notes due 2007
--------------------------------------
--------------------------
PURCHASE AGREEMENT
DATED AS OF JULY 9, 1997
--------------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE> 2
Nebco Evans Holding Company
$100,387,000 Principal Amount of
12 3/8% Senior Discount Notes due 2007
PURCHASE AGREEMENT
July 9, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Nebco Evans Holding Company, a Delaware corporation ("NEHC"), proposes to
issue and sell an aggregate of $100,387,000 in principal amount of 12 3/8%
Senior Discount Notes due 2007 (the "Senior Discount Notes") of the NEHC, to
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" or the "Initial
Purchaser") to be issued pursuant to an indenture (the "Indenture") between NEHC
and State Street Bank and Trust Company of Connecticut, N.A., as trustee (the
"Trustee"). The Senior Discount Notes and the New Senior Discount Notes (as
defined below) issuable in exchange therefor are collectively referred to herein
as the "Notes." Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
The Senior Discount Notes are being issued and sold in connection with an
Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of May 23,
1997, as amended, by and between the Company and the Pepsi Food Service division
of PepsiCo, Inc. ("PFS"). The Asset Purchase Agreement provides that, subject to
certain conditions as described therein, AmeriServe Food Distribution, Inc. (the
"Company"), a wholly-owned subsidiary of NEHC, will acquire substantially all of
the assets of PFS (the "Acquisition") for a purchase price of $830 million in
cash and the assumption of certain liabilities (the "Asset Purchase
Consideration").
The proceeds to NEHC from the sale to the Initial Purchasers of the
Senior Discount Notes (the "Proceeds") will be used to partially fund the
contribution of cash from NEHC to the Company (the "Equity Contribution"), which
the Company will use to partially fund the Asset Purchase Consideration. In
addition to the Proceeds, the Company will generate funding for the Acquisition
through (i) the consummation of the offering of 10 1/8% Senior Subordinated
Notes due 2007, (ii) borrowings under a credit facility (the "New Credit
Facility") with the financial institutions which are party thereto (the
"Lenders") and Bank of America National Trust and Savings Association, as agent
for the Lenders, to be entered into concurrently with the closing of the
Acquisition and (iii) Accounts Receivable Transactions.
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<PAGE> 3
1. ISSUANCE OF SECURITIES. The Senior Discount Notes will be offered and
sold to the Initial Purchaser pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). NEHC has
prepared a preliminary offering memorandum, dated June 23, 1997 (the
"Preliminary Offering Memorandum") and a final offering memorandum, dated July
9, 1997 (the "Offering Memorandum" and, together with the Preliminary Offering
Memorandum, the "Offering Documents"), relating to the Senior Discount Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Senior
Discount Notes (and all securities issued in exchange therefor, in substitution
thereof or upon conversion thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF NEHC THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES LESS THAN $100,000, AN OPINION OF COUNSEL
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND, IN THE CASE OF CLAUSE (b), (c), (d), or (e), BASED
UPON AN OPINION OF COUNSEL IF NEHC SO REQUESTS), (2) TO NEHC OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, NEHC agrees to issue and sell to the Initial
Purchaser, and the Initial Purchaser agrees to purchase from NEHC, the principal
amount at maturity of all of the Senior Discount Notes offered in the Offering
at a purchase price equal to 50.788% of such principal amount (the "Purchase
Price").
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<PAGE> 4
3. TERMS OF OFFERING. The Initial Purchaser will make offers (the "Exempt
Resales") of the Senior Discount Notes purchased hereunder on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to persons
(each, a "144A Purchaser") whom the Initial Purchaser reasonably believes to be
"qualified institutional buyers" as defined in Rule 144A under the Act ("QIBs")
or persons otherwise exempt under Regulation S of the Securities Act (together
with QIBs, "Eligible Purchasers"). The Initial Purchaser will offer the Senior
Discount Notes to Eligible Purchasers initially at a price equal to 54.788% of
the principal amount thereof. Such price may be changed at any time without
notice.
Holders (including subsequent transferees) of the Senior Discount Notes
will have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date (as defined
below), in substantially the form of Exhibit A hereto, for so long as such
Senior Discount Notes constitute "Transfer Restricted Securities" (as defined in
the Registration Rights Agreement). Pursuant to the Registration Rights
Agreement, NEHC will agree to file with the Securities and Exchange Commission
(the "Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to (A) Company's 12 3/8% new Senior Discount Notes due 2007 (the "New Senior
Discount Notes") to be offered in exchange for the Senior Discount Notes, (such
offer to exchange being referred to as the "Registered Exchange Offer") and (ii)
a shelf registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Senior Discount Notes, and to use their best efforts to cause
such Registration Statements to be declared effective and consummate the
Registered Exchange Offer. This Agreement, the Indenture, the Notes, and the
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents."
4. DELIVERY AND PAYMENT. (a) Delivery of, and payment of the Purchase Price
for, the Senior Discount Notes shall be made at the offices of Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street New York, New York 10019 or at such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m. New York City time, on July 11, 1997 or at such other time as shall
be agreed upon by NEHC and the Initial Purchaser. The time and date of such
delivery and the payment are herein called the "Closing Date."
(b) One or more Senior Discount Notes in definitive form, registered in the
name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), or such
other names as the Initial Purchaser may request upon at least one business
day's notice to NEHC, having an aggregate principal amount corresponding to the
aggregate principal amount of Senior Discount Notes sold pursuant to Exempt
Resales to Eligible Purchasers (collectively, the "Master Notes"), shall be
delivered by NEHC to the Initial Purchaser (or as the Initial Purchaser directs)
in each case with any taxes thereon duly paid by NEHC, against payment by the
Initial Purchaser of the Purchase Price thereof by wire transfer in same day
funds to the order of NEHC or as NEHC may direct. The Master Notes shall be made
available to the Initial Purchaser for inspection not later than 9:30 a.m., New
York City time, on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF NEHC. NEHC covenants and agrees with the Initial Purchaser
as follows:
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<PAGE> 5
(a) To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, to confirm such advice in writing, (i) of the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Senior Discount
Notes for offering or sale in any jurisdiction designated by the Initial
Purchaser pursuant to Section 5(e) hereof, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority and (ii) of the happening of any event that makes any
statement of a material fact made in the Offering Documents (or any
amendment or supplement thereto) untrue or that requires the making of any
additions to or changes in the Offering Documents (or any amendment or
supplement thereto) in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading. NEHC shall
use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the Senior
Discount Notes under any state securities or Blue Sky laws, and, if at any
time any state securities commission or other regulatory authority shall
issue any stop order or order suspending the qualification or exemption
from qualification of any of the Senior Discount Notes under any state
securities or Blue Sky laws, NEHC shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to NEHC, without charge, as many copies of the
Offering Documents, and any amendments or supplements thereto, as the
Initial Purchaser may reasonably request. NEHC consents to the use of the
Offering Documents, and any amendments or supplements thereto required
pursuant hereto, by the Initial Purchaser in connection with Exempt
Resales.
(c) During such period as in the written opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered
in connection with the Exempt Resales by the Initial Purchaser and in
connection with market-making activities of the Initial Purchaser for so
long as the Senior Discount Notes are outstanding (i) not to amend or
supplement the Offering Documents, whether before or after the Closing
Date, unless the Initial Purchaser shall previously have been advised
thereof, and shall not have objected thereto within a reasonable time after
being furnished a copy thereof, and (ii) to promptly prepare, upon the
Initial Purchaser's reasonable request, any amendment or supplement to the
Offering Documents that the Initial Purchaser reasonably believe necessary
or advisable in connection with Exempt Resales or such market-making
activities.
(d) If, after the date hereof and prior to the earlier of the
completion of all Exempt Resales by the Initial Purchaser and the 90th day
after the Closing Date, any event shall occur as a result of which, in the
judgment of NEHC or counsel to the Initial Purchaser, it becomes necessary
to amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such Offering
Memorandum is delivered to an Eligible Purchaser, not misleading or if it
is necessary to amend or supplement the Offering Memorandum to comply with
any law, statute, rule or regulation, to forthwith prepare an appropriate
amendment or supplement to such Offering Memorandum so that the statements
therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchaser and counsel to the Initial
Purchaser in connection with the registration or qualification of the
Senior Discount Notes under the state securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may request, to continue
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<PAGE> 6
such registration or qualification in effect so long as required for the
Exempt Resales and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; provided, however, that NEHC shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction in which NEHC is not now so qualified, or take any action that
would subject NEHC to general consent to service of process or taxation,
other than as to matters and transactions relating to Exempt Resales, in
any jurisdiction in which NEHC is not now so subject.
(f) For so long as the Notes are outstanding, to furnish without
charge to the Initial Purchaser promptly upon their becoming available (i)
all reports or other publicly available information that NEHC shall mail or
otherwise make available to NEHC's stockholders and (ii) all reports,
financial statements and proxy or information statements filed by NEHC or
its subsidiaries with the Commission or any national securities exchange
and such other publicly available information concerning the business and
financial condition of NEHC or its subsidiaries, including without
limitation, press releases, as the Initial Purchaser may reasonably
request.
(g) To use the net proceeds from the sale of the Senior Discount Notes
in the manner described in the Offering Memorandum (and any amendments or
supplements thereto) under the caption "Use of Proceeds".
(h) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(i) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated to pay and
be responsible for all costs, expenses, fees and taxes in connection with
or incident to:
(1) the preparation, printing, processing, duplicating, filing
and distribution of the Offering Documents (including, without
limitation, financial statements and exhibits) and all amendments and
supplements thereto;
(2) the preparation, printing and delivery of the Operative
Documents, the preliminary and final Blue Sky memoranda and all other
agreements, memoranda, correspondence and other documents printed,
distributed and delivered in connection herewith and with the Exempt
Resales (including in each case any disbursements of counsel to the
Initial Purchaser relating to such printing and delivery);
(3) the issuance, transfer and delivery by NEHC of the Senior
Discount Notes to the Initial Purchaser;
(4) the registration or qualification of the Notes for offer and
sale under the securities or Blue Sky laws of the jurisdictions
referred to in Section 5(e) (including, in each case, the fees and
disbursements of counsel to the Initial Purchaser relating to such
registration or qualification and memoranda relating thereto);
(5) furnishing such copies of the Preliminary Offering Memorandum
and the Offering Memorandum, and all amendments and supplements
thereto, as may be requested for use in connection with the Exempt
Resales;
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<PAGE> 7
(6) the preparation of certificates for the Notes (including,
without limitation, printing and engraving thereof);
(7) the rating of the Notes by investment rating agencies;
(8) the fees, disbursements and expenses of NEHC's counsel and
accountants;
(9) all expenses and listing fees in connection with the
application for quotation of the Senior Discount Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL");
(10) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Indenture and the Notes;
(11) all fees and expenses (including fees and expenses of
counsel to NEHC) of NEHC in connection with approval of the Notes by
DTC for "book-entry" transfer; and
(12) the performance by NEHC of its other obligations under this
Agreement and the other Operative Documents.
(j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than a default by the Initial Purchaser) or if for
any reason NEHC shall be unable or unwilling to perform their obligations
hereunder, NEHC shall, except as otherwise agreed by the parties hereto,
reimburse the Initial Purchaser for the fees and expenses to be paid or
reimbursed pursuant to Section 5(i) above, and reimburse the Initial
Purchaser for all out-of-pocket expenses (including the fees and expenses
of counsel to the Initial Purchaser) reasonably incurred by the Initial
Purchaser in connection with the transactions contemplated by this
Agreement.
(k) Prior to the consummation of the Exchange Offer, to furnish to the
Initial Purchaser, as soon as they have been prepared by NEHC, a copy of
any consolidated financial statements of NEHC for any period subsequent to
the period covered by the financial statements appearing in the Offering
Memorandum.
(l) Not to distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Senior Discount Notes other
than the Offering Memorandum.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Senior Discount Notes in a manner that
would require the registration under the Act of the sale to the Initial
Purchaser or the Eligible Purchasers of the Senior Discount Notes.
(n) For so long as any of the Notes remain outstanding and during any
period in which NEHC is not subject to Section 13 or 15(d) of the Exchange
Act, to make available to any holder of Notes in connection with any sale
thereof and any prospective purchaser of such Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Act.
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<PAGE> 8
(o) To comply with all of their agreements set forth in the
Registration Rights Agreement, and all agreements set forth in the
representation letters of NEHC to DTC relating to the approval of the Notes
by DTC for "book-entry" transfer.
(p) To cause the Exchange Offer to be made in the appropriate form to
permit registered New Senior Discount Notes to be offered in exchange for
the Senior Discount Notes and to comply with all applicable federal and
state securities laws in connection with the Registered Exchange Offer.
(q) To use its best efforts to cause the Notes to be eligible for
trading through PORTAL and to obtain approval of the Notes by DTC for
"book-entry" transfer.
6. REPRESENTATIONS AND WARRANTIES. NEHC represents and warrants to the
Initial Purchaser that:
(a) The Offering Documents have been prepared in connection with the
Exempt Resales. The Preliminary Offering Memorandum and the Offering
Memorandum do not and any supplement or amendment thereto will not, contain
any untrue statement of a material fact or omit to state any 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, except that the representations and warranties contained in
this paragraph (a) shall not apply to statements in or omissions from the
Offering Documents (or any amendment or supplement thereto) made in
reliance upon information relating to the Initial Purchaser furnished to
NEHC in writing by the Initial Purchaser expressly for use therein. NEHC
acknowledges for all purposes under this Agreement that the statements set
forth in the last paragraph on the cover page, the legend on the inside
cover page and in the first sentence of the third paragraph, the first
sentence of the fourth paragraph and the third sentences of the seventh and
ninth paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum constitute the only written information furnished to NEHC by the
Initial Purchaser expressly for use in the Offering Documents (or any
amendment or supplement thereto). No stop order preventing the use of the
Offering Documents, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued.
(b) Each of NEHC and its subsidiaries (i) has been, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will be, duly organized and validly existing as a corporation in
good standing under the laws of its respective jurisdiction, (ii) has, and
after giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement will have, all requisite corporate power and authority
to carry on its business as described in the Offering Memorandum and to
own, lease and operate its properties, and (iii) is, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will be, duly qualified and in good standing as a foreign
corporation authorized to do business in each other jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a Material Adverse Effect. As used herein, "Material Adverse Effect"
shall mean, with respect to any Person, any effect or group of related or
unrelated effects that (i) would be reasonably expected to result in a
material adverse effect on the assets, properties, business, results of
operations, condition (financial or otherwise) or prospects of NEHC and its
subsidiaries, taken
7
<PAGE> 9
as a whole or (ii) would reasonably be expected to interfere with,
adversely affect or question the validity of the execution, delivery and
performance of any of the Operative Documents, the issuance of the Notes or
the consummation of this Agreement.
(c) All of the issued and outstanding shares of capital stock of NEHC
and each of its subsidiaries have been duly and validly authorized and
issued, and all of the shares of capital stock of each such subsidiary are
owned, directly or indirectly, by NEHC. All such shares of capital stock
are fully paid and non-assessable and have not been issued in violation of
any preemptive or similar rights and are owned free and clear of any
security interest, mortgage, pledge, claim, lien, limitation on voting
rights or encumbrance (each, a "Lien"), except for Liens granted pursuant
to the New Credit Facility. There are not currently, and will not be as a
result of the Offering or the consummation of the Acquisition pursuant to
the terms of the Asset Purchase Agreement, any outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments of
sale or Liens related to or entitling any person to purchase or otherwise
to acquire any shares of the capital stock of, or other securities
evidencing equity ownership interests in, NEHC or any of its subsidiaries.
(d) NEHC has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Operative Documents to which
it is a party, and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the corporate power and authority
to issue, sell and deliver the Senior Discount Notes to the Initial
Purchaser.
(e) Neither NEHC nor any of its subsidiaries is, and after giving
effect to the Offering and the Acquisition pursuant to the terms of the
Asset Purchase Agreement will be, (i) in violation of its charter or
bylaws, (ii) in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument, in each
case, which is material to the conduct of the business of NEHC, to which
NEHC is a party or by which it or any of NEHC's subsidiaries or their
respective property is bound, or (iii) in violation of any local, state or
federal law, statute, ordinance, rule, regulation, requirement, judgment or
court decree (including, without limitation, environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable to
NEHC, its subsidiaries or any of its assets or properties (whether owned or
leased), other than violations or defaults that would not reasonably be
expected to have a Material Adverse Effect. To the best knowledge of NEHC,
there exists no condition that, with notice, the passage of time or
otherwise, would constitute a default under any such document or
instrument, except for such defaults that could not reasonably be expected
to have a Material Adverse Effect.
(f) None of (i) the execution, delivery or performance by NEHC of this
Agreement and the other Operative Documents, (ii) the performance by NEHC
of the Asset Purchase Agreement and consummation of the Acquisition
pursuant to the terms of the Asset Purchase Agreement, (iii) the issuance
and sale of the Notes by NEHC and (iv) the consummation by NEHC of the
transactions described in the Offering Memorandum under the caption "Use of
Proceeds," will conflict with or constitute a breach of any of the terms or
provisions of, or, after giving effect to the Acquisition pursuant to the
terms of the Asset Purchase Agreement, will violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, or result in the imposition of a lien or encumbrance on any
properties of NEHC or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of NEHC, (2) any bond,
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<PAGE> 10
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which NEHC is a party or by which any of its property is
bound, or (3) any law or administrative regulation applicable to NEHC or
any of its assets or properties, or any judgment, order or decree of any
court or governmental agency or authority entered in any proceeding to
which NEHC was or is now a party or to which any of its properties may be
subject. No consent, approval, authorization or order of, or filing or
registration with, any regulatory body, administrative agency, or other
governmental agency (except as securities or Blue Sky laws of the various
states may require) is required for the execution, delivery and performance
of the Operative Documents and the valid issuance and sale of the
Securities. No consents or waivers from any person are required to
consummate the transactions contemplated by the Operative Documents or the
Offering Documents, other than such consents and waivers as have been or
will be obtained prior to the Closing Date or, in the case of the
Registration Rights Agreement and the transactions contemplated thereby,
will be obtained and made under the Act, the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act") and state securities or Blue Sky
laws and regulations.
(g) This Agreement has been duly authorized and, when validly executed
by NEHC and (assuming the due execution and delivery thereof by the Initial
Purchaser) is a legally valid and binding obligation of NEHC, enforceable
against it in accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity) and (iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution.
(h) NEHC has duly authorized the Indenture, and when NEHC has duly
executed and delivered the Indenture (assuming the due authorization,
execution and delivery thereof by the Trustee), the Indenture will be the
legally valid and binding obligation of NEHC, enforceable against NEHC in
accordance with its terms, except as the enforceability thereof may be (i)
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally and (ii) limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(i) NEHC has duly authorized the Senior Discount Notes and, when
issued and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchaser in accordance with the
terms hereof, will be the legally valid and binding obligations of NEHC,
enforceable against NEHC in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally and (ii) limited by
general principles of equity (whether considered in a proceeding at law or
in equity).
(1) NEHC has duly authorized the New Senior Discount Notes and, when
issued and authenticated in accordance with the terms of the Registered
Exchange Offer and the Indenture, the New Senior Discount Notes will be the
legally valid and binding obligations of NEHC, enforceable against NEHC in
accordance with their terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity).
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(k) The Registration Rights Agreement has been duly authorized and
when validly executed by NEHC will be (assuming the due execution and
delivery thereof by the Initial Purchaser) the legally valid and binding
obligation of NEHC, enforceable against NEHC in accordance with its terms,
except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally and (ii)
limited by general principles of equity (whether considered in a proceeding
at law or in equity).
(l) The Asset Purchase Agreement has been duly and validly authorized
by NEHC and is a legally valid and binding agreement of NEHC, enforceable
against it in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization or other similar laws and court decisions
affecting or relating to the rights of creditors generally or by general
principles of equity, and except as rights to indemnification may be
limited by applicable law.
(m) There is, and after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement will be, (i) no action, suit,
proceeding or investigation before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending,
threatened, or, to the knowledge of NEHC, contemplated to which NEHC is or
may be a party or to which the business or property of NEHC is or, after
giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement, may be subject, (ii) no statute, rule, regulation or
order that has been enacted, adopted or issued by any governmental agency
or, to the best knowledge of NEHC, proposed by any governmental body or
(iii) no injunction, restraining order or order of any nature issued by a
federal or state court of competent jurisdiction to which NEHC is or may be
subject that, in the case of clauses (i), (ii) and (iii) above, (1) is
required to be disclosed in the Offering Memorandum and that is not so
disclosed, (2) could reasonably be expected to have a Material Adverse
Effect or (3) would interfere with or adversely affect the issuance of the
Senior Discount Notes.
(n) There are no holders of any security of NEHC who by reason of the
execution by NEHC of this Agreement or any other Operative Document or the
consummation of the transactions contemplated hereby and thereby, have the
right to request or demand that NEHC register under the Act, or analogous
foreign laws and regulations, securities held by them.
(o) NEHC has delivered to the Initial Purchaser true and correct
executed copies of the Asset Purchase Agreement and all documents and
agreements related thereto and there have been no amendments, alterations,
modifications or waivers thereto or in the exhibits or schedules thereto,
except as have been delivered to the Initial Purchaser.
(p) NEHC is not, and after giving effect to the Acquisition pursuant
to the terms of the Asset Purchase Agreement will not be, involved in any
material labor dispute nor, to the knowledge of NEHC, is any material
dispute threatened which, if such dispute were to occur, could have a
Material Adverse Effect.
(q) NEHC has not violated any safety or similar law applicable to its
business, nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules and regulations
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<PAGE> 12
promulgated thereunder, except for such instances of noncompliance that,
either singly or in the aggregate, could not have a Material Adverse
Effect.
(r) NEHC is, and after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement will be, in compliance with all
applicable existing federal, state, local and foreign laws and regulations
(collectively, "Environmental Laws") relating to the protection of human
health or the environment or imposing liability or standards of conduct
concerning any Hazardous Material (as defined below), except for such
instances of noncompliance that, either singly or in the aggregate, could
not have a Material Adverse Effect. The term "Hazardous Material" means (i)
any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, (ii) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act,
as amended, (iii) any petroleum or petroleum product, (iv) any
polychlorinated biphenyl and (v) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material, waste or substance regulated under
or within the meaning of any other Environmental Law. Except as set forth
in the Offering Memorandum, there is no alleged liability, or, to the best
knowledge and information of NEHC, potential liability (including, without
limitation, alleged or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property
damages, personal injuries, or penalties) of NEHC or any of its
subsidiaries arising out of, based on, or resulting from (1) the presence
or release into the environment of any Hazardous Material at any location
currently or previously owned by NEHC or any of its subsidiaries or at any
location currently or previously used or leased by NEHC or any of its
subsidiaries, or (2) any violation or alleged violation of any
Environmental Law, except in each case with respect to clause (1) and (2),
alleged or potential liabilities that, singly or in the aggregate, could
not have a Material Adverse Effect.
(s) NEHC and each of its Subsidiaries has and, after giving effect to
the Acquisition pursuant to the terms of the Asset Purchase Agreement, will
have, such permits, licenses, franchises and authorizations of governmental
or regulatory authorities ("permits"), including, without limitation, under
any applicable Environmental Laws, as are necessary or will be necessary,
to own, lease and operate their respective properties and to conduct their
respective businesses in the manner described in the Offering Memorandum,
except for those permits the absence of which could not reasonably be
expected to have a Material Adverse Effect; NEHC and each of its
Subsidiaries has and, after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement, will have, fulfilled and
performed all of its obligations with respect to such permits, except for
such obligations the failure of which to be fulfilled or performed could
not reasonably be expected to have a Material Adverse Effect and no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit, except for such
event, that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; and, except as described in the
Offering Memorandum, such permits contain no restrictions that are or will
be materially burdensome to NEHC or any of its Subsidiaries.
(t) In connection with the Acquisition, NEHC has reviewed the effect
of Environmental Laws and the disposal of hazardous or toxic substances or
wastes, pollutants or contaminants on the business, assets, operations and
properties of PFS and identified and evaluated associated costs and
liabilities (including, without limitation, all material capital and
operating expenditures required for clean-up, closure of properties and
compliance with
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<PAGE> 13
Environmental Laws, all permits, licenses and approvals, all related
constraints on operating activities and all potential liabilities to third
parties). On the basis of such reviews, including the indemnification
provided by the Asset Purchase Agreement, NEHC has reasonably concluded
that such associated costs and liabilities could not reasonably be expected
to have a Material Adverse Effect.
(u) NEHC and its subsidiaries own or possess free and clear of all
Liens or has the right to use free and clear of any rights of third parties
that adversely affect such use by NEHC and its subsidiaries and, after
giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement, will own or possess free and clear of all Liens or have
the right to use free and clear of any rights of third parties that
adversely affect such use by NEHC and its subsidiaries, all patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names (collectively, "Intellectual Property") presently employed by either
of them or which are proposed to be employed by either of them in
connection with the businesses now operated by either of them or which are
proposed to be operated by them, except where the failure to own or possess
such Intellectual Property could not, either singly or in the aggregate,
have a Material Adverse Effect. The use of such Intellectual Property in
connection with the business and operations of NEHC and its subsidiaries
does not to NEHC's knowledge, infringe on the rights or claimed rights of
any person. No other person is, to NEHC's knowledge, infringing upon any of
the Intellectual Property of NEHC or has notified NEHC or any of its
subsidiaries that it is claiming ownership of, or the right to use any
Intellectual Property owned by NEHC or its subsidiaries. NEHC and its
subsidiaries have taken all reasonable steps to protect the Intellectual
Property from infringement by any other person, except where the failure to
take such steps would not, individually or in the aggregate, have a
Material Adverse Effect on NEHC. Other than in connection with the use of
so-called "off-the-shelf" software and except as otherwise disclosed in the
Offering Memorandum, neither NEHC nor its subsidiaries are obligated or
under any liability whatsoever to make any payment in excess of $150,000
per fiscal year, in the aggregate, by way of royalties, fees or otherwise
to any persons with respect to the use of the Intellectual Property.
Neither NEHC nor any of its subsidiaries has received (i) any notice of
infringement of or conflict with assessed rights of others with respect to
any Intellectual Property or (ii) any notice of an action or proceeding
seeking to limit, cancel or question the validity of any Intellectual
Property, which singly or in the aggregate, if the subject of any
unfavorable decision, ruling or finding, might have a Material Adverse
Effect on NEHC.
(v) All tax returns required to be filed by NEHC or any of its
subsidiaries in any jurisdiction have been filed, and all material taxes
(including, without limitation, withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from any
taxing authority) have been paid other than those being contested in good
faith and for which adequate reserves have been provided. To the knowledge
of NEHC, there are, and after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement will be, no material proposed
additional tax assessments against NEHC, any of its subsidiaries or the
assets or property of NEHC or any of its subsidiaries.
(w) NEHC and its subsidiaries have and, after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement, will
have all certificates, consents, exemptions, orders, permits, franchises,
licenses, authorizations, or other approvals (each, an "Authorization") of
and from, and has made all declarations and filings with and notices to,
all
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federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, necessary
or required to own, lease, license, operate and use their respective
properties and assets and to conduct their business in the manner described
in the Offering Memorandum except for such Authorizations the absence of
which could not reasonably be expected to have a Material Adverse Effect on
NEHC; all such Authorizations are and, after giving effect to the
Acquisition pursuant to the terms of the Asset Purchase Agreement, will be
valid and in full force and effect; NEHC and its subsidiaries are in
compliance with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities and governing
bodies having jurisdiction with respect thereto; and neither NEHC nor any
of its subsidiaries has received any notice, or has any knowledge or belief
(or any basis therefor), that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization.
(x) Except as set forth in the Offering Memorandum and except as could
not reasonably be expected to have a Material Adverse Effect on NEHC, (i)
NEHC and its subsidiaries has and, after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement, will have good and
marketable title, free and clear of all Liens except Liens for taxes not
yet due and payable and Liens granted pursuant to the New Credit Facility,
to all property and assets described in the Offering Memorandum as being
owned by each of them. All leases to which NEHC or any of its subsidiaries
is a party are and, after giving effect to the Acquisition pursuant to the
terms of the Asset Purchase Agreement, will be valid and binding and, to
the best of NEHC's knowledge, no default has occurred or is continuing
thereunder which could reasonably be expected to have a Material Adverse
Effect on NEHC, and NEHC and its subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which NEHC and its
subsidiaries are a party as lessee with such exceptions as do not
materially interfere with the use currently made by NEHC or its
subsidiaries, as the case may be.
(y) NEHC maintains and, after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement, will endeavor to
maintain adequate insurance for its business and the value of its
properties (including, without limitation, public liability insurance,
third party property damage insurance and replacement value insurance),
and, to the best of NEHC's knowledge, all such insurance is outstanding and
in force as of the date hereof.
(z) The financial statements, together with related notes forming part
of the Offering Documents (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of operations
and changes in financial position of NEHC on the basis stated in the
Offering Documents at the respective dates or for the respective periods to
which they apply, and such financial statements and related schedules and
notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein and the other financial and statistical information and
data set forth in the Offering Documents (and any amendment or supplement
thereto) is, in all material respects, accurately presented and prepared on
a basis consistent with such financial statements and the books and records
of NEHC. The pro forma financial data are, in all material respects,
accurately presented and prepared in good faith on the basis of the
assumptions described therein, and such assumptions are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(aa) NEHC maintains and, after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement, will maintain a
system of internal accounting controls sufficient
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<PAGE> 15
to provide assurance 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
accountability for assets; and (iii) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(ab) Subsequent to the dates for which information is given in the
Offering Documents and up to the Closing Date, unless set forth in the
Offering Memorandum or NEHC has notified the Initial Purchaser: (i) NEHC
has not incurred any liabilities or obligations, direct or contingent,
which are or, after giving effect to the Acquisition pursuant to the terms
of the Asset Purchase Agreement, could reasonably be expected to have a
Material Adverse Effect on NEHC, nor has NEHC entered into any material
transactions not in the ordinary course of business; (ii) there has not
been any decrease in NEHC's capital stock or any increase in long-term
indebtedness to meet working capital requirements or any material increase
in short-term indebtedness of NEHC or any payment of or declaration to pay
any dividends or any other distribution with respect to NEHC's capital
stock; and (iii) there has not been any event or series of events that
could reasonably be expected to have a Material Adverse Effect.
(ac) Prior to and immediately after the issuance of the Senior
Discount Notes and, after giving effect to the Acquisition pursuant to the
terms of the Asset Purchase Agreement, (i) the present fair saleable value
of the assets of NEHC and its subsidiaries exceeded and will exceed the
amount that will be required to be paid on, or in respect of, the debts and
other liabilities (including contingent liabilities) of NEHC and its
subsidiaries as they become absolute and matured, (ii) the assets of NEHC
and its subsidiaries do not constitute and will not constitute unreasonably
small capital to carry out their businesses as conducted or as proposed to
be conducted, and (iii) NEHC and its subsidiaries do not intend to, or
believe that it will, incur debts or other liabilities beyond its ability
to pay such debts and liabilities as they mature. In computing the amount
of such contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount than can
reasonably be expected to become an actual or matured liability.
(ad) Except as would not otherwise be unlawful, NEHC has not (i)
taken, directly or indirectly, any action designed to cause or to result
in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of NEHC to facilitate the sale or resale of the Notes or (ii) since the
date of the Preliminary Offering Memorandum (A) sold, bid for, purchased,
or paid anyone other than the Initial Purchaser any compensation for
soliciting purchases of, the Senior Discount Notes or (B) paid or agreed to
pay to any person any compensation for soliciting another to purchase any
other securities of NEHC.
(ae) Neither NEHC nor any of its subsidiaries nor any agent thereof
acting on the behalf of them, has taken or will take any action that might
cause this Agreement or the issuance or sale of the Notes to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System, in each case as in
effect now or as the same may hereafter be in effect on the Closing Date.
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(af) Neither NEHC nor any of its subsidiaries is or, after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement, will be an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of
1940, as amended.
(ag) The accountants, Ernst & Young LLP, that have certified the
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants, as required by the Act and
the Exchange Act. The historical financial statements, together with
related schedules and notes, set forth in the Offering Memorandum comply as
to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(ah) When the Senior Discount Notes are issued and delivered pursuant
to this Agreement, such Senior Discount Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as securities of NEHC that
are listed on a national securities exchange registered under Section 6 of
the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(ai) Assuming (i) that the representations and warranties of the
Initial Purchaser in Section 7 hereof are true, (ii) that the Initial
Purchaser complied with their covenants as set forth in Section 7 hereof,
(iii) that none of the Eligible Purchasers is an affiliate of NEHC and (iv)
that each of the Eligible Purchasers is a QIB or is purchasing the Senior
Discount Notes pursuant to the exemption provided for under Regulation S,
the purchase and resale of the Senior Discount Notes pursuant hereto
(including pursuant to the Exempt Resales) is exempt from the registration
requirements of the Act. No form of general solicitation or general
advertising was used by NEHC or any of its representatives (other than the
Initial Purchaser, as to whom NEHC makes no representation) in connection
with the offer and sale of the Senior Discount Notes, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. No securities of the same
class as the Senior Discount Notes have been issued and sold by NEHC within
the six-month period immediately prior to the date hereof.
(aj) The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Securities to be purchased by the Eligible
Purchasers will not involve any prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code with respect to any
employee benefit plan of NEHC. The representation made by NEHC in the
preceding sentence is made in reliance upon and subject to the accuracy of,
and compliance with, the representations and covenants made or deemed made
by the Eligible Purchasers as set forth in the Offering Documents under the
Section entitled "Notice to Investors."
(ak) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date contains, and as of the Closing Date will
contain, all the information specified in, and meeting the requirements of,
Rule 144A(d)(4) under the Act.
(al) None of NEHC, its subsidiaries or any of its or their affiliates
or any person acting on its or their behalf has engaged or will engage in
any directed selling efforts within the meaning of Regulation S with
respect to the Senior Discount Notes, and NEHC, its subsidiaries
15
<PAGE> 17
and its or their affiliates and all persons acting on its or their behalf
have complied or will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Senior Discount Notes
outside the United States.
(am) There is no "substantial U.S. market interest" as defined in rule
902(n) of Regulation S for the Senior Discount Notes or any security of the
same class as the Senior Discount Notes.
(an) The sale of the Senior Discount Notes in offshore transactions
pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Act.
(ao) NEHC and its subsidiaries have complied with all of the
provisions of Florida H.B. 1771, codified as Section 517.075, of the
Florida statutes, and all regulations promulgated thereunder relating to
issuers doing business with the Government of Cuba or with any person or
any affiliate located in Cuba.
7. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INITIAL
PURCHASER. The Initial Purchaser represents and warrants to NEHC as follows:
(a) The Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the Senior Discount Notes.
(b) The Initial Purchaser (i) is not acquiring the Senior Discount
Notes with a view to any distribution thereof that would violate the Act or
the securities laws of any state of the United States or any other
applicable jurisdiction and (ii) will be reoffering and reselling the
Senior Discount Notes only to QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and to persons
outside the United States in reliance on the exemption from the
registration requirements of the Act provided by Regulation S.
(c) No form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) has been or will be used by the
Initial Purchaser or any of its representatives in connection with the
offer and sale of any of the Senior Discount Notes, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with the Exempt
Resales, it will solicit offers to buy the Senior Discount Notes only from,
and will offer to sell the Senior Discount Notes only to, Eligible
Purchasers. The Initial Purchaser further agrees that it will offer to sell
the Senior Discount Notes only to, and will solicit offers to buy the
Senior Discount Notes only from, persons who in purchasing such Senior
Discount Notes will be deemed to have represented and agreed (i) if such
Eligible Purchasers are QIBs, that they are purchasing the Senior Discount
Notes for their own account or accounts with respect to which they exercise
sole investment discretion and that they or such accounts are QIBs, (ii)
that such Senior Discount Notes will not have been registered under the Act
and may be resold, pledged or otherwise transferred, only (1) (a) inside
the United States to a person who the seller reasonably believes
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is a "qualified institutional buyer" within the meaning of Rule 144A under
the Act in a transaction meeting the requirements of Rule 144A, (b) in a
transaction meeting the requirements of Rule 144 under the Act, (c) outside
the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Act or (d) in accordance with another
exemption from the registration requirements of the Act (and based in the
case of clauses (b) and (c) above upon an opinion of counsel if NEHC so
requests), (2) to NEHC or (3) pursuant to an effective registration
statement under the Act, in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction, and (iii) that the holder will, and each subsequent holder is
required to, notify any purchaser from it of the security evidenced thereby
of the resale restrictions set forth in (ii) above. Accordingly, the
Initial Purchaser represents and agrees that neither it, its affiliates nor
any persons acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S
with respect to the Senior Discount Notes, and it, or its affiliates and
all persons acting on its or their behalf have complied and will comply
with the offering restrictions requirements of Regulation S.
(e) The Initial Purchaser represents and agrees that the Senior
Discount Notes offered and sold in reliance on Regulation S have been and
will be offered and sold only in offshore transactions and that such
securities have been and will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the Restricted Period and only upon certification of
beneficial ownership of the securities by a non-U.S. person or a U.S.
person who purchased such securities in a transaction that was exempt from
the registration requirements of the Act, which U.S. person will acquire an
interest in a Transfer Restricted Security.
(f) The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Senior Discount Notes (other than a sale pursuant to Rule 144A),
it will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases the Senior Discount
Notes from it during the Restricted Period a confirmation or notice to
substantially the following effect:
"The Senior Discount Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act") and may not be offered and sold within the United States or to,
or for the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the closing date, except
in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the same
meanings assigned to them in Regulation S."
The Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution
or delivery of the Senior Discount Notes, except with its affiliates or
with the prior written consent of NEHC.
(g) The Initial Purchaser further represents and agrees that (i) it
has not offered or sold and will not offer or sell any Senior Discount
Notes to persons in the United Kingdom prior to the expiry of the period of
six months from the issue date of the Senior Discount Notes, except to
persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United
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Kingdom within the meaning of the Public Offers of Securities Regulations
1995, (ii) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything done by it in
relation to the Senior Discount Notes in, from or otherwise involving the
United Kingdom, and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Senior Discount Notes to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.
(h) The Initial Purchaser agrees that it will not offer, sell or
deliver any of the Senior Discount Notes in any jurisdiction outside the
United States except under circumstances that will result in compliance
with the applicable laws thereof, and that it will take at its own expense
whatever action is required to permit its purchase and resale of the Senior
Discount Notes in such jurisdictions. The Initial Purchaser understands
that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for
such purpose.
(i) The Initial Purchaser agrees not to cause any advertisement of the
Senior Discount Notes to be published in any newspaper or periodical or
posted in any public place and not to issue any circular relating to the
Senior Discount Notes, except such advertisements as include the statements
required by Regulation S.
(j) The sale of the Senior Discount Notes in offshore transactions
pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Act.
(k) The Initial Purchaser is not a pension or welfare plan (as defined
in Section 3 of ERISA) and is not acquiring the Senior Discount Notes on
behalf of a pension or welfare plan.
(l) Prior to consummating the Eligible Resales, the Initial Purchaser
shall have delivered a copy of the Offering Memorandum and any supplements
or amendments thereto to each Eligible Purchaser.
(m) The Initial Purchaser also understands that NEHC and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to
Sections 9(d) and (e) hereof, counsel to NEHC and counsel to the Initial
Purchaser will rely upon the accuracy and truth of the foregoing
representations and the Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) NEHC agrees to indemnify and hold harmless (i) the Initial
Purchaser, (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Initial
Purchaser (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person"), and (iii) the
respective officers, directors, partners, employees, representatives and
agents of the Initial Purchaser or any controlling person (any person
referred to in clause (i), (ii) or (iii) in such capacity may hereinafter
be referred to as an "Indemnified Person") to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including, without limitation and as
incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing or
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defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person) directly
or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum, the
Offering Memorandum or any Rule 144A Information provided by NEHC to any
holder or prospective purchaser of Senior Discount Notes pursuant to
Section 5(n) (or any amendment or supplement thereto), or any 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, except insofar as
such losses, claims, damages, liabilities, judgments, actions or expenses
are caused by an untrue statement or omission or alleged untrue statement
or omission that is made in reliance upon and in conformity with
information relating to any of the Initial Purchaser furnished in writing
to NEHC by any of the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto); provided however, that the
indemnification contained in this paragraph (a) with respect to the
Preliminary Offering Memorandum shall not inure to the benefit of the
Initial Purchaser (or to the benefit of any person controlling the Initial
Purchaser) on account of any such loss, claim, damage, liability, judgment,
action or expense arising from the sale of Senior Discount Notes by the
Initial Purchaser to any person if a copy of the Offering Memorandum, as it
may be amended or supplemented, shall not have been delivered or sent to
such person, at or prior to the confirmation of such sale, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the Preliminary Offering Memorandum was
corrected in the Offering Memorandum, as it may have been amended or
supplemented; provided that NEHC delivered the Offering Memorandum, as it
may be amended or supplemented, to the Initial Purchaser in requisite
quantity on a timely basis to permit such delivery or sending. NEHC also
agrees to reimburse each Indemnified Person for any and all fees and
expenses (including, without limitation, the reasonable fees and expenses
of counsel) as they are incurred in connection with enforcing such
Indemnified Person's rights under this Agreement (including, without
limitation, its rights under this Section 8). NEHC shall notify the Initial
Purchaser promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves NEHC
or an Indemnified Person.
(b) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any of the Indemnified Persons with respect to which indemnity may
be sought against NEHC, such Indemnified Person shall promptly notify NEHC
in writing (provided, that the failure to give such notice shall not
relieve NEHC of its obligations pursuant to this Agreement) and NEHC shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person and payment of all reasonable fees
and expenses (regardless of whether it is ultimately determined that an
Indemnified Person is not entitled to indemnification hereunder). Such
Indemnified Person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the employment of such counsel shall have been specifically
authorized in writing by NEHC, (ii) NEHC shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and
NEHC and such Indemnified Person shall have been advised by such counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to NEHC (in which case NEHC
shall not have the right to assume
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the defense of such action on behalf of such Indemnified Person, it being
understood, however, that NEHC shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by the Initial Purchaser
and that all such reasonable fees and expenses shall be reimbursed as they
are incurred). NEHC shall not be liable for any settlement of any such
action or proceeding effected without the prior written consent of NEHC,
but if settled with the written consent of NEHC, which consent will not be
unreasonably withheld, NEHC agrees to indemnify and hold harmless any
Indemnified Person from and against any loss, claim, damage, liability or
expense by reason of any such settlement. Notwithstanding the foregoing
sentence, if at any time an Indemnified Person shall have requested NEHC to
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, NEHC agrees that it
shall be liable for any settlement of any proceeding effected without
NEHC's written consent if (i) such settlement is entered into more than
thirty (30) business days after receipt by NEHC of the aforesaid request,
and (ii) NEHC shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement or
contested the reasonableness of such fees and expenses prior to the date of
such settlement. NEHC shall not, without the prior written consent of each
Indemnified Person (which consent shall not unreasonably be withheld),
settle or compromise or consent to the entry of judgment in or otherwise
seek to terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Person is a party
thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from all
liability arising out of such action, claim, litigation or proceeding.
(c) The Initial Purchaser agrees to indemnify and hold harmless NEHC,
any person controlling (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) NEHC and the officers, directors, partners,
employees, representatives and agents of each such person to the same
extent as the foregoing indemnity from NEHC to each of the Indemnified
Persons, but only with respect to claims, actions, losses, damages,
liabilities, judgments or expenses based on information relating to the
Initial Purchaser furnished in writing by the Initial Purchaser expressly
for use in the Preliminary Offering Memorandum or the Offering Memorandum
(or any amendments or modifications thereto); provided however, that in no
case shall the Initial Purchaser be liable or responsible for any amount in
excess of the discounts and commissions received by the Initial Purchaser,
as set forth on the cover page of the Offering Memorandum.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities, judgments, actions or expenses referred to herein,
then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities, judgments,
actions and expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party (or parties, as
applicable) on the one hand and the indemnified party (or parties, as
applicable) on the other hand from the offering of the Senior Discount
Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party (or parties, as
applicable) and the indemnified party, (or parties, as applicable) as well
as
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any other relevant equitable considerations. The relative benefits received
by NEHC on the one hand, and the Initial Purchaser, on the other hand,
shall be deemed to be in the same proportion as the total proceeds from the
Offering (net of Initial Purchaser's discounts and commissions but before
deducting expenses) received by NEHC bear to the total discounts and
commissions received by the Initial Purchaser, in each case, as set forth
on the table on the cover page of the Offering Memorandum. The relative
fault of NEHC, on the one hand, and the Initial Purchaser, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact related to information supplied
by NEHC, on the one hand, or the Initial Purchaser, on the other hand, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
NEHC and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities, judgments, actions or
expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, the Initial Purchaser (and the Initial
Purchaser's related Indemnified Persons) shall not be required to
contribute, in the aggregate, any amount in excess of the amount by which
the total discount applicable to the Senior Discount Notes purchased by the
Initial Purchaser pursuant to this Agreement exceeds the amount equal to
(i) the amount of any damages which the Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission plus (ii) any amount paid or contributed by
the Initial Purchaser pursuant to the Registration Rights Agreement. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements of NEHC contained in
this Section 8 are in addition to any liability or obligation which NEHC
may otherwise have to the Indemnified Persons and the indemnity and
contribution agreements of the Initial Purchaser contained in this Section
8 are in addition to any liability or obligation which the Initial
Purchaser may otherwise have to NEHC, any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) NEHC
and the officers, directors, partners, employees, representatives and
agents of each such person.
9. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The several
obligations of the Initial Purchaser to purchase and pay for the Senior Discount
Notes as provided herein, shall be subject to the satisfaction of each of the
following conditions:
(a) All the representations and warranties of NEHC contained in this
Agreement shall be true and correct on the Closing Date, with the same
force and effect as if made on and as of the date hereof and the Closing
Date, respectively. NEHC shall have performed or complied with its
obligations and agreements and satisfied the conditions to be performed,
complied with or satisfied by it on or prior to the Closing Date.
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(b) (1) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchaser not later than 9:00 a.m., New
York City time, on the day following the date of this Agreement, or at
such later date and time as to which the Initial Purchaser may
approve;
(2) no action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would, as of the Closing Date, prevent the
issuance of the Senior Discount Notes;
(3) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction shall have been
issued as of the Closing Date or, to the best knowledge of NEHC,
threatened against, NEHC which would prevent the issuance of the
Senior Discount Notes; and
(4) no stop order preventing the use of the Offering Documents,
or any amendment or supplement thereto, or suspending the
qualification or exemption from qualification of the Senior Discount
Notes for sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof shall have been issued and no
proceedings for that purpose shall have been commenced or shall be
pending threatened or, to NEHC's knowledge contemplated.
(c) (1) (i) Since the date of the latest balance sheet in the Offering
Memorandum, there shall not have been any material adverse change, or
any development involving a prospective material adverse change, in
the assets, properties, business, results of operations, condition
(financial or otherwise) or prospects, whether or not arising in the
ordinary course of business, of NEHC and its subsidiaries, taken as a
whole, (ii) since the date of the latest balance sheet included in the
Offering Memorandum, there shall not have been any material change, or
any development that is reasonably likely to result in a material
change, in the capital stock or in the long-term debt, or material
increase in short-term debt, of NEHC and its subsidiaries, taken as a
whole, from that set forth in the Offering Memorandum and (iii) except
as set forth in the Offering Memorandum, neither NEUC nor any of its
subsidiaries shall have any liability or obligation, direct or
contingent, which is material to NEHC;
(2) NEHC shall not have any material liability or obligation,
direct or contingent, other than those reflected in the Offering
Memorandum; and
(3) the Initial Purchaser shall have received certificates dated
the Closing Date, signed on behalf of NEHC by (i) the President and
(ii) the Chief Financial Officer of NEHC, confirming all matters set
forth in Sections 9(a), (b) and (c) hereof.
(d) On the Closing Date, the Initial Purchaser shall have received an
opinion (satisfactory to the Initial Purchaser and counsel to the Initial
Purchaser) dated the Closing Date, of Wachtell, Lipton, Rosen & Katz,
counsel for NEHC, substantially to the effect that:
(1) Each of NEHC and its subsidiaries (i) is, and after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement will be, duly organized and validly existing as a
corporation in good standing under the laws of its respective
jurisdiction, (ii) has, and after giving effect to the Acquisition
pursuant to the
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terms of the Asset Purchase Agreement will have, all requisite
corporate power and authority to carry on its business as described in
the Offering Memorandum and to own, lease and operate its properties,
and (iii) is, and after giving effect to the Acquisition pursuant to
the terms of the Asset Purchase Agreement will be, duly qualified and
is in good standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification except
where the failure to be so qualified would not have a Material Adverse
Effect.
(2) All of the issued and outstanding shares of capital stock of,
or other securities evidencing equity ownership interests in, NEHC and
each of its subsidiaries have been duly and validly authorized and
issued, and, except as otherwise disclosed in the Offering Memorandum,
all of the shares of capital stock of, or other securities evidencing
equity ownership interests in, each such subsidiary are owned,
directly or indirectly, by NEHC. All such shares of capital stock are
fully paid and non-assessable and have not been issued in violation of
any preemptive or similar rights and are owned free and clear of any
Lien, except for Liens granted pursuant to the New Credit Facility.
There are not currently, and will not be as a result of the Offering
or the consummation of the Acquisition pursuant to the terms of the
Asset Purchase Agreement, any outstanding subscriptions, rights,
warrants, options, calls, convertible securities, commitments of sale
or Liens related to or entitling any person to purchase or otherwise
to acquire any shares of the capital stock of, or other securities
evidencing equity ownership interests in, NEHC or any of its
subsidiaries.
(3) NEHC has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Operative
Documents to which it is a party, and to consummate the transactions
contemplated thereby, including, without limitation, the corporate
power and authority to issue, sell and deliver the Senior Discount
Notes to the Initial Purchaser.
(4) Neither NEHC nor any of its subsidiaries is, and after giving
effect to the Offering and the Acquisition pursuant to the terms of
the Asset Purchase Agreement will be, (i) in violation of its charter
or bylaws or partnership agreement, as the case may be, (ii) in
default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument, in
each case which is material to the conduct of the business of NEHC, to
which NEUC is a party or by which it or any of NEHC's subsidiaries or
their respective property is bound, or (iii) in violation of any
local, state or federal law, statute, ordinance, rule, regulation,
requirement, judgment or court decree (including, without limitation,
environmental laws, statutes, ordinances, rules, regulations,
judgments or court decrees) applicable to NEHC, its subsidiaries or
any of its assets or properties (whether owned or leased), other than
violations or defaults that would not reasonably be expected to have a
Material Adverse Effect. To the best knowledge of NEHC, there exists
no condition that, with notice, the passage of time or otherwise,
would constitute a default under any such document or instrument,
except for such defaults that could not reasonably be expected to have
a Material Adverse Effect.
(5) None of (i) the execution, delivery or performance by NEHC of
this Agreement and the other Operative Documents, (ii) the performance
by NEHC of the
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Asset Purchase Agreement and consummation of the Acquisition pursuant
to the terms of the Asset Purchase Agreement, (iii) the issuance and
sale of the Notes by NEHC and (iv) the consummation by NEHC of the
transactions described in the Offering Memorandum under the caption
"Use of Proceeds," will conflict with or constitute a breach of any of
the terms or provisions of, or, after giving effect to the Acquisition
pursuant to the terms of the Asset Purchase Agreement, will violate,
conflict with or constitute a breach of any of the terms or provisions
of, or a default under, or result in the imposition of a lien or
encumbrance on any properties of NEHC or an acceleration of
indebtedness pursuant to, (1) the charter or bylaws of NEHC (2) to the
best of its knowledge, any bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument to which NEUC is a
party or by which any of its property is bound, or (3) any law or
administrative regulation applicable to NEHC or any of its assets or
properties, or any judgment, order or decree of any court or
governmental agency or authority entered in any proceeding to which
NEHC was or is now a party or to which any of its properties may be
subject except as would not have a Material Adverse Effect. No
consent, approval, authorization or order of, or filing or
registration with, any regulatory body, administrative agency, or
other governmental agency (except as securities or Blue Sky laws of
the various states may require) is required for the execution,
delivery and performance of the Operative Documents and the valid
issuance and sale of the Securities. No consents or waivers from any
person are required to consummate the transactions contemplated by the
Operative Documents or the Offering Documents, other than such
consents and waivers as have been or will be obtained prior to the
Closing Date or, in the case of the Registration Rights Agreement and
the transactions contemplated thereby, will be obtained and made under
the Act, the Trust Indenture Act and state securities or Blue Sky laws
and regulations.
(6) This Agreement has been duly authorized and, when validly
executed by NEHC and (assuming the due execution and delivery thereof
by the Initial Purchaser) is a legally valid and binding obligation of
NEHC, enforceable against NEHC in accordance with its terms, except as
the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally,
(ii) limited by general principles of equity (whether considered in a
proceeding at law or in equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy
against, indemnification or contribution.
(7) NEHC has duly authorized the Indenture, and when NEHC has
duly executed and delivered the Indenture (assuming the due
authorization, execution and delivery thereof by the Trustee), the
Indenture will be the legally valid and binding obligation of NEHC,
enforceable against NEHC in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity).
(8) NEHC has duly authorized the Senior Discount Notes and, when
issued and authenticated in accordance with the terms of the Indenture
and delivered to and paid for by the Initial Purchaser in accordance
with the terms hereof, will be the legally valid and binding
obligations of NEHC, enforceable against NEHC in accordance with their
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terms, except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors'
rights generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(9) NEHC has duly authorized the New Senior Discount Notes and,
when issued and authenticated in accordance with the terms of the
Registered Exchange Offer and the Indenture, the New Senior Discount
Notes will be the legally valid and binding obligations of NEHC,
enforceable against NEHC in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity).
(10) The Registration Rights Agreement has been duly authorized
and when validly executed by NEHC will be (assuming the due execution
and delivery thereof by the Initial Purchaser) the legally valid and
binding obligation of NEHC, enforceable against NEHC in accordance
with its terms, except as the enforceability thereof may be (i)
subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors' rights generally and (ii) limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(11) The Asset Purchase Agreement has been duly and validly
authorized by NEHC and is a valid and binding agreement of NEHC,
enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization or other similar
laws and court decisions affecting or relating to the rights of
creditors generally or by general principles of equity, and except as
rights to indemnification may be limited by applicable law.
(12) To the best knowledge of such counsel, there is and, after
giving effect to the Acquisition pursuant to the terms of the Asset
Purchase Agreement, will be (i) no action, suit, proceeding or
investigation before or by any court, arbitrator or governmental
agency, body or official, domestic or foreign, now pending,
threatened, or, to the knowledge of NEHC, contemplated to which NEHC
is or may be a party or to which the business or property of NEHC is
or, after giving effect to the Acquisition pursuant to the terms of
the Asset Purchase Agreement, may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or, to the best knowledge of NEHC, proposed by any
governmental body or (iii) no injunction, restraining order or order
of any nature issued by a federal or state court of competent
jurisdiction to which NEHC is or may be subject that, in the case of
clauses (i), (ii) and (iii) above, (1) is required to be disclosed in
the Offering Memorandum and that is not so disclosed, (2) might have a
Material Adverse Effect or (3) would interfere with or adversely
affect the issuance of the Senior Discount Notes.
(13) To the best knowledge of such counsel, there is no contract
or document concerning NEHC of a character required to be described in
the Offering Memorandum that is not so described.
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(14) To the best knowledge of such counsel, there are no holders
of any security of NEHC who by reason of the execution by NEHC of this
Agreement or any other Operative Document or the consummation of the
transactions contemplated hereby and thereby, have the right to
request or demand that NEHC register under the Act, or analogous
foreign laws and regulations, securities held by them.
(15) The statements under the captions "Description of Notes,"
"Description of Indebtedness," "The Transactions," "The Acquisition"
and "The Business-Litigation" in the Offering Memorandum, insofar as
such statements constitute a summary of legal matters, documents or
proceedings referred to therein, are correct in all material respects.
(16) Neither NEHC nor any of its subsidiaries nor any agent
thereof acting on the behalf of them, has taken or will take any
action that might cause this Agreement or the issuance or sale of the
Notes to violate Regulation 6 (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X
(12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve
System, in each case as in effect now or as the same may hereafter be
in effect on the Closing Date.
(17) Neither NEHC nor any of its subsidiaries is or, after giving
effect to the Acquisition pursuant to the terms of the Asset Purchase
Agreement, will be an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company
Act of 1940, as amended.
(18) When the Senior Discount Notes are issued and delivered
pursuant to this Agreement, such Senior Discount Notes will not be of
the same class (within the meaning of Rule 144A under the Act) as
securities of NEHC that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.
(19) The Indenture is not required to be qualified under the
Trust Indenture Act prior to the first to occur of (i) the Registered
Exchange Offer and (ii) the effectiveness of the Shelf Registration
Statement.
(20) Assuming (i) that the representations and warranties of the
Initial Purchaser in Section 7 hereof are true, (ii) that the Initial
Purchaser complied with its covenants as set forth in Section 7
hereof, (iii) that none of the Eligible Purchasers is an affiliate of
NEHC and (iv) that each of the Eligible Purchasers is a QIB, the
purchase and resale of the Senior Discount Notes pursuant hereto
(including pursuant to the Exempt Resales) is exempt from the
registration requirements of the Act.
(21) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto,
as of its date (except for the financial statement and the notes
thereto and schedules and other financial, statistical and accounting
data included therein, as to which no opinion need be expressed),
complied as to form in all material respects with the requirements of
Rule 144A of the Act.
In addition, such counsel shall state that it has participated in
conferences with representatives of NEHC, representatives of NEHC's
accountants, the Initial Purchaser's
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representatives and counsel for the Initial Purchaser, at which conferences
the contents of the Offering Documents and related matters were discussed,
and, although such counsel has not independently verified and is not
passing upon and assumes no responsibility for the accuracy, completeness
or fairness of the statements contained in the Offering Documents (other
than those that such counsel must opine on pursuant to Section 9(d)(15) of
this Agreement), no facts have come to such counsel's attention which led
it to believe that the Offering Memorandum, on the date thereof or on the
date of such opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements contained therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no view with respect to the financial statements and
data and related notes, the financial statement schedules and other
financial, statistical and accounting data included in the Offering
Documents).
(e) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, in form and substance
satisfactory to the Initial Purchaser.
(f) The Initial Purchaser shall have received customary comfort
letters from (i) Ernst & Young LLP, independent public accountants for NEHC
and (ii) KPMG Peat Marwick LLP, independent public accountants for PFS, in
each case, dated as of the date of this Agreement and as of the Closing
Date, in form and substance satisfactory to the Initial Purchaser and
counsel to the Initial Purchaser, with respect to the financial statements
and certain financial information contained in the Offering Memorandum.
(g) NEHC and the Trustee shall have entered into the Indenture and the
Initial Purchaser shall have received counterparts, conformed as executed,
thereof.
(h) NEHC and the Initial Purchaser shall have entered into the
Registration Rights Agreement for the benefit of the Initial Purchaser and
the benefit of the other purchasers, in the form attached hereto as Exhibit
A, and the Initial Purchaser shall have received counterparts, conformed as
executed, thereof.
(i) NEHC shall have fully performed or complied with any of the
agreements herein contained and required to be performed or complied with
by NEHC on or prior to the Closing Date.
(j) Latham & Watkins shall have been furnished with such documents and
opinions, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 9 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective upon the execution and
delivery of this Agreement by the parties hereto. The Initial Purchaser may
terminate this Agreement at any time prior to the Closing Date by written
notice to NEHC if any of the following has occurred: (i) since the
respective dates as of which information is given in the Offering
Documents, any
27
<PAGE> 29
adverse change or development involving a prospective adverse change which
would cause a Material Adverse Effect on NEHC, whether or not arising in
the ordinary course of business, which would, in the Initial Purchaser's
reasonable judgment, make it impracticable to market the Senior Discount
Notes on the terms and in the manner contemplated in the Offering
Documents; (ii) any outbreak or escalation of hostilities or other national
or international calamity or crisis or material change in economic
conditions, if the effect of such outbreak, escalation, calamity, crisis or
change on the financial markets of the United States or elsewhere would, in
the Initial Purchaser's reasonable judgment, be material and adverse and
make it impracticable to market the Senior Discount Notes on the terms and
in the manner contemplated in the Offering Documents; (iii) the suspension
or material limitation of trading in securities on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market System
or limitation on prices for securities on any such exchange or national
market system; (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in the Initial Purchaser's
reasonable opinion causes or will cause a Material Adverse Effect; (v) the
declaration of a banking moratorium by either federal or New York State
authorities; or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs
which in the Initial Purchaser's reasonable opinion has a material adverse
effect on the financial markets in the United States.
(b) If, on the Closing Date, the Initial Purchaser shall fail or
refuse to purchase Senior Discount Notes in an aggregate principal amount
that exceeds 10% of the total principal amount of the Senior Discount Notes
and arrangements satisfactory to NEHC for the purchase of such Senior
Discount Notes are not made within 48 hours after such default, this
Agreement shall terminate without liability on the part of NEHC, except as
otherwise provided in this Section 10. In any such case that does not
result in termination of this Agreement, the Initial Purchaser or NEHC may
postpone the Closing Date for not longer than seven days, in order that the
required changes, if any, in the Offering Memorandum or any other documents
or arrangements may be effected. Any action taken under this paragraph
shall not relieve a defaulting Initial Purchaser from liability in respect
of any default by the Initial Purchaser under this Agreement.
(c) If this Agreement shall be terminated by the Initial Purchaser
pursuant to clause (i) of paragraph (a) of this Section 10 or because of
the failure or refusal on the part of NEHC to comply with the terms or to
fulfill any of the conditions of this Agreement, NEHC agrees to reimburse
the Initial Purchaser for all out-of-pocket expenses (including, without
limitation, the reasonable fees and disbursements of counsel) reasonably
incurred by the Initial Purchaser. Notwithstanding any termination of this
Agreement, NEHC shall be liable for all expenses which it has agreed to pay
pursuant to Section 5(i) hereof.
11. AGREEMENT OF THE INITIAL PURCHASER.
The Initial Purchaser agrees that, upon its receipt of any written notice
from NEHC of the existence of any fact or the happening of any event that
requires the making of any additions to or changes in any offering memorandum,
registration statement or prospectus, or amendment or supplement thereto,
referred to in Section 5(d) hereof in order that such document will not contain
any untrue statement of a material fact or omission to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing as of the date such document was delivered, not
misleading, the Initial Purchaser shall forthwith discontinue disposition of the
applicable Notes
28
<PAGE> 30
pursuant to such document until (i) the Initial Purchaser receives from NEHC
copies of an amended or supplemented document that NEHC states in writing may be
used by the Initial Purchaser or (ii) the Initial Purchaser is advised in
writing by NEHC that the use of such document may be resumed.
12. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement shall be
addressed as follows: (i) if to NEHC, to Nebco Evans Holding Company, 545
Steamboat Road, Greenwich, Connecticut 06830, Attention: President, (ii) if
to the Initial Purchaser, to Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, and (iii) if to the Initial Purchaser pursuant to
Section 11 hereof, to Donaldson, Lufkin & Jenrette Securities Corporation,
277 Park Avenue, New York, New York 10172, Attention: Syndicate Department
& Compliance Department, or in any case to such other address as the person
to be notified may have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements set forth in or made
pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Senior Discount
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any such person, (ii) acceptance of the
Senior Discount Notes and payment for them hereunder and (iii) termination
of this Agreement.
(c) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon NEHC, the Initial
Purchaser, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not
include a purchaser of any of the Senior Discount Notes from any of the
Initial Purchaser merely because of such purchase.
(d) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
(e) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument. Please confirm that
the foregoing correctly sets forth the agreement between NEHC and the
Initial Purchaser.
(f) In any provision hereunder purporting to give effect to the
Acquisition, such statements are made with respect to facts known as of the
date hereof (and not future events other than the consummation of the
Acquisition) and are meant only to account for consummation of the
Acquisition in accordance with the terms of the Asset Purchase Agreement.
(g) All representations and warranties hereunder made by the Company
or the Subsidiary Guarantors, and the opinions of Wachtell, Lipton, Rosen &
Katz and Cassem, Tierney, Adams, Gotch and Douglas are qualified by the
information contained in the Preliminary Offering Memorandum and the
Offering Memorandum.
[signature pages follow]
29
<PAGE> 31
Very truly yours,
NEBCO EVANS HOLDING COMPANY
By: /s/ Raymond E. Marshall
-------------------------------
Name: Raymond E. Marshall
Title: President and Treasurer
The foregoing Purchase Agreement is
hereby confirmed and accepted as of
the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 32
Very truly yours,
NEBCO EVANS HOLDING COMPANY
By:
-------------------------------
Name:
Title:
The foregoing Purchase Agreement is
hereby confirmed and accepted as of
the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Tyler J. Wolfram
------------------------------
Name: Tyler J. Wolfram
Title: Vice President
<PAGE> 33
EXHIBIT A
Form of Registration Rights Agreement
<PAGE> 1
EXHIBIT 2.2
STRICTLY CONFIDENTIAL
================================================================================
AmeriServe Food Distribution, Inc.
================================================================================
ASSET PURCHASE AGREEMENT
between
PepsiCo, Inc. and
Nebco Evans Holding Company
----------
May 23, 1997
================================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of the 23rd day of May, 1997, between PepsiCo, Inc., a North Carolina
corporation (the "Seller"), and Nebco Evans Holding Company, a Delaware
corporation (the "Buyer").
PRELIMINARY STATEMENTS
A. The Seller, through its unincorporated division called PFS ("PFS"),
owns and operates a distribution business which sells food, supplies, equipment,
smallwares, uniforms, beverages, promotional items and point of purchase
materials to (i) all of the Pizza Hut, Taco Bell and KFC restaurants currently
owned by the Seller and its subsidiaries within the contiguous 48 States of the
United States (the "Continental United States"), except for 53 KFC restaurants,
and (ii) a portion of the Pizza Hut, Taco Bell and KFC restaurants which have
been franchised to independent franchisees within the Continental United States,
and (iii) a limited number of Pizza Hut, Taco Bell and KFC restaurants outside
the Continental United States by exporting such food, supplies, equipment,
smallwares, uniforms, beverages, promotional items and point of purchase
materials from PFS distribution centers in the United States (as currently
conducted, the "PFS Business").
B. The Buyer desires to acquire, and the Seller desires to sell, the
assets and properties of the Seller used or held for use in the PFS Business,
and, subject to the terms and subject to the conditions set forth in this
Agreement, the Buyer desires to assume certain liabilities and obligations of
the PFS Business as hereinafter specified.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE 1
AGREEMENT TO PURCHASE AND SELL
SECTION 1.01. Sale of Assets arid Assumption of Liabilities.
(a) Subject to and upon the terms and conditions set forth in this
Agreement: (i) the Seller agrees to sell, transfer, assign, convey, set over and
deliver to the Buyer, and the Buyer agrees to purchase, acquire and receive from
<PAGE> 3
the Seller, all of the PFS Assets (as defined below), and (ii) the Buyer agrees
to assume all of the PFS Liabilities (as defined below), in each case at a
closing (the "Closing") to be held at the offices of Wachtell, Lipton, Rosen &
Katz, 51 West 52nd Street, New York, New York, 10019, or at such other location
as the parties hereto may agree, on the later of (i) the third business day
after satisfaction or waiver of the conditions set forth in Article 9 (subject
to Article 11) and (ii) June 25, 1997, or on such other date as shall be
mutually agreed in writing by the parties hereto (the "Closing Date"). All
transactions consummated at the Closing shall be deemed to have been made
simultaneously and shall all be effective at and as of the close of business on
the Closing Date.
(b) On or prior to the Escrow Date (as defined in Article 10), Pepsi-Cola
Canada, Ltd. ("PCL"), a Canadian corporation and wholly owned subsidiary of the
Seller, the Seller and the Buyer shall enter into a Canadian Asset Purchase
Agreement substantially similar to this Agreement but with such reasonable and
customary provisions as may be necessary or desirable under Canadian law (the
"Canadian Sale Agreement") pursuant to which PCL will agree to sell to the Buyer
and the Buyer will agree to purchase from PCL the PFS Canadian Business
comprised of the PFS Canadian Assets and the PFS Canadian Liabilities (as such
terms will be defined in the Canadian Sale Agreement).
SECTION 1.02. PFS Assets. The term "PFS Assets" shall mean all of the
Seller's (and each of the Seller's subsidiaries' other than PCL) right, title
and interest in and to all of the following assets, properties and rights:
(a) Owned Real Property. The parcel of real property in Manassas, Virginia
more specifically described in Exhibit A attached hereto, and operating as a
distribution center, together with all easements, rights of way, privileges,
licenses, appurtenances and other rights and benefits running with such parcel
of real property (the "Owned Real Property");
(b) Leased Real Property. All of the Seller's rights and leasehold
interests in the real property leased or subleased to the Seller pursuant to the
real estate lease agreements (or sublease agreements) described in Exhibit B
attached hereto (collectively, the "Leased Real Property"; the Owned Real
Property and the Leased Real Property are together referred to herein as the
"Real Property"). The Leased Real Property includes all 21 leased distribution
centers of the PFS Business within the Continental United States;
(c) Owned Tangible Personal Property. All fixtures, machinery, leasehold
improvements, equipment and all other tangible personal property (other than the
Vehicles and the Inventory, as such terms are defined below) owned by the Seller
and located at or forming part of the Real Property on the Closing Date,
including, without limitation, all furniture, office equipment (including all
computer
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<PAGE> 4
hardware, copiers, fax machines and other business machines), refrigeration
equipment, material handling equipment, supplies and miscellaneous items
(collectively, the "Owned Tangible Personal Property"). Attached as Exhibit C is
a list of the refrigeration equipment owned by the Seller on the date hereof
which have been installed in the distribution centers of the PFS Business and a
separate list of substantially all of the material handling equipment of the PFS
Business owned by the Seller on the date hereof;
(d) Leased Tangible Personal Property. All of the Seller's rights and
interests in the equipment and other tangible personal property which are leased
to the Seller as of the Closing Date and are used or held for use primarily in
the PFS Business pursuant to equipment or vehicle lease agreements
(collectively, the "Leased Tangible Personal Property"; the Owned Tangible
Personal Property and the Leased Tangible Personal Property are together
referred to herein as the "Tangible Personal Property"). Exhibit D attached
hereto lists all material lease agreements existing on the date hereof relating
to the Leased Tangible Personal Property;
(e) Tractors, Trailers and Other Motor Vehicles. All of the route
tractors, yard tractors, route trailers and yard trailers and other motor
vehicles owned by the Seller as of the Closing Date and used or held for use
primarily in the PFS Business (collectively, the "Vehicles"), together with any
titles and licenses of the Seller relating to the Vehicles. Attached hereto as
Exhibit E is a list of all such Vehicles existing as of the date hereof;
(f) Intangible Property. All rights, title and interests of the Seller in
and to the following intangible property (collectively, the "Intangible
Property"):
(i) The Sourcelink automated order entry computer software system
owned by the Seller and more fully described in Exhibit F attached hereto;
(ii) the exclusive rights of the Seller to market, sell and install
in Taco Bell franchised restaurants the Home Office 360 computer software
system licensed by the Seller from Peavine Creek Software, Inc. pursuant
to the License and Marketing Agreement dated July 1, 1994 between Peavine
Creek Software, Inc. and the Seller, which Home Office 360 computer
software system is more fully described in Exhibit F attached hereto;
(iii) all computer applications, programs and other software, data
and databases (including all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions,
improvements, enhancements, updates and accessions thereto), all technical
3
<PAGE> 5
manuals and documentation made in connection with the foregoing, and all
licenses and rights with respect to the foregoing or of like nature,
including operating software, network software, firmware, middleware,
design software, design tools, systems documentation and instructions, in
each case to the extent owned by the Seller and used or held for use
exclusively in the PFS Business as of the Closing Date including, without
limitation, the Seller's rights in the Manugistics inbound transportation
software, the ASI inventory forecasting software, SAILS replenishment
program, and J.D. Edwards software package;
(iv) all service and parts records, warranty records, maintenance
and repair records and similar records of the Seller and all warranties
issued to the Seller as of the Closing Date relating to the PFS Assets;
and
(v) all material licenses and permits (collectively, the "Permits")
issued to the Seller as of the Closing Date by any governmental or
quasi-governmental agency or authority or any private party relating to or
affecting the ownership, use or enjoyment of the PFS Assets or required to
carry on the PFS Business, to the extent the Permits are transferable.
(g) Contracts. All of the rights, title and interest of the Seller in, to
and under the agreements, arrangements, contracts and commitments of the PFS
Business, including those agreements, arrangements, contracts and commitments
which are listed in Exhibits B, D, G, L and R attached hereto and purchase
orders for Goods in Transit (as defined herein) being transferred to the Buyer
pursuant to this Agreement, subject to the assumption by the Buyer of the
Seller's obligations thereunder as described in Section 1.03 below;
(h) Inventory. All of the inventory of finished goods, work in progress,
goods, commodities, supplies and raw materials owned by the Seller and located
on, or in transit to or from, the Real Property or used or sold in the operation
of the PFS Business and existing on the Closing Date (collectively, the
"Inventory");
(i) Goods in Transit. Anything falling under the description Owned
Tangible Personal Property or Inventory above ordered by the Seller from third
party vendors in the ordinary course of business for use in the PFS Business but
not yet received by the Seller prior to the Closing Date (the "Goods in
Transit");
(j) Prepaid Expenses. All prepaid expenses of Seller relating to the PFS
Business and included in the calculation of the Final Working Capital (defined
in Section 1.06 below);
4
<PAGE> 6
(k) Accounts Receivable. All of the accounts receivable of the Seller
arising out of the operations of the PFS Business and included in the
calculation of the Final Working Capital;
(l) Cash and Cash Equivalents. All cash equivalents and all cash included
in the calculation of the Final Working Capital or in bank accounts used
exclusively for the operation of the PFS Business and existing on the Closing
Date;
(m) Records. All records of the PFS Business in the Seller's possession on
the Closing Date, including sales and credit records, studies and reports,
advertising and sales material, customer lists, vendor lists, costs and supply
data, purchasing records, distribution and transportation records, inventory
records, historical product velocity reports, historical Department of
Transportation logs, financial records, copies of property and sales tax
records, personnel and payroll records for PFS employees, computer data and
records and other materials and information used in the PFS Business; provided,
however, that if the records or other information described in this clause (m)
is included within information relating to the businesses of the Seller and its
subsidiaries other than the PFS Business, then only the data relating to PFS
shall be provided by the Seller;
(n) Claims. All claims, rights of action and similar rights of the Seller
against third parties arising out of the Seller's ownership of the PFS Assets;
(o) Intellectual Property. All rights, title and interests of Seller as of
the Closing Date in and to the following intellectual property (collectively,
the "Intellectual Property") to the extent used or held for use primarily in the
PFS Business: any and all United States (i) patents (including design patents,
industrial designs and utility models) and patent applications (including
docketed patent disclosures awaiting filing, reissues, divisions, continuations
in part and extensions), patent disclosures awaiting filing determination,
inventions and improvements thereto; (ii) trademark, tradename, service mark and
brand name rights of the Seller to the PFS name, the PFS Globe design and the
Sourcelink name pursuant to the trademark registrations and applications listed
in Exhibit F attached hereto in the respective countries listed therein; (iii)
copyrights (including software) and registrations thereof; (iv) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential and technical information, manufacturing, engineering and technical
drawings, product specifications and confidential business information; (v) mask
work and other semiconductor chip rights and registrations thereof; and (vi)
copies and tangible embodiments thereof (in whatever form or medium, including
electronic media), including, but not limited to, rights to sue for and remedies
against past, present and future infringements thereof; and rights of priority
and protection of interests therein under the laws of any jurisdiction worldwide
and all tangible embodiments thereof; and
5
<PAGE> 7
(p) The PFS Business as an ongoing concern and the goodwill thereof.
SECTION 1.03. PFS Liabilities. The term "PFS Liabilities" shall mean:
(a) All obligations and liabilities of the Seller under any and all of the
leases, contracts, licenses and commitments of the PFS Business which are
described in Section 1.02 as part of the PFS Assets;
(b) Those liabilities and obligations in respect of the employees of the
PFS Business on the Closing Date to be assumed in accordance with Article 6
below;
(c) All liabilities of the PFS Business with respect to any litigation
disclosed pursuant to Section 2.10 below; provided, however, that the total
amount of liabilities assumed by the Buyer pursuant to this clause (c) shall not
exceed $2,000,000;
(d) All liabilities (including, without limitation, accounts payable)
arising out of the operation of the PFS Business or the ownership of the PFS
Assets existing on the Closing Date and included in the calculation of the Final
Working Capital described in Section 1.06 hereof;
(e) Up to $3,000,000 of sales, transfer and similar taxes on the transfer
of the PFS Assets to the Buyer pursuant to this Agreement plus any additional
such taxes occasioned by the failure of the Buyer to file appropriate and timely
resale certificates or take similar action to avoid such taxes; and
(f) No liability, obligation, claim or other matter shall in any event be
a PFS Liability except as expressly set forth in this Section 1.03.
SECTION 1.04. Purchase Price. The purchase price (the "Purchase Price")
for the PFS Assets and the PFS Canadian Assets is US$830,000,000, as adjusted
pursuant to Sections 1.06 and 1.07 below. The Purchase Price is in addition to
the assumption of the PFS Liabilities and the PFS Canadian Liabilities by the
Buyer, as described herein and in the Canadian Sale Agreement. The Purchase
Price for the PFS Assets and the PFS Canadian Assets shall be paid at the
Closing by wire transfer of immediately available funds to a bank account
designated by the Seller prior to the Closing.
SECTION 1.05. Allocation of Purchase Price. The Seller and the Buyer shall
use their reasonable best efforts to agree, within sixty (60) days after the
Closing Date, to an allocation of the Purchase Price (together with liabilities
assumed hereunder and other relevant items) among the PFS Assets and the PFS
6
<PAGE> 8
Canadian Assets. Such allocation will comply with the requirements of Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and will be
determined through arm's length negotiations. The Seller and the Buyer each
agrees that, to the extent permitted by applicable law, it will adopt and
utilize the amounts so allocated to each asset or class of assets for purposes
of all federal, state and other tax returns or reports of any nature filed by it
and that, except as may be required by applicable law or regulation, it will not
take any position inconsistent therewith upon examination of any such tax
returns or reports, in any claim for refund, in any litigation or otherwise with
respect to such tax returns or reports.
SECTION 1.06. Closing Balance Sheet.
(a) As promptly as practicable, but no later than 90 days after the
Closing Date, the Buyer (through the management of the PFS Business) will cause
to be prepared and delivered to the Seller a balance sheet (the "Closing Balance
Sheet"), and a certificate based on such Closing Balance Sheet setting forth in
detail the Buyer's calculation of the Closing Working Capital (as such term is
hereinafter defined). The Closing Balance Sheet shall fairly present the
consolidated financial position of the PFS Business and the PFS Canadian
Business as of the close of business on the Closing Date on a basis consistent
with those principles used in preparation of the Financial Statements referred
to in Section 2.07 below but including only those assets that are PFS Assets,
only those liabilities that are PFS Liabilities and reflecting all valuation and
other reserves with respect to PFS Assets recorded in any of the books and
records of the Seller or any division or affiliate of the Seller. For purposes
of this Agreement, the "Closing Working Capital" shall mean an amount equal to
(A) the sum of all current assets of the PFS Business and the PFS Canadian
Business, as defined by United States generally accepted accounting principles
("GAAP") and applied in a manner consistent with the Financial Statements
referred to in Section 2.07 below, less (B) the sum of all current liabilities
(but excluding all accounts payable cash management account liabilities
determined in accordance with the historical accounting practices and statements
of the PFS Business) of the PFS Business and the PFS Canadian Business, as
defined by GAAP and applied in a manner consistent with the Financial Statements
referred to in Section 2.07 below, but in each case excluding any items excluded
from the calculation of the Statement of Net Assets To Be Sold (as hereinafter
defined).
(b) After delivery of its calculation of the Closing Working Capital, the
Buyer shall make available to the Seller all books, records, work papers,
personnel and other materials and sources used by the Buyer to prepare the
calculation of the Closing Working Capital delivered pursuant to subsection
1.06(a). If the Seller disagrees with the Buyer's calculation of the Closing
Working Capital delivered pursuant to subsection 1.06(a), the Seller may within
60 days after receipt of the
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<PAGE> 9
Buyer's calculation of the Closing Working Capital, send a notice to the Buyer
disagreeing with such calculation and setting forth the Seller's calculation of
such amount. Any such notice of disagreement shall specify those items or
amounts as to which the Seller disagrees.
(c) If a notice of disagreement is given by the Seller pursuant to
subsection 1.06(b), the Buyer and the Seller shall, during the 15 business days
following receipt of such notice, use their best efforts to reach agreement on
the disputed items or amounts in order to determine the Closing Working Capital.
If, during such period, the Buyer and the Seller are unable to reach such
agreement, they shall promptly thereafter cause a nationally recognized firm of
independent accountants chosen and mutually accepted by the Buyer and the Seller
(the "Accounting Referee") to review this Agreement and the disputed items or
amounts for the purpose of calculating the Closing Working Capital. In making
such calculation, the Accounting Referee shall consider only those items or
amounts in the Buyer's calculation of the Closing Working Capital as to which
the Seller has disagreed. The Accounting Referee shall deliver to the Buyer and
the Seller, as promptly as practicable, a report setting forth such calculation.
Such report shall be final and binding upon the Buyer and the Seller and shall
constitute an arbitral award upon which a judgment may be entered in any court
having jurisdiction thereof. The cost of such review and report by the
Accounting Referee shall be borne (i) by the Buyer if (A) the difference between
the Final Working Capital (as such term is hereinafter defined) and the Buyer's
calculation of the Closing Working Capital delivered pursuant to subsection
1.06(a) is greater than (B) the difference between the Seller's calculation of
the Closing Working Capital delivered pursuant to subsection 1.06(b) and the
Final Working Capital, and (ii) by the Seller if the amount referred to in
clause (A) above is less than the amount referred to in clause (B) above. For
purposes of this Agreement, the "Final Working Capital" shall mean the Closing
Working Capital, (x) as shown in the Buyer's calculation delivered pursuant to
subsection 1.06(a) if no notice of disagreement with respect thereto is
delivered by the Seller pursuant to subsection 1.06(b), or (y) if such a notice
of disagreement is delivered by the Seller, as agreed by the parties pursuant to
this subsection 1.06(c) or, in the absence of such agreement, as shown in the
Accounting Referee's calculation delivered pursuant to this subsection 1.06(c).
(d) The Buyer and the Seller agree that they will cooperate and assist in
the preparation of the Closing Balance Sheet and the calculation of the Closing
Working Capital and in the conduct of the audits and reviews referred to in this
Section 1.06, including, without limitation, making available to the extent
necessary books, records, work papers and personnel.
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<PAGE> 10
SECTION 1.07. Adjustment of Purchase Price.
(a) If the Final Working Capital is less than US$232,342,000 (the amount
of Closing Working Capital estimated by the Seller immediately prior to the date
hereof), the Seller shall pay to the Buyer, as an adjustment to the Purchase
Price, in the manner provided in subsection 1.07(b), the amount of such
difference. If the Final Working Capital is greater than US$232,342,000, the
Buyer shall pay to the Seller, in the manner provided in subsection 1.07(b),
the amount of such difference.
(b) Any payment due pursuant to subsection 1.07(a) shall be made by wire
transfer of immediately available funds within 10 days after the Final Working
Capital has been determined pursuant to Section 1.06(c), to such bank account of
the other party as may be designated by such other party. If the payment due
pursuant to subsection 1.07(a) is not made within such 10 day period, interest
shall be due on such late payment at a rate equal to the lesser of: (i) 18% per
annum (calculated on the basis of the number of days elapsed and a 365 day year)
or (ii) the maximum rate permitted to be charged under applicable state law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce the Buyer to enter into this Agreement, the Seller
hereby represents and warrants as follows:
SECTION 2.01. Organization and Standing of the Seller. The Seller (i) is a
duly organized and validly existing corporation, in good standing under the laws
of the State of North Carolina, (ii) has all requisite corporate power and
authority to own, lease, use and operate the PFS Assets and to transact the PFS
Business where and as now conducted, and (iii) is duly qualified and in good
standing in each jurisdiction in which the conduct of the PFS Business, as now
conducted, makes such qualification necessary.
SECTION 2.02. Corporate Power and Authority. The Seller has full corporate
power and authority to carry out its obligations hereunder. The execution and
delivery of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Seller. No other
corporate acts or proceedings on the part of the Seller or its stockholders are
necessary to authorize the exclusion and delivery of this Agreement or the
consummation of the transactions contemplated hereby. When duly executed and
delivered by the parties hereto, this Agreement will constitute a valid and
legally
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binding obligation of, and will be enforceable against, the Seller in accordance
with its terms.
SECTION 2.03. Conflicts, Consents and Approvals.
(a) Except as described in subsection 2.03(b) below, neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by the Seller with any of the provisions
hereof, will: (i) result in the creation of any lien, security interest, charge,
or encumbrance upon any of the PFS Assets; (ii) violate any order, writ,
injunction, decree, or any statute, rule or regulation applicable to the Seller
or any of the PFS Assets; (iii) violate the certificate of incorporation or
bylaws or other organizational documents of the Seller; or (iv) require the
consent or approval of any third party, court, or governmental body or agency,
instrumentality, or authority, other than as required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
(b) Exhibits B, D, G and R attached hereto identify all of the leases and
other agreements listed in such Exhibits which require the consents of certain
of the other parties thereto to assign to the Buyer such leases and agreements.
As described in Section 4.05 below certain of the Permits (including local,
state and federal vehicle, dairy and food licenses) are not transferable.
SECTION 2.04. Title to Properties; Absence of Liens and Encumbrances.
(a) Exhibits A and B hereto list and describe all of the Real Property of
the PFS Business. Exhibit C hereto lists and describes all of the refrigeration
equipment installed in the distribution centers of the PFS Business and a
separate list of substantially all of the material handling equipment of the PFS
Business owned by the Seller on the date hereof. Exhibit D hereto lists all
Leased Tangible Personal Property of the PFS Business. Exhibit E hereto lists
all Vehicles of the PFS Business.
(b)(i) Exhibit A sets forth a complete and accurate list and
description of all Owned Real Property. Exhibit B also sets forth a
complete and accurate list and description of all Leased Real Property,
such description including, for each Leased Real Property, an
identification of the lease or sublease agreement therefor, the names of
the lessor and lessee (or sublessor and sublessee) thereunder, the title
and date thereof, the address and approximate size of the premises leased
thereunder, the rental and term thereunder, including any extension
options, and the use of such premises.
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(ii) Seller holds good and marketable fee or leasehold title (as the
case may be) to the Owned Real Property and the Leased Real Property, free
and clear of any liens, mortgages, easements, rights-of-way, licenses, use
restrictions, claims, charges, options, title defects or encumbrances of
any nature whatsoever, except for the Permitted Encumbrances (as defined
below). The Permitted Encumbrances do not impair or adversely affect the
value of any Real Property in any material respect, the current use,
occupancy or operation thereof, or the business, operations or financial
condition of the PFS Business. As used herein, the term "Permitted
Encumbrances" means (A) liens for taxes not yet due and payable or which
are being contested by Seller in good faith and by appropriate
proceedings; (B) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course of business
which are less than $50,000 in amount and which are being contested in
good faith and by appropriate proceedings; or (C) easements,
rights-of-way, encroachments, restrictions, conditions and other similar
encumbrances incurred or suffered in the ordinary course of business and
which, individually or in the aggregate, (1) are not substantial in
character, amount or extent in relation to the applicable Real Property
and (2) do not materially detract from the use, utility or value of the
applicable Real Property or otherwise materially impair Seller's present
business operations at such location.
(iii) No condemnation or eminent domain proceeding against any
material part of the Real Property is pending or (to Seller's knowledge)
threatened, and no material damage or destruction has occurred with
respect to any of the Real Property.
(iv) Seller has granted no outstanding options and has entered into
no outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or any
part of the Real Property. No person or entity has any right or option to
acquire, or right of first refusal with respect to, Seller's interest in
the Real Property or any part thereof.
(v) All of the leases or subleases of the Leased Property (the "Real
Property Leases") are valid, binding and in full force and effect. No Real
Property Lease is subject to any pledge, lien, sublease, assignment,
license or other agreement pursuant to which the Seller granted to any
third party any interest in such Real Property Lease or any right to the
use or occupancy of any Leased Real Property. True and complete copies of
the Real Property Leases have previously been delivered to Buyer,
including, without limitation all amendments or modifications thereof and
all side letters or other instruments affecting in any material way the
obligations of
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any party thereunder. The lessee under each Real Property Lease is now in
possession of the applicable Leased Real Property. There is no pending or,
to the knowledge of the Seller, threatened proceeding against the Seller
which might interfere with the quiet enjoyment of each tenant. There are
no outstanding defaults or circumstances which, upon the giving of notice
or passage of time or both, would constitute a default or breach by the
Seller under any Real Property Lease. As used herein, the term "lease"
shall also include subleases, the term "lessor" shall also include any
sublessor, and the term "lessee" shall also include any sublessee.
(c) The Seller owns and has good and marketable title to (or, in the case
of leased property, has a valid leasehold interest in) the PFS Assets (other
than the Real Property, which is addressed in subparagraph 2.04(b) above), free
and clear of any liens, claims, charges, pledges, mortgages, security interests
or encumbrances (collectively "Encumbrances"), except for immaterial
Encumbrances which do not materially adversely affect the full use or enjoyment
of the PFS Assets and liens for taxes or assessments not yet due and payable.
SECTION 2.05. Condition of PFS Assets. All of the PFS Assets (i) are in
good operating condition, ordinary, wear and tear excepted and (ii) are fit for
the purposes for which they are intended and for which they are presently being
used in the operation of the PFS Business.
SECTION 2.06. Agreements and Commitments. Exhibits B, D, G, L and R list
all material contracts or agreements (including lease agreements and employment
agreements) of the PFS Business to which the Seller or any Affiliate of the
Seller is a party (collectively, the "Material Contracts"). Contracts and
agreements involving a total commitment of more than $50,000 (other than
purchase orders made in the ordinary course of business) shall be deemed to be
material for purposes of this Section 2.06. Each Material Contract is a valid
and binding agreement of the Seller and, to the Seller's knowledge, of the other
parties thereto. The Seller is not in default in any material respect under the
terms of such material contracts or agreements of the PFS Business and, to the
knowledge of the Seller, there is no existing default by the other party to such
material contracts or agreements.
SECTION 2.07. Financial Statements. Attached hereto as Exhibit H are true
and complete copies of:
(i) The audited consolidated balance sheets of PFS Business and the
PFS Canadian Business as at December 25, 1996 (the "Balance Sheet Date")
and December 27, 1995;
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(ii) The audited consolidated income statements and statements of
cash flows and divisional equity of the PFS Business and the PFS Canadian
Business for each of the three years ended December 25, 1996, December 27,
1995 and December 28, 1994;
(iii) The unaudited consolidated balance sheet of the PFS Business
and the PFS Canadian Business as of March 19, 1997 (the "Quarterly Balance
Sheet Date");
(iv) The unaudited consolidated income statements and statements of
cash flow and divisional equity of the PFS Business and the PFS Canadian
Business for the 12 week periods ended March 19, 1997 and March 23, 1996;
and
(v) The unaudited statement of the net PFS Assets and PFS
Liabilities (and the PFS Canadian Assets and PFS Canadian Liabilities) to
be sold as at the Balance Sheet Date (such statement, the "Statement of
Net Assets To Be Sold").
The balance sheets, income statements and statements of cash flows and
divisional equity referred to in paragraphs (i), (ii), (iii) and (iv) above have
been prepared in accordance with GAAP applied on a consistent basis and present
fairly the consolidated financial position of the PFS Business and the PFS
Canadian Business as of the dates indicated and the consolidated results of
operations and cash flows of the PFS Business and the PFS Canadian Business for
the years and periods indicated.
Except as reflected in the adjustments reflected in the statements
referred to in paragraph (v) above, the balance sheet referred to in paragraph
(i) above does not include any material assets that do not constitute a part of
the PFS Business and the PFS Canadian Business.
Except as set forth in Exhibit H, and without prejudice to the
classification of any claim, liability or obligation as a PFS Liability, to the
Seller's knowledge, there is no outstanding claim, liability or obligation of
any nature, whether absolute, accrued, known or unknown, contingent or
otherwise, affecting the PFS Assets or the PFS Business, other than (i)
liabilities and obligations that are fully reflected, accrued or reserved
against on the Financial Statements, (ii) liabilities and obligations that are
not required under GAAP to be reflected, accrued or reserved on the Financial
Statements, or (iii) other liabilities and obligations incurred since the
Quarterly Balance Sheet Date in the ordinary course of business consistent with
the prior practices of the PFS Business and the PFS Canadian Business, none of
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the assets, liabilities, results of
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operations, business or financial condition of the PFS Business (a "Material
Adverse Effect").
SECTION 2.08. Insurance. The Seller carries insurance sufficient in type
and amount to protect the PFS Assets and the PFS Business. The Seller has
provided to the Buyer a description of the insurance policies carried by it for
the PFS Business. The premiums for such insurance policies are fully paid and
there are no loans outstanding against any of such policies. All such insurance
will be maintained through the Closing Date but not thereafter.
SECTION 2.09. Taxes. Except as set forth in Exhibit I attached hereto, (i)
all tax returns and reports relating to the PFS Business which were required by
law to be filed for all periods prior to or including the Closing Date have been
timely filed or will be prepared and timely filed and are true and correct in
all material respects, (ii) all Taxes (as defined below) upon the PFS Business,
or upon any of its properties, assets or income, which are due and payable for
Pre-Closing Tax Periods (as defined below) have been paid or adequately
reserved, other than those presently payable without penalty or interest and
other than in connection with any sales or use tax arising as a result of the
transaction contemplated by this Agreement and (iii) the Seller has received no
written notice from any governmental authority, and has no actual knowledge,
that any deficiency or claim for additional taxes or any special tax or
assessment is to be levied against any PFS Asset. For purposes of this
Agreement, (i) "Tax" or "Taxes" shall mean any income, capital stock, sales,
use, ad valorem, payroll, occupation, property, excise taxes or governmental
charges (including interest and penalties), and (ii) "Pre-Closing Tax Periods"
shall mean all Tax periods ending on or before the Closing Date, and, with
respect to any Tax period that includes but does not end on the Closing Date,
the portion of such period that ends on and includes the Closing Date.
SECTION 2.10. No Litigation. Except as set forth in Exhibit J attached
hereto, there is no claim, arbitration, litigation or other legal proceeding or
governmental investigation pending or, to the knowledge of the Seller,
threatened against or affecting the PFS Business or the PFS Assets. For purposes
of this Agreement, the "knowledge of the Seller" shall mean the knowledge of the
officers, directors and management of the Seller and its subsidiaries and
divisions, including without limitation, the officers and management of the PFS
Business. The Seller is not in default with respect to any judgment, order,
injunction or decree of any court or other governmental authority affecting the
PFS Business.
SECTION 2.11. Compliance with Laws. The PFS Business is in compliance in
all respects, other than noncompliance which is individually or in the aggregate
immaterial with respect to the operations of the PFS Business, with all federal,
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state and local laws (statutory, judicial or otherwise), ordinances and
regulations, including, but not limited to "Environmental Laws" (hereinafter
defined).
Except as to matters that would not reasonably be expected to have a
Material Adverse Effect:
(a) the Seller has obtained or caused to be obtained all environmental
permits necessary for the operation of the PFS Business by the Seller to comply
with all Environmental Laws; all such permits are in good standing; the Seller
is in compliance with all terms and conditions of such permits, and the PFS
Business is in compliance with all other applicable Environmental Laws;
(b) during the two year period prior to the date hereof; no written
notice, request for information, order, complaint or penalty has been received
by Seller relating to, and Seller has not filed any notice pursuant to the
requirements of, any Environmental Law relating to the PFS Business;
(c) there are no judicial, administrative or other actions, suits or
proceedings pending or, to the Seller's knowledge, threatened which allege a
violation of any Environmental Law by Seller in connection with its operation of
the PFS Business; and
(d) there has been no written audit conducted by Seller of any properties
currently used in connection with the PFS Business which has not been delivered
to Buyer prior to the date hereof.
For purposes of this section, the term "Environmental Law" shall mean all
federal, state and local laws, ordinances and regulations of any governmental
entity now in effect and all judicial or administrative rulings, consent
decrees, orders, judgments or binding opinions, relating to the regulation and
protection of the environment or natural resources, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Clean Air Act, the Federal Water Pollution Control Act,
the Emergency Planning Community Right to Know Act, the Toxic Substances Control
Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Hazardous
Materials Transportation Act and applicable state laws.
SECTION 2.12. Permits. The Seller has all material Permits required for
the conduct of the PFS Business or to utilize the PFS Assets, which Permits are
listed in Exhibit K attached hereto. All such Permits are in full force and
effect, valid and outstanding, and the Seller has duly complied with all of the
terms and
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conditions under which each is held. Substantially all of the permits listed
in Exhibit K are not transferable.
SECTION 2.13. Employee Matters. The Seller has in relation to the
employees of the PFS Business, including, without limitation, those on lay-off,
short or long term disability, family leave or other leave of absence (the "PFS
Employees"), complied in all material respects with all federal, state and local
laws, ordinances and regulations. The Seller is not a party to any union
contract or collective bargaining agreements with the PFS Employees. Exhibit L
lists all employment agreements between the Seller and the PFS Employees. There
are no labor strikes or work stoppages pending or, to the knowledge of the
Seller, threatened against the PFS Business, nor have there been any such labor
strikes or work stoppages at any time within two years prior to the date of this
Agreement.
SECTION 2.14. Conduct of Business. Except as expressly contemplated
pursuant to the terms of this Agreement or disclosed in any Exhibit hereto,
since the Balance Sheet Date the Seller has not:
(a) sold, assigned, transferred or otherwise disposed of, mortgaged,
pledged or subjected to lien, charge, security interest or any other
encumbrance, any material PFS Asset, or any of the Seller's interest in any
material PFS Asset, except inventory and other items of personal property
disposed of in the ordinary course of the PFS Business;
(b) suffered any material damage, destruction or loss to the PFS Assets,
which damage or loss is not fully covered by insurance, or suffered any other
significant change, event or condition which a reasonable person could expect to
have a material adverse effect on the PFS Business (taken as a whole);
(c) taken any action, or failed to take any action, or permitted any act
or omission which would have a material adverse effect on the PFS Business
(taken as a whole);
(d) cancelled any material claim of or debt for borrowed money owed to the
PFS Business outside the ordinary course of business;
(e) subjected to or suffered the imposition of any lien on any material
PFS Asset, except for Permitted Encumbrances;
(f) made any material amendment or modification to or terminated any
Material Contract except in the ordinary course of business;
(g) except as disclosed to the Buyer prior to the date hereof,
increased, or committed to increase, the compensation for services payable or
to become
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payable to any officer, director or employee of the PFS Business, or any bonus
payment or similar arrangement for services made to or with any of such
officers, directors or employees, other than routine increases made in the
ordinary course of business not exceeding ten percent (10%) per annum for any of
them individually, in each case which will be an obligation or liability of the
Buyer (other than those obligations or liabilities assumed by the Buyer pursuant
hereto);
(h) incurred, assumed, or taken any property subject to, any indebtedness
that would be a PFS Liability (excluding trade payable and other liabilities
incurred in the ordinary course of business and consistent with past practices);
(i) except as disclosed to the Buyer prior to the date hereof, adopted any
material plan or agreement or made any material amendment to any plan or
agreement providing any new or additional "fringe benefits" for the employees of
the PFS Business, in each case which will be an obligation or liability of the
Buyer (other than those obligations or liabilities assumed by the Buyer pursuant
hereto);
(j) made any material alteration in the manner of keeping the books,
accounts or records of the Seller as to the PFS Business, or in the accounting
practices therein reflected; or
(k) agreed, orally or in writing, or granted any other person or entity an
option, to do any of the things specified in paragraphs (a) through (j) above.
SECTION 2.15. Brokerage and Finder's Fees. Neither the Seller nor any of
its officers or employees has incurred or will incur any brokerage, finder's or
similar fee in connection with the transaction contemplated by this Agreement,
except that Merrill Lynch & Company ("ML") has acted as financial advisor to
the Seller. All fees of ML will be borne by the Seller.
SECTION 2.16. Intellectual Property. The Seller owns the Intangible
Property and the Intellectual Property including, but not limited to, the
trademarks, tradenames, service marks and brand names set forth in Exhibit F
attached hereto, and, except as disclosed in that Exhibit, has not granted any
options, licenses or rights therein. Except as disclosed in Exhibit F, the
Seller, as of the date hereof, possesses the right to use in perpetuity (without
royalty or payment except as disclosed in Exhibit F) all of the property rights
disclosed on Exhibit F. To the Seller's knowledge, it is not infringing on the
intangible property rights of any person or entity in the operation of the PFS
Business, and the Seller does not know of any third party who has asserted any
claim concerning such an infringement.
SECTION 2.17. All Distribution Businesses. Except through PFS and PCL, the
Seller does not own and operate any distribution businesses which sell
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food (excluding snacks and beverages), supplies, equipment, smallwares,
uniforms, promotional items or point of purchase materials to Pizza Hut, Taco
Bell or KFC restaurants within the United States or Canada.
SECTION 2.18. All Assets. The PFS Assets include all of the assets and
properties of the Seller (i) used or held for use primarily in the PFS Business,
except for (x) the administrative services currently provided by the Seller or
its Subsidiaries to the PFS Business and (y) services and rights provided to the
PFS Business as expressly contemplated by this Agreement or (ii) included in
"Property and Equipment, Net" in the Statement of Net Assets to be Sold (subject
to change in the ordinary course of business since the date of the Statement of
Net Assets to be Sold). The PFS Assets include all of the assets and properties
of the Seller required for the continued conduct by the Buyer of the PFS
Business as now being conducted, except for (x) the administrative services
currently provided by the Seller or its Subsidiaries to the PFS Business and (y)
services and rights provided to the PFS Business as expressly contemplated by
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Seller to enter into this Agreement, the Buyer
hereby represents and warrants as follows:
SECTION 3.01. Organization and Standing. (a) The Buyer is a duly organized
and validly existing corporation, in good standing under the laws of the State
of Delaware.
(b) Holberg Industries, Inc. (the "Guarantor") is a duly organized and
validly existing corporation, in good standing under the laws of the State of
Delaware.
SECTION 3.02. Corporate Power and Authority. The Buyer and the Guarantor
each have full corporate power and authority to carry out their respective
obligations hereunder. The execution and delivery of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Buyer and the execution and delivery of the Guaranty
has been duly and validly authorized by the Board of Directors of the Guarantor.
No other corporate acts or proceedings on the part of the Buyer are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby and no other corporate acts or proceedings on the part of the Guarantor
are necessary to authorize the Guarantee. When duly executed and delivered by
the parties hereto, this Agreement will constitute a valid and legally
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binding obligation of, and will be enforceable against, the Buyer in accordance
with its terms. When duly executed and delivered by the Guarantor, the Guarantee
will constitute a valid and legally binding obligation of, and will be
enforceable against, the Guarantor in accordance with its terms.
SECTION 3.03. Conflicts, Consents and Approvals. Neither the execution and
delivery of this Agreement nor the creation and delivery of the Guarantee, nor
the consummation of the transactions contemplated hereby, nor compliance by the
Buyer with any provision hereof, nor compliance by the Guarantor with any
provisions of the Guarantee will: (i) violate any order, writ, injunction,
decree or any statute, rule or regulation applicable to the Buyer or the
Guarantor; or (ii) require the consent or approval of any third party, court, or
governmental body or agency, instrumentality, or authority, other than as
required by the HSR Act.
SECTION 3.04. Financial Information. True and complete copies of the most
recent financial statements concerning the Guarantor have previously been
delivered to the Seller. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis and present fairly the
financial position of the Guarantor as of the dates indicated.
SECTION 3.05. Brokerage and Finder's Fees. Neither the Buyer nor any of
its officers or employees has incurred or will incur any brokerage, finder's or
similar fee in connection with the transaction contemplated by this Agreement,
except that Donaldson, Lufkin and Jenrette Securities Corporation ("DLJ") has
acted as financial advisor to the Buyer. All fees of DLJ will be borne by the
Buyer.
ARTICLE 4
INTERIM COVENANTS OF THE SELLER
The Seller agrees that subsequent to the date hereof and prior to the
Closing Date:
SECTION 4.01. Access. The Seller will afford to the officers, employees
and authorized representatives of the Buyer full access during normal business
hours to the PFS Assets (including all contracts, commitments, books and records
of the PFS Business) and to the management, employees, accountants and other
agents and representatives of the PFS Business to discuss matters relating to
the PFS Business. Any information relating to the PFS Assets and the PFS
Business provided to the Buyer or its authorized representatives pursuant to
this Agreement shall be held by the Buyer and its representatives prior to the
Closing in accordance with the Confidentiality Agreement, dated March 13, 1997,
by and between Holberg Industries, Inc. and the Seller, except paragraphs 3 and
5 thereof.
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No investigations made by the Buyer shall affect the representations, warranties
and agreements made by the Seller pursuant to this Agreement, and each such
representation, warranty and agreement shall survive any such investigation.
SECTION 4.02. Management of the PFS Business. The Seller shall cause the
PFS Business to be maintained in a manner consistent with the present operation
of the PFS Business and the Seller shall not sell, transfer, convey or encumber
the PFS Assets, or any part thereof or interest therein without the Buyer's
prior written consent (which consent shall not be unreasonably withheld), other
than sales in the ordinary course of business. The Seller shall use reasonable
and good faith efforts to retain the services of the key employees of the PFS
Business, to maintain all of the PFS Assets in their current condition (normal
wear and tear excepted) and to preserve the present goodwill and advantageous
relationships of the Seller with respect to the PFS Business. The Seller shall
not, without the prior written consent of the Buyer:
(a) take any action described in Section 2.14;
(b) enter into any agreements or contracts that would require payments by
the Seller or the Buyer of more than $1,000,000 over any period of twelve (12)
months or more or impose material restrictions that would affect the continued
operation of the PFS Business by the Buyer in whole or in part; or
(c) take any action, or omit to take any actions, that would cause any of
the representations and warranties set forth in Article 2 (Representations and
Warranties of the Seller) to become untrue in any material respect as of or
prior to the Closing Date.
SECTION 4.03. Governmental Consents and Approvals. The Seller shall make
all required filings and obtain all consents or other approvals required to be
obtained by the Seller from any appropriate governmental agency or authority in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, any filing required to be made by the
Seller under the HSR Act.
SECTION 4.04. Third Party Consents.
(a) To the extent that any of the agreements, leases, licenses or any
other contract included in the PFS Assets and listed in the Exhibits hereto to
be transferred to the Buyer under this Agreement are not transferable without
the consent of a third party as described in the Exhibits hereto (the
"Nontransferable Agreements"), the Seller and the Buyer agree to use their
respective best efforts prior or subsequent to the Closing Date to identify and
secure the required third party consent to the transfer of each Nontransferable
Agreement to the Buyer, and
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shall afford the Buyer the opportunity in cooperation with the Seller to
negotiate directly with each third party in the event that such consent shall
initially be denied. For purposes of this Section 4.04, the term "best efforts"
by the Seller or the Buyer, as the case may be, shall not require the Seller or
the Buyer, as the case may be, to execute any guaranty, incur any other
obligation, or pay any money to the third party under any Nontransferable
Agreement or commence any legal, administrative or other proceeding.
Notwithstanding the foregoing, (i) in no event shall Seller require that, in
connection with the assignment or transfer to the Buyer of any Real Property
Lease or other contract or agreement, the landlord or other party to such
contract or agreement release Seller, in whole or in part, from any liability
under such Real Property Lease or other contract or agreement following the
Closing, and (ii) Seller shall, if required by a landlord or other third party
as a condition to obtaining a required consent from such landlord or other third
party, confirm in writing Seller's continuing liability under such Real Property
Lease or other contract or agreement; provided, however, that the Buyer shall
agree to fully indemnify the Seller for such continuing liability.
(b) The Seller and the Buyer agree that, so long as the required consent
for the transfer of a Nontransferable Agreement has not been obtained, the
Seller and the Buyer shall enter into satisfactory arrangements on the Closing
Date (i) to afford to the Buyer the material economic and practical benefits of
each such Nontransferable Agreement and (ii) to eliminate any liability of the
Seller with respect to the Nontransferable Agreement after the Closing.
SECTION 4.05. Permits. Certain of the Permits of the PFS Business
(including certain local, state and federal vehicle, dairy and food licenses)
are not transferable and as a result the Buyer will need its own permits to
distribute certain products. To the extent the Buyer does not already have such
Permits, the Seller will assist the Buyer in its efforts to identify, apply and
receive such Permits prior to the Closing Date.
SECTION 4.06. Communications. The Seller will promptly advise the Buyer of
all material communications which it receives from any governmental agencies or
authorities or any person or entity alleging that the consent of such person or
entity is required in connection with the transactions contemplated by this
Agreement; and any claim, action, lawsuit or proceeding commenced or, to the
Seller's knowledge, threatened, relating to the consummation of the transactions
contemplated by this Agreement or any person or entity alleging that the consent
of such person or entity is required in connection with the transactions
contemplated by this Agreement; and any claim, action, lawsuit or proceeding
commenced or, to the Seller's knowledge, threatened, relating to the
consummation of the transactions contemplated by this Agreement.
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SECTION 4.07. Announcements. Neither party will, without the prior consent
of the other party, make any announcement to the public concerning the
transactions contemplated by this Agreement, except as may be required by law.
SECTION 4.08. No Waiver. Nothing in this Article 4 shall in any way waive
or modify the conditions to Closing provided for herein.
ARTICLE 5
INTERIM COVENANTS OF THE BUYER
The Buyer agrees that subsequent to the date hereof and prior to the
Closing Date:
SECTION 5.01. Government Consents and Approvals. The Buyer shall make
all required filings and obtain all licenses, consents or other approvals
required to be obtained by the Buyer from any appropriate governmental agency or
authority or other person in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, any
required filing to be obtained by the Buyer under the HSR Act.
SECTION 5.02. Communications. The Buyer will promptly advise the Seller of
all material communications which it receives from any governmental agencies or
authorities or any person or entity alleging that the consent of such person or
entity is required in connection with the transactions contemplated by this
Agreement; and any claim, action, lawsuit or proceeding commenced or, to the
Buyer's knowledge, threatened, relating to the consummation of the transactions
contemplated by this Agreement.
SECTION 5.03. Announcements. The Buyer will not, without the prior consent
of the Seller, make any announcement to the public concerning the transactions
contemplated by this Agreement, except as may be required by law.
ARTICLE 6
EMPLOYEE MATTERS
SECTION 6.01. Employment and Compensation of PFS Employees. (a) The Buyer
agrees that immediately after the Closing Date, the Buyer shall employ all of
the employees of the PFS Business on the Closing Date who are listed in Exhibit
M hereto, except as otherwise agreed by the Buyer and the Seller in writing;
including without limitation, those employees on lay-off, short-term
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disability, family leave or any other leave of absence as of the Closing Date
(collectively "Transferred Employees"). Employees on long-term disability as of
the closing date are not to be considered Transferred Employees unless, later,
on recovery the Buyer accepts them into employment.
(b) Buyer agrees to provide Transferred Employees with cash bonuses equal
to the full 1997 cash bonuses due under the Seller's Middle Management
Incentive Program and Executive Incentive Program, such bonuses to be paid
during the first quarter of 1998 in accordance with the terms and conditions set
forth in Exhibit M-1, including without limitation the condition that no
Transferred Employee shall be entitled to any such bonus if the employment of
such Transferred Employee is terminated for cause or voluntarily by such
Transferred Employee before January 1, 1998.
(c) Employee Payroll Information. Seller shall transfer to Buyer any
records relating to withholding and payment of income and unemployment taxes
(federal, state and local) and FICA and FUTA taxes and any and all state
unemployment payment reserves and/or charge history with respect to wages paid
to Transferred Employees for the calendar year in which the Closing occurs
(including, without limitation, Forms W-4 and Employees' Withholding Allowance
Certificate). Buyer shall provide Transferred Employees with Forms W-2, Wage and
Tax Statement, for the calendar year in which the Closing occurs setting forth
the wages paid and taxes withheld with respect to the Transferred Employees for
such calendar year by Seller and Buyer as predecessor and successor employers,
respectively, as provided in Revenue Procedure 96-60.
SECTION 6.02. Employee Matters.
(a) Exhibit N attached hereto identifies certain Employee Benefit Plans,
(as defined in Section 3(3) of the Employee Retirement Income Security Act, as
amended ("ERISA")) and certain Employee Arrangements, including employment and
consulting contracts, bonus and other incentive compensation, deferred
compensation, disability, severance, vacation, stock awards, stock options,
worker's compensation agreements, plans, programs, policies and arrangements
with respect to the employment and termination of employment of the Transferred
Employees maintained by the Seller as of the date hereof.
(b) The Seller hereby represents to the Buyer as follows: (1) the Seller
has provided or made available to the Buyer true, correct and complete copies of
the following with respect to each such Employee Benefit Plans: (i) all plan
documents, benefit schedules, and insurance contracts, as applicable; (ii) the
most recent summary plan descriptions, if any; and (iii) the most recent annual
financial reports, if any; (2) no liability currently exists, and under no
circumstances could the Seller or any of its ERISA Affiliates incur a liability
under plans sponsored by
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the Seller on or before the Closing Date, pursuant to the provisions of Title I,
II or IV of ERISA or Section 412, 4971 or 4980B of the Code that could become a
liability of Buyer after the consummation of the transactions contemplated by
this Agreement; and (3) neither this Agreement nor the consummation of the
transactions contemplated by this Agreement will entitle any employee, including
but not limited to, Transferred Employees, to any severance benefits other than
those described in Section 6.05(d) below nor will it (either alone or in
conjunction with a termination of employment) accelerate compensation due any
such Transferred Employee as of the Closing Date.
(c) Effective as of the Closing Date, Transferred Employees shall cease
participation in all Employee Benefit Plans and Employee Arrangements maintained
by the Seller, except as otherwise provided herein. The Buyer agrees that for a
period of twelve months commencing on the Closing Date, the Buyer shall maintain
such Employee Benefit Plans and Employee Arrangements necessary to provide each
Transferred Employee with (i) Welfare Plan benefits including post-retirement
welfare benefits (as defined in Section 3(1) of ERISA) and compensation that are
in the aggregate equal in value to the compensation and Welfare Plan benefits
which such Transferred Employees received from Seller under the Employee Benefit
Plans and Employee Arrangements identified in Exhibit N, but disregarding for
this purpose any compensation paid in the form of stock, options to acquire
stock or any other equity-based compensation, (ii) benefits under "Pension
Plans" (as defined in Section 3(2) of ERISA) of Buyer and/or its affiliates on
the same basis as other similarly situated employees of Buyer and its
affiliates, and (iii) benefits as set forth below.
SECTION 6.03. Pension Plans. (a) As of the Closing Date, (i) the Seller
shall cease benefit accruals for all Transferred Employees who are then
Participants in the PepsiCo Salaried Employees Retirement Plan and the PepsiCo
Retirement Plan for Transportation Employees (the "Qualified Pension Plans") and
the PepsiCo Pension Equalization Plan (the "Non-qualified Pension Plan"), and
(ii) Transferred Employees who have not yet satisfied participation requirements
under such Plans shall thereafter not become eligible to participate thereunder.
Notwithstanding the foregoing, all Transferred Employees who are participants in
the Qualified Pension Plans and the Non-qualified Pension Plan as of the Closing
Date shall continue to accrue Service (as such term is defined in the Qualified
Pension Plans and the Non-qualified Pension Plan) for purposes of satisfying the
vesting and early retirement requirements under such Plans during the time such
Transferred Employees continue employment with the Buyer or, with Seller's prior
approval, any successor or affiliate of the Buyer.
(b) In connection with the Pension benefits provided under subsection (a)
above, the Buyer shall pay to the Seller by wire transfer of immediately
available funds to a bank account designated by the Seller prior to the Closing
(i)
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US$4,000,000.00 within ninety (90) days after the Closing and (ii)
US$4,000,000.00 within two hundred seventy (270) days after the Closing.
SECTION 6.04. Savings Plans. As of the Closing Date, the Buyer shall have
established one or more defined contribution plans that are qualified under
Section 401(a) of the Code and that allow for participant loans ("Defined
Contribution Plans") and shall have established related trusts for such plans
that are exempt under Section 501(a) of the Code. As soon as practicable after
the Closing Date, the Buyer shall provide the Seller with an opinion of counsel
acceptable to the Seller that the Buyer has established the Defined Contribution
Plans and the Seller shall provide the Buyer with an opinion of counsel
acceptable to the Buyer that the PepsiCo Long Term Savings Program (the "Savings
Plan") is in form and operation qualified under Section 401(a) of the Code and
that the related trust is exempt under Section 501(a) of the Code. After both
such opinions have been delivered, the Seller shall cause the trustee of the
PepsiCo Long Term Savings Program (the "Savings Plan") to transfer, in cash and
to the extent a participant has any outstanding loans, all promissory notes
issued in connection therewith, to the Defined Contribution Plans, the Savings
Plan account balances and related assets, including promissory notes covering
outstanding employee loan balances, allocated to Transferred Employees. Such
account balances and assets shall be valued as of the business day immediately
preceding the transfer date to the Defined Contribution Plans.
As of the effective date of the transfer, but subject to audit, all
obligations and liabilities with respect to the Savings Plan account balances,
including outstanding loans, of Transferred Employees shall be assumed by the
Buyer. Following such date, the Seller shall have no further liability with
respect to the Savings Plan account balances of the Transferred Employees, and
the Buyer shall indemnify and hold the Seller harmless from any claims and
losses with respect thereto. Notwithstanding the foregoing, the Seller shall
indemnity and hold the Buyer harmless from any liabilities, claims and losses
arising as a result of a failure of the Savings Plan to be qualified under
Section 401(a) of the Code and/or a failure of the related trust to be exempt
under Section 501(a) of the Code.
SECTION 6.05. Welfare Plans and Vacation Pay.
(a) Neither the Seller nor any of its subsidiaries and affiliates nor any
of the Welfare Plans maintained by the Seller, shall have any obligation to
provide coverage to any Transferred Employee under any Employee Benefit Plans or
Employee Arrangements, including any health care, short-term disability,
long-term disability, accident, educational assistance or life insurance or any
other Welfare Plan after the Closing Date. The Seller shall be responsible for
payment of all claims incurred by Transferred Employees and their eligible
beneficiaries and dependents prior to the Closing Date under any Employee
Benefit Plans or
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Employee Arrangements maintained by the Seller. All claims incurred with respect
to Transferred Employees and their eligible spouses and dependents after the
Closing Date for any Employee Benefit Plans or Employee Arrangements maintained
by the Buyer shall be the responsibility of the Buyer.
(b) The Buyer agrees to provide continuation coverage to "qualified
beneficiaries" (as such term is defined in Section 602 of ERISA and Section
4980B of the Code) of the PFS Business as of the Closing Date and to provide
"continuation coverage" to Transferred Employees, their spouses and their
dependents who become "qualified beneficiaries" subsequent to the Closing Date.
(c) For the remainder of the calendar year including the Closing Date, the
Buyer agrees to continue to maintain any and all health care plans maintained by
the Seller as of the Closing Date.
(d) As of the Closing Date, the Buyer agrees to waive all pre-existing
condition exclusions under any health care plan it maintains with respect to
Transferred Employees and for the remainder of the fiscal year which includes
the Closing Date, Buyer agrees to take into account any deductibles and out-of
pocket expenses incurred by Transferred Employees or their beneficiaries prior
to the Closing in determining satisfaction of deductibles and out-of-pocket
limits under health care plans maintained by the Buyer for the benefit of
Transferred Employees.
(e) Severance Plans. Transferred Employees shall not be entitled to any
severance benefits from the Seller, its divisions or subsidiaries.
Notwithstanding the provisions of the immediately preceding sentence, or the
provisions of any severance plan of the Buyer, if the Buyer terminates any
Transferred Employee within twelve months following the Closing Date, other than
for good cause, the Buyer shall pay a severance benefit to such Transferred
Employee in an amount computed as set forth on Exhibit 0 attached hereto based
upon (i) the Transferred Employee's number of years of service with the Seller,
and its subsidiaries, affiliates and predecessors through the date of his or her
termination and (ii) the Transferred Employee's job classification with the PFS
Business as of the Closing Date.
(f) Vacation Policy. The Buyer agrees to continue for Transferred
Employees the Seller's vacation pay policy for the remainder of the calendar
year in which the Closing occurs.
SECTION 6.06. Past Service Granted. The Buyer shall grant full past
service credit (including credit for eligibility, benefit accrual and for
vesting) to the Transferred Employees for service with the Seller and its
affiliates and
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predecessors under any and all of the Buyer's Employee Benefit Plans, severance
plans, service award plans, vacation pay plans and employee arrangements.
SECTION 6.07. Rights. Except as provided in Section 6.05(c) and 6.02(c),
no provision of this Article 6 shall be construed (a) to limit the right of the
Buyer or any of its affiliates to amend any employee benefit plan or terminate
any employee benefit plan, or (b) to create any right or entitlement whatsoever
in any Transferred Employee or any beneficiary or dependent thereof, including
without limitation a right to continued employment or to any benefit under a
plan or any other compensation.
SECTION 6.08. Employee Communications. The Seller and the Buyer shall use
their reasonable best efforts to cooperate with one another in making any
required communications with Transferred Employees regarding any Employee
Benefit Plans or Employee Arrangements.
ARTICLE 7
TAX MATTERS
SECTION 7.01. Overlap Taxes. Any real and personal property Taxes (and any
other Taxes not measured or measurable, in whole or in part, by net or gross
income or receipts), with respect to the PFS Assets that relate to a tax period
beginning before the Closing Date and ending after the Closing Date (an "Overlap
Period") shall be apportioned between the Seller and the Buyer on a per diem
basis; provided, however, that this Article shall not apply to (i) any sales,
transfer and similar taxes on the transfer of the PFS Assets to the Buyer
pursuant to this Agreement or (ii) any taxes which have been accrued on the
Closing Balance Sheet as a prepaid tax asset and reflected in the Closing
Working Capital described in Section 1.06 hereof. Overlap Period returns shall
be prepared and timely filed by the entity responsible for filing such returns
under local law, regulation or custom, and the Seller or the Buyer, as the case
may be, shall cause such entity to timely file such returns and timely pay any
Tax due with respect to such returns when due or assessed. Such returns shall be
prepared in a manner consistent with past practice of the Seller and in a manner
that does not distort the taxable income or loss of tax liability of the Seller
or the Buyer, except as required by law or regulation or otherwise agreed to by
the Seller and the Buyer. To the extent an Overlap Period Tax is paid in full by
the Seller after the Closing, the Buyer shall pay to the Seller, within fifteen
days of receipt of written notice from the Seller (which notice shall set forth
in reasonable detail the calculations regarding the Buyer's share of the Overlap
Taxes), the amount of any such Taxes apportioned to the Buyer under the first
sentence of this paragraph, except to the extent the Buyer has made such payment
to the Seller pursuant to the purchase price adjustment in
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Section 1.07. In the case where the Buyer is responsible for filing the
applicable Overlap Tax Return or paying the applicable Overlap Period Tax, the
Seller shall pay to the Buyer, within fifteen days of receipt of written notice
from the Buyer (which notice shall set forth in reasonable detail the
calculations regarding the Seller's share of the Overlap Taxes), the amount of
any such Taxes apportioned to the Seller under the first sentence of this
paragraph, in each case except to the extent the Seller has paid such Tax or
accrued or otherwise reflected such Tax as a liability on the Closing Balance
Sheet.
ARTICLE 8
DISTRIBUTION AGREEMENT
SECTION 8.01 Distribution Agreement with Company Owned Pizza Hut, Taco
Bell and KFC Restaurants. The Buyer understands that the Seller, through its
subsidiaries, Pizza Hut, Inc., Taco Bell Corp., Kentucky Fried Chicken
Corporation and Kentucky Fried Chicken of California, Inc., and their respective
subsidiaries (the "Restaurant Companies"), currently own approximately 9,000
Pizza Hut, Taco Bell and KFC restaurants (such restaurants, except for 53 KFC
restaurants currently operated by a subsidiary of the Restaurant Companies
called WMCR Corporation which are not customers of the PFS Business, are
hereinafter referred to as the "Company Owned Restaurants") within the United
States. At the Closing the Seller will assign its rights to the Buyer and the
Buyer shall assume the Seller's obligations under the Sales and Distribution
Agreement dated as of May 6, 1997 among the Seller and the Restaurant Companies
(the "Exclusive Distribution Agreement") in the form attached hereto as Exhibit
P pursuant to which the Buyer shall become the exclusive distributor after the
Closing Date of certain food, restaurant supplies and smallwares for the Company
Owned Restaurants which are owned by Restaurant Companies on the Closing Date.
Attached hereto as Exhibit Q is a list of the Company Owned Restaurants on the
date hereof. The Buyer understands that the number of such Company Owned
Restaurants on the Closing Date, and covered by the Exclusive Distribution
Agreement, may be less than the number of Company Owned Restaurants on the date
hereof as a result of the ongoing refranchising process by the Restaurant
Companies. As provided in the Exclusive Distribution Agreement, if the
Restaurant Companies sell any Pizza Hut or Taco Bell Company Owned Restaurants
after the Closing Date and during the term of the Exclusive Distribution
Agreement, the new franchisees of such restaurants will be required as part of
the refranchise terms to assume the Distribution Agreement with respect to such
Pizza Hut or Taco Bell restaurants for the remaining term of the Distribution
Agreement.
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SECTION 8.02. Franchised Pizza Hut, Taco Bell and KFC Restaurants. The
Buyer understands that the Restaurant Companies have also entered into franchise
agreements to franchise Pizza Hut, Taco Bell and KFC Restaurants (the
"Franchised Restaurants") within the United States. The Buyer further
understands that while PFS is currently the distributor of food, restaurant
supplies and restaurant equipment for many of the Franchised Restaurants within
the United States, PFS has not been appointed by any Franchised Restaurants as
the exclusive distributor of any products purchased by Franchised Restaurants,
except for the exclusive appointments by certain Taco Bell franchised
restaurants which are described in Exhibit R attached hereto. As a result,
except as described in Exhibit R, the Buyer will have no legal commitment from
any Franchised Restaurants currently serviced by PFS that the Buyer will
continue to be the distributor for such Franchised Restaurants after the Closing
Date.
ARTICLE 9
CONDITIONS PRECEDENT
SECTION 9.01. Mutual Conditions Precedent. The obligations of the Seller
and the Buyer to consummate the transactions contemplated herein shall be
subject, in each instance, to the fulfillment or written waiver of each of the
following conditions at or prior to the Closing:
(a) Pre-merger Notification. The parties hereto shall have made all
filings required by the HSR Act with respect to the transaction contemplated
hereby, and all waiting periods under the HSR Act shall have expired or been
terminated without the institution of a proceeding challenging the transactions
contemplated hereby by the United States Federal Trade Commission or Department
of Justice, and all comparable requirements under Canadian Law applicable to the
transactions contemplated by the Canadian Asset Purchase Agreement shall also
have been satisfied.
(b) Exclusive Distribution Agreement. The Seller shall have duly assigned
the Exclusive Distribution Agreement to the Buyer, and the amendment thereto
attached hereto as Exhibit P-1 shall have been duly executed and delivered by
the Buyer and the Restaurant Companies at the Closing.
SECTION 9.02. Conditions Precedent to the Buyer's Obligations. The
obligations of the Buyer hereunder to consummate the transactions contemplated
herein shall be subject, in each instance, to the fulfillment, or written waiver
by the Buyer, of each of the following conditions at or prior to the Closing:
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(a) Correctness of Warranties. All of the representations and warranties
of the Seller contained in this Agreement shall be true, complete and correct in
all material respects, except for such representations and warranties which are
qualified as to materiality, which shall be true, complete and correct in all
respects, at and as of the Closing Date as though such representations and
warranties were then made in exactly the same language as contained herein, and
the Seller shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date.
(b) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the
transactions contemplated hereby or materially adversely affecting the right of
the Buyer to own the PFS Assets or to operate the PFS Business shall have been
issued by any federal or state court or other governmental authority and remain
in effect and no action, suit or proceeding shall have been brought by any
governmental authority seeking any of the foregoing.
(c) Adverse Change. There shall have been no material adverse change in
the assets, liabilities, results of operations, business or financial condition
of the PFS Business from the date hereof to the Closing Date.
(d) Documents and Instruments to be Delivered at the Closing. The Seller
shall deliver or cause to be executed and delivered to the Buyer at the Closing
the following documents, each dated the Closing Date unless otherwise specified
below:
(i) A limited warranty deed in respect of each parcel of Owned Real
Property, duly executed and acknowledged and in recordable form, conveying
to the Buyer fee simple title to the Real Property;
(ii) Such other deeds, assignments, bills of sale and other
instruments of transfer duly executed by and on behalf of the Seller,
reasonably satisfactory in form and substance to counsel to the Buyer, as
are necessary or desirable to effect the conveyance, sale, assignment,
transfer and delivery of all rights, interests and properties constituting
the PFS Assets, including, without limitation, all contracts, leases,
licenses and Intangible Property to be assigned to the Buyer as part of
the PFS Assets;
(iii) A certificate of the Seller's good standing as a domestic
corporation in the State of North Carolina, certified by the Secretary of
State of the State of North Carolina as of a date no more than 15 days
prior to the Closing Date;
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(iv) A certificate duly executed by a Vice President of the Seller
certifying: (i) that the representations and warranties made by the Seller
in this Agreement are true and correct as of the Closing Date with the
same effect as if made at and as of such date, and (ii) that the Seller is
not in material breach of any covenants made pursuant to this Agreement;
(v) Copies of the resolutions, certified by the Secretary or an
Assistant Secretary of the Seller as being in full force and effect on
the Closing Date, duly adopted by the Board of Directors of the Seller
evidencing the approval and authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby;
(vi) A certificate of the Secretary or an Assistant Secretary of the
Seller as to the incumbency and specimen signatures of each officer of the
Seller who executes this Agreement or any other documents or instrument
contemplated hereby; and
(vii) Such affidavits, certifications, evidence of corporate
authority, indemnities and other instruments as Buyer's title insurance
company shall require in order to issue any title insurance policy to be
obtained by Buyer at Closing with respect to the Owned Real Property.
(e) Services Agreement. Buyer and Seller shall have executed the services
agreement pursuant to Section 11.03 hereof
SECTION 9.03. Conditions Precedent to the Seller's Obligations. The
obligations of the Seller hereunder to consummate the transactions contemplated
herein shall be subject, in each instance, to the fulfillment, or written waiver
by the Seller, of each of the following conditions at or prior to the Closing:
(a) Correctness of Warranties. All of the representations and warranties
of the Buyer contained in this Agreement shall be true, complete and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were then made in exactly the same language as
contained herein, and the Buyer shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(b) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have been issued by
any federal or state court or other governmental body and remain in effect and
no
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action, suit or proceeding shall have been brought by any governmental authority
seeking any of the foregoing.
(c) Documents and Instruments to be Delivered at the Closing. The Buyer
shall deliver or cause to be executed and delivered to the Seller at the Closing
the following documents, each dated the Closing Date unless otherwise specified
below:
(i) One or more assumption agreements, in a form reasonably
satisfactory in form and substance to counsel to the Seller, pursuant to
which the Buyer assumes and agrees to perform or pay the PFS Liabilities;
(ii) A certificate of the Buyer's good standing as a domestic
corporation in the State of Delaware, certified by the Secretary of State
of the State of Delaware as of a date no more than 15 days prior to the
Closing Date;
(iii) A certificate duly executed by a Vice President of the Buyer
certifying: (i) that the representations and warranties made by the Buyer
in this Agreement are true and correct as of the Closing Date with the
same effect as if made at and as of such date and (ii) that the Buyer is
not in material breach of any covenant made pursuant to this Agreement;
(iv) Copies of the resolutions, certified by the Secretary or an
Assistant Secretary of the Buyer as being in full force and effect on the
Closing Date, duly adopted by the Board of Directors of the Buyer
evidencing the approval and authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby; and
(v) A certificate of the Secretary or an Assistant Secretary of the
Buyer as to the incumbency and specimen signatures of each officer of the
Buyer who executes this Agreement or any other document or instrument
contemplated hereby.
ARTICLE 10
ESCROW AND GUARANTEED NOTE
The parties shall use their reasonable best efforts to satisfy all of the
conditions set forth in Article 9 hereof on or before June 5, 1997 (the "Escrow
Date").
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(a) If on the Escrow Date, all of the conditions to Closing set forth in
Article 9 hereof (except for Section 9.0l(a), which need not be satisfied as of
such date) shall have been satisfied or waived, but even if the conditions set
forth in Section 9.01(a) shall have been satisfied as of such date, the
following shall occur:
(i) Each of the Buyer and the Seller shall execute and deliver to
Chase Manhattan Bank, N.A. (or such other escrow agent as is mutually
acceptable to both Buyer and Seller) all of the documents to be delivered
by such party at the Closing pursuant to Article 9, all in such form so
that upon release from escrow in accordance with the terms hereof and of
the escrow agreement the matters and transactions contemplated to be
effected at the Closing will be effected or will be capable of being
effected by the other party by use of such documents without any further
act or instrument of such party. The escrow agreement shall provide for
the release of such documents held in escrow to the Buyer and the Seller
at the Closing. Following the Escrow Date, the Closing shall take place on
the later of (x) June 25, 1997 and (y) the third business day after
satisfaction of the condition set forth in Section 9.01(a). Following the
Escrow Date, there shall be no conditions to Closing other than the
condition set forth in Section 9.01(a), and all other conditions to
Closing set forth in Article IX shall be irrevocably deemed to have been
satisfied.
(ii) The Buyer shall execute and deliver to Seller a promissory note
in the form attached hereto as Exhibit S (the "Note") and Holberg
Industries, Inc. shall execute an unconditional guarantee (the
"Guarantee") in the form attached hereto as Exhibit T. The Note shall be
in the principal amount equal to the Purchase Price. The Note shall become
immediately due and payable by the Buyer on the Closing Date,
simultaneously with the release of the documents from the escrow and the
consummation of the Closing.
(iii) At the Closing, the Buyer will pay the Note in full by wire
transfer of immediately available funds, together with interest thereon
from the Escrow Date to the Closing Date, against delivery of all the
documents held in escrow, which payment shall satisfy in full its
obligation to pay the Purchase Price. In addition, at the Closing, by wire
transfer or immediately available funds, the Seller shall deliver to the
Buyer an amount of cash equal to the Net Cash (as defined below). The term
"Net Cash" means the net amount of cash generated by the PFS Business for
the period from the Escrow Date through the Closing Date, as determined
from the change in the intercompany accounts between the Escrow Date and
the Closing Date between the PFS Business and the Seller, including cash
payments made to or from the PFS Business and payments made by the Seller
on behalf of the PFS Business and adjusted for the amount of the
outstanding checks on the
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Escrow Date compared to the amount of the outstanding checks on the
Closing Date. Such Net Cash shall be computed and determined as if the PFS
Business had been operated on a stand-alone basis during the period from
the Escrow Date to the Closing Date. The Seller will provide to the Buyer
a statement of the Net Cash, and, if requested by the Buyer, KPMG will,
within 10 days of the Closing, provide a report of their findings on the
Seller's statement of Net Cash, based upon agreed procedures. In the
unlikely event that the Net Cash is actually negative, the Buyer shall
deliver the Seller the amount of such negative Net Cash. Any dispute as to
the amount of Net Cash will be determined in a manner comparable to the
procedure as to Closing Working Capital and Final Working Capital.
(iv) Notwithstanding any provision contained herein to the contrary,
(x) for the purposes of Section 1.06, the Closing Working Capital and the
Final Working Capital shall be determined by reference to the current
assets and current liabilities of the PFS Business measured as such assets
and liabilities existed on the Escrow Date (not the Closing Date) and (y)
for purposes of the asset transfer and liability assumption provisions of
Section 1.02, all PFS Assets and PFS Liabilities determined by reference
to Final Working Capital shall instead be determined by reference to such
Final Working Capital (computed as if the Escrow Date were the Closing
Date) as the same may have changed in the ordinary course of business from
the Escrow Date to the Closing Date.
If on the Escrow Date, all of the conditions to Closing set forth in
Article 9 (other than Section 9.01(a)) have not been satisfied, the parties
shall use their reasonable best efforts to cause such conditions to be satisfied
as promptly as possible so that the transactions contemplated by clause (a)
above can be completed.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Hart-Scott-Rodino Act. As soon as practicable after the
date hereof the Buyer and the Seller shall, in cooperation with each other, file
any reports or notifications that may be required to be filed by them under the
HSR Act in connection with the transactions contemplated by this Agreement, and
shall use their respective best efforts to obtain early termination of all
waiting periods under the HSR Act. All fees due from any party to the Department
of Justice or the Federal Trade Commission in connection with the filing of
those reports or notifications shall be borne by the Buyer.
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SECTION 11.02. Aberdeen Building Sublease. Prior to the Closing the Buyer
and the Seller shall agree upon the terms of a sublease agreement pursuant to
which the Seller shall sublease to the Buyer the space currently occupied by PFS
in the Aberdeen Building at 14841 Dallas Parkway, Dallas, Texas. The initial
term of the sublease shall be for one year after the Closing Date during which
period the aggregate annual rent payable by the Buyer to the Seller shall be
$500,000. The sublease shall further provide that the Buyer shall have the
right, upon written notice given to Seller not later than 90 days prior to the
end of the initial term, to extend the term of the sublease for one additional
year (at Buyer's option), which extension term may apply (at Buyer's option) to
all or any portion of the subleased premises. The rent during any such extension
term shall be based on all the costs of the Aberdeen Building, including,
without limitation, the rental and other payments to the landlord of the
Aberdeen Building, and will be allocated to the sublet space based on the
percentage of the total space occupied by all Seller-affiliated tenants of the
Aberdeen Building (Pizza Hut, PepsiCo Restaurants International and PFS) which
is sublet to the Buyer. The Seller has made available to the Buyer a copy of the
Seller's lease of the Aberdeen Building. The Buyer understands that the Seller
may assign and transfer all of its rights and obligations under the lease of the
Aberdeen Building to Pizza Hut, Inc. or one of its other restaurant subsidiaries
as part of the planned spin off of the Seller's restaurant operations. If the
Seller transfers its leasehold interest in the Aberdeen Building to Pizza Hut,
Inc. or one of its other restaurant subsidiaries, the sublease to the Buyer will
be assigned by the Seller to Pizza Hut, Inc. or such other restaurant
subsidiary, as the case may be, which will thereafter be responsible for all of
the Seller's obligations under said sublease.
SECTION 11.03. PepsiCo Data Center. The Buyer understands that a data
center (the "Data Center") owned and operated by the Seller at Hillcrest Oaks,
6600 & 6606 LBJ Freeway, Dallas, Texas currently provides the mainframe computer
services required by the PFS Business. Prior to the Closing the Buyer and the
Seller will agree upon a services agreement where the Data Center will provide
such mainframe computer services to the Buyer after the Closing. The term of
such services agreement shall be one year and Buyer shall pay a total service
fee to Seller of $l,000,000 paid in equal monthly installments. The specific
services to be provided will be agreed upon by the Buyer and the Seller prior to
the Closing. The Buyer understands that the Seller may transfer the Data Center
to Pizza Hut, Inc. or one of its other restaurant subsidiaries as part of the
planned spin off of the Seller's restaurant operations. If the Seller transfers
the Data Center to a restaurant subsidiary, the Buyer agrees that the services
agreement between the Data Center and the Buyer shall be assigned by the Seller
to such restaurant subsidiary which shall thereafter be responsible for
performing the computer services under the services agreement.
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<PAGE> 37
SECTION 11.04. Survival of Representations and Warranties and Agreements.
The representations and warranties and agreements made by the parties pursuant
to this Agreement shall survive the Closing and continue for a period of two
years from and after the Closing Date except that (i) the representations and
warranties contained in Section 2.09 regarding tax matters shall survive until
the expiration of the applicable statute of limitations, and (ii) the
representations and warranties contained in Section 2.11 as to environmental
matters shall survive for a period of four years from and after the Closing Date
and thereafter in each case no claims (for indemnification or otherwise) may be
brought with respect to such representations and warranties and agreements,
except to the extent that the party making such claim shall have notified the
other party of any such breach or failure to perform prior to the end of such
two year period or such expiration of the statute of limitations, respectively.
This Section 11.04 shall not limit any agreement of the parties herein which by
its terms contemplates performance after two years from the Closing.
SECTION 11.05. Indemnification.
(a) The Seller agrees to indemnify, defend and hold the Buyer and its
officers, directors, employees and subsidiaries and other affiliates entirely
harmless, on an after-tax basis and net of any insurance proceeds, against and
from any claim, demand, cause of action, judgment, loss, liability, cost or
other expense whatsoever, including, without limitation, reasonable attorneys'
fees (each such claim, demand, cause of action, judgment, loss, liability, cost
or other expense is referred to herein individually as a "Loss" and collectively
as "Losses"), which any of them may suffer, sustain, incur or otherwise become
subject to (i) as a result of any breach of any representation, warranty or
agreement made either (x) by the Seller pursuant to this Agreement or (y) by PCL
pursuant to the Canadian Sale Agreement; provided, however, that Buyer shall not
be entitled to indemnification for Losses pursuant to this Section 11.05(a)
arising out of any breach of any representation or warranty contained in Article
2 or 6 hereof or Article 2 of the Canadian Sales Agreement unless and until the
aggregate of all such Losses exceeds $3,000,000, whereupon the Buyer shall be
entitled to indemnification pursuant to this Section 11.05(a) arising out of any
breach of any representation or warranty contained in Articles 2 and 6 of this
Agreement and Article 2 of the Canadian Sale Agreement only to the extent such
Losses exceed $3,000,000 or (ii) resulting from or arising out of any liability
or obligation not expressly assumed by Buyer pursuant to this Agreement or the
Canadian Sale Agreement. Notwithstanding the foregoing, the provision of the
preceding sentence setting forth the $3,000,000 amount before indemnification
claims may be made shall not apply to the obligations of either party to make a
payment after the Closing to the other as an adjustment to the Purchase Price as
described in Section 1.07 hereof.
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<PAGE> 38
(b) The Buyer agrees to indemnify, defend and hold the Seller and its
officers, directors, employees and subsidiaries and other affiliates (including,
without limitation, PCL) entirely harmless, on an after-tax basis and net of any
insurance proceeds, against and from any claim, demand, cause of action,
judgment, loss, liability, cost or other expense, including, without limitation,
reasonable attorneys' fees, which any of them may suffer, sustain, incur or
otherwise become subject to as a result of (i) any breach of any representation,
warranty or agreement made by the Buyer pursuant to this Agreement or the
Canadian Sale Agreement, or (ii) the operation of the PFS Business or the PFS
Canadian Business by the Buyer after the Closing Date.
(c) With respect to any claims or demands by third parties, whenever the
party to be indemnified (the "Indemnified Party") shall have notice that such a
claim or demand has been asserted or threatened which, if true, would constitute
a basis for indemnification hereunder, the Indemnified Party shall notify the
indemnifying party (the "Indemnifying Party") of such claim or demand and of the
facts within the knowledge of the Indemnified Party which relate thereto. The
Indemnifying Party shall then have the right to contest, negotiate or settle any
such claim or demand through counsel of its own selection, reasonably
satisfactory to the Indemnified Party, and solely at the cost, risk and expense
of the Indemnifying Party; provided, however, that the Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld), settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would or could reasonably
be expected to result in the imposition of a consent order, injunction or decree
which would or could reasonably be expected to restrict the future activity or
conduct of the Indemnified Party. The Indemnified Party may, if it so elects and
entirely within its discretion, defend any such claim or demand in the event the
Indemnifying Party fails to give notice of its intention to contest or settle
any such claim or demand, in which event the Indemnifying Party shall be
required to indemnify the Indemnified Party for any and all Losses related to
such claim or demand to the extent the Indemnified Party is entitled to be
indemnified pursuant to this Section 11.05.
(d) The Indemnified Party shall make demand to the Indemnifying Party in
writing for payment of any claim by the Indemnified Party (whether such claim is
based upon payment of a third party claim or a claim of the Indemnified Party
arising under this Agreement) under the provisions of this Section 11.05.
(e) Any payments made pursuant to the provisions of this Section 11.05
shall be treated as an adjustment to the Purchase Price.
SECTION 11.06. Bulk Sales. The Buyer hereby waives compliance by the
Seller with any bulk-sales notice requirements of applicable law, and the Seller
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<PAGE> 39
shall indemnify and hold the Buyer harmless from any tax or other liability
which shall be incurred by the Buyer for the failure to comply with such
requirements.
SECTION 11.07. Expenses. Unless otherwise expressly provided herein, each
of the parties hereto shall bear the expenses incurred by that party incident to
this Agreement and the transactions contemplated hereby, including, without
limitation, all fees and disbursements of counsel and accountants retained by
such party, whether or not the transactions contemplated hereby shall be
consummated.
SECTION 11.08. Further Assurances. The Seller and the Buyer each agree
that subsequent to the Closing, at the request of the other party, it will
execute and deliver to the other party such further instruments, documents,
conveyances or assurances and take such other action as may be necessary or
otherwise reasonably requested by Buyer to carry out the transactions
contemplated by this Agreement.
SECTION 11.09. Entire Agreement. This Agreement, together with the
Canadian Sale Agreement and the Exhibits attached hereto, contains the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and may be amended, modified, supplemented or altered only
by a writing duly executed by all of the parties hereto, and any prior
agreements or understandings, whether oral or written, are entirely superseded
hereby. All Exhibits attached hereto are hereby incorporated by reference herein
and made a part hereof as if fully set forth herein.
SECTION 11.10. Assignment; Binding Effect. This Agreement shall be binding
upon all of the parties hereto and upon all of their respective successors and
permitted assigns. This Agreement shall not, however, be assignable or
transferable, in whole or in part, by either the Buyer or the Seller except upon
the express prior written consent of the other party provided that the Buyer may
assign this Agreement to any Subsidiary, of the Buyer, provided, further, that
no such assignment shall relieve the Buyer from any of its obligations under
this Agreement. Any attempt to assign or otherwise transfer this Agreement or
any rights or obligations hereunder in violation of the foregoing shall be void.
Nothing contained in this Agreement is intended to confer upon any person, other
than the parties hereto and their respective successors and permitted assigns,
any rights, remedies or obligations under, or by reason of, this Agreement.
SECTION 11.11. Modification, Waiver and Extensions. The Buyer and the
Seller may, by written instrument, extend the time for the performance of any of
the obligations or other acts of the other, waive any inaccuracies of the other
in the representations and warranties contained herein or in any document
delivered pursuant to this Agreement, waive compliance with any of the covenants
of the other contained in this Agreement, and waive the other's performance of
any of the obligations set out in this Agreement. No modification, waiver or
extension of
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<PAGE> 40
any of the provisions of this Agreement and no consent by the Buyer or the
Seller to any departure therefrom by the other shall be effective unless such
modification, waiver or extension shall be in writing and signed by the party or
parties to be bound, and the same shall then be effective only for the period
and on the conditions and for the specific instances and purposes specified in
such writing.
SECTION 11.12. Notices. All notices, demands, consents or other
communications required or permitted hereunder shall be in writing and shall be
personally delivered or sent by overnight air courier, addressed as follows: if
to the Seller to: PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York
10577 Attn: Chief Financial Officer, with a copy to the General Counsel; and if
to the Buyer to: Nebco Evans Holding Company, c/o Holberg Industries, Inc., 545
Steamboat Road, Greenwich, Connecticut 06830, Attn: A. Petter Ostberg, with a
copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
10019, Attn: Adam O. Emmerich; or to such other addresses as may hereafter be
furnished in writing to the other party in the manner described above. Any
notice, demand, consent or communication given hereunder in the manner described
above shall be deemed to have been effected and received as of the date hand
delivered or as of the date received if sent by overnight air courier.
SECTION 11.13. Choice of Law.
THIS AGREEMENT, AND ALL INSTRUMENTS DELIVERED PURSUANT HERETO OR
INCORPORATED HEREIN, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL
RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
SECTION 11.14. Captions. The captions of the various articles and sections
of this Agreement have been inserted for the purpose of convenience of reference
only, and such captions are not a part of this Agreement and shall not be deemed
in any manner to modify, explain, enlarge or restrict any of the provisions of
this Agreement.
SECTION 11.15. Counterparts. This Agreement may be executed by the parties
in one or more counterparts, each of which shall be an original and all of which
shall together constitute one and the same agreement.
SECTION 11.16. Severability. If any provision or provisions of this
Agreement, or any portion of any provision hereof, shall be deemed invalid or
unenforceable pursuant to a final determination of any court of competent
jurisdiction, such determination or action shall be construed so as not to
affect the validity or enforceability of any other provisions of this Agreement.
39
<PAGE> 41
SECTION 11.17. Non-Solicitation. Without the prior written consent of the
Buyer, the Seller agrees that, for a period of 12 months from the date of this
Agreement, neither the Seller nor its Representatives (as defined in the
Confidentiality Agreement referred to in Section 4.01) will actively and
directly solicit any officer, manager or key employee of the Buyer to become
employed by the Seller or any of its affiliates, except that the Seller shall
not be precluded from hiring any such officer, manager or key employee who (i)
initiates discussions regarding such employment without any solicitation by the
Seller, (ii) responds to any advertisement placed by the Seller, or (iii) has
been terminated by the Buyer.
SECTION 11.18. Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties to this Agreement and, except for the agreements set
forth in Article 6, nothing in this Agreement should be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, claim of action or
other right.
SECTION 11.19. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) Mutual Consent. By mutual consent of the parties hereto;
(b) Failure of Conditions. By the Buyer, on the one hand, or the Seller,
on the other hand, if the transactions contemplated hereby are not consummated
on or before July 14, 1997, and by the Seller at any time after June 5, 1997 if
the matters contemplated by Article 10(a)(i) and (ii) have not occurred by the
Escrow Date; provided that in each case each party shall have the right to
terminate under this clause only if the failure to consummate such transactions
on or before such date did not result from the breach of any representation,
warranty or agreement herein of the party seeking such termination (including
without limitation the failure of such party to satisfy any condition to the
other party's obligation to close hereunder).
Termination shall be effected by the giving of written notice to that effect by
one party to the other. If this Agreement is validly terminated and the
transactions contemplated hereby are not consummated, this Agreement shall
become null and void and of no further force and effect and no party shall be
obligated to the other hereunder except as provided in the next sentence.
Notwithstanding the foregoing or anything to the contrary in this Agreement,
termination shall not effect the rights and remedies available to one or more of
the parties as a result of the breach or default by another party or parties
hereunder.
SECTION 11.20. Accounts Receivable. After the Closing, the Buyer shall
have the right to collect, for the account of the Buyer, all receivables, claims
and
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other assets to be transferred to the Buyer as provided herein and to endorse in
the name of the Seller any checks received on the account thereof. The Seller
will promptly transfer and deliver to the Buyer, as received from time to time
after the Closing, any cash or other property that the Seller may receive in
respect of such receivables, claims or other assets which are the property of
the Buyer.
SECTION 11.21. Sales Tax. The Seller agrees that it shall not seek after
the Closing to recover from the Buyer or any customer of the PFS Business any
sales, use, syrup or similar tax, levy, impost or similar charge due, but not
previously charged to and collected from customers of the PFS Business whether
arising as a results of audits or assessments from any governmental or
quasi-governmental taxing authority or otherwise.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
PepsiCo, Inc.
By: /s/
-------------------------------
Nebco Evans Holding Company
By: /s/
-------------------------------
41
<PAGE> 1
Exhibit 3.1
State of Delaware PAGE 1
Office of the Secretary of State
----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"NEBCO EVANS HOLDING COMPANY", FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF
JANUARY, A.D. 1996, AT 4:29 O'CLOCK P.M.
/s/ Edward J. Freel
-----------------------------------
[Seal of the State of Delaware] Edward J. Freel, Secretary of State
AUTHENTICATION: 8529576
2583859 8100
DATE: 06-25-97
971210637
<PAGE> 2
1-25-96
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NEBCO EVANS HOLDING COMPANY
Nebco Evans Holding Company, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
("DGCL") incorporated on, originally incorporated as Nebco Evans Holding Company
and the certificate of incorporation of which was originally filed on January
19, 1996 (the "Corporation").
DOES HEREBY CERTIFY:
FIRST: That by unanimous written consent the Board of Directors of
the Corporation, resolutions were duly adopted setting forth a proposed
amendment and restatement of the Certificate of Incorporation of the Corporation
and declaring said amendment and restatement to be advisable. The resolution
setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Certificate of Incorporation of the
Corporation shall be amended in accordance with Section 241 of the
DGCL to effect certain changes in said Certificate of Incorporation,
and that the Amended and Restated Certificate of Incorporation
attached hereto be adopted, in accordance with Sections 241 and 245
of the General Corporation Law of the State of Delaware, as the
Amended and Restated Certificate of Incorporation of the
Corporation; and further
RESOLVED, that such amendment of the Certificate of
Incorporation of the Corporation is deemed by the Directors of the
Corporation to be advisable and in the best interests of the
Corporation.
SECOND: The Corporation has not received any payment for any of its
stock and said amendment and restatement was duly adopted in accordance with the
applicable provisions of Sections 103, 241 and 245 of the DGCL and, upon filing
with the Secretary of State in accordance with Section 103, shall thenceforth
supercede the original Certificate of Incorporation and shall, as it may
thereafter be amended in accordance with its terms and applicable law, be the
Certificate of Incorporation of the Corporation.
<PAGE> 3
IN WITNESS WHEREOF, said Nebco Evans Holding Company has caused this
certificate to be signed by its Chief Executive Officer this 25th day of
January, 1996.
By: /s/ John V. Holten
--------------------------
John V. Holten
Chief Executive Officer
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<PAGE> 4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEBCO EVANS HOLDING COMPANY
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
NEBCO EVANS HOLDING COMPANY
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act
or activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware.
ARTICLE IV
Section 1. Capital Stock. The aggregate number of shares of all
classes of capital stock which the Corporation
<PAGE> 5
has authority to issue is 55,000 shares divided into three classes as follows:
30,000 shares of Class A Voting Common Stock of the par value of
$0.01 per share ("Voting Common");
20,000 shares of Class B Non-Voting Common Stock of the par value of
$0.01 per share ("Non-Voting Common");
5,000 shares of Preferred Stock of the par value of $0.01 per share
("Preferred Stock").
Section 2. Common Stock.
(a) Rights Generally. Except as provided herein, all shares of Class
A Common Stock ("Voting Common") and Class B Non-Voting Common Stock
("Non-Voting Common") (together, "Common Stock") will be identical
and entitle the holders thereof to the same rights and privileges
including, without limitation, with respect to dividends and
liquidation.
(b) Voting. Except as otherwise required by law or by the resolution
or resolutions adopted by the Board designating the rights, powers
and preferences of any series of Preferred Stock, the holders of
Voting Common will have the exclusive right to vote
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<PAGE> 6
for directors and for all other purposes and will be entitled to one
vote per share on all matters to be voted on by the stockholders of
the Corporation and the holders of Non-Voting Common will have no
right to vote on any matters to be voted on by the stockholders of
the Corporation.
(c) Conversion. Shares of Non-Voting Common shall be convertible at
the option of the holder thereof into one fully paid and
non-assessable share of Voting Common if (A) the holder at the time
of such conversion is a person other than DLJ International
Partners, C.V. or any limited partner thereof or (B) the holder, if
DLJ International Partners, C.V. or any limited partner thereof is
the holder, does not beneficially own any of the 12.5% Senior
Secured Notes due 2006 of the Company issued pursuant to that
certain Indenture dated as of January ___, 1996, by and between the
Company and IBJ Schroder Bank & Trust Company, or any successor, as
trustee (the "Notes"), or all the Notes that were owned by such
holder have been redeemed or repaid in full.
Each conversion of shares of Non-Voting Common into shares of
Voting Common will be effected
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<PAGE> 7
by the surrender of the certificate or certificates
representing the shares to be converted at the principal
office of the Corporation at any time during normal business
hours, together with a written notice by the holder of such
shares of Non-Voting Common stating that such holder desires
to convert the shares, or a stated number of the shares, of
Non-Voting Common represented by such certificate or
certificates into shares of Voting Common. Such notice shall
also state the name or names (with addresses) and
denominations in which the certificate or certificates for
such Voting Common are to be issued. Such conversion will be
deemed to have been effected as of the close of business on
the date on which such certificate or certificates have been
surrendered and such notice has been received, and at such
time the rights of the holder of the converted shares of
Non-Voting Common as such holder will cease and the person or
persons in whose name or names the certificate or certificates
for such shares of Voting Common are to be issued upon such
conversion will be deemed to have become the
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<PAGE> 8
holder or holders of record of the shares of Voting Common
represented thereby.
Promptly after such surrender and the receipt of such written
notice, the Corporation will issue and deliver in accordance
with the surrendering holder's instructions each of the
following:
(A) the certificate or certificates representing the shares
of Voting Common issuable upon such conversion; and
(B) a certificate representing any shares of Non-Voting
Common which were represented by the certificate or
certificates delivered to the Corporation in connection
with such conversion but which were not converted into
shares of Voting Common.
(d) Subdivision or Combination. 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 will be
proportionately subdivided or combined.
-5-
<PAGE> 9
(e) Liquidation, Dissolution, Mergers, etc. In the event of any
liquidation, dissolution or winding up (either voluntary or involuntary)
of the Corporation, the holders of Voting Common Stock and the holders of
Non-Voting Common Stock shall be entitled to receive the assets and funds
of the Corporation available for distribution, after payments to creditors
and to the holders of any Preferred Stock of the Corporation that may at
the time be outstanding, in proportion to the number of shares held by
them, respectively, without regard to class. In the event of any corporate
merger, consolidation, purchase or acquisition of property or stock, or
other reorganization in which any consideration is to be received by the
holders of Voting Common Stock or the holders of Non-Voting Common Stock,
the holders of Voting Common Stock and the holders of Non-Voting Common
Stock shall receive the same consideration on a per share basis.
(f) Reservation of Shares. The Corporation shall at all times
reserve from its authorized Voting Common a sufficient number of shares to
provide for conversion of all Non-Voting Common from time to time
outstanding. If the Voting Common issuable upon conversion of the
Non-Voting Common is listed on any national securities exchange or
automated quotation system of NASD; the Corporation will cause within 60
days of any such conversion, all shares
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<PAGE> 10
reserved for such conversion to be listed on such exchange or automated
quotation system, subject to official notice of issuance upon such
conversion.
Section 3. Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors of the Corporation is
hereby authorized to fix the voting rights, if any, designations, powers,
preferences and the relative, participation, optional or other rights, if any,
and the qualifications, limitations or restrictions thereof, of any unissued
series of Preferred Stock; and to fix the number of shares constituting such
series, and to increase or decrease the number or shares of any such series (but
not below the number of shares thereof then outstanding).
ARTICLE V
Unless and except to the extent that the By-Laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors of the Corporation may make, alter and repeal the By-Laws
of the Corporation as provided therein.
-7-
<PAGE> 11
ARTICLE VII
The Corporation reserves the right at any time from time to time to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE VIII
Section 1. Elimination of Certain Liability of Directors. A director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (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 of the State
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<PAGE> 12
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, 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 said
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<PAGE> 13
law permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employee Retirement Income Security Act of 1974) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board. The right to
indemnification conferred in this Section 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; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer 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 person while a director or officer,
including, without limitation, service
-10-
<PAGE> 14
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of the Board, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a)
of this Section is not paid in full by the Corporation within thirty days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the State
of Delaware for the Corporation to indemnify the
-11-
<PAGE> 15
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director,
-12-
<PAGE> 16
officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such 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 General
Corporation Law of the State of Delaware.
-13-
<PAGE> 17
State of Delaware PAGE 1
Office of the Secretary of State
----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "NEBCO EVANS HOLDING COMPANY", FILED IN THIS OFFICE ON THE
TWENTY-FIFTH DAY OF JANUARY, A.D. 1996, AT 4:30 O'CLOCK P.M.
/s/ Edward J. Freel
-----------------------------------
[Seal of the State of Delaware] Edward J. Freel, Secretary of State
AUTHENTICATION: 8529577
2583859 8100
DATE: 06-25-97
971210637
<PAGE> 18
NEBCO EVANS HOLDING COMPANY
----------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------
Senior Non-Convertible Preferred Stock
----------------------------------
The undersigned, A. Petter Ostberg, Secretary of Nebco Evans Holding
Company, a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that
the following resolution has been duly adopted by the Board of Directors of the
corporation:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation (the "Board of Directors") by the
provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the shares of
Preferred Stock of the Corporation authorized in Article IV of the Certificate
of Incorporation (the "Preferred Stock"), a series of the Preferred Stock of the
Corporation consisting of 600 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following qualifications, limitations and restrictions (in
addition to
<PAGE> 19
the powers, designations, preferences and relative, participating, optional and
other rights and the qualifications, limitations and restrictions, set forth in
the Certificate of Incorporation which are applicable to the Preferred Stock):
1. Designation and Amount. This series of Preferred Stock shall be
Senior Non-Convertible Preferred Stock (the "Senior Non-Convertible
Preferred"), and the authorized number of shares constituting such series
shall be 600. The liquidation preference of the Senior Non-Convertible
Preferred shall be $25,000 per share.
2. Dividends. The holders of record of shares of Senior
Non-Convertible Preferred shall be entitled to receive when and as
declared by the Board of Directors out of funds legally available
therefor, cash dividends at the rate of $1,562.50 per share per annum
payable quarterly on such dates as may from time to time be determined by
the Board of Directors, in preference to and in priority over dividends
upon the common stock or any other preferred stock of the Corporation
(collectively, the "Junior Stock"). Dividends on each share of Senior
Non-Convertible Preferred shall accumulate, whether or not declared, from
the date of its issuance. The holders of shares of Senior Non-Convertible
Preferred shall not be entitled to any dividends other than the cash
dividend provided for in this Section 2. During any period when the
Corporation has failed to pay a quarterly dividend on the Senior
Non-Convertible Preferred for any preceding three-month period and until
all unpaid dividends payable, whether or not declared, on the outstanding
Senior Non-Convertible Preferred shall have been paid in full or declared
and set apart for payment, the Corporation shall not: (i) declare or pay
dividends, or make any other distributions, on any shares of Junior Stock,
other than dividends or distributions payable in Junior Stock, or (ii)
redeem, purchase or otherwise acquire for consideration any shares of
Junior Stock, other than redemptions, purchases or other acquisitions of
shares of Junior Stock in exchange for any shares of Junior Stock.
3. Liquidation. In the event of a liquidation, dissolution or
winding up of the Corporation, the holders of shares of Senior
Non-Convertible Preferred shall
-2-
<PAGE> 20
be entitled to receive out of the assets of the Corporation an amount in
cash equal to $25,000.00 per share, plus any accumulated and unpaid
dividends thereon to the date fixed for distribution, in preference to and
in priority over any such distribution upon shares of Junior Stock.
4. Redemption. The Senior Non-Convertible Preferred may be redeemed,
in whole or in part, at the option of the holders of the shares thereof,
at any time and from time to time after 11 years from the date of issuance
of such shares or such earlier time as the Corporation's l2 1/2% Senior
Notes due 2006 (the "Senior Notes") shall have been paid in full
(including all interest and other amounts due thereon), at the redemption
price per share of $25,000.00 plus any accumulated and unpaid dividends
thereon at the date fixed for redemption. The holders of shares of Senior
Non-Convertible Preferred opting to have the Corporation redeem their
shares shall, not less than sixty (60) nor more than seventy-five (75)
days prior to the date that such holders desire to have their shares
redeemed pursuant to this Section 4, provide the Corporation with written
notice specifying the desired date of such redemption, such notice to be
sent by first class mail, postage prepaid, to the Corporation at its
registered office in the State of Delaware.
After the date fixed for the redemption of shares of Senior
Non-Convertible Preferred by the Corporation, the holders of shares who
have opted for redemption shall cease to be shareholders with respect to
such shares and shall have no interest in or claims against the
Corporation by virtue thereof except the right to receive the monies
payable upon such redemption from the Corporation, without interest
thereon, upon surrender (and endorsement, if required by the Corporation)
of their certificates and the shares represented thereby shall no longer
be deemed to be outstanding.
5. Voting Rights. No holder of shares of Senior Non-Convertible
Preferred shall be entitled to vote on any matters brought to a vote
before the shareholders of the Corporation, except as otherwise provided
by the General Corporation Law of the State of Delaware.
6. Consideration for Issuance of Shares. All shares of Senior
Non-Convertible Preferred shall be deemed to be fully paid and
nonassessable upon the issuance thereof.
-3-
<PAGE> 21
7. Notice of Holders of Certain Transactions. The Corporation shall
cause a notice to be mailed to the holders of record of shares of Senior
Non-Convertible Preferred at their respective addresses as the same shall
appear on the books of the Corporation, in case:
a. The Corporation shall declare a dividend (or any other
distribution) on its common stock;
b. Of any reclassification of capital stock of the Corporation
or of any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation
is required, or of the sale or transfer of all or substantially all
of the assets of the Corporation;
c. Of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation.
Such notice shall be mailed at least twenty (20) days prior to the
applicable record date or other date hereinafter referred to and shall
specify (i) the date on which a record is to be taken for the purpose of
such dividend, redemption, distribution of rights or, if a record is not
to be taken, the date as of which the holders of shares or common stock of
record to be entitled to such dividend, distribution, redemption or rights
are to be determined, or (ii) the date on which, in connection with such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, it is expected that holders of shares of common
stock of record shall be entitled to exchange their shares of common stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
8. Conversion. The holders of the shares of Senior Non-Convertible
Preferred shall have no rights to convert their shares into shares of
common stock of the Corporation or into shares of any other capital stock
of the Corporation.
9. No Other Rights. The shares of Senior Non-Convertible Preferred
shall not have any relative, participating, optional or other special
rights or powers other than as set forth above and in the Certificate of
Incorporation.
-4-
<PAGE> 22
10. Certain Restrictions. Notwithstanding anything to the contrary
in this Certificate of Designation, the Senior Non-Convertible Preferred
and the powers, designations, preferences and relative, participating,
optional and other rights thereof, and the qualifications, limitations and
restrictions thereon as set forth in this Certificate of Designation are
subject to certain restrictions set forth in an Investors Agreement, dated
as of January 25th, 1996, by and among DLJ Merchant Banking Partners,
L.P., DLJ International Partners, C.V., DLJ Offshore Partners, C.V., DLJ
Merchant Banking Funding, Inc., Orkla a.s., Holberg Industries, Inc., and
the Corporation, and in the Indenture relating to the Senior Notes, dated
as of January 25th, 1996, by and between the Corporation and IBJ Schroder
Bank & Trust Company.
11. Certificates. Each certificate for shares of Senior
Non-Convertible Preferred shall bear a legend incorporating a certified
copy of this Resolution which shall be authenticated by the President or
Vice President of the Corporation and appended to each such certificate.
-5-
<PAGE> 23
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by A. Peter Ostberg, its Secretary, this 25th day of
January, 1996.
NEBCO EVANS HOLDING COMPANY
By: /s/ A.P. Ostberg
-----------------------------------------
-6-
<PAGE> 24
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "NEBCO EVANS HOLDING COMPANY", FILED IN THIS OFFICE ON THE
TWENTIETH DAY OF NOVEMBER, A.D. 1996, AT 1 O'CLOCK P.M.
[SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8529578
DATE: 06-25-97
2583859 8100
971210637
<PAGE> 25
NEBCO EVANS HOLDING COMPANY
----------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------
8% Pay-In-Kind Preferred Stock
----------------------------------
The undersigned, A. Petter Ostberg, Secretary of Nebco Evans Holding
Company, a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that
the following resolution has been duly adopted by the Board of Directors of the
Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the shares of
Preferred Stock of the Corporation authorized in Article IV of the Certificate
of Incorporation (the "Preferred Stock"), a series of the Preferred Stock of the
Corporation consisting of 600 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following
<PAGE> 26
qualifications, limitations and restrictions (in addition to the powers,
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions, set forth in the
Certificate of Incorporation which are applicable to the Preferred Stock):
1. Designation and Amount. This series of Preferred Stock shall be
8% Pay-In-Kind Preferred Stock (the "PIK Preferred"), and the authorized
number of shares constituting such series shall be 600. The liquidation
preference of the PIK Preferred shall be $10,000 per share.
2. Dividends. The holders of record of shares of PIK Preferred shall
be entitled to receive when and as declared by the Board of Directors out
of funds legally available therefor, dividends at the rate of $800 per
share per annum payable annually on January 15 of each year, in preference
to and in priority over dividends upon the common stock or any preferred
stock of the Corporation ranking junior to the PIK Preferred
(collectively, the "Junior Stock"), on a parity with any other preferred
stock of the Corporation ranking pari passu with the PIK Preferred (the
"Parity Stock") and subordinated to the Senior Convertible Preferred Stock
and Senior Non-Convertible Preferred Stock of the Corporation and any
other preferred stock of the Corporation ranking senior to the PIK
Preferred (the "Senior Stock"), Dividends on each share of PIK Preferred
shall accumulate, whether or not declared, from the date of its issuance.
Dividends payable on the PIK Preferred may be paid in cash or in
additional shares (and/or fractional shares) of PIK Preferred, which
choice of payment shall be at the sole discretion of the Corporation. The
holders of shares of PIK Preferred shall not be entitled to any dividends
other than the dividend provided for in this Section 2. During any period
when the Corporation has failed to pay an annual dividend on the PIK
Preferred for any preceding year and until all unpaid dividends payable,
whether or not declared, on the outstanding PIK Preferred shall have been
paid in full or declared and set apart for payment, the Corporation shall
not: (i) declare or pay dividends, or make any other distributions, on any
shares of Junior Stock or Parity Stock, other than dividends or
distributions
-2-
<PAGE> 27
payable in Junior Stock, or (ii) redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock, other than
redemptions, purchases or other acquisitions of shares of Junior Stock or
Parity Stock in exchange for any shares of Junior Stock.
3. Liquidation. In the event of a liquidation, dissolution or
winding up of the Corporation, the holders of shares of PIK Preferred
shall be entitled to receive out off the assets of the Corporation an
amount in cash equal to $10,000.00 per share, plus any accumulated and
unpaid dividends thereon to the date fixed for distribution, in preference
to and in priority over any such distribution upon shares of Junior Stock
and in subordination to any such distribution on shares of Senior Stock.
4. Redemption. At the Option of the Corporation, shares of PIK
Preferred may be redeemed at any time as a whole or in part from time to
time, at a redemption price, payable in cash, equal to the per share
liquidation preference thereof, plus, in each case, an amount equal to
accrued and unpaid dividends thereon (whether or not earned or declared),
if any, to the date fixed for redemption,
5. Voting Rights. No holder of shares of PIK Preferred shall be
entitled to vote on any matters brought to a vote before the shareholders
of the Corporation, except as otherwise provided by the General
Corporation Law of the State of Delaware.
6. Consideration for Issuance of Shares. All shares of PIK Preferred
shall be deemed to be fully paid and nonassessable upon the issuance
thereof.
7. Notice of Holders of Certain Transactions. The Corporation shall
cause a notice to be mailed to the holders of record of shares of PIK
Preferred at their respective addresses as the same shall appear on the
books of the Corporation, in case:
a. The Corporation shall declare a dividend (or any other
distribution) on its common stock;
b. Of any reclassification of capital stock of the Corporation
or of any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation
is required, or of the sale or transfer of all
-3-
<PAGE> 28
or substantially all of the assets of the Corporation;
c. Of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation.
Such notice shall be mailed at least twenty (20) days prior to the
applicable record date or other date hereinafter referred to and shall
specify (i) the date on which a record is to be taken for the purpose of
such dividend, redemption, distribution of rights or, if a record is not
to be taken, the date as of which the holders of shares of common stock of
record to be entitled to such dividend, distribution, redemption or rights
are to be determined, or (ii) the date on which, in connection with such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, it is expected that holders of shares of common
stock of record shall be entitled to exchange their shares of common stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
8. Conversion. The holders of the shares of PIK Preferred shall have
no rights to convert their shares into shares of common stock of the
Corporation or into shares of any other capital stock of the Corporation.
9. No Other Rights. The shares of PIK Preferred shall not have any
relative, participating, optional or other special rights or powers other
than as set forth above and in the Certificate of Incorporation.
10. Certificates. Each certificate for shares of PIK Preferred shall
bear a legend incorporating a certified copy of this Resolution which
shall be authenticated by the President or Vice President of the
Corporation and appended to each such certificate.
11. Senior Stock. The Corporation may issue or create Senior Stock
without the consent of the holders of PIK Preferred.
-4-
<PAGE> 29
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by A. Petter Ostberg, its Secretary, this 20th day of
November, 1996.
NEBCO EVANS HOLDING COMPANY
By: /s/ A.P. Ostberg
-----------------------------------------
A. Petter Ostberg
-5-
<PAGE> 30
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "NEBCO EVANS HOLDING COMPANY", FILED IN THIS OFFICE ON THE
TWENTIETH DAY OF NOVEMBER, A.D. 1996, AT 1 O'CLOCK P.M.
[SEAL OF THE STATE OF DELAWARE]
[SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8544640
DATE: 07-07-97
2583859 8100
97122745
<PAGE> 31
NEBCO EVANS HOLDING COMPANY
----------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------
8% Pay-In-Kind Preferred Stock
----------------------------------
The undersigned, A. Petter Ostberg, Secretary of Nebco Evans Holding
Company, a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that
the following resolution has been duly adopted by the Board of Directors of the
Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the shares of
Preferred Stock of the Corporation authorized in Article IV of the Certificate
of Incorporation (the "Preferred Stock"), a series of the Preferred Stock of the
Corporation consisting of 600 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional and
other rights, and the following
<PAGE> 32
qualifications, limitations and restrictions (in addition to the powers,
designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions, set forth in the
Certificate of Incorporation which are applicable to the Preferred Stock):
1. Designation and Amount. This series of Preferred Stock shall be
8% Pay-In-Kind Preferred Stock (the "PIK Preferred"), and the authorized
number of shares constituting such series shall be 600. The liquidation
preference of the PIK Preferred shall be $10,000 per share.
2. Dividends. The holders of record of shares of PIK Preferred shall
be entitled to receive when and as declared by the Board of Directors out
of funds legally available therefor, dividends at the rate of $800 per
share per annum payable annually on January 15 of each year, in preference
to and in priority over dividends upon the common stock or any preferred
stock of the Corporation ranking junior to the PIK Preferred
(collectively, the "Junior Stock"), on a parity with any other preferred
stock of the Corporation ranking pari passu with the PIK Preferred (the
"Parity Stock") and subordinated to the Senior Convertible Preferred Stock
and Senior Non-Convertible Preferred Stock of the Corporation and any
other preferred stock of the Corporation ranking senior to the PIK
Preferred (the "Senior Stock") . Dividends on each share of PIK Preferred
shall accumulate whether or not declared, from the date of its issuance.
Dividends payable on the PIK Preferred may be paid in cash or in
additional shares (and/or fractional shares) of PIK Preferred, which
choice of payment shall be at the sole discretion of the Corporation. The
holders of shares of PIK Preferred shall not be entitled to any dividends
other than the dividend provided for in this Section 2. During any period
when the Corporation has failed to pay an annual dividend on the PIK
Preferred for any preceding year and until all unpaid dividends payable,
whether or not declared, on the outstanding PIK Preferred shall have been
paid in full or declared and set apart for payment, the Corporation shall
not: (i) declare or pay dividends, or make any other distributions, on any
shares of Junior Stock or Parity Stock, other than dividends or
distributions
-2-
<PAGE> 33
payable in Junior Stock, or (ii) redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock, other than
redemptions, purchases or other acquisitions of shares of Junior Stock or
Parity Stock in exchange for any shares of Junior Stock.
3. Liquidation. In the event of a liquidation, dissolution or
winding up of the Corporation, the holders of shares of PIK Preferred
shall be entitled to receive out of the assets of the Corporation an
amount in cash equal to $l0,000.00 per share, plus any accumulated and
unpaid dividends thereon to the date fixed for distribution, in preference
to and in priority over any such distribution upon shares of Junior Stock
and in subordination to any such distribution on shares of Senior Stock.
4. Redemption. At the option of the Corporation, shares of PIK
Preferred may be redeemed at any time as a whole or in part from time to
time, at a redemption price, payable in cash, equal to the per share
liquidation preference thereof, plus, in each case, an amount equal to
accrued and unpaid dividends thereon (whether or not earned or declared),
if any, to the date fixed for redemption.
5. Voting Rights. No holder of shares of PIK Preferred shall be
entitled to vote on any matters brought to a vote before the shareholders
of the Corporation, except as otherwise provided by the General
Corporation Law of the State of Delaware.
6. Consideration for Issuance of Shares. All shares of PIK
Preferred shall be deemed to be fully paid and nonassessable upon the
issuance thereof.
7. Notice of Holders of Certain Transactions. The Corporation shall
cause a notice to be mailed to the holders of record of shares of PIK
Preferred at their respective addresses as the same shall appear on the
books of the Corporation, in case:
a. The Corporation shall declare a dividend (or any other
distribution) on its common stock;
b. Of any reclassification of capital stock of the Corporation
or of any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation
is required, or of the sale or transfer of all
-3-
<PAGE> 34
or substantially all of the assets of the Corporation;
c. Of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation.
Such notice shall be mailed at least twenty (20) days prior to the
applicable record date or other date hereinafter referred to and shall
specify (i) the date on which a record is to be taken for the purpose of
such dividend, redemption, distribution of rights or, if a record is not
to be taken, the date as of which the holders of shares of common stock of
record to be entitled to such dividend, distribution, redemption or rights
are to be determined, or (ii) the date on which, in connection with such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, it is expected that holders of shares of common
stock of record shall be entitled to exchange their shares of common stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
8. Conversion. The holders of the shares of PIK Preferred shall have
no rights to convert their shares into shares of common stock of the
Corporation or into shares of any other capital stock of the
Corporation.
9. No Other Rights. The shares of PIK Preferred shall not have any
relative, participating, optional or other special rights or powers other
than as set forth above and in the Certificate of Incorporation.
10. Certificates. Each certificate for shares of PIK Preferred shall
bear a legend incorporating a certified copy of this Resolution which
shall be authenticated by the President or Vice President of the
Corporation and appended to each such certificate.
11. Senior Stock. The Corporation may issue or create Senior Stock
without the consent of the holders of PIK Preferred.
-4-
<PAGE> 35
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by A Petter Ostberg, its Secretary, this 20th day of
November, 1996.
NEBCO EVANS HOLDING COMPANY
By: /s/ A.P. Ostberg
-----------------------------------------
A. Petter Ostberg
-5-
<PAGE> 36
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "NEBCO EVANS HOLDING COMPANY", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF
NOVEMBER, A.D. 1996, AT 1:02 O'CLOCK P.M.
[SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8529579
DATE: 06-25-97
2583859 8100
971210637
<PAGE> 37
NEBCO EVANS HOLDING COMPANY
----------------------------------
CERTIFICATE OF AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION
----------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------------------------
Senior Non-Convertible Preferred Stock
----------------------------------
The undersigned, A. Petter Ostberg, Secretary of Nebco Evans Holding
Company, a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation (the "Board of Directors") by the Amended and Restated
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the Board of Directors, on January 25, 1996, adopted a
resolution creating a series of 600 shares of Preferred Stock designated as
Senior Non-Convertible Preferred Stock (the "Senior Non-Convertible Preferred")
and (ii) all 600 shares of Senior Non-Convertible Preferred have been issued by
the Corporation.
I FURTHER CERTIFY:
That pursuant to the authority expressly granted and vested in the
Board of Directors by the Certificate of Incorporation and Section 242 of the
General Corporation Law
<PAGE> 38
of the State of Delaware, and with the consent of the holders of 100% of the
Common Stock, par value $0.01 per share, of the Corporation and the holders of
100% of the Senior Non-Convertible Preferred, the Board of Directors on November
19, 1996 adopted the following resolution amending the powers, preferences and
relative participating, optional or other special rights of the shares of Senior
Non-Convertible Preferred, and the qualifications, limitations or restrictions
thereof while keeping the designation of such series unchanged:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by the provisions of the Certificate of
Incorporation, that the series of Preferred Stock previously designated "Senior
Non-Convertible Preferred Stock" remain so designated and the terms thereof be
amended and restated so that such series shall have the following powers,
designations, preferences and relative, participating, optional and other
rights, and the following qualifications, limitations and restrictions (in
addition to the powers, designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions,
set forth in the Certificate of Incorporation which are applicable to the
Preferred Stock):
1. Designation and Amount. This series of Preferred Stock shall be
Senior Non-Convertible Preferred Stock (the "Senior Non-Convertible
Preferred"), and the authorized number of shares constituting such series
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<PAGE> 39
shall be 600. The liquidation preference of the Senior Non-Convertible
Preferred shall be $25,000 per share.
2. Dividends. The holders of record of shares of Senior
Non-Convertible Preferred shall be entitled to receive when and as
declared by the Board of Directors out of funds legally available
therefor, cash dividends at the rate of $1,562.50 per share per annum
payable quarterly on such dates as may from time to time be determined by
the Board of Directors, in preference to and in priority over dividends
upon the common stock or any other preferred stock of the Corporation
which is junior to the Senior Non-Convertible Preferred Stock
(collectively, the "Junior Stock") and subordinated to the Senior
Convertible Preferred Stock of the Corporation (the "Senior Stock") .
Dividends on each share of Senior Non-Convertible Preferred shall
accumulate, whether or not declared, from the date of its issuance. The
holders of shares of Senior Non-Convertible Preferred shall not be
entitled to any dividends other than the cash dividend provided for in
this Section 2. During any period when the Corporation has failed to pay a
quarterly dividend on the Senior Non-Convertible Preferred for any
preceding three-month period and until all unpaid dividends payable,
whether or not declared, on the outstanding Senior Non-Convertible
Preferred shall have been paid in full or declared and set apart for
payment, the Corporation shall not: (i) declare or pay dividends, or make
any other distributions, on any shares of Junior Stock, other than
dividends or distributions payable in Junior Stock, or (ii) redeem,
purchase or otherwise acquire for consideration any shares of Junior
Stock, other than redemptions, purchases or other acquisitions of shares
of Junior Stock in exchange for any shares of Junior Stock.
3. Liquidation. In the event of a liquidation, dissolution or
winding up of the Corporation, the holders of shares of Senior
Non-Convertible Preferred shall be entitled to receive out of the assets
of the Corporation an amount in cash equal to $25,000.00 per share, plus
any accumulated and unpaid dividends thereon to the date fixed for
distribution, in preference to and in priority over any such distribution
upon shares of Junior Stock, and in subordination to any such distribution
upon the shares of Senior Stock.
4. Redemption. The Senior Non-Convertible Preferred may be redeemed,
in whole or in part, at the option of the holders of the shares thereof,
at any time and from time to time after 11 years from the date of
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<PAGE> 40
issuance of such shares or such earlier time as the Corporation's l2 1/2%
Senior Notes due 2006 (the "Senior Notes") shall have been paid in full
(including all interest and other amounts due thereon), at the redemption
price per share of $25,000.00 plus any accumulated and unpaid dividends
thereon at the date fixed for redemption. The holders of shares of Senior
Non-Convertible Preferred opting to have the Corporation redeem their
shares shall, not less than sixty (60) nor more than seventy-five (75)
days prior to the date that such holders desire to have their shares
redeemed pursuant to this Section 4, provide the Corporation with written
notice specifying the desired date of such redemption, such notice to be
sent by first class mail, postage prepaid, to the Corporation at its
registered office in the State of Delaware.
After the date fixed for the redemption of shares of Senior
Non-Convertible Preferred by the Corporation, the holders of shares who
have opted for redemption shall cease to be shareholders with respect to
such shares and shall have no interest in or claims against the
Corporation by virtue thereof except the right to receive the monies
payable upon such redemption from the Corporation, without interest
thereon, upon surrender (and endorsement, if required by the Corporation)
of their certificates and the shares represented thereby shall no longer
be deemed to be outstanding.
5. Voting Rights. No holder of shares of Senior Non-Convertible
Preferred shall be entitled to vote on any matters brought to a vote
before the shareholders of the Corporation, except as otherwise provided
by the General Corporation Law of the State of Delaware.
6. Consideration for Issuance of Shares. All shares of Senior
Non-Convertible Preferred shall be deemed to be fully paid and
nonassessable upon the issuance thereof.
7. Notice of Holders of Certain Transactions. The Corporation shall
cause a notice to be mailed to the holders of record of shares of Senior
Non-Convertible Preferred at their respective addresses as the same shall
appear on the books of the Corporation, in case:
a. The Corporation shall declare a dividend (or any other
distribution) on its common stock;
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<PAGE> 41
b. Of any reclassification of capital stock of the Corporation
or of any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation
is required, or of the sale or transfer of all or substantially all
of the assets of the Corporation;
c. Of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation.
Such notice shall be mailed at least twenty (20) days prior to the
applicable record date or other date hereinafter referred to and shall
specify (i) the date on which a record is to be taken for the purpose of
such dividend, redemption, distribution of rights or, if a record is not
to be taken, the date as of which the holders of shares of common stock of
record to be entitled to such dividend, distribution, redemption or rights
are to be determined, or (ii) the date on which, in connection with such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, it is expected that holders of shares of common
stock of record shall be entitled to exchange their shares of common stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.
8. Conversion. The holders of the shares of Senior Non-Convertible
Preferred shall have no rights to convert their shares into shares of
common stock of the Corporation or into shares of any other capital stock
of the Corporation.
9. No Other Rights. The shares of Senior Non-Convertible Preferred
shall not have any relative, participating, optional or other special
rights or powers other than as set forth above and in the Certificate of
Incorporation.
10. Certain Restrictions. Notwithstanding anything to the contrary
in this Certificate of Designation, the Senior Non-Convertible Preferred
and the powers, designations, preferences and relative, participating,
optional and other rights thereof, and the qualifications, limitations and
restrictions thereon as set forth in this Certificate of Designation are
subject to certain restrictions set forth in an Investors Agreement, dated
as of January 25, 1996, by and among DLJ
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<PAGE> 42
Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., Orkla a.s.,
Holberg Industries, Inc., and the Corporation, and in the Indenture
relating to the Senior Notes, dated as of January 25, 1996, by and between
the Corporation and IBJ Schroder Bank & Trust Company.
11. Certificates. Each certificate for shares of Senior
Non-Convertible Preferred shall bear a legend incorporating a certified
copy of this Resolution which shall be authenticated by the President or
Vice President of the Corporation and appended to each such certificate.
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<PAGE> 43
IN WITNESS WHEREOF, the corporation has caused this certificate of
Designation to be signed by A. Petter Ostberg, its Secretary, this 20th day of
November, 1996.
NEBCO EVANS HOLDING COMPANY
By: /s/ A.P. Ostberg
-----------------------------------------
A. Petter Ostberg
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<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
of
NEBCO EVANS HOLDING COMPANY
----------------------------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE -- The registered office of Nebco Evans
Holding Company (the "Corporation") shall be established and maintained at the
office of The Corporation Trust Center at 1209 Orange Street in the City of
Wilmington, County of New Castle, State of Delaware, and The Corporation Trust
Company shall be the registered agent of the Corporation in charge thereof.
SECTION 2. OTHER OFFICES -- The Corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time select or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders for
the election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. If
the Board of Directors fails so to determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the Corporation on the first Tuesday in April. If the date of the
annual meeting shall fall upon a legal holiday, the meeting shall be held on the
next succeeding business day. At each annual meeting, the stockholders entitled
to vote shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
<PAGE> 2
SECTION 2. SPECIAL MEETINGS -- Special meetings of the stockholders
for any purpose or purposes may be called by the Chairman of the Board, the
President or the Secretary, or by resolution of the Board of Directors.
SECTION 3. VOTING -- Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation of the Corporation and these
By-Laws may vote in person or by proxy, but no proxy shall be voted after three
years from its date unless such proxy provides for a longer period. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, with the address of each, and the number of
shares held by each, shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the 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. The 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 entitled to be present.
SECTION 4. QUORUM -- Except as otherwise required by law, by the
Certificate of Incorporation of the Corporation or by these By-Laws, the
presence, in person or by proxy, of stockholders holding shares constituting a
majority of the voting power of the Corporation shall constitute a quorum at all
meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote shall
be represented, any business may be transacted that might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. NOTICE OF MEETINGS -- Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to
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<PAGE> 3
each stockholder entitled to vote thereat, at his or her address as it appears
on the records of the Corporation, not less than ten nor more than sixty days
before the date of the meeting. No business other than that stated in the notice
shall be transacted at any meeting without the unanimous consent of all the
stockholders entitled to vote thereat.
SECTION 6. ACTION WITHOUT MEETING -- Unless otherwise provided by
the Certificate of Incorporation of the Corporation, any action required or
permitted to be taken at any annual or special meeting of stockholders 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 the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM -- The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors which
shall consist of not less than five persons. The exact number of directors shall
initially be five and may thereafter be fixed from time to time by the Board of
Directors. Directors shall be elected at the annual meeting of stockholders and
each director shall be elected to serve until his or her successor shall be
elected and shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS -- Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Chairman of the Board, the President or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES -- If the office of any director becomes
vacant, the remaining directors in the office, though less than a quorum, by a
majority vote, may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his or her successor shall be duly
chosen. If the office of any director becomes vacant and
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<PAGE> 4
there are no remaining directors, the stockholders, by the affirmative vote of
the holders of shares constituting a majority of the voting power of the
Corporation, at a special meeting called for such purpose, may appoint any
qualified person to fill such vacancy.
SECTION 4. REMOVAL -- Except as hereinafter provided, any director
or directors may be removed either for or without cause at any time by the
affirmative vote of the holders of a majority of the voting power entitled to
vote for the election of directors, at an annual meeting or a special meeting
called for the purpose, and the vacancy thus created may be filled, at such
meeting, by the affirmative vote of holders of shares constituting a majority of
the voting power of the Corporation.
SECTION 5. COMMITTEES -- The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board of Directors, designate
one or more committees, each committee to consist of one or more directors of
the Corporation.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it.
SECTION 6. MEETINGS -- The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent of
all the Directors.
Regular meetings of the Board of Directors may be held without
notice at such places and times as shall be determined from time to time by
resolution of the Board of Directors.
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President, or by the Secretary on the written
request of any director, on at least one day's notice to each director (except
that notice to any director may be waived in writing by such director) and shall
be held at such place or places as may be determined by the Board of Directors,
or as shall be stated in the call of the meeting.
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<PAGE> 5
Unless otherwise restricted by the Certificate of Incorporation of
the Corporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in any meeting
of the Board of Directors or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
SECTION 7. QUORUM -- A majority of the Directors shall constitute a
quorum for the transaction of business. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time until a quorum is obtained, and no
further notice thereof need be given other than by announcement at the meeting
which shall be so adjourned. The vote of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors unless the Certificate of Incorporation of the Corporation or these
By-Laws shall require the vote of a greater number.
SECTION 8. COMPENSATION -- Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the Board of Directors a fixed fee and expenses of attendance may
be allowed for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 9. ACTION WITHOUT MEETING -- Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a written consent thereto is
signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or such committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS -- The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Treasurer and
a Secretary, all of whom shall
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<PAGE> 6
be elected by the Board of Directors and shall hold office until their
successors are duly elected and qualified. In addition, the Board of Directors
may elect such Assistant Secretaries and Assistant Treasurers as they may deem
proper. The Board of Directors may appoint such other officers and agents as it
may deem advisable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.
SECTION 2. CHAIRMAN OF THE BOARD -- The Chairman of the Board shall
be the Chief Executive Officer of the Corporation. He or she shall preside at
all meetings of the Board of Directors and shall have and perform such other
duties as may be assigned to him or her by the Board of Directors. The Chairman
of the Board shall have the power to execute bonds, mortgages and other
contracts on behalf of the Corporation, and to cause the seal of the Corporation
to be affixed to any instrument requiring it, and when so affixed the seal shall
be attested to by the signature of the Secretary or the Treasurer or an
Assistant Secretary or an Assistant Treasurer.
SECTION 3. PRESIDENT -- The President shall be the Chief Operating
Officer of the Corporation. He or she shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. The President shall have the power to execute bonds, mortgages and
other contracts on behalf of the Corporation, and to cause the seal to be
affixed to any instrument requiring it, and when so affixed the seal shall be
attested to by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
SECTION 4. VICE PRESIDENTS -- Each Vice President shall have such
powers and shall perform such duties as shall be assigned to him or her by the
Board of Directors.
SECTION 5. TREASURER -- The Treasurer shall be the Chief Financial
Officer of the Corporation. He or she shall have the custody of the Corporate
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the Corporation. He or she shall deposit all
moneys and other valuables in the name and to the credit of the Corporation in
such depositaries as may be designated by the Board of Directors. He or she
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, the Chairman of the Board, or the President, taking proper vouchers
for such disbursements. He or she shall render to the Chairman of the Board, the
President and Board of Directors at the regular meetings of the Board of
Directors, or
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<PAGE> 7
whenever they may request it, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he or she shall give the Corporation a bond for the faithful
discharge of his or her duties in such amount and with such surety as the Board
of Directors shall prescribe.
SECTION 6. SECRETARY -- The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and of the Board of Directors and
all other notices required by law or by these By-Laws, and in case of his or her
absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the Chairman of the Board or the President, or by
the Board of Directors, upon whose request the meeting is called as provided in
these By-Laws. He or she shall record all the proceedings of the meetings of the
Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him or her by the Board of Directors, the Chairman
of the Board or the President. He or she shall have the custody of the seal of
the Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors, the Chairman of the Board or the
President, and attest to the same.
SECTION 7. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES --
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the Board of Directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock shall be
issued to each stockholder certifying the number of shares owned by such
stockholder in the Corporation. Certificates of stock of the Corporation shall
be of such form and device as the Board of Directors may from time to time
determine.
SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or such
owner's legal representatives, to give the Corporation a bond, in such sum as
they may direct, not exceeding double the value
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<PAGE> 8
of the stock, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss of any such certificate, or the
issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES -- The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE -- 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, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or 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 of Directors 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 of Directors and which
record date: (1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty nor less than ten days before the date
of such meeting; (2) in the case of determination of stockholders entitled to
express consent to corporate action in writing without a meeting, shall not be
more than ten days from the date upon which the resolution fixing the record
date is adopted by the Board of Directors; and (3) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of 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; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action of the Board of Directors is required by law, shall be the
first day on which a signed written consent
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<PAGE> 9
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. 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 of Directors may
fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS -- Subject to the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors may, out of funds
legally available therefor at any regular or special meeting, declare dividends
upon stock of the Corporation as and when they deem appropriate. Before
declaring any dividend there may be set apart out of any funds of the
Corporation available for dividends, such sum or sums as the Board of Directors
from time to time in their discretion deem proper for working capital or as a
reserve fund to meet contingencies or for equalizing dividends or for such other
purposes as the Board of Directors shall deem conducive to the interests of the
Corporation.
SECTION 6. SEAL -- The corporate seal of the Corporation shall be in
such form as shall be determined by resolution of the Board of Directors. Said
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise imprinted upon the subject document or paper.
SECTION 7. FISCAL YEAR -- The fiscal year of the Corporation shall
be determined by resolution of the Board of Directors.
SECTION 8. CHECKS -- All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, or agent or agents,
of the Corporation, and in such manner as shall be determined from time to time
by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE-- Whenever any notice is
required to be given under these By-Laws, personal notice is not required unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage
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<PAGE> 10
prepaid, addressed to the person entitled thereto at his or her address as it
appears on the records of the Corporation, and such notice shall be deemed to
have been given on the day of such mailing. Stockholders not entitled to vote
shall not be entitled to receive notice of any meetings except as otherwise
provided by law. Whenever any notice is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the Corporation or of these By-Laws, a waiver thereof, in
writing and signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to such
required notice.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered, amended or repealed at any annual
meeting of the stockholders (or at any special meeting thereof if notice of such
proposed alteration, amendment or repeal to be considered is contained in the
notice of such special meeting) by the affirmative vote of the holders of shares
constituting a majority of the voting power of the Corporation. Except as
otherwise provided in the Certificate of Incorporation of the Corporation, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present alter, amend or repeal these By-Laws, or enact such other
By-Laws as in their judgment may be advisable for the regulation and conduct of
the affairs of the Corporation.
ARTICLE VII
INVESTORS AGREEMENT
These By-laws are subject to an Investors Agreement, dated as of
January 25, 1996, by and among DLJ Merchant Banking Partners, L.P., DLJ
International Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking
Funding, Inc., Orkla a.s., Holberg Industries, Inc., NED Holdings, Inc., Holberg
Inc. and the Corporation and the provisions of Article 2 of such Investors
Agreement are, subject to the term, provisions and limitations of the Investors
Agreement, hereby incorporated by reference herein and made a part hereof.
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<PAGE> 1
Exhibit 4.1
EXECUTION COPY
================================================================================
Nebco Evans Holding Company
--------------------------------------
$100,387,000
12 3/8% SENIOR DISCOUNT NOTES DUE 2007
--------------------------------------
-------------------------
INDENTURE
DATED AS OF JULY 11, 1997
-------------------------
State Street Bank and Trust Company
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) .................................................. 7.10
(a)(2) .................................................. 7.10
(a)(3) .................................................. N.A.
(a)(4) .................................................. N.A.
(a)(5) .................................................. 7.10
(b) ..................................................... 7.03; 7.10
(c) ..................................................... N.A.
311 (a) ..................................................... 7.11
(b) ..................................................... 7.11
(c) ..................................................... N.A.
312 (a) ..................................................... 2.05
(b) ..................................................... 10.03
(c) ..................................................... 10.03
313 (a) ..................................................... 7.06
(b)(1) .................................................. 7.06
(b)(2) .................................................. 7.06; 7.07
(c) ..................................................... 7.06;10.02
(d) ..................................................... 7.06
314 (a) ..................................................... 4.03;10.05
(b) ..................................................... N.A.
(c)(1) .................................................. 10.04
(c)(2) .................................................. 10.04
(c)(3) .................................................. N.A.
(d) ..................................................... N.A.
(e) ..................................................... 10.05
(f) ..................................................... N.A.
315 (a) ..................................................... 7.01
(b) ..................................................... 7.05,10.02
(c) ..................................................... 7.01
(d) ..................................................... 7.01
(e) ..................................................... 6.11
316 (a)(last sentence) ...................................... 2.09
(a)(1)(A) ............................................... 6.05
(a)(1)(B) ............................................... 6.04
(a)(2) .................................................. 2.13
(b) ..................................................... 6.07
(c) ..................................................... N.A.
317 (a)(1) .................................................. 6.08
(a)(2) .................................................. 6.09
(b) ..................................................... 2.04
318 (a) ..................................................... 10.01
(b) ..................................................... N.A.
(c) ..................................................... 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions ................................................. 1
Section 1.02. Other Definitions ........................................... 14
Section 1.03. Incorporation by Reference of Trust Indenture Act ........... 15
Section 1.04. Rules of Construction ....................................... 15
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating ............................................. 16
Section 2.02. Execution and Authentication ................................ 17
Section 2.03. Registrar and Paying Agent .................................. 18
Section 2.04. Paying Agent to Hold Money in Trust ......................... 18
Section 2.05. Holder Lists ................................................ 18
Section 2.06. Transfer and Exchange ....................................... 19
Section 2.07. Replacement Notes ........................................... 26
Section 2.08. Outstanding Notes ........................................... 26
Section 2.09. Treasury Notes .............................................. 27
Section 2.10. Temporary Notes ............................................. 27
Section 2.11. Cancellation ................................................ 27
Section 2.12. Defaulted Interest .......................................... 27
Section 2.13. Record Date ................................................. 28
Section 2.14. Computation of Interest ..................................... 28
Section 2.15. CUSIP Number ................................................ 28
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee .......................................... 28
Section 3.02. Selection of Notes to be Redeemed or Purchased .............. 29
Section 3.03. Notice of Redemption ........................................ 29
Section 3.04. Effect of Notice of Redemption .............................. 30
Section 3.05. Deposit of Redemption or Purchase Price ..................... 30
Section 3.06. Notes Redeemed in Part ...................................... 30
Section 3.07. Optional Redemption ......................................... 30
Section 3.08. Mandatory Redemption ........................................ 31
Section 3.09. Repurchase Offers ........................................... 31
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes ............................................ 33
Section 4.02. Maintenance of Office or Agency ............................. 33
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Section 4.03. Commission Reports .......................................... 34
Section 4.04. Compliance Certificate ...................................... 34
Section 4.05. Taxes ....................................................... 35
Section 4.06. Stay, Extension and Usury Laws .............................. 35
Section 4.07. Restricted Payments ......................................... 35
Section 4.08. Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries ..................................... 37
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock .. 38
Section 4.10. Assets Sales ................................................ 41
Section 4.11. Transactions With Affiliates ................................ 41
Section 4.12. Liens ....................................................... 42
Section 4.13. Sale and Leaseback Transactions ............................. 42
Section 4.14. Offer to Purchase Upon Change of Control .................... 43
Section 4.15. Corporate Existence ......................................... 43
Section 4.16. Limitation on Issuances of Capital Stock of Wholly
Owned Restricted Subsidiaries ............................... 44
Section 4.17. Business Activities ......................................... 44
Section 4.18. Payment for Consents ........................................ 44
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation of Sale of Assets ..................... 44
Section 5.02. Successor Corporation Substituted ........................... 45
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default ........................................... 45
Section 6.02. Acceleration ................................................ 47
Section 6.03. Other Remedies .............................................. 47
Section 6.04. Waiver of Past Defaults ..................................... 48
Section 6.05. Control by Majority ......................................... 48
Section 6.06. Limitation on Suits ......................................... 48
Section 6.07. Rights of Holders of Notes to Receive Payment ............... 49
Section 6.08. Collection Suit by Trustee .................................. 49
Section 6.09. Trustee May File Proofs of Claim ............................ 49
Section 6.10. Priorities .................................................. 49
Section 6.11. Undertaking for Costs ....................................... 50
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee ........................................... 50
Section 7.02. Rights of Trustee ........................................... 51
Section 7.03. Individual Rights of Trustee ................................ 52
Section 7.04. Trustee's Disclaimer ........................................ 52
Section 7.05. Notice of Defaults .......................................... 52
Section 7.06. Reports by Trustee to Holders of the Notes .................. 52
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Section 7.07. Compensation and Indemnity .................................. 53
Section 7.08. Replacement of Trustee ...................................... 53
Section 7.09. Successor Trustee by Merger, etc ............................ 54
Section 7.10. Eligibility; Disqualification ............................... 54
Section 7.11. Preferential Collection of Claims Against NEHC .............. 55
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance .................................................. 55
Section 8.02. Legal Defeasance and Discharge .............................. 55
Section 8.03. Covenant Defeasance ......................................... 55
Section 8.04. Conditions to Legal or Covenant Defeasance .................. 56
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. .............. 57
Section 8.06. Repayment to NEHC ........................................... 57
Section 8.07. Reinstatement ............................................... 58
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Notes ..................... 58
Section 9.02. With Consent of Holders of Notes ............................ 59
Section 9.03. Compliance with Trust Indenture Act ......................... 60
Section 9.04. Revocation and Effect of Consents ........................... 60
Section 9.05. Notation on or Exchange of Notes ............................ 60
Section 9.06. Trustee to Sign Amendments, etc ............................. 60
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Trust Indenture Act Controls ................................ 61
Section 10.02. Notices ..................................................... 61
Section 10.03. Communication by Holders of Notes with Other
Holders of Notes ............................................ 62
Section 10.04. Certificate and Opinion as to Conditions Precedent .......... 62
Section 10.05. Statements Required in Certificate or Opinion ............... 62
Section 10.06. Rules by Trustee and Agents ................................. 63
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders .................................. 63
Section 10.08. Governing Law ............................................... 63
Section 10.09. No Adverse Interpretation of Other Agreements ............... 63
Section 10.10. Successors .................................................. 63
Section 10.11. Severability ................................................ 63
Section 10.12. Counterpart Originals ....................................... 63
Section 10.13. Table of Contents, Headings, etc ............................ 64
ARTICLE 1
DEFINITIONS AND INCORPORATION
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BY REFERENCE
Section 1.01. Definitions ................................................. 1
Section 1.02. Other Definitions ........................................... 14
Section 1.03. Incorporation by Reference of Trust Indenture Act ........... 15
Section 1.04. Rules of Construction ....................................... 15
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating ............................................. 16
Section 2.02. Execution and Authentication ................................ 17
Section 2.03. Registrar and Paying Agent .................................. 18
Section 2.04. Paying Agent to Hold Money in Trust ......................... 18
Section 2.05. Holder Lists ................................................ 18
Section 2.06. Transfer and Exchange ....................................... 19
Section 2.07. Replacement Notes ........................................... 26
Section 2.08. Outstanding Notes ........................................... 27
Section 2.09. Treasury Notes .............................................. 27
Section 2.10. Temporary Notes ............................................. 27
Section 2.11. Cancellation ................................................ 27
Section 2.12. Defaulted Interest .......................................... 28
Section 2.13. Record Date ................................................. 28
Section 2.14. Computation of Interest ..................................... 28
Section 2.15. CUSIP Number ................................................ 28
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee .......................................... 28
Section 3.02. Selection of Notes to be Redeemed or Purchased .............. 29
Section 3.03. Notice of Redemption ........................................ 29
Section 3.04. Effect of Notice of Redemption .............................. 30
Section 3.05. Deposit of Redemption or Purchase Price ..................... 30
Section 3.06. Notes Redeemed in Part ...................................... 30
Section 3.07. Optional Redemption ......................................... 31
Section 3.08. Mandatory Redemption ........................................ 31
Section 3.09. Repurchase Offers ........................................... 31
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes ............................................ 33
Section 4.02. Maintenance of Office or Agency ............................. 33
Section 4.03. Commission Reports .......................................... 34
Section 4.04. Compliance Certificate ...................................... 34
Section 4.05. Taxes ....................................................... 35
Section 4.06. Stay, Extension and Usury Laws .............................. 35
Section 4.07. Restricted Payments ......................................... 35
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Section 4.08. Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries ..................................... 38
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock ....................................................... 38
Section 4.10. Assets Sales ................................................ 41
Section 4.11. Transactions With Affiliates ................................ 41
Section 4.12. Liens ....................................................... 42
Section 4.13. Sale and Leaseback Transactions ............................. 42
Section 4.14. Offer to Purchase Upon Change of Control .................... 43
Section 4.15. Corporate Existence ......................................... 43
Section 4.16. Limitation on Issuances of Capital Stock of Wholly
Owned Restricted Subsidiaries ............................... 44
Section 4.17. Business Activities ......................................... 44
Section 4.18. Payment for Consents ........................................ 44
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation of Sale of Assets ..................... 44
Section 5.02. Successor Corporation Substituted ........................... 45
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default ........................................... 45
Section 6.02. Acceleration ................................................ 47
Section 6.03. Other Remedies .............................................. 47
Section 6.04. Waiver of Past Defaults ..................................... 48
Section 6.05. Control by Majority ......................................... 48
Section 6.06. Limitation on Suits ......................................... 48
Section 6.07. Rights of Holders of Notes to Receive Payment ............... 49
Section 6.08. Collection Suit by Trustee .................................. 49
Section 6.09. Trustee May File Proofs of Claim ............................ 49
Section 6.10. Priorities .................................................. 49
Section 6.11. Undertaking for Costs ....................................... 50
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee ........................................... 50
Section 7.02. Rights of Trustee ........................................... 51
Section 7.03. Individual Rights of Trustee ................................ 52
Section 7.04. Trustee's Disclaimer ........................................ 52
Section 7.05. Notice of Defaults .......................................... 52
Section 7.06. Reports by Trustee to Holders of the Notes .................. 52
Section 7.07. Compensation and Indemnity .................................. 53
Section 7.08. Replacement of Trustee ...................................... 53
Section 7.09. Successor Trustee by Merger, etc ............................ 54
Section 7.10. Eligibility; Disqualification ............................... 54
Section 7.11. Preferential Collection of Claims Against NEHC .............. 55
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance .................................................. 55
Section 8.02. Legal Defeasance and Discharge .............................. 55
Section 8.03. Covenant Defeasance ......................................... 55
Section 8.04. Conditions to Legal or Covenant Defeasance .................. 56
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions. .............. 57
Section 8.06. Repayment to NEHC ........................................... 57
Section 8.07. Reinstatement ............................................... 58
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Notes ..................... 58
Section 9.02. With Consent of Holders of Notes ............................ 59
Section 9.03. Compliance with Trust Indenture Act ......................... 60
Section 9.04. Revocation and Effect of Consents ........................... 60
Section 9.05. Notation on or Exchange of Notes ............................ 60
Section 9.06. Trustee to Sign Amendments, etc ............................. 60
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls ................................ 61
Section 10.02. Notices ..................................................... 61
Section 10.03. Communication by Holders of Notes with Other
Holders of Notes ............................................ 62
Section 10.04. Certificate and Opinion as to Conditions Precedent .......... 62
Section 10.05. Statements Required in Certificate or Opinion ............... 62
Section 10.06. Rules by Trustee and Agents ................................. 63
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders .................................. 63
Section 10.08. Governing Law ............................................... 63
Section 10.09. No Adverse Interpretation of Other Agreements ............... 63
Section 10.10. Successors .................................................. 63
Section 10.11. Severability ................................................ 63
Section 10.12. Counterpart Originals ....................................... 63
Section 10.13. Table of Contents, Headings, etc ............................ 64
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EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFEROR
Exhibit C FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
vii
<PAGE> 10
Indenture, dated as of July 11, 1997, between Nebco Evans Holding Company,
a Delaware corporation ("NEHC") and State Street Bank and Trust Company, as
trustee (the "Trustee").
NEHC and the Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the holders of NEHC's 12 3/8% Senior
Discount Notes due 2007 (the "Senior Discount Notes") and the new 12 3/8% Senior
Discount Notes due 2007 (the "New Senior Discount Notes" and, together with the
Senior Discount Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Accreted Value" means, for each $1,000 face amount of Notes, as of any
date of determination prior to July 15, 2002, the sum of (i) $547.88 and (ii)
that portion of the excess of the principal amount of each Note over such
initial offering price which shall have been accreted thereon through such date,
such amount to be so accreted on a daily basis and compounded semi-annually on
each July 15 and January 15 at the rate of 12 3/8% per annum from the date of
issuance of the Notes through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
beneficial interests in a Global Note, the rules and procedures of the
Depositary that apply to such transfer and exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices and other than a Receivables Transaction
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of NEHC and its Restricted Subsidiaries taken as
a whole will be governed by Section 4.14 and/or Article 5 hereof and not by the
provisions of Section 4.10 hereof), and (ii) the issue or sale by NEHC or any of
its Restricted Subsidiaries of Equity Interests of any of NEHC's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $3.0 million or (b) for net proceeds in excess of $3.0
million.
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Notwithstanding the foregoing: (i) a transfer of assets by NEHC to a Wholly
Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to NEHC
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to NEHC or to another Wholly
Owned Restricted Subsidiary, and (iii) a Restricted Payment that is permitted by
Section 4.07 hereof will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the board of directors of NEHC or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the New Credit
Facility or with any domestic commercial bank having capital and surplus in
excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition and (vi)
securities quoted by the Nasdaq National Market or listed on a United States,
Canadian or Western European national securities exchange.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of NEHC and its Subsidiaries taken as a whole
2
<PAGE> 12
to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act)
other than the Principals or their Related Parties (as defined below), (ii) the
adoption of a plan relating to the liquidation or dissolution of NEHC, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of NEHC
(measured by voting power rather than number of shares), (iv) the first day on
which a majority of the members of the Board of Directors of NEHC are not
Continuing Directors or (v) NEHC consolidates with, or merges with or into, any
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, NEHC, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of NEHC is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of NEHC outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such issuance).
"Commission" means the Securities and Exchange Commission.
"Company" means AmeriServe Food Distribution, Inc., a Nebraska
corporation.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) projected
quantifiable improvements in operating results (on an annualized basis) due to
cost reductions calculated in accordance with Article 11 of Regulation S-X under
the Securities Act and evidenced by (A) in the case of cost reductions of less
than $10.0 million, an Officers' Certificate delivered to the Trustee and (B) in
the case of cost reductions of $10.0 million or more, a resolution of the Board
of Directors set forth in an Officers' Certificate delivered to the Trustee,
minus (vi) non-cash items increasing such Consolidated Net Income for such
period. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be
3
<PAGE> 13
dividended to NEHC by such Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iv) the cumulative effect of a change in accounting principles shall
be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to NEHC or one of its Restricted
Subsidiaries for purposes of Section 4.09 hereof and shall be included for
purposes of Section 4.07 hereof only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of NEHC who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) any successor Continuing Directors appointed by
such Continuing Directors (or their successors).
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agent" means the Bank of America, in its capacity as
Administrative Agent for the lenders party to the New Credit Facility or any
successor thereto or any person otherwise appointed.
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<PAGE> 14
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of EXHIBIT A-1
attached hereto (but without including the text referred to in footnotes 1 and 3
thereto).
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to Section 2.06 of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature; provided, however,
that any Capital Stock that would not qualify as Disqualified Stock but for
change of control provisions shall not constitute Disqualified Stock if the
provisions are not more favorable to the holders of such Capital Stock than the
provisions described under Section 4.14 hereof.
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, the Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to Holders to exchange
Senior Discount Notes for New Senior Discount Notes.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of NEHC and its Subsidiaries
(other than Indebtedness under the New Credit Facility) in existence on the date
of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
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<PAGE> 15
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of NEHC, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that NEHC or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by NEHC or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Global Notes" means the Rule 144A Global Notes, the Regulation S
Temporary Global Notes and the Regulation S Permanent Global Notes and any Notes
exchanged for any of the foregoing in the Exchange Offer.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
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<PAGE> 16
"Hedging Obligations" means, with respect to any Person, the obligations
of such 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 currency rates.
"Holberg" means Holberg Industries, Inc., a Delaware corporation, the
indirect parent of NEHC.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to NEHC or to the creditors of
NEHC, as such, or to the assets of NEHC, or (ii) any liquidation, dissolution,
reorganization or winding up of NEHC, whether voluntary or involuntary and
involving insolvency or bankruptcy, or (iii) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of NEHC.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If NEHC or any Restricted Subsidiary of NEHC sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of NEHC such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of NEHC, NEHC shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity
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<PAGE> 17
Interests of such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described under
Section 4.07 hereof.
"Junior Exchangeable Preferred Stock" means the 15 % Junior Exchangeable
Preferred Stock due 2009 of NEHC.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal Corporate
Trust Office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment shall be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"NEHC" means Nebco Evans Holding Company, a Delaware corporation, the
parent of the Company.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by NEHC or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Facility, dated as of the
date of the Indenture, by and among the Company and Bank of America, providing
for up to $150.0 million of revolving credit borrowings and $205.0 million of
term credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
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<PAGE> 18
"New Senior Discount Notes " means NEHC's 12 3/8% Senior Discount Notes
due 2007, which will be issued in exchange for NEHC's Senior Discount Notes.
"Non-Recourse Debt" means Indebtedness (i) as to which neither NEHC nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the Notes being
offered hereby) of NEHC or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of NEHC or any of its Restricted Subsidiaries.
"Note Custodian" means the Trustee when serving as custodian for the
Depositary with respect to the Notes in global form, or any successor entity
thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offer and sale of the Senior Discount Notes as
contemplated by the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum, dated July 9, 1997,
relating to NEHC's offering and placement of the Senior Discount Notes.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of NEHC by
two Officers of NEHC, one of whom must be the principal executive officer, the
principal financial officer, the treasurer or the principal accounting officer
of NEHC, that meets the requirements of Section 10.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.05 hereof.
The counsel may be an employee of or counsel to NEHC, any Subsidiary of NEHC or
the Trustee.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect to
DTC, shall include Euroclear and Cedel).
"Permitted Business" means any of the businesses and any other businesses
related to the businesses engaged in by NEHC and its respective Restricted
Subsidiaries on the date of the Indenture.
"Permitted Investments" means (a) any Investment in NEHC or in a Wholly
Owned Restricted Subsidiary of NEHC that is engaged in a Permitted Business; (b)
any Investment in Cash Equivalents; (c) any Investment by NEHC or any Restricted
Subsidiary of NEHC in a Person, if as a result of such Investment (i) such
Person becomes a Wholly Owned Restricted Subsidiary of NEHC that is engaged in a
Permitted Business or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, NEHC or a Wholly Owned Restricted
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<PAGE> 19
Subsidiary of NEHC that is engaged in a Permitted Business; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of NEHC; (f) loans and advances made
after the date of the Indenture to Holberg not to exceed $12.0 million at any
time outstanding; and (g) other Investments made after the date of the Indenture
in any Person having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (g) that are at the time outstanding, not to exceed $12.0 million.
"Permitted Liens" means (i) Liens securing Indebtedness under the New
Credit Facility that was permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of NEHC; (iii) Liens on property of a Person existing at the
time such Person is merged into or consolidated with NEHC or any Restricted
Subsidiary of NEHC; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with NEHC; (iv) Liens
on property existing at the time of acquisition thereof by NEHC or any
Restricted Subsidiary of NEHC, provided that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date of the Indenture; (vii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of NEHC or any
Restricted Subsidiary of NEHC with respect to obligations that do not exceed
$7.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by NEHC or such Restricted
Subsidiary and (ix) Liens on assets of Unrestricted Subsidiaries that (A) secure
Non-Recourse Debt of Unrestricted Subsidiaries or (B) are incurred in connection
with a Receivables Transaction.
"Permitted Refinancing Indebtedness" means any Indebtedness of NEHC or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of NEHC or any of its Restricted Subsidiaries; provided that: (i)
except for Indebtedness used to extend, refinance, renew, replace, defease or
refund the New Credit Facility, the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
NEHC or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
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<PAGE> 20
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Principals" means Holberg, John V. Holten, Orkla ASA, Nebco Evans
Distributors, Inc., DLJ Merchant Banking, L.P., DLJ International Partners,
C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ
Merchant Banking Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P.,
DLJ Offshore Partners II, C.V., DLJ Diversified Partners, DLJ Diversified
Partners-A, L.P., DLJ Millennium Partners, L.P., DLJ Millennium Partners-A,
L.P., DLJMB Funding II, Inc., DLJ First ESC LLC, DLJ EAB Partners, L.P. and UK
Investment Plan 1997 Partners.
"Private Placement Legend" means the legend initially set forth on the
Senior Discount Notes in the form set forth in Section 2.06(g) hereof.
"Public Equity Offering" means a public offering of Equity Interests
(other than Disqualified Stock) of (i) NEHC; or (ii) Holberg.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"Receivables" means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable incurred in the ordinary course of business,
including without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services no matter how
evidenced, whether or not earned by performance. (iii) all rights to any goods
or merchandise represented by any of the foregoing after creation of the
foregoing, including, without limitation, returned or repossessed goods, (iv)
all reserves and credit balances with respect to any such accounts receivable or
account debtors, (v) all letters of credit, security, or guarantees for any of
the foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (vii) all collection or deposit accounts relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.
"Receivables Subsidiary" means an Unrestricted Subsidiary exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, that (i) at no time shall NEHC and its Subsidiaries have more than one
Receivables Subsidiary and (ii) all Indebtedness or other borrowings of such
Unrestricted Subsidiary shall be Non-Recourse Debt.
"Receivables Transaction" means (i) the sale or other disposition to a
third party of Receivables or an interest therein, or (ii) the sale or other
disposition of Receivables or an interest therein to a Receivables Subsidiary
followed by a financing transaction in connection with such sale or disposition
of such Receivables (whether such financing transaction is effected by such
Receivables Subsidiary or by a third party to whom such Receivables Subsidiary
sells such Receivables or interests therein); provided that in each of the
foregoing, NEHC or its Subsidiaries receive at least 80% of the aggregate
principal amount of any Receivables financed in such transaction.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, between NEHC and the Initial Purchaser.
"Regulation S" means Regulation S promulgated under the Securities Act.
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<PAGE> 21
"Regulation S Global Notes" means the Regulation S Temporary Global Notes
or the Regulation S Permanent Global Notes as applicable.
"Regulation S Permanent Global Notes" means the permanent global notes
that do not contain the paragraphs referred to in footnote 1 to the form of Note
attached hereto as Exhibit A-2 and that are deposited with and registered in the
name of the Depositary or its nominee, representing a series of Notes sold in
reliance on Regulation S.
"Regulation S Temporary Global Notes" means the temporary global notes
that contain the paragraphs referred to in footnote 1 to the form of Note
attached hereto as Exhibit A-2 and that are deposited with and registered in the
name of the Depositary or its nominee, representing a series of Notes sold in
reliance on Regulation S.
"Related Party" with respect to any Principal means (A) any controlling
stockholder or partner, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership, limited liability company or other entity, the
beneficiaries, stockholders, partners, members, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in the Rule 144A Global Note or the
Regulation S Global Note.
"Restricted Broker Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Restricted Global Notes" means the Rule 144A Global Notes and the
Regulation S Global Notes, all of which shall bear the Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Notes" means the permanent global notes that contain the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 3 to the form of the Note attached hereto as EXHIBIT A-1, and that is
deposited with and registered in the name of the Depositary or its nominee,
representing a series of Notes sold in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes" means NEHC's 12 3/8% Senior Discount Notes due
2007.
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<PAGE> 22
Senior Exchangeable Preferred Stock" means the 13 1/2% Senior
Exchangeable Preferred Stock due 2009 of NEHC.
"Senior Subordinated Note Guarantees" means the note guarantees executed
by the Company's subsidiary guarantors to each Holder of a Senior Subordinated
Note.
"Senior Subordinated Notes" means the Company's 10 1/8% Senior
Subordinated Notes due 2007.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss.77aaa-77bbbb), as amended, as in effect on the date hereof.
"Transfer Restricted Securities" means Notes or beneficial interests
therein that bear or are required to bear the Private Placement Legend.
"Trustee" means State Street Bank and Trust Company until a successor
replaces it in accordance with the applicable provisions of this Indenture, and
thereafter means the successor.
"Unrestricted Global Notes" means one or more Global Notes that do not and
are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with NEHC or any Restricted Subsidiary of NEHC
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to NEHC or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of NEHC; (c)
is a Person with respect to which neither NEHC nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such
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Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of NEHC or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of NEHC or any of its
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of NEHC or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of NEHC as of such date (and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, NEHC shall be in
default of such covenant). The Board of Directors of NEHC may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of NEHC of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.09 hereof, and (ii) no Default or
Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity"' means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" .......................................... 4.11
"Asset Sale Offer" ............................................... 4.10
"Change of Control Offer" ........................................ 4.14
"Change of Control Payment" ...................................... 4.14
"Change of Control Payment Date" ................................. 4.14
"Covenant Defeasance" ............................................ 8.03
"Custodian" ...................................................... 6.01
"DTC" ............................................................ 2.03
"Event of Default" ............................................... 6.01
"Excess Proceeds" ................................................ 4.10
"incur" .......................................................... 4.09
"Legal Defeasance" ............................................... 8.02
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"Offer Amount" ................................................... 3.09
"Offer Period" ................................................... 3.09
"Paying Agent" ................................................... 2.03
"Payment Default" ................................................ 6.01
"Permitted Debt" ................................................. 4.09
"Purchase Date" .................................................. 3.09
"Registrar" ...................................................... 2.03
"Repurchase Offer" ............................................... 3.09
"Restricted Payments" ............................................ 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means NEHC and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by the Commission rule
under the TIA have the meanings so assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or
rules adopted by the Commission from time to time.
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ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A-1 or EXHIBIT A-2 attached hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its authentication.
The Notes initially shall be issued in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and NEHC and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
(a) Global Notes. Notes offered and sold to QIBs in reliance on Rule 144A
shall be issued initially in the form of Rule 144A Global Notes, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with a
custodian of the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by NEHC and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee as hereinafter
provided.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall he
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel, duly executed by NEHC and
authenticated by the Trustee as hereinafter provided. The "40-day restricted
period" (as defined in Regulation S) shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Notes (except to the
extent of any beneficial owners thereof who acquired an interest therein
pursuant to another exemption from registration under the Securities Act and who
will take delivery of a beneficial ownership interest in a Rule 144A Global
Note, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from NEHC certifying as to the same matters covered in clause (i)
above. Following the termination of the 40-day restricted period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Notes. The aggregate principal amount of the Regulation S Temporary
Global Notes and the Regulation S Permanent Global Notes may from time to time
be increased or decreased by adjustments made on the records of the Trustee and
the Depositary or its nominee, as the case may be, in connection with transfers
of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges, redemptions and
transfers of interests. Any endorsement of a Global Note to reflect the amount
of any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian,
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at the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Notes and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or Cedel.
The Trustee shall have no obligation to notify Holders of any such procedures or
to monitor or enforce compliance with the same.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to Rule
144A Global Notes and Regulation S Permanent Global Notes deposited with or on
behalf of the Depositary.
NEHC shall execute and the Trustee shall, in accordance with this Section
2.01(b), authenticate and deliver the Global Notes that (i) shall be registered
in the name of the Depositary or the nominee of the Depositary and (ii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Participants shall have no rights either under this Indenture with respect
to any Global Note held on their behalf by the Depositary or by the Note
Custodian as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by NEHC, the Trustee and any agent of NEHC or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent NEHC, the Trustee or
any agent of NEHC or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of EXHIBIT A-1 attached hereto (but without including
the text referred to in footnotes 1 and 3 thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for NEHC by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Notes shall be substantially as set forth in
EXHIBIT A-1 or EXHIBIT A-2 hereto.
The Trustee shall, upon a written order of NEHC signed by an Officer
directing the Trustee to authenticate the Notes and certifying that all
conditions precedent to the issuance of the Notes contained herein have been
complied with, authenticate Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Notes. The Trustee shall, upon
written order of NEHC signed by an Officer,
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authenticate New Senior Discount Notes for original issuance in exchange for a
like principal amount of Senior Discount Notes exchanged in the Exchange Offer
or otherwise exchanged for New Senior Discount Notes pursuant to the terms of
the Registration Rights Agreement. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount except as provided in Section
2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to NEHC to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with NEHC or an Affiliate of NEHC.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
NEHC shall maintain (i) an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and (ii) an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. NEHC may
appoint one or more additional paying agents. The term "Paying Agent" includes
any additional paying agent. NEHC may change any Paying Agent or Registrar
without notice to any Holder. NEHC shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If NEHC fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. NEHC or any of its Subsidiaries may act as Paying Agent or
Registrar.
NEHC initially appoints The Depository Trust Company ("DTC") to act as
Depositary with respect to the Global Notes.
NEHC initially appoints the Trustee to act as the Registrar and Paying
Agent and to act as Note Custodian with respect to the Global Notes. NEHC
initially appoints the Trustee to act as the Registrar and Paying Agent with
respect to the Definitive Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
NEHC shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and shall
notify the Trustee of any default by NEHC in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. NEHC at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than NEHC or a Subsidiary) shall have no further
liability for the money. If NEHC or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon the occurrence of events specified in
Section 6.01(viii) and (ix) hereof, the Trustee shall serve as Paying Agent for
the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, NEHC shall furnish to the Trustee at least seven (7) Business
Days before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of the Holders of Notes and
NEHC shall otherwise comply with TIA ss.312(a).
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SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) Rule 144A Global Note to Regulation S Global Note. If, at any
time, an owner of a beneficial interest in a Rule 144A Global
Note deposited with the Depositary (or the Trustee as
custodian for the Depositary) wishes to transfer its
beneficial interest in such Rule 144A Global Note to a Person
who is required or permitted to take delivery thereof in the
form of an interest in a Regulation S Global Note, such owner
shall, subject to the Applicable Procedures, exchange or cause
the exchange of such interest for an equivalent beneficial
interest in a Regulation S Global Note as provided in this
Section 2.06(a)(i). Upon receipt by the Trustee of (1)
instructions given in accordance with the Applicable
Procedures from a Participant directing the Trustee to credit
or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the beneficial
interest in the Rule 144A Global Note to be exchanged, (2) a
written order given in accordance with the Applicable
Procedures containing information regarding the Participant
account of the Depositary and the Euroclear or Cedel account
to be credited with such increase, and (3) a certificate in
the form of EXHIBIT B-1 hereto given by the owner of such
beneficial interest stating that the transfer of such interest
has been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S, then the
Trustee, as Registrar, shall instruct the Depositary to reduce
or cause to be reduced the aggregate principal amount at
maturity of the applicable Rule 144A Global Note and to
increase or cause to be increased the aggregate principal
amount at maturity of the applicable Regulation S Global Note
by the principal amount at maturity of the beneficial interest
in the Rule 144A Global Note to be exchanged or transferred,
to credit or cause to be credited to the account of the Person
specified in such instructions, a beneficial interest in the
Regulation S Global Note equal to the reduction in the
aggregate principal amount at maturity of the Rule 144A Global
Note, and to debit, or cause to be debited, from the account
of the Person making such exchange or transfer the beneficial
interest in the Rule 144A Global Note that is being exchanged
or transferred.
(ii) Regulation S Global Note to Rule 144A Global Note. If, at any
time, after the expiration of the 40-day restricted period, an
owner of a beneficial interest in a Regulation S Global Note
deposited with the Depositary or with the Trustee as custodian
for the Depositary wishes to transfer its beneficial interest
in such Regulation S Global Note to a Person who is required
or permitted to take delivery thereof in the form of an
interest in a Rule 144A Global Note, such owner shall, subject
to the Applicable Procedures, exchange or cause the exchange
of such interest for an equivalent beneficial interest in a
Rule 144A
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Global Note as provided in this Section 2.06(a)(ii). Upon
receipt by the Trustee of (1) instructions from Euroclear or
Cedel, if applicable, and the Depositary, directing the
Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
beneficial interest in the Regulation S Global Note to be
exchanged, such instructions to contain information regarding
the Participant account with the Depositary to be credited
with such increase, (2) a written order given in accordance
with the Applicable Procedures containing information
regarding the participant account of the Depositary and (3) a
certificate in the form of EXHIBIT B-2 attached hereto given
by the owner of such beneficial interest stating (A) if the
transfer is pursuant to Rule 144A, that the Person
transferring such interest in a Regulation S Global Note
reasonably believes that the Person acquiring such interest in
a Rule 144A Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the requirements
of Rule 144A and any applicable blue sky or securities laws of
any state of the United States, (B) that the transfer complies
with the requirements of Rule 144 under the Securities Act,
(C) if the transfer is to an Institutional Accredited Investor
that such transfer is in compliance with the Securities Act
and a certificate in the form of EXHIBIT C attached hereto
and, if such transfer is in respect of an aggregate principal
amount of less than $100,000, an Opinion of Counsel acceptable
to NEHC that such transfer is in compliance with the
Securities Act or (D) if the transfer is pursuant to any other
exemption from the registration requirements of the Securities
Act, that the transfer of such interest has been made in
compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be
supported by an Opinion of Counsel from the transferee or the
transferor in form reasonably acceptable to NEHC and to the
Registrar and in each case, in accordance with any applicable
securities laws of any state of the United States or any other
applicable jurisdiction, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable Rule
144A Global Note by the principal amount at maturity of the
beneficial interest in the Regulation S Global Note to be
exchanged or transferred, and the Trustee, as Registrar, shall
instruct the Depositary, concurrently with such reduction, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
applicable Rule 144A Global Note equal to the reduction in the
aggregate principal amount at maturity of such Regulation S
Global Note and to debit or cause to be debited from the
account of the Person making such transfer the beneficial
interest in the Regulation S Global Note that is being
exchanged or transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request to register the transfer
of the Definitive Notes or to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested only if
the Definitive Notes are presented or surrendered for registration of transfer
or exchange, are endorsed and contain a signature guarantee or accompanied by a
written instrument of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney and contains a signature guarantee,
duly authorized in writing and the Registrar received the following
documentation (all of which may be submitted by facsimile):
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(i) in the case of Definitive Notes that are Transfer Restricted
Securities, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, or such Transfer
Restricted Security is being transferred to NEHC or any
of its Subsidiaries, a certification to that effect from
such Holder (in substantially the form of EXHIBIT B-3
hereto); or
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of EXHIBIT B-3 hereto); or
(C) if such Transfer Restricted Security is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 904 under the
Securities Act, a certification to that effect from such
Holder (in substantially the form of EXHIBIT B-3
hereto);
(D) if such Transfer Restricted Security is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those
listed in subparagraphs (B) and (C) above, a
certification to that effect from such Holder (in
substantially the form of EXHIBIT B-3 hereto), a
certification substantially in the form of EXHIBIT C
hereto, and, if such transfer is in respect of an
aggregate principal amount of Notes of less than
$100,000, an Opinion of Counsel acceptable to NEHC that
such transfer is in compliance with the Securities Act;
or
(E) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of EXHIBIT B-3 hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to NEHC and to the Registrar to
the effect that such transfer is in compliance with the
Securities Act.
(c) Transfer of a Beneficial Interest in a Rule 144A Global Note or
Regulation S Permanent Global Note for a Definitive Note.
(i) Any Person having a beneficial interest in a Rule 144A Global
Note or Regulation S Permanent Global Note may upon request,
subject to the Applicable Procedures, exchange such beneficial
interest for a Definitive Note. Upon receipt by the Trustee of
written instructions or such other form of instructions as is
customary for the Depositary (or Euroclear or Cedel, if
applicable), from the Depositary or its nominee on behalf of
any Person having a beneficial interest in a Rule 144A Global
Note or Regulation S Permanent Global Note, and, in the
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case of a Transfer Restricted Security, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of EXHIBIT B-4
hereto);
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
the transferor (in substantially the form of EXHIBIT B-4
hereto);
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, pursuant to a private
placement exemption from the registration requirements
of the Securities Act (and based on an opinion of
counsel if NEHC so requests), a certification to that
effect from such Holder (in substantially the form of
EXHIBIT B-4 hereto) and a certificate from the
applicable transferee (in substantially the form of
EXHIBIT C hereto); or
(D) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of EXHIBIT B-4 hereto) and an Opinion of
Counsel from the transferee or the transferor reasonably
acceptable to NEHC and to the Registrar to the effect
that such transfer is in compliance with the Securities
Act, in which case the Trustee or the Note Custodian, at
the direction of the Trustee, shall, in accordance with
the standing instructions and procedures existing
between the Depositary and the Note Custodian, cause the
aggregate principal amount of Rule 144A Global Notes or
Regulation S Permanent Global Notes, as applicable, to
be reduced accordingly and, following such reduction,
NEHC shall execute and, the Trustee shall authenticate
and deliver to the transferee a Definitive Note in the
appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest
in a Rule 144A Global Note or Regulation S Permanent Global
Note, as applicable, pursuant to this Section 2.06(c) shall be
registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or
Indirect Participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered.
Following any such issuance of Definitive Notes, the Trustee,
as Registrar, shall instruct the Depositary to reduce or cause
to be reduced the aggregate principal amount at maturity of
the applicable Global Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsection (f) of this Section 2.06), a
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Global Note may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(e) Transfer and Exchange of a Definitive Note for Beneficial Interests in
a Global Note. A Definitive Note may not be transferred or exchanged for a
beneficial interest in a Global Note.
(f) Authentication of Definitive Notes in Absence of Depositary. If at
any time:
(i) the Depositary for the Notes notifies NEHC that the Depositary
is unwilling or unable to continue as Depositary for the
Global Notes and a successor Depositary for the Global Notes
is not appointed by NEHC within 90 days after delivery of such
notice; or
(ii) NEHC, at its sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of Definitive Notes under
this Indenture,
then NEHC shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend (the "Private
Placement Legend") in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF NEHC THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (l)(a) INSIDE THE UNITED STATES TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
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501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR"), THAT PRIOR TO SUCH
TRANSFER, FURNISHED THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN
BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS
THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO NEHC THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE
(b), (c), (d) OR (e), BASED UPON AN OPINION OF COUNSEL IF NEHC
SO REQUESTS), (2) TO NEHC OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security
for a Definitive Note that does not bear the legend set
forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security upon
receipt of a certification from the transferring holder
substantially in the form of EXHIBIT B-4 hereto; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted
Security shall not be required to bear the legend set
forth in (i) above, but shall continue to be subject to
the provisions of Section 2.06(a) and (b) hereof;
provided, however, that with respect to any request for
an exchange of a Transfer Restricted Security that is
represented by a Global Note for a Definitive Note that
does not bear the legend set forth in (i) above, which
request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that
such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of EXHIBIT
B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) in reliance on any exemption from the
registration requirements of the Securities Act (other than
exemptions pursuant to Rule 144A or Rule 144 under the
Securities Act) in which the Holder or the transferee provides
an Opinion of Counsel to NEHC and the Registrar in form and
substance reasonably acceptable to NEHC and the Registrar
(which Opinion of Counsel shall also state that the transfer
restrictions contained in the legend are no longer
applicable):
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(A) in the case of any Transfer Restricted Security that is
a Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security
for a Definitive Note that does not bear the legend set
forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted
Security shall not be required to bear the legend set
forth in (i) above, but shall continue to be subject to
the provisions of Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon the consummation of the
Exchange Offer in accordance with the Registration Rights
Agreement, NEHC shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof,
the Trustee shall authenticate (i) one or more Unrestricted
Global Notes in aggregate principal amount equal to the
principal amount of the Restricted Beneficial Interests
tendered for acceptance by persons that are not (x)
broker-dealers, (y) Persons participating in the distribution
of the Notes or (z) Persons who are affiliates (as defined in
Rule 144) of NEHC and accepted for exchange in the Exchange
Offer and (ii) Definitive Notes that do not bear the Private
Placement Legend in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted
for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate
principal amount of the applicable Restricted Global Notes to
be reduced accordingly and NEHC shall execute and the Trustee
shall authenticate and deliver to the Persons designated by
the Holders of Definitive Notes so accepted Definitive Notes
in the appropriate principal amount.
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, NEHC shall execute and the Trustee
shall authenticate Global Notes and Definitive
Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but NEHC
may require payment of a sum sufficient to cover
any stamp or transfer tax or similar governmental
charge payable in connection therewith (other than
any such stamp or transfer taxes or similar
governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 4.10,
4.14 and 9.05 hereto).
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(iii) All Global Notes and Definitive Notes issued upon
any registration of transfer or exchange of Global
Notes or Definitive Notes shall be the valid
obligations of NEHC, evidencing the same debt, and
entitled to the same benefits under this
Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or
exchange.
(iv) The Registrar shall not be required: (A) to issue,
to register the transfer of or to exchange Notes
during a period beginning at the opening of
fifteen (15) Business Days before the day of any
selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer
of or to exchange any Note so selected for
redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in
part, or (C) to register the transfer of or to
exchange a Note between a record date and the next
succeeding interest payment date.
(v) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and
NEHC may deem and treat the Person in whose name
any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of
principal of and interest on such Notes and for
all other purposes, and neither the Trustee, any
Agent nor NEHC shall be affected by notice to the
contrary.
(vi) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions
of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or NEHC and the
Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, NEHC shall issue and the Trustee, upon the written order of
NEHC signed by an Officer of NEHC, shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or NEHC, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and NEHC to protect NEHC, the Trustee, any Agent and any authenticating
agent from any loss that any of them may suffer if a Note is replaced. NEHC and
the Trustee may charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of NEHC and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because NEHC or an Affiliate of NEHC holds
the Note.
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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than NEHC, a Subsidiary or an Affiliate of any
thereof) holds, on a redemption date or maturity date, money sufficient to pay
Notes payable on that date, then on and after that date such Notes shall be
deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by NEHC,
or by any Affiliate of NEHC shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes shown
on the Trustee's register as being owned shall be so disregarded.
Notwithstanding the foregoing, Notes that are to be acquired by NEHC or an
Affiliate of NEHC pursuant to an exchange offer, tender offer or other agreement
shall not be deemed to be owned by such entity until legal title to such Notes
passes to such entity.
SECTION 2.1O. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, NEHC may prepare and the
Trustee shall authenticate temporary Notes upon a written order of NEHC signed
by an Officer of NEHC. Temporary Notes shall be substantially in the form of
Definitive Notes but may have variations that NEHC considers appropriate for
temporary Notes. Without unreasonable delay, NEHC shall prepare and the Trustee
shall upon receipt of a written order of NEHC signed by an Officer authenticate
Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
NEHC at any time may deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder or which NEHC may have acquired
in any manner whatsoever, and all Notes so delivered shall be promptly cancelled
by the Trustee. All Notes surrendered for registration of transfer, exchange or
payment, if surrendered to any Person other than the Trustee, shall be delivered
to the Trustee. The Trustee and no one else shall cancel all Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation.
Subject to Section 2.07 hereof, NEHC may not issue new Notes to replace Notes
that it has redeemed or paid or that have been delivered to the Trustee for
cancellation. All cancelled Notes held by the Trustee shall be destroyed and
certification of their destruction delivered to NEHC, unless by a written order,
signed by an Officer of NEHC, NEHC shall direct that cancelled Notes be returned
to it.
SECTION 2.12. DEFAULTED INTEREST.
If NEHC defaults in a payment of interest on the Notes, it shall pay the
defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but
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in all events at least five (5) Business Days prior to the payment date, in each
case at the rate provided in the Notes and in Section 4.01 hereof. NEHC shall
fix or cause to be fixed each such special record date and payment date, and
shall promptly thereafter, notify the Trustee of any such date. At least fifteen
(15) days before the special record date, NEHC (or the Trustee, in the name and
at the expense of NEHC) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA ss.
316 (c).
SECTION 2.14. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 2.15. CUSIP NUMBER.
NEHC in issuing the Notes may use a "CUSIP" number, and if it does so, the
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. NEHC shall promptly
notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If NEHC elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days but not more than 60 days before a redemption date (unless a shorter period
is acceptable to the Trustee) an Officers' Certificate setting forth (i) the
Section of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the
redemption price.
If NEHC is required to make an offer to purchase Notes pursuant to Section
4.10 or 4.14 hereof, it shall furnish to the Trustee, at least 45 days before
the scheduled purchase date, an Officers' Certificate setting forth (i) the
section of this Indenture pursuant to which the offer to purchase shall occur,
(ii) the terms of the offer, (iii) the principal amount of Notes to be
purchased, (iv) the purchase price, (v) the purchase date and (vi) and further
setting forth a statement to the effect that (a) NEHC or one its Subsidiaries
has affected an Asset Sale and there are Excess Proceeds aggregating more than
$15.0 million or (b) a Change of Control has occurred, as applicable.
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SECTION 3.02. SELECTION OF NOTES T0 BE REDEEMED OR PURCHASED.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall he redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, NEHC
shall mail or cause to be mailed by first class mail, a notice of redemption to
each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Notes and accrued interest,
and Liquidated Damages, if any;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Notes to be redeemed and that, after
the redemption date, upon surrender of such Note, a new Note
or Notes in principal amount equal to the unredeemed portion
shall be issued upon surrender of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless NEHC defaults in making such redemption payment,
interest and Liquidated Damages, if any, on Notes called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being
redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At NEHC's request, the Trustee shall give the notice of redemption in
NEHC's name and at NEHC's expense; provided, however, that NEHC shall have
delivered to the Trustee, at least 45 days
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prior to the redemption date (or such shorter period as shall be acceptable to
the Trustee), an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in the notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Note shall not affect the validity of
the proceeding for the redemption of any other Note.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price plus accrued and unpaid interest and
Liquidated Damages, if any, to such date. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or before 10:00 a.m. (New York City time) on each redemption date or
the date on which Notes must be accepted for purchase pursuant to Section 4.10
or 4.14, NEHC shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued and unpaid interest and
Liquidated Damages, if any, on all Notes to be redeemed or purchased on that
date. The Trustee or the Paying Agent shall promptly return to NEHC upon its
written request any money deposited with the Trustee or the Paying Agent by NEHC
in excess of the amounts necessary to pay the redemption price of (including any
applicable premium), accrued interest and Liquidated Damages, if any, on all
Notes to be redeemed or purchased.
If Notes called for redemption or tendered in an Asset Sale Offer or
Change of Control Offer are paid or if NEHC has deposited with the Trustee or
Paying Agent money sufficient to pay the redemption or purchase price of, unpaid
and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed
or purchased, on and after the redemption or purchase date interest and
Liquidated Damages, if any, shall cease to accrue on the Notes or the portions
of Notes called for redemption or tendered and not withdrawn in an Asset Sale
Offer or Change of Control Offer (regardless of whether certificates for such
securities are actually surrendered). If a Note is redeemed or purchased on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest and Liquidated Damages, if any, shall
be paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of NEHC to comply with
the preceding paragraph, interest shall be paid on the unpaid principal and
Liquidated Damages, if any, from the redemption or purchase date until such
principal and Liquidated Dames, if any, is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case, at the rate provided
in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, NEHC shall issue and,
upon NEHC's written request, the Trustee shall authenticate for the Holder at
the expense of NEHC a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
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(a) Except as set forth in the next paragraph, the Notes will not be
redeemable at NEHC's option prior to July 15, 2002. Thereafter, the Notes will
be subject to redemption at any time at the option of NEHC, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on July 15
of the years indicated below:
Year Percentage
2002 ............................................. 106.188%
2003 ............................................. 104.125%
2004 ............................................. 102.063%
2005 and thereafter .............................. 100.000%
(b) Notwithstanding the foregoing, at any time NEHC may redeem the Notes,
in whole but not in part, at the option of NEHC, at a redemption price of
112.375% of the Accreted Value (determined at the date of redemption), with the
net cash proceeds of a Public Equity Offering; provided that such redemption
shall occur within 45 days of the date of the closing of such Public Equity
Offering.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 3.09, 4.10 and 4.14 hereof, NEHC shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 3.09. REPURCHASE OFFERS.
In the event that NEHC shall be required to commence an offer to all
Holders to repurchase Notes (a "Repurchase Offer") pursuant to Section 4.10
hereof, an "Excess Proceeds Offer," or pursuant to Section 4.14 hereof, a
"Change of Control Offer," NEHC shall follow the procedures specified below.
A Repurchase Offer shall commence no earlier than 30 days and no later
than 60 days after a Change of Control (unless NEHC is not required to make such
offer pursuant to Section 4.14(c) hereof) or an Excess Proceeds Offer Triggering
Event (as defined below), as the case may be, and remain open for a period of
twenty (20) Business Days following its commencement and no longer, except to
the extent that a longer period is required by applicable law (the "Offer
Period"). No later than five (5) Business Days after the termination of the
Offer Period (the "Purchase Date"), NEHC shall purchase the principal amount of
Notes required to be purchased pursuant to Section 4.10 hereof, in the case of
an Excess Proceeds Offer, or 4.14 hereof, in the case of a Change of Control
Offer (the "Offer Amount") or, if less than the Offer Amount has been tendered,
all Notes tendered in response to the Repurchase Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Repurchase Offer.
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Upon the commencement of a Repurchase Offer, NEHC shall send, by first
class mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to such Repurchase Offer. The
Repurchase Offer shall be made to all Holders. The notice, which shall govern
the terms of the Repurchase Offer, shall describe the transaction or
transactions that constitute the Change of Control or Excess Proceeds Offer
Triggering Event, as the case may be and shall state:
(a) that the Repurchase Offer is being made pursuant to this Section 3.09
and Section 4.10 or 4.14 hereof, as the case may be, and the length of
time the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless NEHC defaults in making such payment, any Note accepted
for payment pursuant to the Repurchase Offer shall cease to accrue
interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to a
Repurchase Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note,
duly completed, or transfer by book-entry transfer, to NEHC, the
Depositary, or the Paying Agent at the address specified in the notice not
later than the close of business on the last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if NEHC, the
Depositary or the Paying Agent, as the case may be, receives, not later
than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, NEHC shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by NEHC so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. (New York City time) on each Purchase Date, NEHC
shall irrevocably deposit with the Trustee or Paying Agent in immediately
available funds the aggregate purchase price with respect to a principal amount
of Notes equal to the Offer Amount, together with accrued and unpaid interest
and Liquidated Damages, if any, thereon, to be held for payment in accordance
with the terms of this Section 3.09. On the Purchase Date, NEHC shall, to the
extent lawful, (i) accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Repurchase Offer, or if less than the Offer Amount has been tendered, all
Notes tendered, (ii) deliver or cause the Paying Agent or depository, as the
case may be, to deliver to the Trustee Notes so accepted and (iii) deliver to
the Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by NEHC in accordance with the terms of this Section
3.09. NEHC,
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the Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than three (3) Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by NEHC for purchase, plus any
accrued and unpaid interest and Liquidated Damages, if any, thereon, and NEHC
shall promptly issue a new Note, and the Trustee, shall authenticate and mail or
deliver such new Note, to such Holder, equal in principal amount to any
unpurchased portion of such Holder's Notes surrendered. Any Note not so accepted
shall be promptly mailed or delivered by NEHC to the Holder thereof. NEHC shall
publicly announce in a newspaper of general circulation or in a press release
provided to a nationally recognized financial wire service the results of the
Repurchase Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01, 3.02, 3.05 and 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
NEHC shall pay or cause to be paid the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes. NEHC
shall pay all Liquidated Damages, if any, in the same manner on the dates and in
the amounts set forth in the Registration Rights Agreement. Principal, premium
and Liquidated Damages, if any, and interest, shall be considered paid for all
purposes hereunder on the date the Paying Agent if other than NEHC or a
Subsidiary thereof holds, as of 10:00 a.m. (New York City time) money deposited
by NEHC in immediately available funds and designated for and sufficient to pay
all such principal, premium and Liquidated Damages, if any, and interest, then
due.
NEHC shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1
% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
NEHC shall maintain in the Borough of Manhattan, the City of New York an
office or agency (which may be an office of the Trustee or an affiliate of the
Trustee or Registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon NEHC in
respect of the Notes and this Indenture may be served. NEHC shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time NEHC 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.
NEHC may also from time to time designate one or more other offices or
agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
NEHC of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New
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York for such purposes. NEHC shall give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.
NEHC hereby designates the Corporate Trust Office of the Trustee as one
such office or agency of NEHC in accordance with Section 2.03 hereof.
SECTION 4.03. COMMISSION REPORTS.
From and after the earlier of the effective date of the Exchange Offer
Registration Statement or the effective date of the Shelf Registration
Statement, whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, NEHC shall furnish to the
Holders of Notes (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 NEHC were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by NEHC's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if NEHC were required to
file such reports. In addition, whether or not required by the rules and
regulations of the Commission, NEHC shall file a copy of all such information
and reports with the Commission for public availability (unless the Commission
will not accept such a filing) within the time periods that would have been
applicable had NEHC been subject to such rules and regulations and make such
information available to securities analysts and prospective investors upon
request. In addition, NEHC has agreed that, for so long as any Notes remain
outstanding, it shall furnish to the Holders, to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. NEHC shall at
all times comply with TIA ss. 314(a).
The financial information to be distributed to Holders of Notes shall be
filed with the Trustee and mailed to the Holders at their addresses appearing in
the register of Notes maintained by the Registrar, within 90 days after the end
of NEHC's fiscal years and within 45 days after the end of each of the first
three quarters of each such fiscal year.
NEHC shall provide the Trustee with a sufficient number of copies of all
reports and other documents and information and, if requested by NEHC, the
Trustee will deliver such reports to the Holders under this Section 4.03.
SECTION 4.04. COMPLIANCE CERTIFICATE.
NEHC shall deliver to the Trustee, within 90 days after the end of each
fiscal year, an Officers' Certificate stating that a review of the activities of
NEHC and its Subsidiaries during the preceding fiscal year has been made under
the supervision of the signing Officers with a view to determining whether each
has kept, observed, performed and fulfilled its obligations under this Indenture
(including, with respect to any Restricted Payments made during such year, the
basis upon which the calculations required by Section 4.07 hereof were computed,
which calculations may be based on NEHC's latest available financial
statements), and further stating, as to each such Officer signing such
certificate, that, to the best of his or her knowledge, each entity has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action NEHC is taking or proposes
to take with respect thereto) and that, to the best of his or her knowledge, no
event has occurred and remains in existence by reason of which payments on
account of the principal of, premium or Liquidated Damages, if any, or interest
on the Notes is prohibited or if such event has
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occurred, a description of the event and what action NEHC is taking or proposes
to take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, in connection with the
year-end financial statements delivered pursuant to Section 4.03 hereof, NEHC
shall use its best efforts to deliver a written statement of NEHC's independent
public accountants (who shall be a firm of established national reputation) that
in making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that NEHC has violated any provisions of Article Four or Section 5.01 hereof or,
if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation. In the event that such written statement of NEHC's independent
public accountants cannot be obtained, NEHC shall deliver an Officers'
Certificate certifying that it has used its best efforts to obtain such
statements and was unable to do so.
NEHC shall, so long as any of the Notes are outstanding, deliver to the
Trustee, forthwith upon any Officer becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of Default
and what action NEHC is taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
NEHC shall pay, and shall cause each of its Subsidiaries to pay, prior to
delinquency all material taxes, assessments and governmental levies, except such
as are contested in good faith and by appropriate proceedings and with respect
to which appropriate reserves have been taken in accordance with GAAP.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
NEHC covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and NEHC (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
From and after the date hereof NEHC shall not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of NEHC's or any
of its Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving NEHC) or to
the direct or indirect holders of NEHC's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
NEHC); (ii) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation involving
NEHC) any Equity Interests of NEHC or any direct or indirect parent of NEHC;
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of NEHC that is pari
passu with or subordinated to the Notes (other than Notes), except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth
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in clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) NEHC would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by NEHC and its Subsidiaries after the
date hereof (excluding Restricted Payments permitted by clause (ii) of the
next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of NEHC for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after
the date of the Indenture to the end of NEHC's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by NEHC from the issue or sale since
the date of the Indenture of Equity Interests of NEHC (other than
Disqualified Stock) or of Disqualified Stock or debt securities of NEHC
that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to a
Subsidiary of NEHC and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii)
to the extent that any Restricted Investment that was made after the date
of the Indenture is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment plus (iv) if any Unrestricted
Subsidiary (A) is redesignated as a Restricted Subsidiary, the fair market
value of such redesignated Subsidiary (as determined in good faith by the
Board of Directors) as of the date of its redesignation or (B) pays any
cash dividends or cash distributions to NEHC or any of its Restricted
Subsidiaries, 50% of any such cash dividends or cash distributions made
after the date hereof.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions hereof; (ii)
the redemption, repurchase, retirement, defeasance or other acquisition of any
pari passu or subordinated Indebtedness or Equity Interests of NEHC in exchange
for, or out of the net cash proceeds of the substantially concurrent sale or
issuance (other than to a Restricted Subsidiary of NEHC) of, other Equity
Interests of NEHC (other than any Disqualified Stock); provided that the amount
of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Restricted Subsidiary of NEHC to the
holders of its Equity Interests on a pro rata basis; (v) the declaration or
payment of dividends to Holberg for expenses incurred by Holberg in its capacity
as a holding company that are attributable to the operations of NEHC and its
Restricted Subsidiaries, including, without limitation, (a) customary salary,
bonus and other benefits payable to officers and employees of Holberg, (b) fees
and expenses paid to members of the Board of Directors of Holberg, (c)
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general corporate overhead expenses of Holberg, (d) foreign, federal, state or
local tax liabilities paid by Holberg, (e) management, consulting or advisory
fees paid to Holberg not to exceed $1.0 million in any fiscal year, and (f) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of NEHC or Holberg held by any member of NEHC's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of the
Indenture; provided, however, the aggregate amount paid pursuant to the
foregoing clauses (a) through (f) does not exceed $10.0 million in any fiscal
year; (vi) Investments in any Person (other than NEHC or a Wholly-Owned
Restricted Subsidiary) engaged in a Permitted Business in an amount not to
exceed $7.0 million; (vii) other Investments in Unrestricted Subsidiaries having
an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (vii) that are at that time outstanding, not to exceed
$3.0 million; (viii) Permitted Investments; (ix) payments to Holberg pursuant to
the tax sharing agreement among Holberg and other members of the affiliated
corporations of which Holberg is the common parent; (x) non-cash accretions to
the liquidation value of shares of Senior Exchangeable Preferred Stock and
shares of Junior Exchangeable Preferred Stock, and any payment in kind dividends
with respect to any of the foregoing; (xi) any exchange of shares of Senior
Exchangeable Preferred Stock and Junior Exchangeable Preferred Stock for 131/2 %
Subordinated Exchange Debentures due 2009, or 15% Subordinated Exchange
Debentures due 2009, as the case may be, pursuant to the terms of the Senior
Exchangeable Preferred Stock or Junior Exchangeable Preferred Stock, as the case
may be; and (xii) other Restricted Payments in an aggregate amount not to exceed
$15.0 million.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by the Company be
transferred to or held by an Unrestricted Subsidiary. For purposes of making
such determination, all outstanding Investments by NEHC and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation (as determined in good faith by
the Board of Directors). Such designation shall only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by NEHC or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined in good faith by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $10.0 million. Not later than the date of making any Restricted
Payment, NEHC shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
SECTION 4.08. DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
NEHC shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (i)(a) pay dividends or make any other distributions to NEHC or
any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or
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participation in, or measured by, its profits, or (b) pay any indebtedness owed
to NEHC or any of its Restricted Subsidiaries, (ii) make loans or advances to
NEHC or any of its Restricted Subsidiaries or (iii) transfer any of its
properties or assets to NEHC or any of its Restricted Subsidiaries, except for
such encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) the New Credit Facility as in
effect as of the date hereof, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive in the aggregate (as determined by the Credit Agent in good faith)
with respect to such dividend and other payment restrictions than those
contained in the New Credit Facility as in effect on the date hereof, (c) this
Indenture and the Notes, (d) any applicable law, rule, regulation or order, (e)
any instrument governing Indebtedness or Capital Stock of a Person acquired by
NEHC or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), 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,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms hereof to be incurred, (f) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the material restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced (i) contracts for the sale of assets, including
without limitation customary restrictions with respect to a Subsidiary pursuant
to an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary, and (j)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
NEHC shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and NEHC will
not issue any Disqualified Stock and will not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that NEHC may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for NEHC's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Restricted Subsidiaries of NEHC of term
Indebtedness under the New Credit Facility; provided that the aggregate
principal amount of all term Indebtedness outstanding under the New Credit
Facility after giving effect to such incurrence does not exceed the aggregate
amount of term Indebtedness borrowed under the New Credit Facility on the date
hereof less the aggregate amount of all repayments, optional or mandatory, of
the principal of any term Indebtedness under the New Credit
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Facility (other than repayments that are immediately reborrowed) that have been
made since the date hereof; provided, that the foregoing proviso shall not limit
the principal amount of Permitted Refinancing Indebtedness that may be incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (i);
(ii) the incurrence by the Restricted Subsidiaries of NEHC of revolving
Indebtedness and letters of credit pursuant to New Credit Facility; provided
that the aggregate principal amount of all revolving Indebtedness (with letters
of credit being deemed to have a principal amount equal to the maximum potential
liability of the Restricted Subsidiaries of NEHC thereunder) outstanding under
the New Credit Facility after giving effect to such incurrence does not exceed
$150.0 million; provided that the foregoing proviso shall not limit the amount
of Permitted Refinancing Indebtedness that may be incurred to refinance or
replace any Indebtedness incurred pursuant to this clause (ii);
(iii) the incurrence by NEHC and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by NEHC and its Restricted Subsidiaries of
Indebtedness represented by the Notes, the Senior Subordinated Notes and the
Senior Subordinated Note Guarantees;
(v) the incurrence by NEHC or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of NEHC or such Restricted
Subsidiary (whether through the direct purchase of assets or the Capital Stock
of any Person owning such Assets), in an aggregate principal amount not to
exceed $150.0 million;
(vi) the incurrence by NEHC or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Restricted
Subsidiary; provided that such Indebtedness was incurred by the prior owner of
such assets or such Restricted Subsidiary prior to such acquisition by NEHC or
one of its Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by NEHC or one of it Subsidiaries; provided
further that the principal amount (or accreted value, as applicable) of such
Indebtedness, together with any other outstanding Indebtedness incurred pursuant
to this clause (vi), does not exceed $7.0 million;
(vii) the incurrence by NEHC or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness that was permitted by this
Indenture to be incurred;
(viii) the incurrence by NEHC or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among NEHC and any of its Wholly Owned
Restricted Subsidiaries; provided, however, that (i) if NEHC is the obligor on
such Indebtedness and the payee is not a Subsidiary Guarantor, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held by
a Person other than NEHC or a Wholly Owned Restricted Subsidiary and (B) any
sale or other transfer of any such Indebtedness to a Person that is not either
NEHC or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by NEHC or such Restricted
Subsidiary, as the case may be;
(ix) the incurrence by NEHC or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
currency risk or interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be outstanding;
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(x) the guarantee by NEHC or any of its Restricted Subsidiaries of
Indebtedness of NEHC or a Restricted Subsidiary of NEHC that was permitted to be
incurred by another provision of this covenant;
(xi) the incurrence by NEHC's Unrestricted Subsidiaries of Non-Recourse
Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse
Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an
incurrence of Indebtedness by a Restricted Subsidiary of NEHC;
(xii) Asset Sales in the form of Receivables Transactions;
(xiii) Indebtedness incurred by NEHC or any of its Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of credit issued
in the ordinary course of business, including without limitation to letters of
credit in respect to workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding workers'
compensation claims; provided, however, that upon the drawing of such letters
of credit or the incurrence of such Indebtedness, such obligations are
reimbursed within 30 days following such drawing or incurrence;
(xiv) Indebtedness arising from agreements of NEHC or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, asset or a Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
provided that the maximum aggregate liability of all such Indebtedness shall at
no time exceed 50% of the gross proceeds actually received by NEHC and its
Restricted Subsidiaries in connection with such disposition;
(xv) obligations in respect of performance and surety bonds and completion
guarantees provided by NEHC or any Restricted Subsidiary in the ordinary course
of business;
(xvi) any incurrence of Indebtedness permitted by clause (xi) of the
exceptions to Section 4.07;
(xvii) guarantees incurred in the ordinary course of business in an
aggregate principal amount not to exceed $7.0 millon at any time outstanding;
and
(xviii) the incurrence by NEHC or any of its Restricted Subsidiaries of
additional Indebtedness, including Attributable Debt incurred after the date of
the Indenture, in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xviii), not to exceed $30.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xviii) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
NEHC shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this Section 4.09 and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest and the accretion of
accreted value will not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
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SECTION 4.10. ASSETS SALES.
NEHC shall not, and shall not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale other than transfers of Receivables to a
Receivables Subsidiary in connection with a Receivables Transaction unless (i)
NEHC (or the Restricted Subsidiary, as the case may be) receives consideration
at the time of such Asset Sale at least equal to the fair market value
(evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 80% of the consideration
therefor received by NEHC or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on NEHC's or such
Restricted Subsidiary's most recent balance sheet), of NEHC or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases NEHC or such Restricted Subsidiary from further liability and (y)
any securities, notes or other obligations received by NEHC or any such
Restricted Subsidiary from such transferee that are converted by NEHC or such
Restricted Subsidiary into cash within 180 days (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt by NEHC of any Net Proceeds from an
Asset Sale, NEHC may apply such Net Proceeds, at its option, to the acquisition
of a controlling interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, in a
Permitted Business. Pending the final application of any such Net Proceeds, NEHC
may invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales received by NEHC that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $20.0 million, NEHC will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the Accreted Value thereof on the
date of purchase (if such date of purchase is prior to July 15, 2002) or 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (if such date of purchase is on
or after July 15, 2002), in each case in accordance with the procedures set
forth in Section 3.09 hereof. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, NEHC
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
NEHC shall not, and shall not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction") involving consideration in excess of $5.0
million unless (i) such Affiliate Transaction is on terms that are no less
favorable to NEHC or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by NEHC or such Restricted
Subsidiary with an unrelated Person and (ii) NEHC delivers to the Trustee (a)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $7.5 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
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disinterested members of the Board of Directors (if such disinterested members
exist) and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving either aggregate consideration in excess of
$15.0 million or an aggregate consideration in excess of $10.0 million where
there are no disinterested members of the Board of Directors, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that the following shall not be deemed Affiliate
Transactions: (p) any transaction permitted by the Amended and Restated
Investors Agreement dated on or about July 11, 1997, as the same may be from
time to time amended, provided that no such amendment materially affects the
Notes, (q) any employment agreement entered into by NEHC or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of NEHC or such Restricted Subsidiary, (r) transactions
between or among NEHC and/or its Restricted Subsidiaries, (s) Permitted
Investments and Restricted Payments that are permitted by the provisions of
Section 4.07 hereof, (t) customary loans, advances, fees and compensation paid
to, and indemnity provided on behalf of, officers, directors, employees or
consultant of NEHC or any of its Restricted Subsidiaries, (u) annual management
fees paid to Holberg not to exceed $5.0 million in any one year, (v) transaction
pursuant to any contract or agreement in effect on the date hereof as the same
may be amended, modified or replaced from time to time so long as any such
amendment, modification or replacement is no less favorable to NEHC and its
Restricted Subsidiaries than contract or agreement as in effect on the Issue
Date or is approved by a majority of the disinterested directors of NEHC, (w)
transactions between NEUC or its Restricted Subsidiaries on the one hand, and
Holberg on the other hand, involving the provision of financial or advisory
services by Holberg; provided that fees payable to Holberg do not exceed the
usual and customary fees for similar services, (x) transactions between NEHC or
its Restricted Subsidiaries on the one hand, and DLJ or its Affiliates on the
other hand, involving the provision of financial, advisory, lending, placement
or underwriting services by DLJ; provided that fees payable to DLJ do not exceed
the usual and customary fees of DLJ for similar services, (y) the insurance
arrangements between NEHC and its Subsidiaries and an Affiliate of Holberg that
are not less favorable to NEHC or any of its Subsidiaries than those that are in
effect on the date hereof provided such arrangements are conducted in the
ordinary course of business consistent with past practices, and (z) payments
under the tax sharing agreement among Holberg and other members of the
affiliated group of corporations of which it is the common parent.
SECTION 4.12. LIENS.
NEHC shall not and shall not permit any of its Restricted Subsidiaries to,
create, incur, assume or otherwise cause or suffer to exist or become effective
any Lien of any kind securing trade payables or Indebtedness of NEHC that is
subordinate to or pari passu with the Notes (other than Permitted Liens) upon
any of their property or assets, now owned or hereafter acquired.
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS.
NEHC shall not, and shall not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that NEHC may, and
may permit its Restricted Subsidiaries to, enter into a sale and leaseback
transaction if (i) NEHC could have (a) incurred Indebtedness in an amount equal
to the Attributable Debt relating to such sale and leaseback transaction
pursuant to Section 4.09 hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and NEHC, to the extent
it receives the proceeds of such transaction, applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
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SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require NEHC to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the Accreted Value thereof on the date of purchase (if such date of
purchase is prior to July 15, 2002) or 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (if such date of purchase is after July 15, 2002) (the
"Change of Control Payment")~ Within 30 days following any Change of Control,
NEHC will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by
Section 3.09 hereof and described in such notice. NEHC shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, NEHC shall, to the extent lawful,
(1) accept for payment all Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by NEHC. The
Paying Agent will promptly mail to each Holder of Notes so tendered the Change
of Control Payment for such Notes, and the Trustee will promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided that each such new Note will be in a principal amount of $1,000
or an integral multiple thereof.
The Change of Control provisions described above will be applicable
whether or not any other provisions of this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of the Notes to require that NEHC
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
NEHC shall not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth herein
applicable to a Change of Control Offer made by NEHC and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
SECTiON 4.15. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, as the case may be, NEHC
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each of its Subsidiaries in accordance with the respective
organizational documents (as the same may be amended from time to time) of NEHC
or any such Subsidiary and the rights (charter and statutory), licenses and
franchises of NEHC and its Subsidiaries; provided that NEHC shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries, if the Board of
Directors of NEHC shall determine that the preservation thereof is no longer
desirable in the conduct of the business of NEHC and its Subsidiaries, taken as
a whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.
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SECTION 4.16. LIMITATION ON ISSUANCES OF CAPITAL STOCK OF WHOLLY OWNED
RESTRICTED SUBSIDIARIES.
NEHC (i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary of NEHC to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of NEHC to any Person (other than
NEHC or a Wholly Owned Restricted Subsidiary of NEHC), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 hereof and (ii) will not permit any Wholly Owned Restricted
Subsidiary of NEHC to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to NEHC or a Wholly Owned Restricted Subsidiary
of NEHC.
SECTION 4.17 BUSINESS ACTIVITIES.
NEHC shall not, and shall not permit any Restricted Subsidiary to, engage
in any business other than a Permitted Business, except to such extent as would
not be material to NEHC and its Restricted Subsidiaries taken as a whole.
SECTION 4.18. PAYMENT FOR CONSENTS.
Neither NEHC nor any of its Subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions hereof or the Notes unless
such consideration is offered to be paid or is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OF SALE OF ASSETS.
NEHC shall not consolidate or merge with or into (whether or not NEHC is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(i) NEHC is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than NEHC) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or Person
formed by or surviving any such consolidation or merger (if other than NEHC) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of NEHC
under the Notes and this Indenture; (iii) immediately after such transaction no
Default or Event of Default exists; (iv) except in the case of a merger of NEHC
with or into a Wholly Owned Restricted Subsidiary of NEHC, NEHC or the entity or
Person formed by or surviving any such consolidation or merger (if other than
NEHC), or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, 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
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period, be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of NEHC in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which NEHC is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to NEHC), and shall exercise every right and
power of NEHC under this Indenture with the same effect as if such successor
Person had been named as NEHC herein; provided, that, (i) solely for the
purposes of computing Consolidated Net Income for purposes of clause (b) of the
first paragraph of Section 4.07 hereof, the Consolidated Net Income of any
person other than NEHC and its Subsidiaries shall be included only for periods
subsequent to the effective time of such merger, consolidation, combination or
transfer of assets; and (ii) in the case of any sale, assignment, transfer,
lease, conveyance, or other disposition of less than all of the assets of the
predecessor Company, the predecessor Company shall not be released or discharged
from the obligation to pay the principal of or interest and Liquidated Damages,
if any, on the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes;
(ii) default in payment when due of principal of or premium, if any, on
the Notes;
(iii) failure by NEHC to comply with the provisions described under
Sections 4.10 or 4.14 or Article 5 hereof;
(iv) failure by NEHC for 30 days after notice from the Trustee or at
least 25% in principal amount of the Notes then outstanding to
comply with the provisions described under Sections 4.07 or 4.09
hereof;
(v) failure by NEHC for 60 days after notice from the Trustee or at
least 25% in principal amount of the Notes then outstanding to
comply with any of its other agreement in this Indenture or the
Notes;
(vi) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by NEHC or any of its
Subsidiaries (or the payment of which is guaranteed by NEHC or any
of its Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date hereof, which default (a) is
caused by a failure to pay principal of or
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premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $15.0 million or more;
(vii) failure by NEHC or any of its Subsidiaries to pay final judgments
aggregating in excess of $50 million, which judgments are not paid,
discharged or stayed for a period of 60 days;
(viii) NEHC or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole would constitute a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against NEHC or any of its
Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an
involuntary case;
(b) appoints a Custodian of NEHC or any of its
Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or
substantially all of the property of the Company
or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(c) orders the liquidation of NEHC or any of its
Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
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SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the principal of (or, if prior to July 15, 2002, the Accreted Value of),
premium, if any, and accrued and unpaid interest on the Notes shall be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default as described in clause (viii) or (ix) of Section 6.01 hereof, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce this Indenture or the Notes except as
provided in this Indenture.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of NEHC with the
intention of avoiding payment of the premium that NEHC would have had to pay if
NEHC then had elected to redeem the Notes pursuant to the optional redemption
provisions of Section 3.07(a) hereof, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to July 15, 2002
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of NEHC with the intention of avoiding the prohibition on redemption of
the Notes prior to July 15, 2002, then the amount payable in respect of such
Notes for purposes of this paragraph for each of the twelve-month periods
beginning on July 15 of the years indicated below shall be set forth below,
expressed as percentages of the Accreted Value and Liquidated Damages, if any,
to the date of payment:
Year Percentage
---- ----------
1997 .................................................... 112.375%
1998 .................................................... 111.138%
1999 .................................................... 109.900%
2000 .................................................... 108.663%
2001 .................................................... 107.425%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any,
interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
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NEHC is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and NEHC is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
this Indenture (including any acceleration (other than an automatic
acceleration) resulting from an Event of Default under clause (viii) or (ix) of
Section 6.01 hereof) except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes (other than as a result
of an acceleration), which shall require the consent of all of the Holders of
the Notes then outstanding.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust power
conferred on it. However, (i) the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability, and (ii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction. In case an Event of Default shall occur (which shall not be cured),
the Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Notwithstanding any
provision to the contrary in this Indenture, the Trustee is under no obligation
to exercise any of its rights or powers under this Indenture at the request of
any Holder of Notes, unless such Holder shall offer to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from
NEHC;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, interest, and
Liquidated Damages, if any, on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against NEHC for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and 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.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to NEHC (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
securities or property payable or deliverable upon the conversion or exchange of
the Notes or on any such claims and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. 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 Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
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First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, interest, and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium, if any, interest, and
Liquidated Damages, if any, respectively;
Third: without duplication, to the Holders for any other Obligations
owing to the Holders under this Indenture and the Notes; and
Fourth: to NEHC or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of which a
Responsible Officer of the Trustee has knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture
and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture or the TIA and the Trustee
need perform only those duties that are specifically set forth in
this Indenture or the TIA and no others, and no implied covenants
or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
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requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with NEHC. Money held in
trust by the Trustee need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on the truth of the statements and
correctness of the opinions contained in, and shall be protected from
acting or refraining from acting upon, any document believed by it to
be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel.
Prior to taking, suffering or admitting any action, the Trustee may
consult with counsel of the Trustee's own choosing and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from NEHC shall be sufficient if signed
by an Officer of NEHC.
(f) 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 unless such Holders shall have offered to the
Trustee reasonable security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner of
Notes and may otherwise deal with NEHC or any Affiliate of NEHC with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue as Trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for NEHC's use of the proceeds from the Notes or any money paid to
NEHC or upon NEHC's direction under any provision of this Indenture, it shall
not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment on any
Note pursuant to Section 6.01(i) or (ii) hereof, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of the
Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA section 313(a) (but if no event described in TIA
section 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
section 313(b). The Trustee shall also transmit by mail all reports as required
by TIA section 313(c).
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A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to NEHC and filed with the Commission and each stock exchange on
which NEHC has informed the Trustee in writing the Notes are listed in
accordance with TIA section 313(d). NEHC shall promptly notify the Trustee when
the Notes are listed on any stock exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
NEHC shall pay to the Trustee from time to time reasonable compensation for
its acceptance of this Indenture and services hereunder. To the extent permitted
by law, the Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. NEHC shall reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for its services. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
NEHC shall indemnify the Trustee against any and all losses, liabilities or
expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against NEHC (including this Section 7.07)
and defending itself against any claim (whether asserted by NEHC or any Holder
or any other person) or liability in connection with the exercise or performance
of any of its powers or duties hereunder except to the extent any such loss,
liability or expense may be attributable to its negligence or bad faith. The
Trustee shall notify NEHC promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify NEHC shall not relieve NEHC of its
obligations hereunder. NEHC shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and NEHC shall
pay the reasonable fees and expenses of such counsel. NEHC need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of NEHC under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure NEHC's payment obligations in this Section 7.07, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal, interest and
Liquidated Damages, if any, on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01 (viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA section 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying NEHC. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and NEHC in writing. NEHC may remove the Trustee if:
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(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, NEHC shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by NEHC.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, NEHC, or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to NEHC. Thereupon, the resignation or removal of
the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and the duties of the Trustee under this Indenture.
The successor Trustee shall mail a notice of its succession to the Holders of
the Notes. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, provided that all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, NEHC's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee or any Agent, as applicable.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities. The Trustee and its direct parent shall at all times have a
combined capital surplus of at least $50.0 million as set forth in its most
recent annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA sections 310(a)(l), (2) and (5). The Trustee is subject to TIA section
310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST NEHC.
The Trustee is subject to TIA section 311(a), excluding any creditor
relationship listed in TIA section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
NEHC may, at the option of their respective Boards of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon NEHC's exercise under Section 8.01 hereof of the option applicable to
this Section 8.02, NEHC shall, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, be deemed to have been discharged from their
respective obligations with respect to all outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that NEHC shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all their respective other obligations under such
Notes and this Indenture (and the Trustee, on demand of and at the expense of
NEHC, shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Notes when such payments are due from the
trust referred to in Section 8.04(a); (b) NEHC's obligations with respect to
such Notes under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10 and 4.02
hereof; (c) the rights, powers, trusts, duties and immunities of the Trustee
including without limitation thereunder Section 7.07, 8.05 and 8.07 hereof and
NEHC's obligations in connection therewith and (d) the provisions of this
Article 8. Subject to compliance with this Article 8, NEHC may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon NEHC's exercise under Section 8.01 hereof of the option applicable to
this Section 8.03, NEHC shall, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, be released from its obligations under the
covenants contained in Sections 3.09, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.16, 4.17 and 5.01 hereof with respect to the outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "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 (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, NEHC or any of its
Subsidiaries may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such
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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 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon NEHC's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(iii) through (v) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) NEHC must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as shall be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and NEHC must specify whether the
Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election under Section 8.02 hereof, NEHC shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) NEHC has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date hereof, there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes shall not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and shall 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 Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, NEHC shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes shall not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance
and shall 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;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than this
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Indenture) to which NEHC or any of its Subsidiaries is a party or by
which NEHC or any of its Subsidiaries is bound;
(f) NEHC shall have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
shall not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) NEHC shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by NEHC with the intent of
preferring the Holders of Notes over the other creditors of NEHC with
the intent of defeating, hindering, delaying or defrauding creditors
of NEHC or others; and
(h) NEHC shall have delivered to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including NEHC acting as Paying Agent) as the Trustee
may determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, interest and Liquidated
Damages, if any, but such money need not be segregated from other funds except
to the extent required by law.
NEHC shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof 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 Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to NEHC from time to time upon the written request of NEHC
and be relieved of all liability with respect to any money or non-callable
Government Securities held by it as provided in Section 8.04 hereof which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.04(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO NEHC.
Any money deposited with the Trustee or any Paying Agent, or then held by
NEHC, in trust for the payment of the principal of, premium, if any, interest or
Liquidated Damages, if any, on any Note and remaining unclaimed for one year
after such principal, and premium, if any, or interest or Liquidated Damages, if
any, has become due and payable shall be paid to NEHC on its written request or
(if then held by NEHC) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to NEHC
for payment thereof, and all liability of the Trustee or
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such Paying Agent with respect to such trust money, and all liability of NEHC 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 NEHC cause to be published once, in the New York Times and The Wall
Street Journal (national edition), 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 notification or publication, any unclaimed balance of such
money then remaining shall be repaid to NEHC.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of NEHC under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if NEHC makes any payment
of principal of, premium, if any, interest or Liquidated Damages, if any, on any
Note following the reinstatement of its obligations, NEHC shall be subrogated to
the rights of the Holders of such Notes to receive such payment from the money
held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE NOTES.
Notwithstanding Section 9.02 of this Indenture, without the consent of any
Holder of Notes NEHC and the Trustee may amend or supplement this Indenture or
the Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of NEHC's obligations to the Holders of
the Notes in the case of a merger, or consolidation pursuant to
Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Notes; or
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the written request of NEHC accompanied by a resolution of its Board
of Directors of NEHC authorizing the execution of any such amended or
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with NEHC in the
execution of any amended or supplemental indenture 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 that affects its
own rights, duties or immunities under this Indenture or otherwise.
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SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, this Indenture or the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer, for Notes), and any existing default or compliance with any
provision of this Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with or a tender offer or exchange
offer for the Notes).
Upon the request of NEHC accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with NEHC in the execution of such amended or supplemental indenture unless
such amended or supplemental indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may,
but shall not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section 9.02
becomes effective, NEHC shall mail to the Holders of each Note affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure of
NEHC to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amended or supplemental indenture or
waiver.
Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of a majority
in aggregate principal amount of the Notes then outstanding may amend or waive
compliance in a particular instance by NEHC with any provision of this Indenture
or the Notes. However, without the consent of each Holder affected, an
amendment, or waiver may not (with respect to any Note held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than provisions relating to Sections 3.09, 4.10 and 4.14
hereof);
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in Section 6.04 or 6.07 hereof;
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(g) waive a redemption or repurchase payment with respect to any Note
(other than a payment required by Section 4.10 or 4.14 hereof); or
(h) make any change in the amendment and waiver provisions of this Article
9.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amended or supplemental indenture that complies with the TIA as then
in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder of a Note may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. When an
amendment, supplement or waiver becomes effective in accordance with its terms,
it thereafter binds every Holder.
NEHC may, but shall not be obligated to, fix a record date for determining
which Holders of the Notes must consent to such amendment, supplement or waiver.
If NEHC fixes a record date, the record date shall be fixed at (i) the later of
30 days prior to the first solicitation of such consent or the date of the most
recent list of Holders of Notes furnished for the Trustee prior to such
solicitation pursuant to Section 2.05 hereof or (ii) such other date as NEHC
shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. NEHC in exchange for
all Notes may issue and the Trustee shall authenticate new Notes that reflect
the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. NEHC may
not sign an amendment or supplemental indenture until their respective Boards of
Directors approve it. In signing or refusing to sign any amended or supplemental
indenture the Trustee shall be entitled to receive and (subject to Section 7.01
hereof) shall be fully protected in relying upon, in addition to the documents
required by Section 11.04 hereof, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
and that it will be valid and binding upon NEHC in accordance with its terms.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA section 318(c), the imposed duties shall control.
SECTION 10.02. NOTICES.
Any notice or communication by NEHC, the Subsidiary Guarantors or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to NEHC:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopier No.: (203) 661-5756
Attention: Secretary
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6188
Telecopier No.: (212) 403-2000
Attention: Adam O. Emmerich
If to the Trustee:
State Street Bank and Trust Company
P.O. Box 230177
Hartford, Connecticut 06123-0177
Telecopier No.: (860) 986-7920
Attention: Corporate Trust Department
NEHC or the Trustee, by notice to the others may designate additional or
different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier promising next Business Day delivery.
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Any notice or communication to a Holder shall be mailed by first class mail
or by overnight air courier promising next Business Day delivery to its address
shown on the register kept by the Registrar. Any notice or communication shall
also be so mailed to any Person described in TIA section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If NEHC mails a notice or communication to Holders, it shall mail a copy to
the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. NEHC, the
Trustee, the Registrar and anyone else shall have the protection of TIA section
312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by NEHC to the Trustee to take any action
under this Indenture (other than the initial issuance of the Senior Discount
Notes), NEHC shall furnish to the Trustee upon request:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA section 314(a)(4)) shall comply with the provisions of TIA
section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(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 such Person, he or she 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 satisfied; and
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(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of NEHC, as
such, shall have any liability for any obligations of NEHC or any Subsidiary
Guarantor under the Notes, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 10.09. No ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of NEHC or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of NEHC in this Indenture and the Notes shall bind their
respective successors and assigns. All agreements of the Trustee in this
Indenture shall bind its successors and assigns.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes 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 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
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SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 74
SIGNATURES
Dated as of July 11, 1997 NEBCO EVANS HOLDING COMPANY
By: _______________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: _______________________________
Name:
Title:
<PAGE> 75
EXHIBIT A
(Face of Senior Discount Note)
12 3/8% Senior Discount Notes due 2007
No. ___ $_____________
CUSIP NO. 639515AA3
NEBCO EVANS HOLDING COMPANY
promises to pay to ___________________ or registered assigns, the principal sum
of ____________ Dollars on July 15, 2007.
Interest Payment Dates: July 15 and January 15
Record Dates: July 1 and January 1
NEBCO EVANS HOLDING COMPANY
By: _______________________________
Name:
Title:
This is one of the
Senior Discount Notes referred to in the
within-mentioned Indenture:
Dated: ____________
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: _______________________________
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(Back of Senior Discount Note)
12 3/8% Senior Discount Notes due 2007
[Unless and until it is exchanged in whole or in part for Senior Discount
Notes in definitive form, this Senior Discount Note may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary. Unless this certificate is presented by an
authorized representative of The Depository Trust Company (55 Water Street, New
York, New York) ("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an
interest herein.]1
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF NEHC THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(l), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), THAT PRIOR TO SUCH TRANSFER, FURNISHED THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $100,000,
AN OPINION OF COUNSEL ACCEPTABLE TO NEHC THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN
THE CASE OF CLAUSE (b), (c), (d) or (e), BASED UPON AN OPINION OF COUNSEL
IF NEHC SO REQUESTS), (2) TO NEHC OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.]2
- --------------------
1. This paragraph should be included only if the Senior Discount Note is issued
in global form.
2. This paragraph should be removed upon the exchange of Senior Discount Notes
for New Senior Discount Notes in the Exchange Offer or upon the registration of
the Senior Discount Notes pursuant to the terms of the Registration Rights
Agreement.
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Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Nebco Evans Holding Company, a Delaware corporation, or its
successor ("NEHC"), promises to pay interest on the principal amount of
this Senior Discount Note at the rate of 12 3/8% per annum and shall pay
the Liquidated Damages, if any, payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. NEHC will pay interest and
Liquidated Damages, if any, in United States dollars (except as otherwise
provided herein) semi-annually in arrears on July 15 and January 15,
commencing on January 15, 2003, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Senior Discount Notes shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
July 15, 2002; provided that if there is no existing Default or Event of
Default in the payment of interest, and if this Senior Discount Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date (but after July 15, 2002), interest
shall accrue from such next succeeding Interest Payment Date, except in the
case of the original issuance of Senior Discount Notes, in which case
interest shall accrue from the date of authentication. NEHC shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in
excess of the then applicable interest rate on the Senior Discount Notes to
the extent lawful; it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace
period) at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. NEHC will pay interest on the Senior Discount Notes
(except defaulted interest) and Liquidated Damages, if any, on the
applicable Interest Payment Date to the Persons who are registered Holders
of Senior Discount Notes at the close of business on the July 1 or January
1 next preceding the Interest Payment Date, even if such Senior Discount
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Senior Discount Notes shall be payable
as to principal, premium and Liquidated Damages, if any, and interest at
the office or agency of NEHC maintained for such purpose within or without
the City and State of New York, or, at the option of NEHC, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided
that payment by wire transfer of immediately available funds shall be
required with respect to principal of, premium and Liquidated Damages, if
any, and interest on, all Global Notes and all other Senior Discount Notes
the Holders of which shall have provided written wire transfer instructions
to NEHC and the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company,
the Trustee under the Indenture, shall act as Paying Agent and Registrar.
NEHC may change any Paying Agent or Registrar without notice to any Holder.
NEHC or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. NEHC issued the Senior Discount Notes under an Indenture dated
as of July 11, 1997 ("Indenture") among NEHC and the Trustee. The terms of
the Senior Discount Notes include those stated in the Indenture and those
made a part of the Indenture by reference to the
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Trust Indenture Act of 1939, as amended (15 U.S. Code sections
77aaa-77bbbb) (the "TIA"). The Senior Discount Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Senior Discount Notes are general unsecured
Obligations of NEHC limited to $100,387,000 in aggregate principal amount,
plus amounts, if any, sufficient to pay premium or Liquidated Damages, if
any, and interest on outstanding Senior Discount Notes as set forth in
Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Senior Discount Notes
shall not be redeemable at NEHC's option prior to July 15, 2002.
Thereafter, the Senior Discount Notes shall be subject to redemption at the
option of NEHC, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below together with accrued and unpaid interest
and any Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on July 15 of
the years indicated below:
Year Percentage
---- ----------
2002 ............................................... 106.188%
2003 ............................................... 104.125%
2004 ............................................... 102.063%
2005 and thereafter ................................ 100.000%
Notwithstanding the foregoing, at any time NEHC may redeem the Senior
Discount Notes, in whole but not in part, at the option of NEHC at a
redemption price of 112.375% of the Accreted Value (determined at the date
of redemption), with the net proceeds of a Public Equity Offering; provided
that such redemption shall occur within 45 days of the date of the closing
of such Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, NEHC shall not be required
to make mandatory redemption or sinking fund payments with respect to the
Senior Discount Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Discount Notes will have the right to require NEHC to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Senior Discount Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the Accreted
Value thereof on the date of purchase (if such date of purchase is prior to
July 15, 2002) or 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
date of purchase (if such date of purchase is on or after July 15, 2002).
Within 30 days following any Change of Control, NEHC will mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control setting forth the procedures governing the Change of
Control Offer required by the Indenture.
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(b) When the aggregate amount of Excess Proceeds exceeds $20.0 million,
NEHC will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the Accreted Value thereof on the date of purchase
(if such date of purchase is prior to July 15, 2002) or 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (if such date of purchase
is on or after July 15, 2002), in each case in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, NEHC may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered
by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at
zero.
(c) Holders of the Senior Discount Notes that are the subject of an offer
to purchase will receive a Change of Control Offer or Asset Sale Offer from
NEHC prior to any related purchase date and may elect to have such Senior
Discount Notes purchased by completing the form titled "Option of Holder to
Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days
but not more than 60 days before the redemption date to each Holder whose
Senior Discount Notes are to be redeemed at its registered address. Senior
Discount Notes in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000, unless all of the Senior Discount
Notes held by a Holder are to be redeemed. On and after the redemption
date, interest and Liquidated Damages, if any, ceases to accrue on the
Senior Discount Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Discount Notes are in
registered form without coupons in initial denominations of $1,000 and
integral multiples of $1,000. The transfer of the Senior Discount Notes may
be registered and the Senior Discount Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
and NEHC may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. NEHC need not exchange or register the transfer
of any Senior Discount Note or portion of a Senior Discount Note selected
for redemption, except for the unredeemed portion of any Senior Discount
Note being redeemed in part. Also, it need not exchange or register the
transfer of any Senior Discount Notes for a period of 15 days before a
selection of Senior Discount Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior Discount Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs, the
Indenture and the Senior Discount Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of
the Senior Discount Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of or, tender offer or
exchange offer for Senior Discount Notes), and any existing Default or
Event of Default or compliance with any provision of the Indenture or the
Senior Discount Notes may be waived with the consent of the Holders of a
majority in principal amount of the then
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outstanding Senior Discount Notes (including consents obtained in
connection with a tender offer or exchange offer for Senior Discount
Notes).
Without the consent of any Holder of Senior Discount Notes, NEHC and
the Trustee may amend or supplement the Indenture or the Senior Discount
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Discount Notes in addition to or in place of
certificated Senior Discount Notes, to provide for the assumption of NEHC's
or a Subsidiary Guarantor's obligations to Holders of Senior Discount Notes
in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Senior Discount
Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the requirements of the
Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act or to allow any Subsidiary to
guarantee the Senior Discount Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days
in the payment when due of interest on or Liquidated Damages, if any, with
respect to the Senior Discount Notes; (ii) default in payment when due of
the principal of or premium, if any, on the Senior Discount Notes; (iii)
failure by NEHC or any Restricted Subsidiary to comply with the provisions
described in Sections 4.10, 4.14 or 5.01 of the Indenture; (iv) failure by
NEHC or any Restricted Subsidiary for 30 days after notice from the Trustee
or at least 25% in principal amount of the Senior Discount Notes to comply
with the provisions described in Sections 4.07 and 4.09, of the Indenture;
(v) failure by NEHC or any Subsidiary for 60 days after notice from the
Trustee or the Holders of at least 25% in principal amount of the Senior
Discount Notes then outstanding to comply with its other agreements in the
Indenture or the Senior Discount Notes; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by NEHC or
any of their its Subsidiaries (or the payment of which is guaranteed by
NEHC or any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (A)(i)
is caused by a failure to pay when due at final stated maturity (giving
effect to any grace period related thereto) any principal of or premium, if
any, or interest on such Indebtedness (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and
(B) in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $15.0 million or more; (vii) failure by NEHC or any
of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid discharged or stayed within 60 days
after their entry; and (viii) certain events of bankruptcy or insolvency
with respect to NEHC, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior
Discount Notes may declare all the Senior Discount Notes to be due and
payable immediately provided, however, that if any Indebtedness or
Obligation is outstanding pursuant to the New Credit Facility, upon a
declaration of acceleration by the holders of the Senior Discount Notes or
the Trustee, all principal and interest under the Indenture shall be due
and payable upon the earlier of (x) the day five Business Days after the
provision to NEHC, the Credit Agent and the Trustee of such written notice
of acceleration or (y) the date of acceleration of any Indebtedness under
the New Credit Facility; and provided, further, that in the event of an
acceleration based upon an Event of Default set forth in clause (vi) above,
such declaration of acceleration shall be automatically
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annulled if the holders of Indebtedness which is the subject of such
failure to pay at maturity or acceleration have rescinded their declaration
of acceleration in respect of such Indebtedness or such failure to pay at
maturity shall have been cured or waived within 30 days thereof and no
other Event of Default has occurred during such 30-day period which has not
been cured, paid or waived. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to NEHC or any of its Significant Subsidiaries all
outstanding Senior Discount Notes will become due and payable without
further action or notice. Holders of the Senior Discount Notes may not
enforce the Indenture or the Senior Discount Notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Senior Discount Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of the Senior Discount Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest) if it determines that withholding notice
is in their interest.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for
NEHC, the Subsidiary Guarantors or their respective Affiliates, and may
otherwise deal with NEHC, the Subsidiary Guarantors or their respective
Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or
stockholder, of NEHC or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of NEHC or any Subsidiary Guarantor under the
Senior Discount Notes or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each
Holder of Senior Discount Notes by accepting a Senior Discount Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Discount Notes.
15. AUTHENTICATION. This Senior Discount Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. 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).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition
to the rights provided to Holders of the Senior Discount Notes under the
Indenture, Holders of Transferred Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement, dated as of the date hereof, among NEHC, the
Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, NEHC has caused CUSIP numbers
to be printed on the Senior Discount Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Discount Notes or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
A-1-7
<PAGE> 82
NEHC shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopy: (203) 661-5756
Chief Financial Officer
A-1-8
<PAGE> 83
ASSIGNMENT FORM
To assign this Senior Discount Note, fill in the form below: (I) or (we) assign
and transfer this Senior Discount Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Senior Discount Note on the books of NEHC. The agent may
substitute another to act for him.
________________________________________________________________________________
Date: ___________________
Your Signature: ________________________
(Sign exactly as your name appears on
the face of this Senior Discount Note)
Signature Guarantee:
A-1-9
<PAGE> 84
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Discount Note purchased by NEHC
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.14
If you want to elect to have only part of the Senior Discount Note
purchased by NEHC pursuant to Section 4.10 or Section 4.14 of the Indenture,
state the amount you elect to have purchased: $_____________
Date: ___________________ Your Signature: ________________________
(Sign exactly as your name appears on
the Senior Discount Note)
Tax Identification No.: ________________
Signature Guarantee.
A-1-10
<PAGE> 85
SCHEDULE OF EXCHANGES OF SENIOR DISCOUNT NOTES(3)
The following exchanges of a part of this Global Note for other Senior Discount
Notes have been made:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Principal Amount of Signature of authorized
Amount of decrease in Amount of increase in this Global Note officer of Trustee or
Principal Amount of Principal Amount of following such decrease Senior Discount Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------------
3. This should be included only if the Senior Note is issued in global form.
A-1-11
<PAGE> 86
EXHIBIT A-2
(Face of Regulation S Global Note)
12 3/8% Senior Discount Notes due 2007
No. ___ $_____________
CIN NO. U62922AA4
NEBCO EVANS HOLDING COMPANY
promises to pay to ___________________ or registered assigns, the principal sum
of _________ Dollars on July 15, 2007.
Interest Payment Dates: July 15 and January 15
Record Dates: July 1 and January 1
NEBCO EVANS HOLDING COMPANY
By:
--------------------------------
Name:
Title:
This is one of the
Senior Discount Notes referred to in the
within-mentioned Indenture:
Dated: ____________
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
--------------------------------
A-2-1
<PAGE> 87
(Back of Regulation S Temporary Global Note)
12 3/8% Senior Discount Note due 2007
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SENIOR DISCOUNT
NOTES IN DEFINITIVE FORM, THIS SENIOR DISCOUNT NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) ("DTC"), TO NEHC OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION S OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION S OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF NEHC THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE UNITED STATES
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(l), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), THAT PRIOR TO SUCH TRANSFER, FURNISHED THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $100,000, AN OPINION OF
COUNSEL ACCEPTABLE TO NEHC THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSES
(b), (c), (d) or (e), BASED UPON AN OPINION OF COUNSEL IF NEHC SO REQUESTS), (2)
TO NEHC OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SENIOR DISCOUNT
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
A-2-2
<PAGE> 88
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON
PRIOR TO THE EXCHANGE OF THIS SENIOR DISCOUNT NOTE FOR A REGULATION S TEMPORARY
GLOBAL NOTE AS CONTEMPLATED BY THE INDENTURE.](1)
Until the Regulation S Temporary Global Note is exchanged for Regulation S
Permanent Global Notes, the Holder hereof shall not be entitled to receive
payments of interest or Liquidated Damages, if any, hereon although interest and
Liquidated Damages, if any, will continue to accrue; until so exchanged in full,
the Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Discount Notes under the Indenture.
The Regulation S Temporary Global Note is exchangeable in whole or in part
for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of the Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or Rule 144A Global Notes, the Trustee shall cancel the
Regulation S Temporary Global Note.
The Regulation S Global Note shall not become valid or obligatory until
the certificate of authentication hereon shall have been duly manually signed by
the Trustee in accordance with the Indenture. The Regulation S Global Note shall
be governed by and construed in accordance with the laws of the State of the New
York. All references to "$," "Dollars," "dollars" or "U.S. $" are to such coin
or currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts therein.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Nebco Evans Holding Company, a Delaware corporation, or
its successor ("NEHC"), promises to pay interest on the principal
amount of this Senior Discount Note at the rate of l2 3/8% per annum
and shall pay the Liquidated Damages, if any, payable pursuant to
Section S of the Registration Rights Agreement referred to below.
NEHC will pay interest and Liquidated Damages, if any, in United
States dollars (except as otherwise provided herein) semi-annually
in arrears on July 15 and January 15, commencing on January 15,
2003, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest
on the Senior Discount Notes shall accrue from the most recent date
to which interest has been paid or, if no interest has been paid,
from July 15, 2002; provided that if there is no existing Default or
Event of Default in the payment of interest, and if this Senior
Discount Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date (but
after July 15, 2002), interest shall accrue from such next
succeeding Interest Payment Date, except in the case of the original
issuance of Senior Discount Notes, in which case interest shall
accrue from the date of authentication. NEHC shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1 % per
annum in excess of the then applicable interest rate on the Senior
Discount Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under
- ----------
(1) These paragraphs should he removed upon the exchange of Regulation S
Temporary Global Notes for Regulation S Permanent Global Notes pursuant to the
terms of the Indenture.
A-2-3
<PAGE> 89
any Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace period) at the same rate
to the extent lawful. Interest shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. NEHC will pay interest on the Senior Discount
Notes (except defaulted interest) and Liquidated Damages, if any, on
the applicable Interest Payment Date to the Persons who are
registered Holders of Senior Discount Notes at the close of business
on the July 1 or January 1 next preceding the Interest Payment Date,
even if such Senior Discount Notes are cancelled after such record
date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest.
The Senior Discount Notes shall be payable as to principal, premium
and Liquidated Damages, if any, and interest at the office or agency
of NEHC maintained for such purpose within or without the City and
State of New York, or, at the option of NEHC, payment of interest
and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders;
provided that payment by wire transfer of immediately available
funds shall be required with respect to principal of, premium and
Liquidated Damages, if any, and interest on, all Global Notes and
all other Senior Discount Notes the Holders of which shall have
provided written wire transfer instructions to NEHC and the Paying
Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, shall act as Paying Agent
and Registrar. NEHC may change any Paying Agent or Registrar without
notice to any Holder. NEHC or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. NEHC issued the Senior Discount Notes under an Indenture
dated as of July 11, 1997 ("Indenture") among NEHC and the Trustee.
The terms of the Senior Discount Notes include those stated in the
Indenture and those made a part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb) (the "TIA"). The Senior Discount Notes are subject to
all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. The Senior Discount Notes are
general unsecured Obligations of NEHC limited to $100,387,000 in
aggregate principal amount, plus amounts, if any, sufficient to pay
premium or Liquidated Damages, if any, and interest on outstanding
Senior Discount Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Senior Discount
Notes shall not be redeemable at NEHC's option prior to July 15,
2002. Thereafter, the Senior Discount Notes shall be subject to
redemption at the option of NEHC, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below
together with accrued and unpaid interest and any Liquidated
Damages, if any, thereon to the applicable redemption date,
A-2-4
<PAGE> 90
if redeemed during the twelve-month period beginning on July 15 of
the years indicated below:
Year Percentage
---- ----------
2002 ................................................... 106.188%
2003 ................................................... 104.125%
2004 ................................................... 102.063%
2005 and thereafter .................................... 100.000%
Notwithstanding the foregoing, at any time NEHC may redeem the
Senior Discount Notes, in whole but not in part, at the option of
NEHC at a redemption price of 112.375% of the Accreted Value
(determined at the date of redemption), with the net proceeds of a
Public Equity Offering; provided that such redemption shall occur
within 45 days of the date of the closing of such Public Equity
Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, NEHC shall not be
required to make mandatory redemption or sinking fund payments with
respect to the Senior Discount Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Discount Notes will have the right to require NEHC to
repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Senior Discount Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer
price in cash equal to 101 % of the Accreted Value thereof on the
date of purchase (if such date of purchase is prior to July 15,
2002) or 101 % of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon,
to the date of purchase (if such date of purchase is on or after
July 15,2002). Within 30 days following any Change of Control, NEHC
will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control setting forth the
procedures governing the Change of Control Offer required by the
Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $20.0
million, NEHC will be required to make an offer to all Holders of
Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the Accreted
Value thereof on the date of purchase (if such date of purchase is
prior to July 15, 2002) or 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (if such date of purchase is on or after
July 15, 2002), in each case in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of
Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, NEHC may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a
pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
A-2-5
<PAGE> 91
(c) Holders of the Senior Discount Notes that are the subject of an
offer to purchase will receive a Change of Control Offer or Asset
Sale Offer from NEHC prior to any related purchase date and may
elect to have such Senior Discount Notes purchased by completing the
form titled "Option of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption
date to each Holder whose Senior Discount Notes are to be
redeemed at its registered address. Senior Discount Notes in
denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Senior
Discount Notes held by a Holder are to be redeemed. On and
after the redemption date, interest and Liquidated Damages, if
any, ceases to accrue on the Senior Discount Notes or portions
thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Discount Notes
are in registered form without coupons in initial
denominations of $1,000 and integral multiples of $1,000. The
transfer of the Senior Discount Notes may be registered and
the Senior Discount Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents and NEHC may require a Holder to pay any
taxes and fees required by law or permitted by the Indenture.
NEHC need not exchange or register the transfer of any Senior
Discount Note or portion of a Senior Discount Note selected
for redemption, except for the unredeemed portion of any
Senior Discount Note being redeemed in part. Also, it need not
exchange or register the transfer of any Senior Discount Notes
for a period of 15 days before a selection of Senior Discount
Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior
Discount Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture and the Senior Discount Notes may be
amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Senior Discount
Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of or, tender
offer or exchange offer for Senior Discount Notes), and any
existing Default or Event of Default or compliance with any
provision of the Indenture or the Senior Discount Notes may be
waived with the consent of the Holders of a majority in
principal amount of the then outstanding Senior Discount Notes
(including consents obtained in connection with a tender offer
or exchange offer for Senior Discount Notes).
Without the consent of any Holder of Senior Discount
Notes, NEHC and the Trustee may amend or supplement the
Indenture or the Senior Discount Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Senior
Discount Notes in addition to or in place of certificated
Senior Discount Notes, to provide for the assumption of NEHC's
or a Subsidiary Guarantor's obligations to Holders of Senior
Discount Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or
benefits to the Holders of Senior Discount Notes or that does
not adversely affect the legal rights under the Indenture of
any such Holder, to comply with the requirements of the
Commission in order to effect or maintain the qualification of
the Indenture under the Trust Indenture Act or to allow any
Subsidiary to guarantee the Senior Discount Notes.
A-2-6
<PAGE> 92
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on or
Liquidated Damages, if any, with respect to the Senior
Discount Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Senior Discount Notes;
(iii) failure by NEHC or any Restricted Subsidiary to comply
with the provisions described in Sections 4.10, 4.14 or 5.01
of the Indenture; (iv) failure by NEHC or any Restricted
Subsidiary for 30 days after notice from the Trustee or at
least 25% in principal amount of the Senior Discount Notes to
comply with the provisions described in Sections 4.07 and
4.09, of the Indenture; (v) failure by NEHC or any Subsidiary
for 60 days after notice from the Trustee or the Holders of at
least 25% in principal amount of the Senior Discount Notes
then outstanding to comply with its other agreements in the
Indenture or the Senior Discount Notes; (vi) default under any
mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by NEHC or any of their its
Subsidiaries (or the payment of which is guaranteed by NEHC or
any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the
Indenture, which default (A) (i) is caused by a failure to pay
when due at final stated maturity (giving effect to any grace
period related thereto) any principal of or premium, if any,
or interest on such Indebtedness (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its
express maturity and (B) in each case, the principal amount of
any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so
accelerated, aggregates $15.0 million or more; (vii) failure
by NEHC or any of its Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not
paid discharged or stayed within 60 days after their entry;
and (viii) certain events of bankruptcy or insolvency with
respect to NEHC, any of its Significant Subsidiaries or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary.
If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25 % in principal amount of
the then outstanding Senior Discount Notes may declare all the
Senior Discount Notes to be due and payable immediately
provided, however, that if any Indebtedness or Obligation is
outstanding pursuant to the New Credit Facility, upon a
declaration of acceleration by the holders of the Senior
Discount Notes or the Trustee, all principal and interest
under the Indenture shall be due and payable upon the earlier
of (x) the day five Business Days after the provision to NEHC,
the Credit Agent and the Trustee of such written notice of
acceleration or (y) the date of acceleration of any
Indebtedness under the New Credit Facility; and provided,
further, that in the event of an acceleration based upon an
Event of Default set forth in clause (vi) above, such
declaration of acceleration shall be automatically annulled if
the holders of Indebtedness which is the subject of such
failure to pay at maturity or acceleration have rescinded
their declaration of acceleration in respect of such
Indebtedness or such failure to pay at maturity shall have
been cured or waived within 30 days thereof and no other Event
of Default has occurred during such 30-day period which has
not been cured, paid or waived. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to NEHC or any of
its Significant Subsidiaries all outstanding Senior Discount
Notes will become due and payable without further action or
notice. Holders of the Senior Discount Notes may not enforce
the Indenture or the Senior Discount Notes except as provided
in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Senior
Discount Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the
Senior Discount Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
A-2-7
<PAGE> 93
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits
from, and perform services for NEHC, the Subsidiary Guarantors
or their respective Affiliates, and may otherwise deal with
NEHC, the Subsidiary Guarantors or their respective
Affiliates, as if it were not the Trustee.
14. No RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder, of NEHC or any Subsidiary
Guarantor, as such, shall have any liability for any
obligations of NEHC or any Subsidiary Guarantor under the
Senior Discount Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Senior Discount Notes by accepting a
Senior Discount Note waives and releases all such liability.
The waiver and release are part of the consideration for the
issuance of the Senior Discount Notes.
15. AUTHENTICATION. This Senior Discount Note shall not be valid
until authenticated by the manual signature of the Trustee or
an authenticating agent.
16. 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).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In addition to the rights provided to Holders of
the Senior Discount Notes under the Indenture, Holders of
Transferred Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set
forth in the Registration Rights Agreement, dated as of the
date hereof, among NEHC, the Subsidiary Guarantors and the
Initial Purchaser (the "Registration Rights Agreement").
18. CIN NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, NEHC
has caused CIN numbers to be printed on the Senior Discount
Notes and the Trustee may use CIN numbers in notices of
redemption as a convenience to the Holders. No representation
is made as to the accuracy of such numbers either as printed
on the Senior Discount Notes or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
NEHC shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the
Registration Rights Agreement. Requests may be made to:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopy: (203) 661-5756
Chief Financial Officer
A-2-8
<PAGE> 94
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Discount Note purchased by NEHC
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.14
If you want to elect to have only part of the Senior Discount Note
purchased by NEHC pursuant to Section 4.10 or Section 4.14 of the Indenture,
state the amount you elect to have purchased:
$______________
Date:____________________ Your Signature:
-------------------------------
(Sign exactly as your name appears on the Senior
Discount Note)
Tax Identification No.:_____________
Signature Guarantee.
A-2-9
<PAGE> 95
SCHEDULE OF EXCHANGES FOR GLOBAL NOTES
The following exchanges of a part of this Regulation S Global Note for
other Global Notes have been made:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Senior Discount
Date of Exchange this Global Note this Global Note (or increase) Note Custodian
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-10
<PAGE> 96
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(1) of the Indenture)
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, Connecticut 06123-4236
Re: 12 3/8% Senior Discount Notes due 2007 of Nebco Evans Holding Company
Reference is hereby made to the Indenture, dated as of July 15, 1997 (the
"Indenture"), between Nebco Evans Holding Company, a Delaware corporation (the
"NEHC") and State Street Bank and Trust Company, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $ __________________ principal amount of Senior
Discount Notes which are evidenced by one or more Rule 144A Global Notes and
held with the Depositary in the name of ___________________ (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in the
Senior Discount Notes to a Person who will take delivery thereof in the form of
an equal principal amount of Senior Discount Notes evidenced by one or more
Regulation S Global Notes, which amount, immediately after such transfer, is to
be held with the Depositary through Euroclear or Cedel or both.
In connection with such request and in respect of such Senior Discount
Notes, the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Senior Discount 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 the Transferor and any person
acting on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
B-1-1
<PAGE> 97
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration provisions of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel or both.
Upon giving effect to this request to exchange a beneficial interest in a
Rule 144A Global Note for a beneficial interest in a Regulation S Global Note,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act and, if such transfer occurs prior to the end of the 40-day
restricted period associated with the initial offering of Senior Discount Notes,
the additional restrictions applicable to transfers of interest in the
Regulation S Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, the initial purchaser of such Senior Discount Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated:
cc: Nebco Evans Holding Company
Donaldson, Lufkin & Jenrette Securities Corporation
B-1-2
<PAGE> 98
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, Connecticut 06123-4236
Re: 12 3/8% Senior Discount Notes due 2007 of Nebco Evans Holding Company
Reference is hereby made to the Indenture, dated as of July 11, 1997 (the
"Indenture"), between Nebco Evans Holding Company, a Delaware corporation (the
"NEHC") and State Street Bank and Trust Company, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $___________ principal amount of Senior Discount
Notes which are evidenced by one or more Regulation S Global Notes and held with
the Depositary through Euroclear or Cedel in the name of ________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Senior Discount Notes to a Person who will take delivery thereof
in the form of an equal principal amount of Senior Discount Notes evidenced by
one or more Rule 144A Global Notes, to be held with the Depositary.
In connection with such request and in respect of such Senior Discount
Notes, the Transferor hereby certifies that:
[CHECK ONE]
|_| such transfer is being effected pursuant to and in accordance with Rule
l44A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Senior Discount Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Senior Discount
Notes for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person
and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
or
|_| such transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption under the
Securities Act other than Rule 144A, Rule 144 or Rule 904 and the
Transferor further certifies that the Transfer complies with the
B-2-1
<PAGE> 99
transfer restrictions applicable to beneficial interests in Global Notes
and Definitive Senior Discount Notes bearing the Private Placement Legend
and the requirements of the exemption claimed, which certification is
supported by (x) if such transfer is in respect of a principal amount of
Senior Discount Notes at the time of Transfer of $100,000 or more, a
certificate executed by the Transferee in the form of EXHIBIT C to the
Indenture, or (y) if such Transfer is in respect of a principal amount of
Senior Discount Notes at the time of transfer of less than $100,000, (1) a
certificate executed in the form of EXHIBIT C to the Indenture and (2) an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the effect
that (1) such Transfer is in compliance with the Securities Act and (2)
such Transfer complies with any applicable blue sky securities laws of any
state of the United States;
or
|_| such transfer is being effected pursuant to an effective registration
statement under the Securities Act; or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Senior
Discount Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a
copy of which the Transferor has attached to this certification) in form
reasonably acceptable to NEHC and to the Registrar, to the effect that
such transfer is in compliance with the Securities Act;
and such Senior Discount Notes are being transferred in compliance with
any applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Notes for a beneficial interest in 144A Global Senior
Discount Notes, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Rule 144A Global Notes pursuant to the
Indenture and the Securities Act.
B-2-2
<PAGE> 100
This certificate and the statements contained herein are made for your
benefit and the benefit of NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, the initial purchaser of such Senior Discount Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated:
cc: Nebco Evans Holding Company
Donaldson, Lufkin & Jenrette Securities Corporation
B-2-3
<PAGE> 101
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE SENIOR SUBORDINATED NOTES
(Pursuant to Section 2.06(b) of the Indenture)
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, Connecticut 06123-4236
Re: 12 3/8% Senior Discount Notes due 2007 Nebco Evans Holding Company
Reference is hereby made to the Indenture, dated as of July 11, 1997 (the
"Indenture"), between Nebco Evans Holding Company, a Delaware corporation (the
"NEHC") and State Street Bank and Trust Company, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This relates to $ ________ principal amount of Senior Discount Notes which
are evidenced by one or more Definitive Senior Discount Notes in the name of
______________ (the "Transferor"). The Transferor has requested an exchange or
transfer of such Definitive Senior Discount Note(s) in the form of an equal
principal amount of Senior Discount Notes evidenced by one or more Definitive
Senior Discount Notes, to be delivered to the Transferor or, in the case of a
transfer of such Senior Discount Notes, to such Person as the Transferor
instructs the Trustee.
In connection with such request and in respect of the Senior Discount
Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Discount Notes"), the Holder of such Surrendered Senior Discount Notes hereby
certifies that:
[CHECK ONE]
|_| the Surrendered Senior Discount Notes are being acquired for the
Transferor's own account, without transfer;
or
|_| the Surrendered Senior Discount Notes are being transferred to NEHC;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to
and in accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Senior Discount Notes are
being transferred to a Person that the Transferor reasonably believes is
purchasing the Surrendered Senior Discount Notes for its own account, or
for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each
B-3-1
<PAGE> 102
such account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of Rule
144A;
or
|_| the Surrendered Senior Discount Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or Rule
904 and the Transferor further certifies that the Transfer complies with
the transfer restrictions applicable to beneficial interests in Global
Notes and Definitive Senior Discount Notes bearing the Private Placement
Legend and the requirements of the exemption claimed, which certification
is supported by (x) if such transfer is in respect of a principal amount
of Senior Discount Notes at the time of Transfer of $100,000 or more, a
certificate executed by the Transferee in the form of EXHIBIT C to the
Indenture, or (y) if such Transfer is in respect of a principal amount of
Senior Discount Notes at the time of transfer of less than $100,000, (1) a
certificate executed in the form of EXHIBIT C to the Indenture and (2) an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the effect
that (1) such Transfer is in compliance with the Securities Act and (2)
such Transfer complies with any applicable blue sky securities laws of any
state of the United States;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Senior
Discount Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a
copy of which the Transferor has attached to this certification) in form
reasonably acceptable to NEHC and to the Registrar, to the effect that
such transfer is in compliance with the Securities Act;
and the Surrendered Senior Discount Notes are being transferred in
compliance with any applicable blue sky securities laws of any state of
the United States.
B-3-2
<PAGE> 103
This certificate and the statements contained herein are made for your
benefit and the benefit of NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, the initial purchaser of such Senior Discount Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated:
cc: Nebco Evans Holding Company
Donaldson, Lufkin & Jenrette Securities Corporation
B-3-3
<PAGE> 104
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO DEFINITIVE SENIOR SUBORDINATED NOTE
(Pursuant to Section 2.06(c) of the Indenture)
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, Connecticut 06123-4236
Re: 12 3/8% Senior Discount Notes due 2007 Nebco Evans Holding Company
Reference is hereby made to the Indenture, dated as of July 11, 1997
(the "Indenture"), between Nebco Evans Holding Company, a Delaware corporation
(the "NEHC") and State Street Bank and Trust Company, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $____________ principal amount of Senior Discount
Notes which are evidenced by a beneficial interest in one or more Rule 144A
Global Notes or Regulation S Permanent Global Notes in the name of
_________________ (the "Transferor"). The Transferor has requested an exchange
or transfer of such beneficial interest in the form of an equal principal amount
of Senior Discount Notes evidenced by one or more Definitive Senior Discount
Notes, to be delivered to the Transferor or, in the case of a transfer of such
Senior Discount Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Senior Discount
Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Discount Notes"), the Holder of such Surrendered Senior Discount Notes hereby
certifies that:
[CHECK ONE]
|_| the Surrendered Senior Discount Notes are being transferred to the
beneficial owner of such Senior Discount Notes;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to
and in accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Senior Discount Notes are
being transferred to a Person that the Transferor reasonably believes is
purchasing the Surrendered Senior Discount Notes for its own account, or
for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in each
case in a transaction meeting they requirements of Rule 144A;
B-4-1
<PAGE> 105
or
|_| the Surrendered Senior Discount Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
|_| the Surrendered Senior Discount Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or Rule
904 and the Transferor further certifies that the Transfer complies with
the transfer restrictions applicable to beneficial interests in Global
Notes and Definitive Senior Discount Notes bearing the Private Placement
Legend and the requirements of the exemption claimed, which certification
is supported by (x) if such transfer is in respect of a principal amount
of Senior Discount Notes at the time of Transfer of $100,000 or more, a
certificate executed by the Transferee in the form of EXHIBIT C to the
Indenture, or (y) if such Transfer is in respect of a principal amount of
Senior Discount Notes at the time of transfer of less than $100,000, (1) a
certificate executed in the form of EXHIBIT C to the Indenture and (2) an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the effect
that (1) such Transfer is in compliance with the Securities Act and (2)
such Transfer complies with any applicable blue sky securities laws of any
state of the United States;
or
|_| such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Senior
Discount Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a
copy of which the Transferor has attached to this certification) in form
reasonably acceptable to NEHC and to the Registrar, to the effect that
such transfer is in compliance with the Securities Act;
and the Surrendered Senior Discount Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the United States.
B-4-2
<PAGE> 106
This certificate and the statements contained herein are made for your
benefit and the benefit of NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation, the initial purchaser of such Senior Discount Notes being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated:
cc: Nebco Evans Holding Company
Donaldson, Lufkin & Jenrette Securities Corporation
B-4-3
<PAGE> 107
EXHIBIT C
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, Connecticut 06123-4236
Re: 12 3/8% Senior Discount Notes due 2007 Nebco Evans Holding Company
Reference is hereby made to the Indenture, dated as of July 11, 1997 (the
"Indenture"), between Nebco Evans Holding Company, a Delaware corporation (the
"NEHC") and State Street Bank and Trust Company, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $___________ aggregate
principal amount of:
(a) |_| Beneficial interests, or
(b) |_| Definitive Senior Discount Notes,
we confirm that:
1. We understand that any subsequent transfer of the Senior Discount
Notes of any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Senior Discount Notes or any interest
therein except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Senior Discount
Notes have not been registered under the Securities Act, and that the Senior
Discount Notes and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell the Senior Discount Notes or any interest therein, (A) we will do so only
(1)(a) to a person who the Seller reasonably believes is a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of 144A, (b) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (c) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 of the
Securities Act, or (d) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel), (2) to NEHC or any of its subsidiaries or (3) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction and (B) we will, and each subsequent holder will be required to,
notify any purchaser from it of the security evidenced hereby of the resale
restrictions set forth in (A) above."
C-1
<PAGE> 108
3. We understand that, on any proposed resale of the Senior Discount
Notes or beneficial interests, we will be required to furnish to you and NEHC
such certifications, legal opinions and other information as you and NEHC may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Senior Discount Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
50l(a)(l), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Senior Discount
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Senior Discount Notes or beneficial
interests therein purchased by us for our own account or for one or more
accounts (each of which is an institutional "accredited investor") as to each of
which we exercise sole investment discretion.
6. We are not acquiring the Senior Discount Notes with a view to any
distribution thereof that would violate the Securities Act or the securities
laws of any State of the United States.
C-2
<PAGE> 109
You and NEHC 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.
------------------------------------
[Insert Name of Accredited Investor]
By:
---------------------------------
Name:
Title:
Dated:_____________, ____
C-3
<PAGE> 110
SIGNATURES
Dated as of July 11, 1997 NEBCO EVANS HOLDING COMPANY
By: /s/ Raymond E. Marshall
---------------------------
Name: Raymond E. Marshall
Title: President
STATE STREET BANK AND TRUST COMPANY
,
as Trustee
By:
--------------------------------
Name:
Title:
<PAGE> 111
SIGNATURES
Dated as of July 11, 1997 NEBCO EVANS HOLDING COMPANY
By:
---------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: /s/ K.D. Woods
--------------------------------
Name: K.D. Woods
Title: Vice President
<PAGE> 1
EXHIBIT 4.2
(Face of New Senior Discount Note)
12 3/8% New Senior Discount Notes due 2007
No. ________ $ __________
CUSIP NO. 639515AA3
NEBCO EVANS HOLDING COMPANY
promises to pay to or registered assigns, the principal sum of
Dollars on July 15, 2007.
Interest Payment Dates: July 15 and January 15
Record Dates: July 1 and January 1
NEBCO EVANS HOLDING COMPANY
By:
--------------------------------------
Name:
Title:
This is one of the
New Senior Discount Notes referred to in the
within-mentioned Indenture:
Dated:
- ---------------
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
- ---------------------------------------------------------
1
<PAGE> 2
(BACK OF NEW SENIOR DISCOUNT NOTE)
12 3/8% NEW SENIOR DISCOUNT NOTES DUE 2007
[Unless and until it is exchanged in whole or in part for New Senior
Discount Notes in definitive form, this New Senior Discount Note may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary. Unless this certificate is presented by
an authorized representative of The Depository Trust Company (55 Water Street,
New York, New York) ("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an
interest herein.](1)
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Nebco Evans Holding Company, a Delaware corporation, or
its successor ("NEHC"), promises to pay interest on the principal
amount of this New Senior Discount Note at the rate of 12 3/8% per
annum and shall pay the Liquidated Damages, if any, payable
pursuant to Section 5 of the Registration Rights Agreement
referred to below. NEHC will pay interest and Liquidated Damages,
if any, in United States dollars (except as otherwise provided
herein) semi-annually in arrears on July 15 and January 15,
commencing on January 15, 2003, or if any such day is not a
Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the New Senior Discount
Notes shall accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from July 15, 2002;
provided that if there is no existing Default or Event of Default
in the payment of interest, and if this New Senior Discount Note
is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date (but after
July 15, 2002), interest shall accrue from such next succeeding
Interest Payment Date, except in the case of the original issuance
of New Senior Discount Notes, in which case interest shall accrue
from the date of authentication. NEHC shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1% per
annum in excess of the then applicable interest rate on the New
Senior Discount Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace period) at the
same rate to the extent lawful. Interest shall be computed on the
basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. NEHC will pay interest on the New Senior
Discount Notes (except defaulted interest) and Liquidated Damages,
if any, on the applicable Interest Payment Date to the Persons who
are registered Holders of New Senior Discount Notes at the close
of business on the July 1 or January 1 next preceding the Interest
Payment Date, even if such New Senior Discount Notes are cancelled
after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The New Senior Discount Notes shall
be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of NEHC maintained for
such purpose within or without the City and State of New York, or,
at the option of NEHC, payment of interest and Liquidated Damages,
if any, may be made by check mailed to the Holders at their
addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds shall be
required with respect to principal of, premium and Liquidated
Damages, if any, and interest on, all Global New Notes and all
other New Senior
- ---------------
(1) This paragraph should be included only if the New Senior Discount Note
is issued in global form.
2
<PAGE> 3
Discount Notes the Holders of which shall have provided written wire
transfer instructions to NEHC and the Paying Agent. Such payment shall
be in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. NEHC may change any Paying Agent or
Registrar without notice to any Holder. NEHC or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. NEHC issued the New Senior Discount Notes under an
Indenture dated as of July 11, 1997 ("Indenture") among NEHC and
the Trustee. The terms of the New Senior Discount Notes include
those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code 77aaa-77bbbb) (the "TIA"). The New Senior
Discount Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such
terms. The New Senior Discount Notes are general unsecured
Obligations of NEHC limited to $100,387,000 in aggregate principal
amount, plus amounts, if any, sufficient to pay premium or
Liquidated Damages, if any, and interest on outstanding New Senior
Discount Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the New Senior
Discount Notes shall not be redeemable at NEHC's option prior to
July 15, 2002. Thereafter, the New Senior Discount Notes shall be
subject to redemption at the option of NEHC, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set
forth below together with accrued and unpaid interest and any
Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve month period beginning on
July 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------ ----------
<S> <C>
2002.................................................. 106.188%
2003.................................................. 104.125%
2004.................................................. 102.063%
2005 and thereafter................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time NEHC may redeem the
New Senior Discount Notes, in whole but not in part, at the option of
NEHC at a redemption price of 112.375% of the Accreted Value
(determined at the date of redemption), with the net proceeds of a
Public Equity Offering; provided that such redemption shall occur
within 45 days of the date of the closing of such Public Equity
Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, NEHC shall not be
required to make mandatory redemption or sinking fund payments
with respect to the New Senior Discount Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of New
Senior Discount Notes will have the right to require NEHC to
repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's New Senior Discount Notes
pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the Accreted
Value thereof on the date of purchase (if such date of purchase is
prior to July 15, 2002) or 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages,
if any, thereon, to the date of purchase (if such date of purchase
is on or after July 15, 2002). Within 30 days following any Change
of Control, NEHC will mail a notice to each
3
<PAGE> 4
Holder describing the transaction or transactions that constitute
the Change of Control setting forth the procedures governing the
Change of Control Offer required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $20.0
million, NEHC will be required to make an offer to all Holders
of New Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of New Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to
100% of the Accreted Value thereof on the date of purchase (if
such date of purchase is prior to July 15, 2002) or 100% of the
principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (if
such date of purchase is on or after July 15, 2002), in each
case in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of New Notes
tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, NEHC may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of New
Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the New Notes to be
purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
(c) Holders of the New Senior Discount Notes that are the
subject of an offer to purchase will receive a Change of Control
Offer or Asset Sale Offer from NEHC prior to any related
purchase date and may elect to have such New Senior Discount
Notes purchased by completing the form titled "Option of Holder
to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date
to each Holder whose New Senior Discount Notes are to be redeemed
at its registered address. New Senior Discount Notes in
denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000, unless all of the New Senior
Discount Notes held by a Holder are to be redeemed. On and after
the redemption date, interest and Liquidated Damages, if any,
ceases to accrue on the New Senior Discount Notes or portions
thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The New Senior Discount Notes
are in registered form without coupons in initial denominations of
$1,000 and integral multiples of $1,000. The transfer of the New
Senior Discount Notes may be registered and the New Senior
Discount Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents
and NEHC may require a Holder to pay any taxes and fees required
by law or permitted by the Indenture. NEHC need not exchange or
register the transfer of any New Senior Discount Note or portion
of a New Senior Discount Note selected for redemption, except for
the unredeemed portion of any New Senior Discount Note being
redeemed in part. Also, it need not exchange or register the
transfer of any New Senior Discount Notes for a period of 15 days
before a selection of New Senior Discount Notes to be redeemed or
during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a New Senior
Discount Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVERS. Subject to the following
paragraphs, the Indenture and the New Senior Discount Notes may be
amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the New Senior Discount
Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of or, tender offer or
exchange offer for New Senior Discount Notes), and any existing
Default or Event of Default or compliance with any provision of
the Indenture or the New Senior Discount Notes may be waived with
the consent of the Holders of a majority in principal amount of
the then outstanding New Senior Discount Notes (including consents
obtained in connection with a tender offer or exchange offer for
New Senior Discount Notes).
4
<PAGE> 5
Without the consent of any Holder of New Senior Discount
Notes, NEHC and the Trustee may amend or supplement the
Indenture or the New Senior Discount Notes to cure any
ambiguity, defect or inconsistency, to provide for
uncertificated New Senior Discount Notes in addition to or in
place of certificated New Senior Discount Notes, to provide for
the assumption of NEHC's or a Subsidiary Guarantor's
obligations to Holders of New Senior Discount Notes in the case
of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of New
Senior Discount Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply
with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust
Indenture Act or to allow any Subsidiary to guarantee the New
Senior Discount Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on or Liquidated
Damages, if any, with respect to the New Senior Discount Notes;
(ii) default in payment when due of the principal of or premium,
if any, on the New Senior Discount Notes; (iii) failure by NEHC or
any Restricted Subsidiary to comply with the provisions described
in Sections 4.10, 4.14 or 5.01 of the Indenture; (iv) failure by
NEHC or any Restricted Subsidiary for 30 days after notice from
the Trustee or at least 25 % in principal amount of the New Senior
Discount Notes to comply with the provisions described in Sections
4.07 and 4.09, of the Indenture; (v) failure by NEHC or any
Subsidiary for 60 days after notice from the Trustee or the
Holders of at least 25% in principal amount of the New Senior
Discount Notes then outstanding to comply with its other
agreements in the Indenture or the New Senior Discount Notes; (vi)
default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by NEHC or any of their its
Subsidiaries (or the payment of which is guaranteed by NEHC or any
of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which
default (A) (i) is caused by a failure to pay when due at final
stated maturity (giving effect to any grace period related
thereto) any principal of or premium, if any, or interest on such
Indebtedness (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity
and (B) in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $15.0
million or more; (vii) failure by NEHC or any of its Subsidiaries
to pay final judgments aggregating in excess of $5.0 million,
which judgments are not paid discharged or stayed within 60 days
after their entry; and (viii) certain events of bankruptcy or
insolvency with respect to NEHC, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of
the then outstanding New Senior Discount Notes may declare all
the New Senior Discount Notes to be due and payable immediately
provided, however, that if any Indebtedness or Obligation is
outstanding pursuant to the New Credit Facility, upon a
declaration of acceleration by the holders of the New Senior
Discount Notes or the Trustee, all principal and interest under
the Indenture shall be due and payable upon the earlier of (x)
the day five Business Days after the provision to NEHC, the
Credit Agent and the Trustee of such written notice of
acceleration or (y) the date of acceleration of any
Indebtedness under the New Credit Facility; and provided,
further, that in the event of an acceleration based upon an
Event of Default set forth in clause (vi) above, such
declaration of acceleration shall be automatically annulled if
the holders of Indebtedness which is the subject of such
failure to pay at maturity or acceleration have rescinded their
declaration of acceleration in respect of such Indebtedness or
such failure to pay at maturity shall have been cured or waived
within 30 days thereof and no other Event of Default has
occurred during such 30-day period which has not been cured,
paid or waived. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to NEHC or any of its Significant
Subsidiaries all outstanding New Senior Discount Notes will
become due and payable without further action
5
<PAGE> 6
or notice. Holders of the New Senior Discount Notes may not enforce
the Indenture or the New Senior Discount Notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding New Senior Discount Notes
may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the New Senior Discount Notes
notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and
perform services for NEHC, the Subsidiary Guarantors or their
respective Affiliates, and may otherwise deal with NEHC, the
Subsidiary Guarantors or their respective Affiliates, as if it
were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder, of NEHC or any Subsidiary Guarantor,
as such, shall have any liability for any obligations of NEHC or
any Subsidiary Guarantor under the New Senior Discount Notes or
the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of New
Senior Discount Notes by accepting a New Senior Discount Note
waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the New Senior
Discount Notes.
15. AUTHENTICATION. This New Senior Discount Note shall not be valid
until authenticated by the manual signature of the Trustee or an
authenticating agent.
16. 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
rights of survivorship and not as tenants in common), CUST
Custodian, and U/G/M/A (=Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In addition to the rights provided to Holders of the
New Senior Discount Notes under the Indenture, Holders of
Transferred Restricted Securities (as defined in the Registration
Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement, dated as of July 11, 1997, among
NEHC, the Subsidiary Guarantors and the Initial Purchaser (the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, NEHC has
caused CUSIP numbers to be printed on the New Senior Discount
Notes and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to the Holders. No representation is
made as to the accuracy of such numbers either as printed on the
New Senior Discount Notes or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
NEHC shall furnish to any Holder upon written request and without charge a
copy of the Indenture and/or the Registration Rights Agreement. Requests may be
made to:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopy: (203) 661-5756
Chief Financial Officer
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<PAGE> 7
ASSIGNMENT FORM
To assign this New Senior Discount Note, fill in the form below: (I) or
(we) assign and transfer this New Senior Discount Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
to transfer this New Senior Discount Note on the books of NEHC. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
- ------------------------
Your Signature:
------------------------------------------------
(Sign exactly as your name appears on the face
of this Senior Discount Note)
Signature Guarantee:
7
<PAGE> 8
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this New Senior Discount Note purchased by
NEHC pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the New Senior Discount Note
purchased by NEHC pursuant to Section 4.10 or Section 4.14 of the Indenture,
state the amount you elect to have purchased: $________
Date: ________ Your Signature:
Sign exactly as your name appears on
the Senior Discount Note)
Tax Identification No.: ________
Signature Guarantee.
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<PAGE> 9
SCHEDULE OF EXCHANGES OF NEW SENIOR DISCOUNT NOTES(2)
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NEW NOTE FOR OTHER NEW SENIOR
DISCOUNT NOTES HAVE BEEN MADE:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
PRINCIPAL AMOUNT OF SIGNATURE OF
THIS GLOBAL NEW NOTE AUTHORIZED
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN FOLLOWING SUCH OFFICER OF TRUSTEE OR
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF DECREASE NEW SENIOR DISCOUNT
DATE OF EXCHANGE THIS GLOBAL NEW NOTE THIS GLOBAL NEW NOTE (OR INCREASE) NOTE CUSTODIAN
</TABLE>
- --------------------------------------------------------------------------------
- ---------------
(2) This should be included only if the New Senior Note is issued in global
form.
9
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
================================================================================
Nebco Evans Holding Company
--------------------------------------
$100,387,000
l2 3/8% SENIOR DISCOUNT NOTES DUE 2007
--------------------------------------
-------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JULY 11, 1997
-------------
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and entered
into as of July 11, 1997, by and between Nebco Evans Holding Company, a Delaware
corporation ("NEHC") and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ" or the "Initial Purchaser"), who have agreed to purchase NEHC's 12 3/8%
Senior Discount Notes due 2007 (the "Senior Discount Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated July
11, 1997 (the "Purchase Agreement"), by and between NEHC and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Senior
Discount Notes, NEHC has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: New Senior Discount Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Senior Discount Notes that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Senior Discount Notes acquired directly from NEHC or any of its respective
affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New Senior
Discount Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by NEHC to the Registrar under the
Indenture of New Senior Discount Notes in the same aggregate principal amount as
the aggregate principal amount of Senior Discount Notes tendered by Holders
thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Transfer Restricted Securities,
each Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
<PAGE> 3
Exchange Offer: The registration by NEHC under the Act of the
New Senior Discount Notes pursuant to the Exchange Offer Registration Statement
pursuant to which NEHC shall offer the Holders of all outstanding Transfer
Restricted Securities held by such holders the opportunity to exchange all such
outstanding Transfer Restricted Securities for New Senior Discount Notes in an
aggregate principal amount equal to the aggregate principal amount of the
Transfer Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser proposes
to sell the Senior Discount Notes (i) to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act or (ii) outside the
United States in reliance upon Regulation S under the Securities Act to non-U.S.
persons.
Global Note Holder: As defined in the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, between NEHC and the
Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to
be issued, as such Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Offering Memorandum: As defined in the Purchase Agreement.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of NEHC relating to (a)
an offering of New Senior Discount Notes pursuant to an Exchange Offer or (b)
the registration for resale of Transfer
2
<PAGE> 4
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) which is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Notes: The Senior Discount Notes and the New Senior Discount Notes.
New Senior Discount Notes: NEHC's 12 3/8% New Senior Discount Notes due
2007 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii)
upon the request of any Holder of Senior Discount Notes covered by a Shelf
Registration Statement, in exchange for such Senior Discount Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of NEHC are sold to an underwriter for reoffering to the
public.
2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
3
<PAGE> 5
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal law
(after the procedures set forth in Section 6(a)(i) below have been complied
with), NEHC shall (i) cause to be filed with the Commission, on or prior to 30
days after the Closing Date, the Exchange Offer Registration Statement, (ii) use
its best efforts to cause such Exchange Offer Registration Statement to become
effective at the earliest possible time, but in no event later than 120 days
after the Closing Date, (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause such Exchange Offer Registration Statement to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the New Senior Discount Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer provided that in no event shall NEHC be obligated to qualify to
do business in any jurisdiction where it is not now so qualified, or take any
action which would subject it to General Service of Process in any jurisdiction
where it is not now so subject, and (iv) upon the effectiveness of such Exchange
Offer Registration Statement, use its reasonable best efforts to commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the New Senior Discount Notes to be offered in
exchange for the Senior Discount Notes that are Transfer Restricted Securities
and to permit sales of Broker-Dealer Transfer Restricted Securities by
Restricted Broker-Dealers as contemplated by Section 3(c) below.
(b) NEHC shall use its best efforts to cause the Exchange Offer Registration
Statement to be effective continuously, and shall keep the Exchange Offer open,
for a period of not less than the minimum period required under applicable
federal and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 Business Days.
NEHC shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Notes shall be included in
the Exchange Offer Registration Statement. NEHC shall use its best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) NEHC shall include a "Plan of Distribution" section in the Prospectus
contained in the Exchange Offer Registration Statement and indicate therein that
any Restricted Broker-Dealer who holds Senior Discount Notes that are Transfer
Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Senior Discount Notes (other than Transfer
Restricted Securities acquired directly from NEHC or any affiliate of NEHC)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to
be an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with the sales of
the New Senior Discount Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such
4
<PAGE> 6
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall
not name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer except to the extent required by the Commission.
NEHC shall use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) below to the extent necessary to ensure that it is
available for sales of Broker-Dealer Transfer Restricted Securities by
Restricted Broker-Dealers, and to ensure that such Registration Statement
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 120 days from the date on which the Exchange Offer is Consummated.
NEHC shall provide sufficient copies of the latest version of such
Prospectus to such Restricted Broker-Dealers promptly upon request, and in no
event later than two days after such request, at any time during such 120-day
period in order to facilitate such sales.
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) NEHC is not required to file an Exchange
Offer Registration Statement with respect to the New Senior Discount Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify NEHC within 20
Business Days following the Consummation of the Exchange Offer that (A) such
Holder who holds at least $2.0 million in aggregate principal amount of the
Senior Discount Notes is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Senior Discount Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (C) such Holder is a Broker-Dealer and holds Senior Discount Notes
acquired directly from NEHC or one of its respective affiliates, then NEHC shall
(x) cause to be filed on or prior to the earliest of (1) 45 days after the date
on which NEHC is notified by the Commission or otherwise determines that they
are not required to file the Exchange Offer Registration Statement pursuant to
clause (i) above and (2) 45 days after the date on which NEHC receives the
notice specified in clause (ii) above, a shelf registration statement pursuant
to Rule 415 under the Act, (which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement
")), relating to all Transfer Restricted Securities the Holders of which shall
have provided the information required pursuant to Section 4(b) hereof, and (y)
use their respective best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission at the earliest possible time, but in no
event later than 120 days after the date on which NEHC becomes obligated to file
such Shelf Registration Statement. If, after NEHC has filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a) above,
NEHC is required to file and make effective a Shelf Registration Statement
solely because the Exchange Offer shall not be permitted under applicable
federal law, then the filing of the Exchange Offer Registration Statement shall
be deemed to satisfy the requirements of clause (x) above. Such an event shall
have no effect on the requirements of clause (y) above, or on the Effectiveness
Target
5
<PAGE> 7
Date as defined in Section 5 below, NEHC shall use its best efforts to keep the
Shelf Registration Statement discussed in this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the date on
which such Shelf Registration Statement first becomes effective under the Act or
such shorter period ending when all of the Transfer Restricted Securities
available for sale thereunder have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
NEHC in writing, within 20 days after receipt of a request therefor, such
information specified in Item 507 of Regulation S-K under the Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder has provided all such information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to NEHC all
information required to be disclosed in order to make the information previously
furnished to NEHC by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been Consummated within 30 Business Days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), NEHC hereby agrees to pay to each
Holder of Transfer Restricted Securities, for the first 90-day period
immediately following the occurrence of such Registration Default, liquidated
damages in an amount equal to $.05 per week per $1,000 principal amount of Notes
constituting Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages payable to each Holder shall increase by an additional $.05
per week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.50 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the
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Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified on each Damages Payment Date. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease. All obligations of NEHC set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, NEHC shall comply with all applicable provisions of Section 6(c) below,
shall use its best efforts to effect such exchange and to permit the sale of
Broker-Dealer Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (which shall be in a manner
consistent with the terms of this Agreement), and shall comply with all of the
following provisions:
(i) If, following the date hereof and prior to Consummation of the
Exchange Offer, there has been published a change in Commission policy
with respect to exchange offers such as the Exchange Offer, such that in
the reasonable judgment of counsel to NEHC there is a substantial question
as to whether the Exchange Offer is permitted by applicable federal law or
Commission policy, NEHC hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing NEHC to Consummate an
Exchange Offer for such Senior Discount Notes. NEHC hereby agrees to
pursue the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. In connection with the foregoing, NEHC hereby
agrees, however, but subject to the proviso set forth above, to take all
such other actions as are reasonably requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation to (A) participate in telephonic conferences
with the Commission, (B) deliver to the Commission staff an analysis
prepared by counsel to NEHC setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursue a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of NEHC, prior to
the Consummation of the Exchange Offer, a written representation to NEHC
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of NEHC, (B) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to participate
in, a distribution of the New Senior Discount Notes to be issued in the
Exchange Offer and (C) it is acquiring the New Senior Discount Notes in
its ordinary course of business. In addition, all such holders of Transfer
Restricted Securities shall otherwise cooperate in NEHC's preparation for
the Exchange Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to participate
in a distribution
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<PAGE> 9
of the securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of New Senior Discount Notes obtained by such Holder in
exchange for Senior Discount Notes acquired by such Holder directly from
NEHC or an affiliate thereof.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, NEHC shall
provide a supplemental letter to the Commission (A) stating that NEHC is
registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above,
(B) including a representation that neither NEHC nor any Subsidiary
Guarantor has entered into any arrangement or understanding with any
Person to distribute the New Senior Discount Notes to be received in the
Exchange Offer and that, to the best of NEHC's information and belief,
each Holder participating in the Exchange Offer is acquiring the New
Senior Discount Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the New Senior Discount Notes received in the Exchange
Offer and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement NEHC shall comply with all the provisions of Section 6(c)
below and shall use its best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to NEHC pursuant to Section 4(b) hereof), and pursuant
thereto NEHC will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), NEHC shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities
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<PAGE> 10
during the period required by this Agreement, NEHC shall file promptly an
appropriate amendment to such Registration Statement, (1) in the case of
clause (A), correcting any such misstatement or omission, and (2) in the
case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon
as practicable thereafter. Notwithstanding the foregoing, at any time
after Consummation of the Exchange Offer, NEHC may allow the Shelf
Registration Statement to cease to be effective and usable if (x) the
Board of Directors of NEHC determines in good faith that it is in the best
interests of NEHC not to disclose the existence of or facts surrounding
any proposed or pending material corporate transaction involving NEHC, and
NEHC notifies the Holders within two business days after the Board makes
such determination, or (y) the Prospectus contained in the Shelf
Registration Statement contains an untrue statement of a material fact or
omits 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;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462 as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities, as applicable for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky
laws, NEHC shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
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<PAGE> 11
(iv) furnish to the Initial Purchaser, each selling Holder named in
any Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders and underwriter(s) in
connection with such sale, if any, for a period of at least five Business
Days, and NEHC will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) if the
selling Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such sale
shall not have had such an opportunity to participate in the preparation
thereof;
(v) prior to the filing of any document that is to be incorporated
by reference into a Registration Statement or Prospectus, provide copies
of such document to the selling Holders and to the underwriter(s) in
connection with such sale, if any, make NEHC's and the Subsidiary
Guarantors' representatives available for discussion of such document and
other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times at NEHC's principal place of
business for inspection by the selling Holders of transfer who shall
certify to NEHC that they have a current intention to sell Transfer
Restricted Securities pursuant to a Shelf Registration Statement
Restricted Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such underwriter(s),
all pertinent financial and other pertinent information of NEHC and cause
NEHC's officers, directors and employees to respond to such inquiries as
shall be reasonably necessary; in the reasonable judgment of counsel to
such Holders, to conduct a reasonable investigation; provided, however,
that each such party shall be required to maintain in confidence and not
to disclose to any other person any information or records reasonably
designated by NEHC in writing as being confidential, until such time as
(A) such information becomes a matter of public record (whether by virtue
of its inclusion in such Registration Statement or otherwise), or (B) such
person shall be required so to disclose such information pursuant to the
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such order,
and only after such person shall have given NEHC prompt prior written
notice of such requirement), or (C) such information is required to be set
forth in such Registration Statement or the Prospectus included therein or
in an amendment or supplement to such Registration Statement or an
amendment or supplement to such Prospectus in order that such Registration
Statement, Prospectus, amendment or supplement, as the case may be, does
not contain an untrue statement of a material fact or omit to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading;
(vii) if requested by any selling Holders or the underwriter(s), as
applicable, in connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information that is required
by the Act as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, and make all required filings
of such Prospectus supplement or post-effective amendment as soon as
practicable after NEHC is notified of the matters to be
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<PAGE> 12
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriter(s)
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(ix) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; NEHC hereby consents to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto. Notwithstanding the foregoing, at any time after
Consummation of the Exchange Offer, NEHC may allow the Shelf Registration
Statement to cease to be effective and usable if (x) the Board of
Directors of NEHC determines in good faith that it is in the best
interests of NEHC not to disclose the existence of or facts surrounding
any proposed or pending material corporate transaction involving NEHC, and
NEHC notifies the Holders within two business days after the Board makes
such determination, or (y) the Prospectus contained in the Shelf
Registration Statement contains an untrue statement of a material fact or
omits 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;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder who holds at lease 5% in aggregate principal
amount of such class of Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement, provided, that, NEHC shall not be required
to enter into any such agreement more than once with respect to all of the
Transfer Restricted Securities, and in the case of a Shelf Registration
Statement, may delay entering into such agreement if the Board of
Directors of the Company determines in good faith that it is in the best
interests of NEHC not to disclose the existence of or facts surrounding
any proposed or pending corporate transaction involving the Company; and
in such connection, whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten Registration,
NEHC shall:
(A) furnish to each selling Holder who holds at least 5% in
aggregate principal amount of such class of Transfer Restricted
Securities and each underwriter, if any, in such substance and scope
as they may request and as is customarily made in connection with an
offering of debt securities pursuant to a Registration Statement
upon the effectiveness of the Shelf Registration Statement and to
each Restricted Broker-Dealer upon Consummation of the Exchange
Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf
of NEHC by (x) the President or any Vice President
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<PAGE> 13
and (y) a principal financial or accounting officer of NEHC
confirming, as of the date thereof, the matters set forth in
paragraphs (a) through (c) of Section 9 of the Purchase
Agreement and such other similar matters as the Holders,
underwriter(s) and/or Restricted Broker-Dealers may reasonably
request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for
NEHC, covering matters customarily covered in opinions
requested in Underwritten Offerings and dated the date of
effectiveness of the Shelf Registration Statement or the date
of Consummation of the Exchange Offer, as the case may be; and
(3) customary comfort letters, dated as of the date of
effectiveness of the Shelf Registration Statement or the date
of Consummation of the Exchange Offer, as the case may be,
from NEHC's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with an offering of debt
securities pursuant to a Registration Statement and affirming
the matters set forth in the comfort letters delivered
pursuant to Section 9(f) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, in connection with any sale or
resale pursuant to any Shelf Registration Statement the
indemnification provisions and procedures of Section 8 hereof with
respect to all parties to he indemnified pursuant to said Section;
and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker-Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by NEHC
pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of NEHC contemplated in (A)(l)
above cease to be true and correct, NEHC shall so advise the
underwriter(s), if any, selling Holders who hold at least 5% in aggregate
principal amount of such class of Transfer Restricted Securities and each
Restricted Broker-Dealer promptly and if requested by such Persons, shall
confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and its
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s), if any, may
reasonably request and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that NEHC shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the
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<PAGE> 14
Registration Statement, in any jurisdiction where it is not now so
subject;
(xii) issue, upon the request of any Holder of Senior Discount Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, New Senior Discount Notes, having an aggregate principal amount
equal to the aggregate principal amount of Senior Discount Notes
surrendered to NEHC by such Holder in exchange therefor or being sold by
such Holder; such New Senior Discount Notes to be registered in the name
of such Holder or in the name of the purchaser(s) of such Notes, as the
case may be; in return, the Senior Discount Notes held by such Holder
shall be surrendered to NEHC for cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to enable such Transfer Restricted Securities to
be in such denominations and registered in such names as such Holders or
the underwriter(s), if any, may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
(xiv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an 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;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust
Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD;
(xviii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period (A) commencing at the end of any fiscal year in which
Transfer Restricted Securities are sold to underwriters in a firm or best
efforts underwritten offering or (B) if not sold to
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<PAGE> 15
underwriters in such an offering beginning with the first month of NEHC's
first fiscal quarter commencing a further effective date of the
Registration Statement;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security or Broker-Dealer Transfer Restricted Securities, as
applicable that, upon receipt of the notice referred to in Section 6(c)(i) or
any notice from NEHC of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof, such Holder will immediately discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or
until it is advised in writing by NEHC that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (the "Advice"). If so directed
by NEHC, each Holder will deliver to NEHC (at NEHC's expense) all copies, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities that was current at the time of receipt of either such
notice. In the event NEHC shall give any such notice, the time period regarding
the effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when each
selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) hereof or shall have received the Advice.
NEHC may require each Holder of Transfer Restricted Securities or
Broker-Dealer Transfer Restricted Securities as to which any registration is
being effected to furnish to NEHC such information regarding such Holder and
such Holder's intended method of distribution of the applicable Transfer
Restricted Securities as NEHC may from time to time reasonably request in
writing, but only to the extent that such information is required in order to
comply with the Act. Each such Holder agrees to notify NEHC as promptly as
practicable of (i) any inaccuracy or change in information previously furnished
by such Holder to NEHC, or (ii) the occurrence of any event, in either case, as
a result of which any prospectus relating to such registration contains or would
contain an untrue statement of a material fact regarding such Holder or such
Holder's intended method of distribution of the applicable Transfer Restricted
Securities or Broker-Dealer Transfer Restricted Securities or omits to state any
material fact regarding such Holder or such Holder's intended method of
distribution of the applicable Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities required to be stated therein or necessary to
make the statements therein not misleading and promptly to furnish to NEHC any
additional information required to correct and update any previously furnished
information or required so that such Prospectus shall not contain, with respect
to such Holder or the distribution of the applicable Transfer Restricted
Securities or Broker-Dealer Transfer Restricted Securities or Broker-Dealer
Transfer
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<PAGE> 16
Restricted Securities 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.
7. REGISTRATION EXPENSES
(a) All expenses incident to NEHC's performance of or compliance with this
Agreement will be borne by NEHC, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration and filing
fees and expenses (including filings made by any Initial Purchaser or Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter") and its counsel that may be required by the rules and
regulations of the NASD); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the New Senior Discount Notes to be issued
in the Exchange Offer and printing of Prospectuses); (iv) all fees and
disbursements of counsel for NEHC and, in accordance with Section 7(b) below,
the Holders of Transfer Restricted Securities; (v) all messenger and delivery
services and telephone expenses of NEHC; (vi) all application and filing fees in
connection with listing the Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof and (vii) all fees and
disbursements of independent certified public accountants of NEHC (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
(b) NEHC will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of any of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by NEHC.
(c) In connection with any Registration Statement required by this
Agreement, as applicable, (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), NEHC will
reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
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<PAGE> 17
8. INDEMNIFICATION
(a) NEHC agrees to indemnify and hold harmless (i) the Initial
Purchaser, (ii) each Holder, (iii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Initial
Purchaser or any Holder (any of the persons referred to in this clause (iii)
being hereinafter referred to as a "controlling person") and (iv) the
respective officers, directors, partners, employees, representatives and agents
of the Initial Purchaser or any Holder or any controlling person (any person
referred to in clause (i), (ii), (iii) or (iv) in such capacity may hereinafter
be referred to as an "Indemnified Holder"), from and against any and all losses,
claims, damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the fees and expenses of counsel to any Indemnified
Holder) directly or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus or
Prospectus (or any amendment or supplement thereto), or any 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, except insofar as such losses,
claims, damages, liabilities, judgments, actions or expenses are caused by any
untrue statement or omission or alleged untrue statement or omission that is
made in reliance upon and in conformity with information relating to any Initial
Purchaser or any of the Holders furnished in writing to NEHC by the Initial
Purchaser or any of the Holders expressly for use therein; and except insofar as
such losses, claims, damages, liabilities, judgments, actions or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that was contained or made in the Preliminary Offering Memorandum and
corrected in the Offering Memorandum or Registration Statement; and (1) any such
losses, claims, damages, liabilities, judgments, actions or expenses suffered or
incurred by any Indemnified Person resulted from an action, claim, or suit by
any person who purchased the Notes from any Initial Purchaser in an Exempt
Resale, (2) the Initial Purchasers failed to deliver or provide a copy of the
Preliminary Offering Memorandum or Offering Memorandum to such person at or
prior to the confirmation of the sale of the Notes and (3) the Preliminary
Offering Memorandum or the Offering Memorandum, as the case may be, (as so
amended or supplemented) would have cured the defect giving rise to such losses,
claims, damages, liabilities, judgments, actions, or expenses. NEHC also agrees
to reimburse each Indemnified Holder for any and all reasonable fees and
expenses (including, without limitation, the reasonable fees and expenses of
counsel) as they are incurred in connection with enforcing such Indemnified
Holder's rights under this Agreement (including, without limitation, its rights
under this Section 8). NEHC shall notify the Initial Purchaser and any Holder
promptly of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation) or litigation in connection with the
matters addressed by this Agreement which involves NEHC or an Indemnified
Holder.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
NEHC, such Indemnified Holder shall promptly notify NEHC in writing (provided,
that the failure to give such notice shall not relieve NEHC of its obligations
pursuant to this Agreement), and NEHC shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Holder and payment of all fees and expenses (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). Such Indemnified Holder shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
16
<PAGE> 18
of such Indemnified Holder unless (i) the employment of such counsel shall have
been specifically authorized in writing by NEHC, (ii) NEHC shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such Indemnified Holder
and NEHC, and such Indemnified Holder shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to NEHC (in which case NEHC shall not have
the right to assume the defense of such action on behalf of such Indemnified
Holder, it being understood, however, that NEHC shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all such Indemnified
Holders, which firm shall be designated in writing by the Indemnified Holders,
and that all such reasonable fees and expenses shall be reimbursed as they are
incurred). NEHC shall not be liable for any settlement of any such action or
proceeding effected without the prior written consent of NEHC, but if settled
with the written consent of NEHC, which consent will not be unreasonably
withheld, NEHC agrees to indemnify and hold harmless any Indemnified Holder
from and against any loss, claim, damage, liability, judgment, action or expense
by reason of any such settlement. Notwithstanding the foregoing sentence, if at
any time an Indemnified Holder shall have requested NEHC to reimburse the
Indemnified holder for fees and expenses of counsel as contemplated by the
second sentence of this paragraph, NEHC agrees that it shall be liable for any
settlement of any proceeding effected without NEHC's written consent if (i) such
settlement is entered into more than thirty (30) business days after receipt by
NEHC of the aforesaid request, and (ii) NEHC shall not have reimbursed the
Indemnified Holder in accordance with such request or contested the
reasonableness of such fees and expenses prior to the date of such settlement.
NEHC shall not, without the prior written consent of the Indemnified Holder
(which consent shall not he unreasonably withheld), settle, compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder by such (whether or not
any Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of such Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless NEHC, any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) NEHC,
and the officers, directors, partners, employees, representatives and agents of
each such person (the "NEHC Indemnified Parties"), to the same extent as the
foregoing indemnity from NEHC to each of the Indemnified Holders, but only with
respect to claims and actions based on information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement; provided however, that in no case shall any Holder be liable or
responsible for any amount in excess of the amount by which the total received
by such Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. In case any action
shall be brought against any NEHC Indemnified Party in respect of which
indemnity may be sought against a Holder of Transfer Restricted Securities, such
Holder shall have the rights and duties given NEHC, and NEHC Indemnified Parties
shall have the rights and duties given to each Holder by the preceding
paragraph.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party in respect of any losses, claims, damages, liabilities,
judgments, actions or expenses referred to therein,
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<PAGE> 19
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities, judgments, actions or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party (or parties, as applicable), on the
one hand, and the indemnified party (or parties, as applicable), on the other
hand, from the initial placement and the sale of Transfer Restricted Securities
pursuant to the applicable Registration Statement or (ii) if such allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party (or
parties, as applicable), and of the indemnified party (or parties, as
applicable), as well as any other relevant equitable considerations. The
relative benefits received by NEHC shall be deemed to be equal to the total
proceeds from the initial placement (net of the Initial Purchaser's commissions,
but before deducting expenses) as set forth on the cover page of the Offering
Memorandum. The relative benefits of the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Offering Memorandum and benefits received by any other Indemnified
Holders shall be deemed to be equal to the total proceeds received by such
Holder upon its sale of Senior Discount Notes. The relative fault of NEHC, on
the one hand, and the Indemnified Holders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact related to information supplied by either of NEHC on the one
hand, or by the Indemnified Holders, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
NEHC, the Initial Purchaser and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities, judgments, actions or expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, the Initial
Purchaser (and such Initial Purchaser's related Indemnified Holders), shall not
be required to contribute, in the aggregate, any amount in excess of the amount
equal to (A) the amount of the total purchase discounts and commissions
applicable to such Transfer Restricted Securities less (B) any amount paid or
contributed by the Initial Purchaser under the Purchase Agreement; nor shall any
Holder or its related Indemnified Holders be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid by
such Holder for such Transfer Restricted Securities plus (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
The indemnity and contribution agreements of NEHC contained in this
Section 8 are in addition to any liability or obligation which NEHC may
otherwise have to the Indemnified Holders. The obligations of the Initial
Purchaser, any Holder, Underwriter or agent thereof contemplated by this Section
8 shall be in addition to any liability which the respective Initial Purchaser,
Holder or Underwriter (or agent thereof) may otherwise have and shall extend
upon the same terms and conditions
18
<PAGE> 20
to each officer and director of NEHC and to each person, if any, who controls
NEHC within the meaning of the Act.
9. RULE 144A
NEHC hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which NEHC is
not subject to Section 13 or 15(d) of the Securities Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Notes, the investment banker or
investment bankers and manager or managers for any Underwritten Offering of
Notes, that will administer such offering will be selected by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering provided, however, that such investment bankers and
managers must be reasonably satisfactory to NEHC. Such investment bankers and
managers are referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) Remedies. NEHC agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. NEHC will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. NEHC has not previously entered
into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of NEHC's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. NEHC will not take any action, or
voluntarily permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended,
19
<PAGE> 21
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless (i) in the case of Section 5 hereof
and this Section 12(d)(i), NEHC has obtained the written consent of the Holders
of all outstanding Transfer Restricted Securities and (ii) in the case of all
other provisions hereof, NEHC has obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority of the outstanding principal amount of Transfer Restricted
Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture;
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Philip E. Coviello, Jr.
(ii) if to NEHC:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopier No.: (203) 661-5756
Attention: Donald J. Rogers
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier No.: (212) 403-2000
Attention: Adam 0. Emmerich
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by
20
<PAGE> 22
the Person giving the same to the Trustee at the address specified in the
Indenture.
(f) 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 limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder at a time when such
Holder could not transfer such Transfer Restricted Securities pursuant to a
Shelf Registration Statement. Each Holder of Transfer Restricted Securities
agrees to be bound by and comply with the terms and provisions of this
Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW RULES.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
[signature page follows]
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<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
NEBCO EVANS HOLDING COMPANY
By: /s/ Raymond E. Marshall
-----------------------------
Name: Raymond E. Marshall
Title: President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Beroth Jamar
-----------------------------
Name: Beroth Jamar
Title: Managing Director
<PAGE> 1
EXHIBIT 10.2
================================================================================
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of July 11, 1997
among
AMERISERVE FOOD DISTRIBUTION, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
as Documentation Agent,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Letter of Credit Issuing Lender
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA SECURITIES, INC.
================================================================================
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS ................................................... 1
1.1 Certain Defined Terms ........................................ 1
1.2 Other Interpretive Provisions ................................ 29
1.3 Accounting Principles ........................................ 29
ARTICLE II THE CREDITS .................................................. 30
2.1 Amounts and Terms of Commitments ............................. 30
(a) The Term A Credit ........................................ 30
(b) The Term B Credit ........................................ 30
(c) The Term C Credit ........................................ 30
(d) The Term D Credit ........................................ 30
(e) The Revolving Credit ..................................... 30
2.2 Loan Accounts ................................................ 31
2.3 Procedure for Borrowing ...................................... 31
2.4 Conversion and Continuation Elections ........................ 32
2.5 Voluntary Termination or Reduction of Commitments ............ 33
2.6 Optional Prepayments ......................................... 34
2.7 Mandatory Prepayments of Loans; Mandatory Commitment
Reductions ................................................. 34
2.8 Repayment .................................................... 36
(a) The Term A Credit ........................................ 36
(b) The Term B Credit ........................................ 37
(c) The Term C Credit ........................................ 38
(d) The Term D Credit ........................................ 39
(e) The Revolving Credit ..................................... 40
2.9 Interest ..................................................... 40
2.10 Fees ......................................................... 41
(a) Arrangement, Agency Fees ................................. 41
(b) Commitment Fees .......................................... 41
2.11 Computation of Fees and Interest ............................. 42
2.12 Payments by the Company ...................................... 42
2.13 Payments by the Lenders to the Administrative Agent .......... 42
2.14 Sharing of Payments, etc. .................................... 43
ARTICLE III THE LETTERS OF CREDIT ....................................... 44
3.1 The Letter of Credit Subfacility ............................. 44
3.2 Issuance, Amendment and Renewal of Letters of Credit ......... 45
3.3 Existing Letters of Credit; Risk Participations,
Drawings and Reimbursements ................................ 47
i
<PAGE> 3
Section Page
3.4 Repayment of Participations .................................. 49
3.5 Role of the Issuing Lender ................................... 49
3.6 Obligations Absolute ......................................... 50
3.7 Cash Collateral Pledge ....................................... 51
3.8 Letter of Credit Fees ........................................ 51
3.9 Uniform Customs and Practice ................................. 52
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY ....................... 52
4.1 Taxes ........................................................ 52
4.2 Illegality ................................................... 53
4.3 Increased Costs and Reduction of Return ...................... 54
4.4 Funding Losses ............................................... 54
4.5 Inability to Determine Rates ................................. 55
4.6 Substitution of Affected Lender .............................. 55
4.7 Certificates of Lenders ...................................... 55
4.8 Survival ..................................................... 56
ARTICLE V COLLATERAL AND GUARANTY ....................................... 56
5.1 Collateral--Personal Property ................................ 56
5.2 Mortgages .................................................... 56
5.3 Guaranty ..................................................... 56
5.4 Company Stock ................................................ 56
5.5 Intercreditor Agreement ...................................... 56
ARTICLE VI CONDITIONS PRECEDENT ......................................... 57
6.1 Conditions of Restatement .................................... 57
(a) Credit Agreement and Notes ............................... 57
(b) Resolutions; Incumbency .................................. 57
(c) Organization Documents ................................... 57
(d) Legal Opinions ........................................... 57
(e) Certificate .............................................. 57
(f) Collateral Documents ..................................... 58
(g) Insurance Policies ....................................... 59
(h) Environmental Review ..................................... 59
(i) Other Documents .......................................... 59
6.2 Other Conditions to Effectiveness of Restatement ............. 59
(a) PFS Acquisition .......................................... 59
(b) Equity Contribution ...................................... 59
(c) Subordinated Debt ........................................ 60
(d) Accounts Receivables Securitization ...................... 60
ii
<PAGE> 4
Section Page
(e) Post ..................................................... 60
(f) Existing Preferred Stock ................................. 60
(g) Indebtedness ............................................. 60
(h) Governmental Approvals ................................... 60
(i) Certificate .............................................. 60
(j) Purchase by Lenders ...................................... 60
6.3 Conditions to All Credit Extensions .......................... 61
(a) Notice, Application ...................................... 61
(b) Continuation of Representations and Warranties ........... 61
(c) No Existing Default ...................................... 61
ARTICLE VII REPRESENTATIONS AND WARRANTIES .............................. 61
7.1 Corporate Existence and Power ................................ 61
7.2 Corporate Authorization; No Contravention .................... 62
7.3 Governmental Authorization ................................... 62
7.4 Binding Effect ............................................... 62
7.5 Litigation ................................................... 62
7.6 No Default ................................................... 63
7.7 ERISA Compliance ............................................. 63
7.8 Use of Proceeds; Margin Regulations .......................... 63
7.9 Title to Properties .......................................... 63
7.10 Taxes ........................................................ 64
7.11 Financial Condition .......................................... 64
7.12 Environmental Matters ........................................ 65
7.13 Regulated Entities ........................................... 66
7.14 No Burdensome Restrictions ................................... 66
7.15 Copyrights, Patents, Trademarks and Licenses, etc. ........... 66
7.16 Subsidiaries ................................................. 66
7.17 Insurance .................................................... 66
7.18 Full Disclosure .............................................. 66
ARTICLE VIII AFFIRMATIVE COVENANTS ...................................... 67
8.1 Financial Statements ......................................... 67
8.2 Certificates; Other Information .............................. 68
8.3 Notices ...................................................... 69
8.4 Preservation of Corporate Existence, etc. .................... 70
8.5 Maintenance of Property ...................................... 70
8.6 Insurance .................................................... 70
8.7 Payment of Obligations ....................................... 70
8.8 Compliance with Laws ......................................... 71
iii
<PAGE> 5
Section Page
8.9 Compliance with ERISA ........................................ 71
8.10 Inspection of Property and Books and Records ................. 71
8.11 Environmental Laws ........................................... 71
8.12 Hedging Agreements ........................................... 71
8.13 Use of Proceeds .............................................. 71
8.14 Further Assurances ........................................... 72
ARTICLE IX NEGATIVE COVENANTS ........................................... 72
9.1 Limitation on Liens .......................................... 72
9.2 Asset Dispositions, etc. ..................................... 74
9.3 Consolidations and Mergers ................................... 75
9.4 Loans and Investments ........................................ 75
9.5 Limitation on Indebtedness ................................... 76
9.6 Transactions with Affiliates ................................. 77
9.7 Use of Proceeds .............................................. 77
9.8 Contingent Obligations ....................................... 77
9.9 Joint Ventures ............................................... 78
9.10 Rental Obligations ........................................... 78
9.11 Restricted Payments .......................................... 78
9.12 Minimum Fixed Charge Coverage ................................ 79
9.13 Minimum Interest Coverage .................................... 79
9.14 Maximum Leverage ............................................. 80
9.15 ERISA ........................................................ 80
9.16 Modification of Certain Agreements ........................... 80
9.17 Negative Pledges, Restrictive Agreements, etc. ............... 80
9.18 Maximum Capital Expenditures ................................. 81
9.19 Change in Business ........................................... 81
9.20 Accounting Changes ........................................... 81
9.21 Restructuring Costs .......................................... 81
ARTICLE X EVENTS OF DEFAULT ............................................. 82
10.1 Event of Default ............................................. 82
(a) Non-Payment .............................................. 82
(b) Representation or Warranty ............................... 82
(c) Specific Defaults ........................................ 82
(d) Other Defaults ........................................... 82
(e) Cross-Default ............................................ 82
(f) Insolvency; Voluntary Proceedings ........................ 83
(g) Involuntary Proceedings .................................. 83
(h) ERISA .................................................... 83
iv
<PAGE> 6
Section Page
(i) Monetary Judgments ....................................... 84
(j) Non-Monetary Judgments ................................... 84
(k) Change of Control ........................................ 84
(l) Impairment of Security, etc. ............................. 84
10.2 Remedies ..................................................... 84
10.3 Rights Not Exclusive ......................................... 85
ARTICLE XI THE AGENTS ................................................... 85
11.1 Appointment and Authorization ................................ 85
11.2 Delegation of Duties ......................................... 86
11.3 Liability of Administrative Agent ............................ 86
11.4 Reliance by Administrative Agent ............................. 86
11.5 Notice of Default ............................................ 87
11.6 Credit Decision .............................................. 87
11.7 Indemnification of Administrative Agent ...................... 87
11.8 Administrative Agent in Individual Capacity .................. 88
11.9 Successor Agent .............................................. 88
11.10 Withholding Tax .............................................. 88
11.11 Collateral Matters ........................................... 90
11.12 Documentation Agent .......................................... 91
ARTICLE XII MISCELLANEOUS ............................................... 91
12.1 Amendments and Waivers ....................................... 91
12.2 Notices ...................................................... 92
12.3 No Waiver; Cumulative Remedies ............................... 92
12.4 Costs and Expenses ........................................... 93
12.5 Company Indemnification ...................................... 93
12.6 Payments Set Aside ........................................... 93
12.7 Successors and Assigns ....................................... 94
12.8 Assignments, Participations, etc. ............................ 94
12.9 Confidentiality .............................................. 95
12.10 Set-off ...................................................... 96
12.11 Automatic Debits of Fees ..................................... 96
12.12 Notification of Addresses, Lending Offices, etc. ............. 97
12.13 Counterparts ................................................. 97
12.14 Severability ................................................. 97
12.15 No Third Parties Benefited ................................... 97
12.16 Governing Law and Jurisdiction ............................... 97
12.17 Waiver of Jury Trial ......................................... 97
12.18 Entire Agreement ............................................. 98
v
<PAGE> 7
SCHEDULES
Schedule 2.1 Commitments
Schedule 3.3 Existing Letters of Credit
Schedule 7.5 Litigation
Schedule 7.7 ERISA
Schedule 7.11 Permitted Obligations
Schedule 7.12 Environmental Matters
Schedule 7.15 Copyrights, Patents, Trademarks, Licenses and Related Matters
Schedule 7.16 Subsidiaries and Minority Interests
Schedule 7.17 Insurance Matters
Schedule 9.1 Permitted Liens
Schedule 9.4 Existing Investments
Schedule 9.5 Permitted Indebtedness
Schedule 9.8 Contingent Obligations
Schedule 12.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Note
Exhibit E Form of Legal Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit F Form of Legal Opinion of Cassem, Tierney, Adams, Gotch and
Douglas
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Guaranty
Exhibit I Form of NEHC Guaranty
vi
<PAGE> 8
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
July 11, 1997, among AmeriServe Food Distribution, Inc. (formerly known as Nebco
Evans Distribution, Inc.), a Nebraska corporation (the "Company"), the several
financial institutions from time to time party to this Agreement (collectively
the "Lenders"; individually each a "Lender"), Bank of America National Trust
and Savings Association, as letter of credit issuing bank, Bank of America
National Trust and Savings Association, as administrative agent for the Lenders,
and Donaldson, Lufkin & Jenrette Securities Corporation, as documentation agent.
WHEREAS, the Company, certain financial institutions, Bank of America
Illinois, as letter of credit issuing bank, and Bank of America National Trust
and Savings Association, as agent, are parties to an Amended and Restated Credit
Agreement dated as of March 26, 1997, as heretofore amended (as so amended the
"Existing Credit Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the Existing
Credit Agreement so as to, among other things, (a) increase the amount of the
facilities, in part to finance the purchase of PFS, a division of PepsiCo, Inc.,
(b) amend the pricing, certain covenants and certain various other provisions of
the Existing Credit Agreement and (c) revise in certain respects the composition
of the lender group; and
WHEREAS, the parties hereto intend that this Agreement and the Loan
Documents executed in connection herewith not effect a novation of the
obligations of the Company under the Existing Credit Agreement and the "Loan
Documents" (as defined in the Existing Credit Agreement), but merely a
restatement, and where applicable, an amendment to the terms governing such
obligations;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the Existing Credit Agreement shall be amended and
restated to read in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Acquisition means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of
any business or division of a Person, (b) the acquisition of in excess of
50% of the capital stock, partnership interests, membership interests or
equity of any Person, or otherwise causing any Person to
<PAGE> 9
become a Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a Subsidiary)
provided that the Company or the Subsidiary is the surviving entity.
Acquisition EBITDA means for any four fiscal quarter period, if the
Company makes an Acquisition during such period, the EBITDA of such
acquired entity as if the Acquisition had taken place on the first day of
such period.
Adjusted EBITDA means as at the end of any fiscal quarter for the
four fiscal quarters (or, if shorter, the period from the Closing Date)
then ending (a) the Company's consolidated EBITDA plus (b) Receivables
Financing Costs deducted in the calculation of EBITDA plus (c) any cash
restructuring charges taken in the 1997, 1998, and 1999 fiscal years
related to the AmeriServ Acquisition or the PFS Acquisition which are
reflected in the operating expenses of the Company's income statement (but
not in excess of $15,000,000 in each of fiscal years 1997, 1998 and 1999)
plus (d) APA Cost Reductions for the four fiscal quarter period ended on
or before March 31, 1998 plus (e) Arby's EBITDA for any four fiscal
quarter period ended on or before December 31, 1997 plus (f) LTM EBITDA
for any four fiscal quarter period ended on or before March 31, 1998;
provided that for the purpose of the calculation of the Leverage Ratio
only, Acquisition EBITDA will be added in the calculation of Adjusted
EBITDA.
Adjusted Funded Debt means all Indebtedness plus the Invested Amount
of the Company and its Subsidiaries, excluding Indebtedness of the Company
to Subsidiaries or of Subsidiaries to the Company or other Subsidiaries;
provided, however, that cash and Cash Equivalent Investments shall be
subtracted from Indebtedness in the calculation of Adjusted Funded Debt at
any time on or before December 31, 1997.
Adjusted Interest Expense means Interest Expense plus Receivables
Financing Costs.
Administrative Agent means BofA in its capacity as agent for the
Lenders hereunder, and any successor agent arising under Section 11.9.
Administrative Agent's Payment Office means the address for payments
set forth on Schedule 12.2 hereto in relation to the Administrative Agent,
or such other address as the Administrative Agent may from time to time
specify.
Affected Lender means any Lender that has given notice to the
Company (which has not been rescinded) of (i) any obligation by the
Company to pay any amount pursuant to Section 4.1 or 4.3 or (ii) the
occurrence of any circumstances of the nature described in Section 4.2.
Affiliate means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another
Person if the controlling Person
2
<PAGE> 10
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by
contract, or otherwise, or in the case of any Lender which is an
investment fund, any other fund which is advised by the same investment
advisor or an Affiliate thereof.
Agent-Related Persons means BofA and any successor Administrative
Agent arising under Section 11.9 and any successor letter of credit
issuing bank hereunder, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
Agents means the Administrative Agent and the Documentation Agent.
Agreement means this Credit Agreement.
AmeriServ Acquisition means the acquisition by the Company of the
stock of AmeriServ Food Company in January 1996.
APA Cost Reductions means those cost reductions described in the PFS
Acquisition Agreement, which shall be $8,325,000 for the four fiscal
quarter period ended September 30, 1997, $5,550,000 for the four fiscal
quarter period ended December 31, 1997 and $2,775,000 for the four fiscal
quarter period ended March 31, 1998.
Applicable Base Rate Margin means (a) initially, 1.25% in the case
of any Revolving Loan or Term A Loan, (b) 1.75% in the case of any Term B
Loan, (c) 2.00% in the case of any Term C Loan, (d) 2.25% in the case of
any Term D Loan and (b) on and after any date specified below on which the
Applicable Base Rate Margin is to be adjusted for Revolving Loans and Term
A Loans, the rate per annum set forth in the table below for the
applicable Loan opposite the applicable Leverage Ratio:
--------------------------------------------------------------------------
Leverage Ratio Applicable Base Rate Margin for
Revolving Loans and Term A
Loans
--------------------------------------------------------------------------
Less than 4.0 to 1.0 0%
--------------------------------------------------------------------------
Less than 4.5 to 1.0 0.25%
but greater than or equal to 4.0 to 1.0
--------------------------------------------------------------------------
Less than 5.0 to 1.0 0.375%
but greater than or equal to 4.5 to 1.0
--------------------------------------------------------------------------
3
<PAGE> 11
--------------------------------------------------------------------------
Less than 5.75 to 1.0 1.0%
but greater than or equal to 5.0 to 1.0
--------------------------------------------------------------------------
Equal to or greater than 5.75 to 1.0 1.25%
--------------------------------------------------------------------------
The Applicable Base Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of any
year, 90 days) after the end of each calendar quarter, based on the
Leverage Ratio as of the last day of such calendar quarter commencing with
the calendar quarter ending December 31, 1997; it being understood that if
the Company fails to deliver the financial statements as required by
subsection 8.1(a) or 8.1 (b), as applicable, and the related Compliance
Certificate required by subsection 8.2(b) by the 45th day (or, if
applicable, the 90th day) after any calendar quarter the Applicable Base
Rate Margin shall be 1.25% for any Revolving Loan or Term A Loan bearing
interest based on the Base Rate until such financial statements and
Compliance Certificate are delivered.
Applicable Offshore Rate Margin means (a) initially 2.50% in the
case of any Revolving Loan or Term A Loan, (B) 3.00% in the case of any
Term B Loan, (C) 3.25% in the case of any Term C Loan, (d) 3.50% in the
case of any Term D Loan and (e) on and after any date specified below on
which the Applicable Offshore Rate Margin is to be adjusted for Revolving
Loans and Term A Loan, the rate per annum set forth in the table below for
the applicable Loan opposite the applicable Leverage Ratio:
--------------------------------------------------------------------------
Leverage Ratio Applicable Offshore Rate Margin
for Revolving Loans and Term A
Loans
--------------------------------------------------------------------------
Less than 3.0 to 1.0 0.75%
--------------------------------------------------------------------------
Less than 3.5 to 1.0 1.0%
but greater than or equal to 3.0 to 1.0
--------------------------------------------------------------------------
Less than 4.0 to 1.0 1.25%
but greater than or equal to 3.5 to 1.0
--------------------------------------------------------------------------
Less than 4.5 to 1.0 1.50%
but greater than or equal to 4.0 to 1.0
--------------------------------------------------------------------------
Less than 5.0 to 1.0 1.875%
but greater than or equal to 4.5 to 1.0
--------------------------------------------------------------------------
Less than 5.75 to 1.0 2.25%
but greater than or equal to 5.0 to 1.00
--------------------------------------------------------------------------
Equal to or greater than 5.75 to 1.0 2.50%
--------------------------------------------------------------------------
4
<PAGE> 12
The Applicable Offshore Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of any
year, 90 days) after the end of each calendar quarter, based on the
Leverage Ratio as of the last day of such quarter commencing with the
calendar quarter ending December 31, 1997; it being understood that if the
Company fails to deliver the financial statements required by subsection
8.1(a) or 8.1(b), as applicable, and the related Compliance Certificate
required by subsection 8.2(b) by the 45th day (or, if applicable, the 90th
day) after any calendar quarter, the Applicable Offshore Rate Margin shall
be 2.50% for Revolving Loans and Term A Loans bearing interest based on
the Offshore Rate until such financial statements and Compliance
Certificate are delivered.
Approved Bank has the meaning specified in the definition of "Cash
Equivalent Investments".
Arby's EBITDA means $2,900,000 for the four fiscal quarter period
ended September 30, 1997, and $1,800,000 for the four fiscal quarter
period ended December 31, 1997.
Arranger means BancAmerica Securities, Inc., a Delaware corporation.
Assignee has the meaning specified in subsection 12.8(a).
Attorney Costs means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. ss.101, et seq.).
Base Rate means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The "reference rate" is a
rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take effect
at the opening of business on the day specified in the public announcement
of such change.
Base Rate Loan means a Revolving Loan, a Term Loan A, a Term B Loan,
a Term C Loan or Term D Loan that bears interest based on the Base Rate or
an L/C Advance.
BofA means Bank of America National Trust and Savings Association, a
national banking association.
5
<PAGE> 13
Borrowing means a borrowing hereunder consisting of Revolving Loans
or Term Loans of the same Type made to the Company on the same day by the
Lenders under Article II, and, other than in the case of Base Rate Loans,
having the same Interest Period.
Borrowing Date means any date on which a Borrowing occurs under
Section 2.3.
Bridge Loan means the up to $350,000,000 of senior subordinated
increasing rate debt issued pursuant to the Securities Purchase Agreement
among DLJ Bridge Finance, Inc., BofA and the Company dated the date
hereof.
Business Day means any day other than a Saturday, Sunday or other
day on which commercial banks in San Francisco are authorized or required
by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in
the applicable offshore dollar interbank market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
Capital Expenditures means all expenditures which, in accordance
with GAAP, would be required to be capitalized and shown on the
consolidated balance sheet of the Company, but (i) excluding expenditures
made in connection with the replacement, substitution or restoration of
assets to the extent financed (A) from insurance proceeds (or other
similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (B) with awards of compensation arising from
the taking by eminent domain or condemnation of the assets being replaced
and (ii) excluding expenditures incurred by the creation of Capitalized
Lease Obligations and financed thereby.
Capitalized Lease Obligations means all monetary obligations of the
Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other
Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty.
Cash Collateralize means to pledge and deposit with or deliver to
the Administrative Agent, for the benefit of the Agents, the Issuing
Lender and the Lenders, as additional collateral for the L/C Obligations,
cash or deposit account balances pursuant to documentation in form and
substance satisfactory to the
6
<PAGE> 14
Administrative Agent and the Issuing Lender (which documents are hereby
consented to by the Lenders). Derivatives of such term shall have a
corresponding meaning. The Company hereby grants the Administrative Agent,
for the benefit of the Agents, the Issuing Lender and the Lenders, a
security interest in all such cash and deposit account balances. Cash
collateral shall be maintained in blocked, interest bearing deposit
accounts at BofA.
Cash Equivalent Investments shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than one year from the date of acquisition,
(ii) marketable direct obligations issued by any State of the United
States of America or any local government or other political subdivision
thereof rated (at the time of acquisition of such security) at least AA by
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P") or the equivalent thereof by Moody's Investors
Service, Inc. ("Moody's") having maturities of not more than one year from
the date of acquisition, (iii) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (x) any Lender, (y)
any domestic commercial bank of recognized standing having capital and
surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating (at the time of acquisition of such security) by
S&P is at least A-1 or the equivalent thereof (any such bank, an "Approved
Bank"), in each case with maturities of not more than six months from the
date of acquisition, (iv) commercial paper and variable or fixed rate
notes issued by any Lender or Approved Bank or by the parent company of
any Lender or Approved Bank and commercial paper and variable rate notes
issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating (at the time of acquisition of such
security) of at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's, or guaranteed by any industrial
company with a long-term unsecured debt rating (at the time of acquisition
of such security) of at least AA or the equivalent thereof by S&P or at
least Aa or the equivalent thereof by Moody's and in each case maturing
within one year after the date of acquisition and (v) repurchase
agreements with any Lender or any primary dealer maturing within one year
from the date of acquisition that are fully collateralized by investment
instruments that would otherwise be Cash Equivalent Investments; provided
that the terms of such repurchase agreements comply with the guidelines
set forth in the Federal Financial Institutions Examination Council
Supervisory Policy -- Repurchase Agreements of Depository Institutions
With Securities Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985.
Change of Control means the failure of (a) Holberg or its
shareholders, or any thereof, to own directly or indirectly, in excess of
50% of the outstanding shares of voting stock of the Company; (b) the
failure of NEHC to own directly 100% of the outstanding shares of voting
stock of the Company (other than shares under stock options held by, or
issued under stock options to, directors, officers, employees and former
directors not in excess of 10% of the shares of voting stock of the
Company);
7
<PAGE> 15
or (c) Holberg Inc. or its shareholders as of the date hereof, or any
thereof, to own at least 50% of the outstanding shares of voting stock of
Holberg. For purposes of this definition, voting stock of a corporation
shall not include capital stock of such corporation if such stock has only
the minimal voting rights required by such corporation's jurisdiction of
organization with respect to any capital stock issued by such corporation.
Closing Date means the date on which all conditions precedent set
forth in Sections 6.1 and 6.2 are satisfied or waived by all Lenders.
Code means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
Collateral means any collateral granted to the Administrative Agent
for the benefit of the Agents, or the Lenders, to secure the Obligations
of the Company, or any Guarantor, under any Loan Document.
Collateral Documents means the Security Agreement, the Pledge
Agreement, the Subsidiary Pledge Agreement, the Trademark Security
Agreement and the NEHC Pledge Agreement.
Commitment means, as to each Lender, such Lender's Revolving
Commitment, Term A Commitment, Term B Commitment, Term C Commitment and
Term D Commitment, as applicable.
Commitment Fee Rate means (a) initially, 0.50% and (b) on and after
any date specified below on which the Commitment Fee Rate is to be
adjusted, the rate per annum set forth in the table below opposite the
applicable Leverage Ratio:
--------------------------------------------------------------------------
Leverage Ratio Commitment Fee Rate
--------------------------------------------------------------------------
Less than 3.0 to 1.0 0.25%
--------------------------------------------------------------------------
Less than 3.5 to 1.0 0.30%
but greater than or equal to 3.0 to 1.0
--------------------------------------------------------------------------
Less than 4.5 to 1.0 0.375%
but greater than or equal to 3.5 to 1.0
--------------------------------------------------------------------------
Equal to or greater than 4.5 to 1.0 0.50%
--------------------------------------------------------------------------
The Commitment Fee Rate shall be adjusted, to the extent applicable, 45
days (or, in the case of the last calendar quarter of any year, 90 days)
after the end of each
8
<PAGE> 16
calendar quarter, based on the Leverage Ratio as of the last day of such
calendar quarter commencing with the calendar quarter ending December 31,
1997; it being understood that if the Company fails to deliver the
financial statements required by subsection 8.1(a) or 8.1(b), as
applicable, and the related Compliance Certificate required by subsection
8.2(b) by the 45th day (or, if applicable, the 90th day) after any
calendar quarter, the Commitment Fee Rate shall be 0.50% until such
financial statements and Compliance Certificate are delivered.
Compliance Certificate means a certificate substantially in the form
of Exhibit C.
Computation Period means as at any fiscal quarter end, the period of
four consecutive quarters then ending or, if shorter, the period
commencing the Closing Date.
Consolidated Net Income means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and
its Subsidiaries for such period.
Contingent Obligation means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease, dividend
(declared and not paid), letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii)
to advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet item, level of income or financial condition of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (iv) otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof
(each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument
(other than any Letter of Credit) issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings
or payments; (c) to purchase any materials, supplies or other property
from, or to obtain the services of, another Person if the relevant
contract or other related document or obligation requires that payment for
such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any Hedging Agreement. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be
deemed equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made or, if not
stated or if indeterminable, the maximum reasonably anticipated liability
in respect thereof, and in the case of other
9
<PAGE> 17
Contingent Obligations, shall be equal to the maximum reasonably
anticipated liability in respect thereof.
Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
Conversion/Continuation Date means any date on which, under Section
2.4, the Company (a) converts Loans of one Type to another Type, or (b)
continues as Loans of the same Type, but with a new Interest Period, Loans
having Interest Periods expiring on such date.
Corporate Allocations means the amount paid by the Company to
Holberg for managerial and administration services performed by Holberg
for the Company.
Credit Extension means and includes (a) the making of any Loans
hereunder, and (b) the Issuance of any Letters of Credit hereunder
(including the Existing Letters of Credit).
Default means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
DLJ means Donaldson, Lufkin & Jenrette Securities Corporation.
Documentation Agent means Donaldson, Lufkin & Jenrette Securities
Corporation in its capacity as documentation agent for the Lenders
hereunder.
Dollars, dollars and $ each mean lawful money of the United States.
EBITDA means, for any Computation Period, the sum of
(a) Consolidated Net Income of the Company for such period
excluding, to the extent reflected in determining such Consolidated Net
Income, extraordinary gains and losses for such period and non-recurring
gains and charges,
plus
(b) to the extent deducted in determining Consolidated Net Income,
Interest Expense, income tax expense, depreciation, depletion and
amortization for such period.
Effective Amount means (i) with respect to any Revolving Loans and
Term Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or repayments of
Revolving Loans and
10
<PAGE> 18
Term Loans occurring on such date; and (ii) with respect to any
outstanding L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to any Issuances of Letters
of Credit occurring on such date and any other changes in the aggregate
amount of the L/C Obligations as of such date, including as a result of
any reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing under
Letters of Credit taking effect on such date.
Eligible Assignee means (i) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (ii) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the country in which it is organized
or another country which is also a member of the OECD; (iii) a Person that
is primarily engaged in the business of commercial banking and that is (A)
a Subsidiary of a Lender, (B) a Subsidiary of a Person of which a Lender
is a Subsidiary, or (C) a Person of which a Lender is a Subsidiary and
(iv) as to the Term Loans, an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D under the Securities Act of 1933,
as amended (other than the Company or an Affiliate of the Company).
Environmental Claims means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
Environmental Laws means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
ERISA Event means (a) a Reportable Event with respect to a Pension
Plan; (b) the failure to make a required contribution to a Pension Plan if
such failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA; (c) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in
11
<PAGE> 19
Section 4001(a)(2) of ERISA) or a cessation of operations which is treated
as such a withdrawal under Section 4062(e) of ERISA; (d) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (e) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (f) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (g) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.
Event of Default means any of the events or circumstances specified
in Section 8.1.
Excess Cash Flow means, for any period, without duplication, (a)
EBITDA for such period; plus (b) net cash extraordinary gains and
nonrecurring gains included in determining Consolidated Net Income for
such period; plus (c) decreases in Working Capital; less (d) increases in
Working Capital; less (e) the amount of cash income taxes deducted in
determining Consolidated Net Income for such period; less (f) the amount
of cash Interest Expense deducted in determining Consolidated Net Income
for such period; less (g) Capital Expenditures (less the amount of any
Indebtedness incurred to finance such Capital Expenditures other than the
Loans hereunder) permitted by Section 9.18 hereof (even if not expended
but without giving effect to any carry-over from a prior year); less (h)
scheduled amortization on the Term Loans or any other Indebtedness
actually paid during such period; less (i) the aggregate of all mandatory
prepayments of the Loans made during such period in accordance with
Section 2.7(c) (other than Section 2.7(c)(v)); less (j) net cash
extraordinary losses and non-recurring charges deducted in determining
Consolidated Net Income for such period; less (k) Restructuring Costs paid
by the Company during such period and not previously deducted in
determining EBITDA and not deducted in determining Consolidated Net Income
for such period; less (l) dividends paid in cash.
Exchange Act means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
Existing Credit Agreement has the meaning specified in the recitals.
Existing Letters of Credit means the letters of credit described in
Schedule 3.3.
Federal Funds Rate means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") on the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or,
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<PAGE> 20
if for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Administrative Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Administrative Agent.
Fee Letter has the meaning specified in subsection 2.10(a).
Fixed Charge Coverage Ratio means, for the Computation Period most
recently ended on or before such date, the ratio of (a) Adjusted EBITDA
for such Computation Period less (i) Capital Expenditures for such
Computation Period less (ii) cash taxes paid by the Company and its
Subsidiaries for such Computation Period, to (b) the sum of (i) Adjusted
Interest Expense for such Computation Period, (ii) cash dividends paid by
the Company during such Computation Period, (iii) the required
installments of principal of the Term Loans and (iv) principal
amortization of Capitalized Lease Obligations for such Computation Period.
FRB means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession); provided that for
the purpose of calculating any financial covenant or financial ratio, GAAP
shall mean such generally accepted accounting principles which are
applicable to the circumstances as of the date hereof and provided further
that upon a change in GAAP which would, if applicable, affect the
calculation of financial covenants or financial ratios, the parties shall
discuss the amendment of such covenants and ratios and the definition of
GAAP.
Governmental Authority means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
Guarantor means (a) NEHC; (b) as of the date hereof, each Subsidiary
listed on Schedule 7.16; and (c) thereafter, the Persons referred to in
clauses (a) and (b) and each other Person which from time to time executes
and delivers a counterpart of the Guaranty.
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<PAGE> 21
Guaranty means the guaranty of the Guarantors (other than NEHC) in
substantially the form of Exhibit H.
Guaranty Obligation has the meaning specified in the definition of
Contingent Obligation.
Hedging Agreement means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any
single transaction) that is an interest rate swap agreement, basis swap,
forward rate agreement, commodity swap, commodity option, equity or equity
index swap or option, bond option, interest rate option, forward foreign
exchange agreement, rate cap, collar or floor agreement, currency swap
agreement, cross-currency rate swap agreement, swaption, currency option
or any other, similar agreement (including any option to enter into any of
the foregoing).
Holberg means Holberg Industries, Inc., a Delaware corporation.
Honor Date has the meaning specified in subsection 3.3(c).
Impermissible Qualification means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion
or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
such Obligor to be in default of any of its obligations under Sections
9.12, 9.13 or 9.14.
Indebtedness of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments (it being understood that undrawn letters of
credit are contingent reimbursement obligations); (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by the
Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale
of such property); (f) all Capital Lease Obligations; (g) all net
obligations with respect
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<PAGE> 22
to Hedging Agreements; (h) all indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and
contracts rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness; and
(i) all Guaranty Obligations in respect of indebtedness or obligations
of others of the kinds referred to in clauses (a) through (g) above.
Indemnified Obligations has the meaning specified in Section 12.5.
Indemnified Person has the meaning specified in Section 12.5.
Independent Auditor has the meaning specified in Section 8.1(b).
Initial Financial Projections means the ten-year projections
provided to the Lenders prior to the date hereof included in the
Information Memorandum dated June, 1997.
Insolvency Proceeding means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S. federal, state
or foreign law, including the Bankruptcy Code.
Intercreditor Agreement means the Intercreditor Agreement dated as
of July 11, 1997 between the Administrative Agent and Norwest Bank
Minnesota, National Association as Trustee under the Pooling and Servicing
Agreement.
Interest Coverage Ratio means, for the Computation Period most
recently ended on or before such date, the ratio of (a) Adjusted EBITDA
for such Computation Period to (b) Adjusted Interest Expense for such
Computation Period.
Interest Expense means, for any period, the consolidated interest
expense of the Company and its Subsidiaries for such period including
interest expense related to Capitalized Lease Obligations.
Interest Payment Date means, as to any Loan other than a Base Rate
Loan, the last day of each Interest Period applicable to such Loan and, as
to any Base Rate Loan, the last Business Day of each calendar quarter;
provided, however, that if any Interest Period for an Offshore Rate Loan
exceeds three months, the date that falls three months after the beginning
of such Interest Period is also an Interest Payment Date.
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<PAGE> 23
Interest Period means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two, three
or six months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period;
(iii) no Interest Period for any Revolving Loan shall extend
beyond the Revolving Termination Date; and
(iv) no Interest Period applicable to a Term A Loan, a Term B
Loan, a Term C Loan or a Term D Loan or portion of any thereof shall
extend beyond any date upon which is due any scheduled principal
payment in respect of the Term A Loans, Term B Loans, Term C Loans
or Term D Loans, as applicable, unless the aggregate principal
amount of Term A Loans, Term B Loans, Term C Loans or Term D Loans,
as applicable, represented by Base Rate Loans, or by Offshore Rate
Loans having Interest Periods that will expire on or before such
date, equals or exceeds the amount of such principal payment.
Invested Amount means, at any time, the outstanding principal amount
that is owed to holders (other than Subsidiaries of the Company) of
securities issued by, or loans to, the trust established under the Pooling
and Servicing Agreement or any other trust established with respect to a
Qualified Receivables Transaction.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Issuance Date has the meaning specified in subsection 3.1(a).
Issue means, with respect to any Letter of Credit, to incorporate
the Existing Letters of Credit into this Agreement, or to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter
of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
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<PAGE> 24
Issuing Lender means BofA in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement letter of
credit issuer arising under subsection 11.1(b) or Section 11.9.
Joint Venture means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal
arrangement (whether created by contract or conducted through a separate
legal entity) now or hereafter formed by the Company or any of its
Subsidiaries with another Person in order to conduct a common venture or
enterprise with such Person. No Receivables Subsidiary or Special Purpose
Vehicle shall be considered a Joint Venture.
L/C Advance means each Lender's participation in any L/C Borrowing
in accordance with its Revolving Percentage.
L/C Amendment Application means an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall
at any time be in use at the Issuing Lender, as the Issuing Lender shall
request.
L/C Application means an application form for issuances of standby
or commercial documentary letters of credit as shall at any time be in use
at the Issuing Lender, as the Issuing Lender shall request.
L/C Borrowing means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the
date when made nor converted into a Borrowing of Revolving Loans under
subsection 3.3(c).
L/C Commitment means the commitment of the Issuing Lender to Issue,
and the commitment of the Lenders severally to participate in Letters of
Credit (including the Existing Letters of Credit) from time to time Issued
or outstanding under Article III, in an aggregate amount not to exceed on
any date the amount of $30,000,000, as the same shall be reduced as a
result of a reduction in the L/C Commitment pursuant to Section 2.5;
provided that the L/C Commitment is a part of the combined Commitments,
rather than a separate, independent commitment.
L/C Fee Rate means, at any time, the Applicable Offshore Rate Margin
for Revolving Loans; provided that each of the foregoing rates shall be
increased by 2% at any time an Event of Default exists.
L/C Obligations means, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of
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<PAGE> 25
Credit, including any of the Issuing Lender's standard form documents for
letter of credit issuances.
Lender has the meaning specified in the introductory clause hereto.
References to the "Lenders" shall include BofA, including in its capacity
as Issuing Lender; for purposes of clarification only, to the extent that
BofA may have any rights or obligations in addition to those of the
Lenders due to its status as Issuing Lender, its status as such will be
specifically referenced.
Lending Office means, as to any Lender, the office or offices of
such Lender specified as its "Lending Office" or "Domestic Lending Office"
or "Offshore Lending Office", as the case may be, on Schedule 12.2, or
such other office or offices as such Lender may from time to time notify
the Company and the Agent.
Letters of Credit means the Existing Letters of Credit and any
letters of credit (whether standby letters of credit or commercial
documentary letters of credit) Issued by the Issuing Lender pursuant to
Article III.
Leverage Ratio means, as at any fiscal quarter end for the Company
and its Subsidiaries on a consolidated basis, the ratio of
(i) Adjusted Funded Debt as of such fiscal quarter end
to
(ii) Adjusted EBITDA.
Lien means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preferential arrangement of any kind or
nature whatsoever in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of
the foregoing, or the filing of any financing statement naming the owner
of the asset to which such lien relates as debtor, under the Uniform
Commercial Code or any comparable law) and any contingent or other
agreement to provide any of the foregoing, but not including the interest
of a lessor under an operating lease.
Loan means an extension of credit by a Lender to the Company under
Article II or Article III in the form of a Revolving Loan, Term Loan or
L/C Advance.
Loan Documents means this Agreement, any Notes, the Fee Letter, the
L/C-Related Documents, the Pledge Agreement, the Subsidiary Pledge
Agreements, the Guaranty, the NEHC Guaranty, the Security Agreement, the
Trademark Security Agreement, the Mortgages, and all other documents
delivered to the Agent or any Lender in connection herewith.
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<PAGE> 26
LTM EBITDA means $94,000,000 for the four fiscal quarter period
ended September 30, 1997, $62,000,000 for the four fiscal quarter period
ended December 31, 1997 and $37,000,000 for the four fiscal quarter period
ended March 31, 1998.
Margin Stock means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material impairment
of the ability of the Company, NEHC or any Subsidiary to perform under any
Loan Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company or any Subsidiary of any Loan Document.
Moody's has been specified in the definition of "Cash Equivalent
Investments".
Mortgage means a mortgage, leasehold mortgage, deed of trust or
similar document granting a Lien on real property in appropriate form for
filing or recording in the applicable jurisdiction and otherwise
reasonably satisfactory to the Administrative Agent.
Mortgaged Property means the real property subject to a Mortgage.
Multiemployer Plan means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate may have any liability.
NEHC means Nebco Evans Holding Company, a Delaware corporation.
NEHC Guaranty means the guaranty of NEHC in substantially the form
of Exhibit I.
NEHC Pledge Agreement means the Pledge Agreement dated the date
hereof between NEHC and the Administrative Agent.
Net Cash Proceeds means
(a) with respect to the sale, transfer, or other disposition by
the Company or any Subsidiary of any asset (including any
stock of any Subsidiary), the aggregate cash proceeds
(including cash proceeds received by way of deferred payment
of principal pursuant to a note, installment receivable or
otherwise, but only as and when received) received by the
Company or any Subsidiary pursuant to such sale, transfer or
other disposition, net of (i) the direct costs relating to
such sale, transfer or
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<PAGE> 27
other disposition (including, without limitation, sales
commissions and legal, accounting and investment banking
fees), (ii) taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions
and any tax sharing arrangements), (iii) amounts required to
be applied to the repayment of any Indebtedness secured by a
Lien on the asset subject to such sale, transfer or other
disposition (other than the Loans) and (iv) any reserve for
adjustment in respect of the sale price of such asset (until
such amount is available to the Company or the applicable
Subsidiary); and
(b) with respect to any issuance of equity securities or
Indebtedness, the aggregate cash proceeds received by the
Company or any Subsidiary pursuant to such issuance, net of
the direct costs relating to such issuance (including, without
limitation, sales and underwriter's commissions and legal,
accounting and investment banking fees).
Note means a promissory note executed by the Company in favor of a
Lender pursuant to subsection 2.2(b), in substantially the form of Exhibit
D.
Notice of Borrowing means a notice in substantially the form of
Exhibit A.
Notice of Conversion/Continuation means a notice in substantially
the form of Exhibit B.
Ob1igations means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
or any Subsidiary to any Lender, the Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter
arising.
OECD has the meaning specified in the definition of "Eligible
Assignee".
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/16th of 1%) determined by
the Administrative Agent as follows:
Offshore Rate = LIBOR
----------------------------------------------
1.00 - Eurodollar Reserve Percentage
where,
Eurodollar Reserve Percentage means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day
(whether or not applicable to any Lender) under regulations issued
from time to time by the FRB for
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<PAGE> 28
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
LIBOR means the rate of interest per annum determined by the Agent
as the rate at which dollar deposits in the approximate amount of
BofA's Offshore Rate Loan for such Interest Period would be offered
by BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other
office as may be designated for such purpose by BofA), to major
banks in the offshore dollar interbank market at their request at
approximately 11:00 a.m. (New York City time) two Business Days
prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
Offshore Rate Loan means a Loan that bears interest based on the
Offshore Rate.
Organization Documents means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
Other Taxes means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other
Loan Documents.
Participant has the meaning specified in subsection 12.8(d).
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
Pension Plan means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, with
respect to which a Company or any ERISA Affiliate may have any liability.
Permitted Indebtedness has the meaning specified in Section 9.5.
Permitted Liens has the meaning specified in Section 9.1.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
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<PAGE> 29
PFS means PFS, a division of the Seller.
PFS Acquisition means the acquisition of PFS by the Company pursuant
to the PFS Acquisition Agreement.
PFS Acquisition Agreement means the Asset Purchase Agreement between
PepsiCo, Inc. and NEHC dated May 23, 1997.
Plan means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
Pledge Agreement means the Amended and Restated Pledge Agreement
dated the date hereof between the Company and the Administrative Agent.
Pooling and Servicing Agreement means the Pooling and Servicing
Agreement dated as of July 1, 1997 among AmeriServe Funding Corporation,
AmeriServe Food Distribution, Inc., and Norwest Bank Minnesota, National
Association, as Trustee, as amended, amended and restated, supplemented or
otherwise modified from time to time.
Post means The Harry H. Post Company, a Colorado corporation.
Post Contribution means the contribution of all the capital stock of
Post to the Company.
Preferred Stock means preferred stock of the Company issued on terms
acceptable to the Required Lenders.
Purchase Money Note means a promissory note evidencing the
obligation of a Receivables Subsidiary to pay all or any portion of the
purchase price for Receivables and other Receivables Program Assets to the
Company or any other Receivables Seller in connection with a Qualified
Receivables Transaction, which note shall be repaid from cash available to
the maker of such note, other than (i) cash required to be held as
reserves pursuant to Receivables Documents, (ii) amounts paid in respect
of interest, principal and (iii) other amounts owing under Receivables
Documents and amounts paid in connection with the purchase of newly
generated Receivables.
Qualified Receivables Transaction means (i) the Receivables Bridge
Facility and (ii) any transaction or series of transactions that may be
entered into by the Company and/or any Subsidiary pursuant to which the
Company and/or any Subsidiary may sell, convey or otherwise transfer to a
Receivables Subsidiary (in the case of a transfer by the Company and/or
any other Receivables Seller) and any other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a security interest
in, any Receivables Program Assets (whether now existing or arising in the
future); provided that:
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<PAGE> 30
(a) no portion of the indebtedness or any other obligations
(contingent or otherwise) of a Receivables Subsidiary or Special Purpose
Vehicle (i) is guaranteed by the Company or any other Receivables Seller
(excluding guarantees of obligations pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any other
Receivables Seller in any way other than pursuant to Standard
Securitization Undertakings or (iii) subjects any property or asset of the
Company or any other Receivables Seller, directly or indirectly,
contingently or otherwise, to the satisfaction of obligations incurred in
such transactions, other than pursuant to Standard Securitization
Undertakings;
(b) neither the Company nor any other Receivables Seller has any
material contract, agreement, arrangement or understanding with a
Receivables Subsidiary or a Special Purpose Vehicle (except in connection
with a Purchase Money Note or Qualified Receivables Transaction) other
than on terms no less favorable to the Company or such Receivables Seller
than those that might be obtained at the time from Persons that are not
affiliates of the Company, other than fees payable in the ordinary course
of business in connection with servicing accounts receivable; and
(c) the Company and the other Receivables Sellers do not have any
obligation to maintain or preserve the financial condition of a
Receivables Subsidiary or a Special Purpose Vehicle or cause such entity
to achieve certain levels of operating results.
Receivable Stated Amount means, with respect to a Receivables
Investor Instrument, the maximum amount of the funding commitment with
respect thereto.
Receivables means all rights of the Company or any other Receivables
Seller to payments (whether constituting accounts, chattel paper,
instruments, general intangibles or otherwise) arising from the sale of
goods, services or future services by the Company and/or a Receivables
Seller, and includes the right to payment of any interest or finance
charge and other obligations with respect thereto and any other rights to
payment recorded as a receivable.
Receivables Bridge Facility means the Receivables Documents in
effect at, or becoming effective contemporaneously with, the Closing Date.
Receivables Documents means (x) each and every receivables purchase
agreement, pooling and servicing agreement, series supplement thereto,
certificate purchase agreement, guaranty, Purchase Money Note, license
agreement, sublicense agreement, credit agreement, agreement to acquire
undivided interests or other agreement to transfer, or create a security
interest in, Receivables Program Assets, in each case as amended,
modified, supplemented or amended and restated and in effect from time to
time entered into by the Company, another Receivables Seller and/or a
Receivables Subsidiary, and (y) each other instrument, agreement and other
document entered into by the Company, any other Receivables Seller and/or
a Receivables Subsidiary relating to the transactions contemplated by the
items referred to in clause
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<PAGE> 31
(x) above, in each case as amended, modified, supplemented or amended and
restated and in effect from time to time.
Receivables Financing Costs means any loss attributable to the sale
of Receivables Program Assets.
Receivables Investor Instruments means trust certificates, purchased
interests or any other securities, instruments or agreements evidencing an
interest in the Receivables Program Assets held by a Person other than the
Company and its Subsidiaries (excluding Receivables Subsidiaries).
Receivables Program Assets means (a) all Receivables which are
described as being transferred by the Company, another Receivables Seller
and/or a Receivables Subsidiary pursuant to the Receivables Documents, (b)
all Receivables Related Assets, and (c) all collections (including
recoveries) and other proceeds of the assets described in the foregoing
clauses.
Receivables Program Obligations means (a) notes, trust certificates,
undivided interests, partnership interests or other interests representing
the right to be paid a specified principal amount from the Receivables
Program Assets, and (b) related obligations of the Company, a Subsidiary
and/or a Special Purpose Vehicle (including, without limitation, rights in
respect of interest or yield, breach of warranty claims and expense
reimbursement and indemnity provisions). The Receivables Program
Obligations shall also include Purchase Money Notes and guarantees by the
Company of obligations pursuant to Standard Securitization Undertakings.
Receivables Related Assets means (i) any rights arising under the
documentation governing or relating to Receivables (including rights in
respect of liens securing such Receivables and other credit support in
respect of such Receivables), (ii) any collections and other proceeds of
such Receivables, (iii) any lockboxes or bank accounts, all documents,
instruments and agreements relating to such lockboxes or bank accounts,
and any amounts from time to time deposited therein, (iv) spread accounts,
trust accounts and other similar accounts (and any amounts on deposit
therein) established in connection with a Qualified Receivables
Transaction, (v) any warranty, indemnity, dilution and other intercompany
claim arising out of Receivables Documents and (vi) other assets
(including those contemplated by Receivables Documents) which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
Receivables Seller means the Company and any Subsidiary of the
Company (other than a Receivables Subsidiary) which is a party to a
Receivables Document.
Receivables Subsidiary means a special purpose wholly-owned
subsidiary of the Company created in connection with the transactions
contemplated by a Qualified Receivables Transaction, which subsidiary
engages in no activities other than those
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incidental to such Qualified Receivables Transaction and which is
designated as a Receivables Subsidiary by the Company's Board of
Directors. Any such designation by the Board of Directors shall be
evidenced by filing with the Administrative Agent a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an officers' certificate certifying, to the best of such
officer's knowledge and belief after consulting with counsel, that such
designation, and the transactions in which the Receivables Subsidiary will
engage, comply with the requirements of the definition of Qualified
Receivables Transaction.
Register has the meaning specified in Section 12.8.
Reportable Event means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
Required Lenders means, at any time, Lenders having an aggregate
Total Percentage of 51% or more.
Requirement of Law means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon
the Person or any of its property or to which the Person or any of its
property is subject.
Responsible Officer means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of the
Company, or any other officer having substantially the same authority and
responsibility.
Restructuring Costs means any cash integration expenditures related
to the AmeriServ Acquisition or the PFS Acquisition incurred by the
Company reflected as (i) a non-operating expense in the Company's income
statement, (ii) a reduction of the restructuring reserve on the Company's
balance sheet, or (iii) restructuring charges taken in the years 1997,
1998, and 1999 to the extent added to Adjusted EBITDA pursuant to clause
(c) of the definition of "Adjusted EBITDA".
Revolving Commitment means, as to any Lender, the commitment of such
Lender to make Revolving Loans pursuant to subsection 2.1(e). The initial
amount of each Lender's Revolving Commitment is set forth on Schedule 2.1.
Revolving Loan has the meaning specified in Section 2.1, and may be
a Base Rate Loan or an Offshore Rate Loan (each a "Type" of Revolving
Loan).
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Revolving Percentage means, as to any Lender, the percentage which
(a) the amount of such Lender's Revolving Commitment is of (b) the
aggregate amount of all of the Lenders' Revolving Commitments.
Revolving Termination Date means the earlier to occur of:
(a) June 30, 2003; and
(b) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
S&P has the meaning specified in the definition of "Cash Equivalent
Investments".
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Seller means PepsiCo, Inc., a North Carolina corporation.
Security Agreement means the Amended and Restated Security Agreement
dated the date hereof between the Company, its Subsidiaries and the
Administrative Agent.
Senior Subordinated Notes means the senior subordinated notes due
July 15, 2007 in a principal amount not in excess of $500,000,000, with
subordination provisions no less favorable to the Lenders than the
subordination provisions described in the Preliminary Offering Memorandum
dated June 23, 1997, with an interest rate which will not require cash
interest payments in excess of 12% per annum and with no scheduled
principal payments prior to July 1, 2007.
Special Purpose Vehicle means a trust, partnership or other special
purpose Person established by the Company and/or its Subsidiaries to
implement a Qualified Receivables Transaction.
Standard Securitization Undertakings means representations,
warranties, covenants and indemnities entered into by the Company and/or
any Subsidiary which are reasonably customary in an accounts receivable
transaction.
Subordinated Debt means all unsecured Indebtedness of the Company
for money borrowed which is subordinated, upon terms reasonably
satisfactory to the Required Lenders, in right of payment to the payment
in full in cash of all Obligations.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, limited liability partnership,
joint venture or other business entity of which more than 50% of the
voting stock, membership interests or other equity
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interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company. No Special Purpose Vehicle will be considered a
"Subsidiary".
Subsidiary Pledge Agreement means the Amended and Restated Pledge
Agreement dated the date hereof between AmeriServ Food Company and the
Administrative Agent.
Supermajority Lenders means, at any time, Lenders having an
aggregate Total Percentage of 66-2/3% or more.
Surety Instruments means all letters of credit (including standby
and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
Tax Sharing Agreement means that certain Tax Sharing Agreement
effective as of the first day of the 1989 consolidated return year between
Holberg and the Company as successor by merger to certain former
subsidiaries of the Company.
Taxes means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured
by each Lender's net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Agent, as
the case may be, is organized or maintains a lending office.
Term A Commitment means, as to any Lender, the commitment of such
Lender to make a Term A Loan pursuant to subsection 2.1(a). The amount of
each Lender's Term A Commitment is set forth on Schedule 2.1.
Term A Loan - see subsection 2.1(a).
Term A Percentage means, as to any Lender, the percentage which (a)
the Term A Commitment of such Lender (or, after the making of the Term A
Loans, the principal amount of such Lender's Term A Loan) is of (b) the
aggregate amount of Term A Commitments (or after the making of the Term A
Loans, the aggregate principal amount of all Term A Loans). The initial
amount of the Term A Loan Percentage for each Lender is set forth opposite
such Lender's name on Schedule 2.1.
Term B Commitment means, as to any Lender, the commitment of such
Lender to make a Term B Loan pursuant to subsection 2.1(b). The amount of
each Lender's Term B Commitment is set forth opposite such Lender's name
on Schedule 2.1.
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Term B Loan - see subsection 2.1(b).
Term B Percentage means, as to any Lender, the percentage which (a)
the Term B Commitment of such Lender (or, after the making of the Term B
Loans, the principal amount of such Lender's Term B Loan) is of (b) the
aggregate amount of Term B Commitments (or after the making of the Term B
Loans, the aggregate principal amount of all Term B Loans). The initial
amount of the Term B Loan Percentage for each Lender is set forth such
Lender's name on Schedule 2.1.
Term C Commitment means as to any Lender, the commitment of such
Lender to make a Term C Loan pursuant to subsection 2.1(c). The amount of
each Lender's Term C Commitment is set forth opposite such Lender's name
on Schedule 2.1.
Term C Loan - see subsection 2.1(c).
Term C Percentage means, as to any Lender, the percentage which (a)
the Term C Commitment of such Lender (or, after the making of the Term C
Loans, the aggregate amount of such Lender's Term C Loan) is of (b) the
aggregate amount of Term C Commitments (or after the making of the Term C
Loans, the aggregate principal amount of all Term C Loans). The initial
amount of the Term C Loan Percentage for each Lender is set forth opposite
such Lender's name on Schedule 2.1.
Term D Commitment means to any Lender, the commitment of such Lender
to make a Term D Loan pursuant to subsection 2.1(d). The amount of each
Lender's Term D Commitment is set forth in Schedule 2.1.
Term D Loan - see subsection 2.1(d).
Term D Percentage means, as to any Lender, the percentage which (a)
the Term D Commitment of, such Lender (or, after the making of the Term D
Loans, the aggregate amount of such Lender's Term D Loan) is of (a) the
aggregate amount of Term D Commitments (or after the making of the Term D
Loans, the aggregate principal amount of all Term D Loans). The initial
amount of the Term D Loan Percentage for each Lender is set forth opposite
such Lender's name on Schedule 2.1.
Term Loan means a Term A Loan, a Term B Loan, a Term C Loan or a
Term D Loan.
Total Percentage means, as to any Lender the percentage which
(a) the aggregate amount of (i) such Lender's Revolving Commitment plus
(ii) such Lender's Term A Commitment (or, after the making of the Term A
Loans, the outstanding principal amount of such Lender's Term A Loans)
plus (iii) such Lender's Term B Commitment (or, after the making of the
Term B Loans, the outstanding principal amount of such Lender's Term B
Loans) plus, (iv) such Lender's Term C Commitment (or, if after the making
of the Term C Loans, the outstanding principal amount of such Lender's
Term C Loans) plus (v) such Lender's Term D Commitment
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(or if after the making of the Term D Loans, the outstanding principal
amount of such Lender's Term D Loans) is of (b) the aggregate amount of
(i) the Revolving Commitments of all Lenders plus (ii) the Term A
Commitments of all Lenders (or, after the making of the Term A Loans, the
outstanding principal amount of all Term A Loans) plus (iii) the Term B
Commitments of all Lenders (or, after the making of the Term B Loans, the
outstanding principal amount of all Term B Loans), plus (iv) the Term C
Commitments of all Lenders (or, if after the making of the Term C Loans,
the outstanding principal amount of all Term C Loans) plus (v) the Term D
Commitments of all Lenders (or, if after the making of the Term D Loans,
the outstanding principal amount of all Term D Loans); provided that after
the Revolving Commitments have been terminated, "Total Percentage" shall
mean, as to any Lender, the percentage which the aggregate principal
amount of such Lender's Loans is of the aggregate principal amount of all
Loans. The initial Total Percentage for each Lender is set forth opposite
such Lender's name on Schedule 2.1.
Trademark Security Agreement means the Amended and Restated
Trademark Security Agreement dated the date hereof between AmeriServ Food
Company and the Administrative Agent.
Transportation Equipment Sale and Leaseback means the purchase,
sale and leaseback of transportation equipment subject to purchase orders
of PFS on the date hereof.
Type has the meaning specified in the definition of "Revolving
Loan."
UCP has the meaning specified in Section 3.9.
Unfunded Pension Liability means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
United States and U.S. each means the United States of America.
Wholly-Owned Subsidiary means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of
each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination
is being made, is owned, beneficially and of record, by the Company, or by
one or more of the other Wholly-Owned Subsidiaries, or both.
Working Capital means the excess of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries, less (ii) the amount of cash and cash equivalents included
in such consolidated current assets;
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over
(b) (i) consolidated current liabilities of the Company and its
Subsidiaries less, (ii) the amount of short-term Indebtedness (including
current maturities of long-term Indebtedness) of the Company and its
Subsidiaries included in such consolidated current liabilities.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and
the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agents, the Company
and the
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other parties, and are the products of all parties. Accordingly, they shall not
be construed against the Lenders or the Agents merely because of the Agents' or
Lenders' involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. (a) The Term A Credit. Each Lender
severally agrees, on the terms and conditions set forth herein, to make a single
loan to the Company (each such loan, a "Term A Loan") on the Closing Date in an
amount not to exceed such Lender's Term A Percentage of $78,095,238.10. Amounts
borrowed as Term A Loans which are repaid or prepaid by the Company may not be
reborrowed. The Term A Commitments shall expire concurrently with the making of
the Term A Loans on the Closing Date.
(b) The Term B Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make a single loan to the Company (each such
loan, a "Term B Loan") on the Closing Date in an amount not to exceed such
Lender's Term B Percentage of $42,301,587.30. Amounts borrowed as Term B Loans
which are repaid or prepaid by the Company may not be reborrowed. The Term B
Commitments shall expire concurrently with the making of the Term B Loans on the
Closing Date.
(c) The Term C Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make a single loan to the Company (each such
loan, a "Term C Loan") on the Closing Date in an amount not to exceed such
Lender's Term C Percentage of $42,301,587.30. Amounts borrowed as Term C Loans
which are repaid or prepaid by the Company may not be reborrowed. The Term C
Commitments shall expire concurrently with the making of the Term C Loans on the
Closing Date.
(d) The Term D Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make a single loan to the Company (each such
loan, a "Term D Loan") on the Closing Date in an amount not to exceed such
Lender's Term D Percentage of $42,301,587.30. Amounts borrowed as Term D Loans
which are repaid or prepaid by the Company may not be reborrowed. The Term D
Commitments shall expire concurrently with the making of the Term D Loans on the
Closing Date.
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(e) The Revolving Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make loans to the Company (each such loan, a
"Revolving Loan"), from time to time on any Business Day during the period from
the Closing Date to the Revolving Termination Date, in an aggregate amount not
to exceed at any time outstanding such Lender's Revolving Percentage of
$150,000,000; provided that, after giving effect to any Borrowing of Revolving
Loans, the aggregate amount of all Revolving Loans plus the Effective Amount of
all L/C Obligations shall not exceed the Revolving Commitments. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
Company may borrow under this subsection 2.1(e), prepay under Section 2.6 and
reborrow under this subsection 2.1(e).
2.2 Loan Accounts. (a) The Loans made by each Lender and the Letters of
Credit Issued by the Issuing Lender shall be evidenced by one or more accounts
or records maintained by such Lender or Issuing Lender, as the case may be, in
the ordinary course of business. The accounts or records maintained by the
Administrative Agent, the Issuing Lender and each Lender shall be rebuttable
presumptive evidence of the amount of the Loans made by the Lenders to the
Company and the Letters of Credit Issued for the account of the Company, and the
interest and payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Loans or any Letter of
Credit.
(b) Upon the request of any Lender made through the Administrative
Agent, the Loans made by such Lender may be evidenced by one or more Notes,
instead of loan accounts. Each such Lender shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the Company with respect
thereto. Each such Lender is irrevocably authorized by the Company to endorse
its Note(s) and each Lender's record shall be conclusive absent manifest error;
provided, however, that the failure of a Lender to make, or an error in making,
a notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of the Company hereunder or under any such Note to such Lender.
2.3 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans or Term
Loans shall be made upon the Company's irrevocable written notice delivered to
the Administrative Agent in the form of a Notice of Borrowing, which notice must
be received by the Administrative Agent (i) prior to 8:30 a.m. (San Francisco
time) three Business Days prior to the requested Borrowing Date, in the case of
Offshore Rate Loans; and (ii) prior to 8:30 a.m. (San Francisco time) on the
requested Borrowing Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $500,000 and, as to Revolving Loans, a
multiple of $100,000 provided, that if the amount of any unused
Commitment is less than $500,000, then the Company may borrow such
amount in Base Rate Loans;
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(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to
such Loans included in such notice. If the Notice of Borrowing fails
to specify the duration of the Interest Period for any Borrowing
comprised of Offshore Rate Loans, such Interest Period shall be one
month.
(b) The Administrative Agent will promptly notify each Lender of its
receipt of any Notice of Borrowing and of the amount of such Lender's share of
that Borrowing based upon such Lender's Revolving Percentage, Term A Percentage,
Term B Percentage, Term C Percentage or Term D Percentage as the case may be.
(c) Each Lender will make the amount of its share of each Borrowing
available to the Administrative Agent for the account of the Company at the
Administrative Agent's Payment Office by 11:00 a.m. (San Francisco time) on the
Borrowing Date requested by the Company in funds immediately available to the
Administrative Agent. The proceeds of all such Loans will then be made available
to the Company by the Administrative Agent at such office by crediting the
account of the Company on the books of BofA with the aggregate of the amounts
made available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent or as otherwise set forth in the Notice of
Borrowing.
(d) After giving effect to any Borrowing, there may not be more than
twenty different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) The Company may, upon
irrevocable written notice to the Administrative Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the
case of any other Type of Loans, to convert any such Loans (or any part
thereof in an amount not less than $500,000, or, in the case of Revolving
Loans, that is in an integral multiple of $100,000 in excess thereof) into
Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods expiring on such day
(or any part thereof in an amount not less than $500,000, or, in the case
of Revolving Loans, that is in an integral multiple of $100,000 in excess
thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate.
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(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Administrative Agent (i) not later than 8:30 a.m. (San
Francisco time) at least three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore Rate Loans; and (ii) not later than 8:30 a.m. (San Francisco time)
on the Conversion/Continuation Date, if the Loans are to be converted into Base
Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
renewed;
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to timely select a new Interest
Period to be applicable to such Offshore Rate Loans, or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Administrative Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e) Unless the Required Lenders otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
there may not be more than twenty different Interest Periods in effect.
2.5 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than five Business Days' prior notice to the Administrative Agent,
terminate the Revolving Commitments, or permanently reduce the Revolving
Commitments by an aggregate minimum amount of $5,000,000 or any multiple of
$100,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Revolving Loans made on the effective date thereof, (a) the
Effective Amount of all Revolving Loans, and L/C Obligations together would
exceed the amount of the Revolving Commitments then in effect, or (b) the
Effective Amount of all L/C Obligations then outstanding would exceed the L/C
Commitment. Once reduced in accordance with this Section, the Revolving
Commitments
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may not be increased. Any reduction of the Revolving Commitments shall be
applied to each Lender according to its Revolving Percentage. If and to the
extent specified by the Company in the notice to the Administrative Agent, some
or all of the reduction in the combined Revolving Commitments shall be applied
to reduce the L/C Commitment. All accrued commitment and letter of credit fees
to, but not including, the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination.
2.6 Optional Prepayments. (a) Subject to Section 4.4, (i) the Company may,
from time to time, upon irrevocable written notice to the Administrative Agent
(which notice must be received by 8:30 a.m. (San Francisco time) on the day of
prepayment in the case of Base Rate Loans and 8:30 a.m. (San Francisco time) two
Business Days prior to the date of prepayment in the case of Offshore Rate
Loans), ratably prepay any Borrowing of Revolving Loans in whole or in part, in
an aggregate amount of $500,000 or a higher integral multiple of $100,000; and
(ii) the Company may, from time to time, upon not less than five Business Days'
irrevocable notice to the Administrative Agent, prepay any Borrowing of Term
Loans in whole or in part, in an aggregate amount of $1,000,000 or a higher
integral multiple of $100,000.
(b) Each notice of prepayment shall specify the date and amount of
such prepayment and the Loans to be prepaid. The Administrative Agent will
promptly notify each Lender of its receipt of any such notice and of such
Lender's share of such prepayment based upon such Lender's Revolving Percentage,
in the case of a prepayment of Revolving Loans, Term A Percentage, in the case
of a prepayment of Term A Loans, Term B Percentage in the case of a prepayment
of Term B Loans, Term C Percentage in the case of prepayment of Term C Loans and
Term D Percentage in the case of prepayment of Term D Loans. If any such notice
is given by the Company, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to such date on the amount prepaid and
any amounts required pursuant to Section 4.4. Each prepayment of Revolving Loans
shall be applied to each Lender's Revolving Loans according to such Lender's
Revolving Percentage. Each prepayment of Term Loans shall be applied pro rata to
the Term Loans and as to any Term Loan, shall be applied to its unpaid
installments pro rata; provided that the Company may offer Lenders holding Term
B Loans, Term C Loans or Term D Loans the right to waive such prepayment. If any
Lender so elects, by notice to the Administrative Agent and the Company not
later than three Business Days after the date such notice is given, the portion
of any prepayment which would have been applied to such Lender's Term B Loans,
Term C Loans or Term D Loans, as applicable, shall be applied pro rata to the
remaining installments of the Term A Loans of all Lenders.
2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.
(a) If on any date the Effective Amount of L/C Obligations exceeds
the L/C Commitment, the Company shall Cash Collateralize on such date the
outstanding Letters of Credit in an amount equal to the excess of the maximum
amount then available to be drawn under the Letters of Credit over the Aggregate
L/C Commitment.
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(b) Subject to Section 4.4, if on any date after giving effect to
any Cash Collateralization made on such date pursuant to the preceding sentence,
the Effective Amount of all Revolving Loans then outstanding plus the Effective
Amount of all L/C Obligations exceeds the Revolving Commitments, the Company
shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Revolving Loans and L/C Advances by an amount equal to
the applicable excess.
(c) The Company (or, in the case of subsection (ii), if the
Administrative Agent is holding the proceeds of insurance as additional
Collateral pursuant to the terms of the Security Agreement, the Administrative
Agent upon the Company's instruction) shall make a prepayment of the Loans at
the following times and in the following amounts:
(i) Within 60 days after any sale, transfer or other disposition by
the Company or any Subsidiary of any asset outside the ordinary course of
its business (other than sales of Receivables Program Assets to the extent
the Invested Amount does not exceed $275,000,000 at any time outstanding,
the sale and leaseback of the Grand Rapids, Michigan distribution center
at any time prior to March 31, 1998 and sales in an amount not in excess
of $10,000,000 prior to January 11, 1998 in connection with the
Transportation Equipment Sale and Leaseback) and to a Person other than
the Company or a Subsidiary, in an amount equal to 100% of the Net Cash
Proceeds of such sale, transfer or other disposition to the extent the
aggregate of such Net Cash Proceeds from any such sale, transfer or
disposition exceeds $3,000,000 or from all such sales, transfers or
dispositions received after the date hereof exceeds $10,000,000.
(ii) Within 60 days after the receipt of any insurance proceeds (or
other similar recoveries) by the Company or any Subsidiary or by the
Administrative Agent (to the extent the Administrative Agent is holding
the insurance proceeds as additional Collateral pursuant to Section 6 of
the Security Agreement) from any casualty loss incurred by the Company or
any Subsidiary, in an amount equal to 100% of such insurance proceeds (or
other similar recoveries) net of any collection expenses; provided that no
such prepayment shall be required to the extent such proceeds are or,
within one year, will be used by the Company for the financing of the
replacement, substitution or restoration of the assets sustaining such
casualty loss.
(iii) Concurrently with the receipt of any Net Cash Proceeds from
any issuance of Indebtedness of the Company or any of its Subsidiaries
(other than Permitted Indebtedness), in an amount equal to 100% of such
Net Cash Proceeds.
(iv) Concurrently with the receipt of any Net Cash Proceeds from any
issuance of equity securities of the Company or any Subsidiary (including
a Public Offering, but excluding the issuance of shares of common stock of
the Company pursuant to any employee, officer or director stock option
program, benefit plan or compensation program), in an amount equal to 50%
of such Net Cash Proceeds.
(v) Within 90 days after the end of each fiscal year, in an amount
equal to 75 % (or after the aggregate principal amount of the Term Loans
is less than
36
<PAGE> 44
$157,500,000, 50%) of Excess Cash Flow for such fiscal year (rounded to
the nearest, or if there is no nearest the next highest, integral multiple
of $10,000).
All prepayments of Loans pursuant to this Section 2.7 shall be applied ratably
to the Term A Loans, the Term B Loans, the Term C Loans and the Term D Loans.
The prepayment of any Term Loan pursuant to this Section 2.7(c) shall be applied
to its installments pro rata except that any prepayment pursuant to clause (iii)
shall be applied to the installments of any Term Loan in the inverse order of
their maturities; provided that the Company may offer Lenders holding Term B
Loans, Term C Loans or Term D Loans the right to waive such mandatory
prepayment. If any such Lender so elects, by notice to the Administrative Agent
and the Company not later than five Business Days after such notice is given,
50% of the portion of any prepayment which would have been applied to such
Lender's Term B Loans, Term C Loans or Term D Loans shall be applied pro rata to
the remaining installments of the Term A Loans of all Lenders (except that any
prepayment pursuant to clause (iii) shall be applied to such installments in the
inverse order of their maturities) and the remaining portion of such prepayment
shall be retained by the Company. Once all of the Term Loans have been paid in
full (or the Term A Loans have been paid in full and the Lenders holding Term B
Loans, Term C Loans or Term D Loans have declined such prepayment), any
prepayment pursuant to this Section 2.7 shall be applied to the Revolving Loans;
and the Revolving Loan Commitments shall be correspondingly reduced.
2.8 Repayment. (a) The Term A Credit. Subject to Sections 2.6 and 2.7, the
Company shall repay the Term A Loans in quarterly installments on the last day
of each calendar quarter, commencing on September 30, 1998 in the amount set
forth opposite the following dates:
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
09/30/98 $ 813,492.06
--------------------------------------------------------------------
12/31/98 $ 813,492.06
--------------------------------------------------------------------
03/31/99 $ 813,492.06
--------------------------------------------------------------------
06/30/99 $ 813,492.06
--------------------------------------------------------------------
09/30/99 $4,067,460.32
--------------------------------------------------------------------
12/31/99 $4,067,460.32
--------------------------------------------------------------------
03/31/00 $4,067,460.32
--------------------------------------------------------------------
06/30/00 $4,067,460.32
--------------------------------------------------------------------
09/30/00 $4,880,952.38
--------------------------------------------------------------------
12/31/00 $4,880,952.38
--------------------------------------------------------------------
03/31/01 $4,880,952.38
--------------------------------------------------------------------
37
<PAGE> 45
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
06/30/01 $4,880,952.38
--------------------------------------------------------------------
09/30/01 $4,880,952.38
--------------------------------------------------------------------
12/31/01 $4,880,952.38
--------------------------------------------------------------------
03/31/02 $4,880,952.38
--------------------------------------------------------------------
06/30/02 $4,880,952.38
--------------------------------------------------------------------
09/30/02 $4,880,952.38
--------------------------------------------------------------------
12/31/02 $4,880,952.38
--------------------------------------------------------------------
03/31/03 $4,880,952.38
--------------------------------------------------------------------
06/30/03 $4,880,952.38
--------------------------------------------------------------------
(b) The Term B Credit. Subject to Sections 2.6 and 2.7, the Company
shall repay the Term B Loans in quarterly installments on the last day of each
calendar quarter, commencing on September 30, 1998 in the amount set forth
opposite the following dates:
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
09/30/98 $ 105,753.97
--------------------------------------------------------------------
12/31/98 $ 105,753.97
--------------------------------------------------------------------
03/31/99 $ 105,753.97
--------------------------------------------------------------------
06/30/99 $ 105,753.97
--------------------------------------------------------------------
09/30/99 $ 105,753.97
--------------------------------------------------------------------
12/31/99 $ 105,753.97
--------------------------------------------------------------------
03/31/00 $ 105,753.97
--------------------------------------------------------------------
06/30/00 $ 105,753.97
--------------------------------------------------------------------
09/30/00 $ 105,753.97
--------------------------------------------------------------------
12/31/00 $ 105,753.97
--------------------------------------------------------------------
03/31/01 $ 105,753.97
--------------------------------------------------------------------
06/30/01 $ 105,753.97
--------------------------------------------------------------------
09/30/01 $ 105,753.97
--------------------------------------------------------------------
38
<PAGE> 46
--------------------------------------------------------------------
12/31/01 $ 105,753.97
--------------------------------------------------------------------
03/31/02 $ 105,753.97
--------------------------------------------------------------------
06/30/02 $ 105,753.97
--------------------------------------------------------------------
09/30/02 $ 105,753.97
--------------------------------------------------------------------
12/31/02 $ 105,753.97
--------------------------------------------------------------------
03/31/03 $ 105,753.97
--------------------------------------------------------------------
06/30/03 $ 105,753.97
--------------------------------------------------------------------
09/30/03 $10,046,626.98
--------------------------------------------------------------------
12/31/03 $10,046,626.98
--------------------------------------------------------------------
03/31/04 $10,046,626.98
--------------------------------------------------------------------
06/30/04 $10,046,626.98
--------------------------------------------------------------------
(c) The Term C Credit. Subject to Sections 2.6 and 2.7, the Company
shall repay the Term C Loans in quarterly installments on the last day of each
calendar quarter commencing September 30, 1998 in the amount set forth opposite
the following dates;
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
09/30/98 $ 105,753.97
--------------------------------------------------------------------
12/31/98 $ 105,753.97
--------------------------------------------------------------------
03/31/99 $ 105,753.97
--------------------------------------------------------------------
06/30/99 $ 105,753.97
--------------------------------------------------------------------
09/30/99 $ 105,753.97
--------------------------------------------------------------------
12/31/99 $ 105,753.97
--------------------------------------------------------------------
03/31/00 $ 105,753.97
--------------------------------------------------------------------
06/30/00 $ 105,753.97
--------------------------------------------------------------------
09/30/00 $ 105,753.97
--------------------------------------------------------------------
12/31/00 $ 105,753.97
--------------------------------------------------------------------
03/31/01 $ 105,753.97
--------------------------------------------------------------------
06/30/01 $ 105,753.97
--------------------------------------------------------------------
39
<PAGE> 47
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
09/30/01 $ 105,753.97
--------------------------------------------------------------------
12/31/01 $ 105,753.97
--------------------------------------------------------------------
03/31/02 $ 105,753.97
--------------------------------------------------------------------
06/30/02 $ 105,753.97
--------------------------------------------------------------------
09/30/02 $ 105,753.97
--------------------------------------------------------------------
12/31/02 $ 105,753.97
--------------------------------------------------------------------
03/31/03 $ 105,753.97
--------------------------------------------------------------------
06/30/03 $ 105,753.97
--------------------------------------------------------------------
09/30/03 $ 105,753.97
--------------------------------------------------------------------
12/31/03 $ 105,753.97
--------------------------------------------------------------------
03/31/04 $ 105,753.97
--------------------------------------------------------------------
06/30/04 $ 105,753.97
--------------------------------------------------------------------
09/30/04 $ 9,940,873.02
--------------------------------------------------------------------
12/31/04 $ 9,940,873.02
--------------------------------------------------------------------
03/31/05 $ 9,940,873.02
--------------------------------------------------------------------
06/30/05 $ 9,940,873.02
--------------------------------------------------------------------
(d) The Term D Credit. Subject to Sections 2.6 and 2.7, the Company
shall repay the Term D Loans in quarterly installments on the last day of each
calendar quarter, commencing on September 30, 1998 in the amount set forth
opposite the following dates;
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
09/30/98 $ 105,753.97
--------------------------------------------------------------------
12/31/98 $ 105,753.97
--------------------------------------------------------------------
03/31/99 $ 105,753.97
--------------------------------------------------------------------
06/30/99 $ 105,753.97
--------------------------------------------------------------------
09/30/99 $ 105,753.97
--------------------------------------------------------------------
12/31/99 $ 105,753.97
--------------------------------------------------------------------
40
<PAGE> 48
--------------------------------------------------------------------
Date Amount
--------------------------------------------------------------------
03/31/00 $ 105,753.97
--------------------------------------------------------------------
06/30/00 $ 105,753.97
--------------------------------------------------------------------
09/30/00 $ 105,753.97
--------------------------------------------------------------------
12/31/00 $ 105,753.97
--------------------------------------------------------------------
03/31/01 $ 105,753.97
--------------------------------------------------------------------
06/30/01 $ 105,753.97
--------------------------------------------------------------------
09/30/01 $ 105,753.97
--------------------------------------------------------------------
12/31/01 $ 105,753.97
--------------------------------------------------------------------
03/31/02 $ 105,753.97
--------------------------------------------------------------------
06/30/02 $ 105,753.97
--------------------------------------------------------------------
09/30/02 $ 105,753.97
--------------------------------------------------------------------
12/31/02 $ 105,753.97
--------------------------------------------------------------------
03/31/03 $ 105,753.97
--------------------------------------------------------------------
06/30/03 $ 105,753.97
--------------------------------------------------------------------
09/30/03 $ 105,753.97
--------------------------------------------------------------------
12/31/03 $ 105,753.97
--------------------------------------------------------------------
03/31/04 $ 105,753.97
--------------------------------------------------------------------
06/30/04 $ 105,753.97
--------------------------------------------------------------------
09/30/04 $ 105,753.97
--------------------------------------------------------------------
12/31/04 $ 105,753.97
--------------------------------------------------------------------
03/31/05 $ 105,753.97
--------------------------------------------------------------------
06/30/05 $ 105,753.97
--------------------------------------------------------------------
09/30/05 $ 9,835,119.05
--------------------------------------------------------------------
12/31/05 $ 9,835,119.05
--------------------------------------------------------------------
03/31/06 $ 9,835,119.05
--------------------------------------------------------------------
06/30/06 $ 9,835,119.05
--------------------------------------------------------------------
41
<PAGE> 49
(e) The Revolving Credit. The Company shall pay to the
Administrative Agent, for the account of the Lenders, on the Revolving
Termination Date the aggregate principal amount of all Revolving Loans
outstanding on such date.
2.9 Interest. (a) Each Revolving Loan and Term Loan shall bear interest on
the outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.4), plus the Applicable Offshore Rate Margin or Applicable Base Rate
Margin, as the case may be.
(b) Interest on each Revolving Loan and Term Loan shall be paid in
arrears on each Interest Payment Date. Interest shall also be paid on the date
of any prepayment of Loans under Section 2.6 or 2.7 for the portion of the Loans
so prepaid and upon payment (including prepayment) in full thereof and, during
the existence of any Event of Default, interest shall be paid on demand of the
Agent at the request or with the consent of the Required Lenders.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Loans, at a rate per annum which is
determined by adding 2% per annum to the Applicable Base Rate Margin or
Applicable Offshore Rate Margin then in effect for such Loans; provided,
however, that, on and after the expiration of any Interest Period applicable to
any Offshore Rate Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall, during the
continuation of such Event of Default or after acceleration, bear interest at a
rate per annum equal to the Base Rate plus the Applicable Base Rate Margin then
in effect plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Lender hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Lender would be contrary to the provisions of
any law applicable to such Lender limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Lender, and in such
event the Company shall pay such Lender interest at the highest rate permitted
by applicable law.
2.10 Fees. In addition to certain fees described in Section 3.8:
(a) Arrangement, Agency Fees. The Company shall pay to the Agents
for each Agent's own account and the Arranger's own account, the fees as
required by the letter agreement ("Fee Letter") between the Company and the
Arranger and Agents dated June 11, 1997, as amended.
(b) Commitment Fees. The Company shall pay to the Administrative
Agent for the account of each Lender a commitment fee equal to the applicable
Commitment Fee Rate times the average daily unused portion of such Lender's
Revolving Commitment, computed
42
<PAGE> 50
on a quarterly basis in arrears on the last Business Day of each calendar
quarter. For purposes of calculating utilization under this subsection, the
Commitments shall be deemed used to the extent of the Effective Amount of
Revolving Loans then outstanding, plus the Effective Amount of L/C Obligations
then outstanding. Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
the last Business Day of each fiscal quarter commencing on the first such date
after the date hereof through the Revolving Termination Date, with the final
payment to be made on the Revolving Termination Date; provided that, in
connection with any reduction or termination of Commitments under Section 2.5 or
Section 2.7, the accrued commitment fee calculated for the period ending on such
date shall also be paid on the date of such reduction or termination, with the
following quarterly payment being calculated on the basis of the period from
such reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article VI are not met.
2.11 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Administrative
Agent shall be conclusive and binding on the Company and the Lenders in the
absence of manifest error.
2.12 Payments by the Company. (a) All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Administrative Agent for the account of the Lenders at the Administrative
Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than 11:00 a.m. (San Francisco time) on the date
specified herein. The Administrative Agent will promptly distribute to each
Lender its Revolving Percentage of any portion of such payment related to the
Revolving Loans, its Term A Percentage of any portion of such payment relating
to the Term Loans, its Term B Percentage of any portion of such payment relating
to the Term B Loans, its Term C Percentage of any portion of such payment
relating to the Term C Loan and its Term D Percentage of any portion of such
payment relating to the Term D Loan. Any payment received by the Administrative
Agent later than 2:00 p.m. (San Francisco time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
43
<PAGE> 51
(c) Unless the Administrative Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders that the Company
will not make such payment in full as and when required, the Administrative
Agent may assume that the Company has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
2.13 Payments by the Lenders to the Administrative Agent. (a) Unless the
Administrative Agent receives notice from a Lender on or prior to the Closing
Date or, with respect to any Borrowing after the Closing Date, at least one
Business Day prior to the date of such Borrowing, that such Lender will not make
available as and when required hereunder to the Administrative Agent for the
account of the Company the amount of that Lender's Revolving Percentage, Term A
Percentage, Term B Percentage, Term C Percentage or Term D Percentage as
applicable, the Administrative Agent may assume that each Lender has made such
amount available to the Administrative Agent in immediately available funds on
the Borrowing Date and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Company such amount, that Lender shall on the Business Day
following such Borrowing Date make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Administrative Agent submitted to any Lender with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the
Administrative Agent shall constitute such Lender's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such failure
to fund and, upon demand by the Administrative Agent, the Company shall pay such
amount to the Administrative Agent for the Administrative Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
2.14 Sharing of Payments, etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share of such payment
(determined in accordance with the provisions of this Agreement),
44
<PAGE> 52
such Lender shall immediately (a) notify the Administrative Agent of such fact,
and (b) purchase from the other Lenders such participations in the Loans made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing
Lender, such purchase shall to that extent be rescinded and each other Lender
shall repay to the purchasing Lender the purchase price paid therefor, together
with an amount equal to such paying Lender's ratable share (according to the
proportion of (i) the amount of such paying Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Company agrees that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 12.10 hereof) with respect to such participation as fully as if such
Lender were the direct creditor of the Company in the amount of such
participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Lenders following
any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms and conditions set
forth herein (i) the Issuing Lender agrees, (A) from time to time on any
Business Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of the Company, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 3.2(c) and 3.2(d), and (B) to honor drafts under the Letters of
Credit; and (ii) the Lenders severally agree to participate in Letters of Credit
Issued for the account of the Company; provided, that the Issuing Lender shall
not be obligated to Issue, and no Lender shall be obligated to participate in,
any Letter of Credit if as of the date of Issuance of such Letter of Credit (the
"Issuance Date") (1) the Effective Amount of all L/C Obligations plus the
Effective Amount of all Revolving Loans exceeds the combined Revolving
Commitments, (2) the participation of any Lender in the Effective Amount of all
L/C Obligations plus the Effective Amount of the Revolving Loans of such Lender
exceeds such Lender's Revolving Commitment, or (3) the Effective Amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Company's ability to obtain
Letters of Credit shall be fully revolving, and, accordingly, the Company may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Lender is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
the Issuing Lender from
45
<PAGE> 53
Issuing such Letter of Credit, or any Requirement of Law applicable to the
Issuing Lender or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over the
Issuing Lender shall prohibit, or request that the Issuing Lender refrain
from, the Issuance of letters of credit generally or such Letter of Credit
in particular or shall impose upon the Issuing Lender with respect to such
Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Lender any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuing Lender in good faith deems material to it;
(ii) the Issuing Lender has received written notice from any
Lender, the Administrative Agent or the Company, on or prior to the
Business Day prior to the requested date of Issuance of such Letter of
Credit, that one or more of the applicable conditions contained in Article
VI is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than 365 days after the date of Issuance, unless the Required Lenders
have approved such expiry date in writing, or (B) after the Revolving
Termination Date, unless all of the Lenders have approved such expiry date
in writing;
(iv) the expiry date of any requested Letter of Credit is
prior to the maturity date of any financial obligation to be supported by
the requested Letter of Credit;
(v) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the
Issuing Lender, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Lender;
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person,
except the Letter of Credit dated January 25, 1996 for the benefit of
Provident Bank in the amount of $516,750;
(vii) such Letter of Credit is in a face amount less than
$25,000 or denominated in a currency other than Dollars; or
(viii) it is not a standby letter of credit.
3.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter
of Credit shall be issued upon the irrevocable written request of the Company
received by the Issuing Lender (with a copy sent by the Company to the
Administrative Agent) at least four days (or such shorter time as the Issuing
Lender may agree in a particular instance in its sole discretion) prior to the
proposed date of issuance. Each such request for issuance of a Letter of Credit
shall be by facsimile, confirmed immediately in an original writing, in the form
of an L/C Application, and shall specify in form and detail satisfactory to the
Issuing Lender: (i) the proposed date of issuance of the Letter of Credit (which
shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii)
the expiry date of the Letter of Credit; (iv) the
46
<PAGE> 54
name and address of the beneficiary thereof; (v) the documents to be presented
by the beneficiary of the Letter of Credit in case of any drawing thereunder;
(vi) the full text of any certificate to be presented by the beneficiary in case
of any drawing thereunder; and (vii) such other matters as the Issuing Lender
may require.
(b) At least two Business Days prior to the Issuance of any Letter
of Credit, the Issuing Lender will confirm with the Administrative Agent (by
telephone or in writing) that the Administrative Agent has received a copy of
the L/C Application or L/C Amendment Application from the Company and, if not,
the Issuing Lender will provide the Administrative Agent with a copy thereof.
Unless the Issuing Lender has received notice on or before the Business Day
immediately preceding the date the Issuing Lender is to issue a requested Letter
of Credit from the Administrative Agent (A) directing the Issuing Lender not to
issue such Letter of Credit because such issuance is not then permitted under
subsection 3.1(a) as a result of the limitations set forth in clauses (1)
through (3) thereof or subsection 3.1(b)(ii); or (B) that one or more conditions
specified in Article VI are not then satisfied; then, subject to the terms and
conditions hereof, the Issuing Lender shall, on the requested date, issue a
Letter of Credit for the account of the Company in accordance with the Issuing
Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Lender will, upon the
written request of the Company received by the Issuing Lender (with a copy sent
by the Company to the Administrative Agent) at least five days (or such shorter
time as the Issuing Lender may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by facsimile, confirmed immediately in an original writing, made in the
form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Lender: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Lender may require. The Issuing Lender shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Lender would have
no obligation at such time to issue such Letter of Credit in its amended form
under the terms of this Agreement; or (B) the beneficiary of any such Letter of
Credit does not accept the proposed amendment to the Letter of Credit. No Lender
shall be obligated to participate in any amended Letter of Credit if such Lender
would have no obligation at such time to participate in such Letter of Credit in
its amended form under the terms of this Agreement if such Letter of Credit were
newly issued pursuant to Section 3.1. The Administrative Agent will promptly
notify the Lenders of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Lender and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Company and upon the written request of the Company received by the
Issuing Lender (with a copy sent by the Company to the Administrative Agent) at
least five days (or such shorter time as the Issuing Lender may agree in a
particular instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Lender shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it. Each such request for
renewal of a
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Letter of Credit shall be made by facsimile, confirmed immediately in an
original writing, in the form of an L/C Amendment Application, and shall specify
in form and detail satisfactory to the Issuing Lender: (i) the Letter of Credit
to be renewed; (ii) the proposed date of notification of renewal of the Letter
of Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Lender may require.
The Issuing Lender shall be under no obligation so to renew any Letter of Credit
if: (A) the Issuing Lender would have no obligation at such time to issue or
amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed renewal of the Letter of Credit. No Lender shall be obligated to
participate in any renewal of any Letter of Credit if such Lender would have no
obligation at such time to participate in such Letter of Credit in its renewed
form under the terms of this Agreement if such Letter of Credit were newly
issued pursuant to Section 3.1. If any outstanding Letter of Credit shall
provide that it shall be automatically renewed unless the beneficiary thereof
receives notice from the Issuing Lender that such Letter of Credit shall not be
renewed, and if at the time of renewal the Issuing Lender would be entitled to
authorize the automatic renewal of such Letter of Credit in accordance with this
subsection 3.2(d) upon the request of the Company but the Issuing Lender shall
not have received any L/C Amendment Application from the Company with respect to
such renewal or other written direction by the Company with respect thereto, the
Issuing Lender shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Lenders hereby authorize such renewal, and,
accordingly, the Issuing Lender shall be deemed to have received an L/C
Amendment Application from the Company requesting such renewal.
(e) The Issuing Lender may, at its election (or as required by the
Administrative Agent at the direction of the Required Lenders), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Revolving
Termination Date.
(f) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Lender will also deliver to the Administrative
Agent, concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
3.3 Existing Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Closing Date, the Existing Letters of
Credit shall be deemed for all purposes, including for purposes of the fees to
be collected pursuant to subsections 3.8(a) and 3.8(c), and reimbursement of
costs and expenses to the extent provided herein, Letters of Credit outstanding
under this Agreement and entitled to the benefits of this Agreement and the
other Loan Documents, and shall be governed by the applications and agreements
pertaining thereto and by this Agreement. Each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Lender on the Closing
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Date a participation in each such Letter of Credit and each drawing thereunder
in an amount equal to the product of (i) such Lender's Revolving Percentage
times (ii) the maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively. For purposes of subsection 2.1(e)
and subsection 2.10(b), the Existing Letters of Credit shall be deemed to
utilize pro rata the Commitment of each Lender.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.3(a), each Lender shall be deemed
to, and hereby irrevocably and unconditionally agrees to, purchase from the
Issuing Lender a participation in such Letter of Credit and each drawing
thereunder in an amount equal to the product of (i) the Revolving Percentage of
such Lender, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.1(e), each Issuance of a Letter of Credit shall be deemed to
utilize the Commitment of each Lender by an amount equal to the amount of such
participation.
(c) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Lender will
promptly notify the Company. The Company shall reimburse the Issuing Lender
prior to 10:00 a.m. (San Francisco time), on each date that any amount is paid
by the Issuing Lender under any Letter of Credit (each such date, an "Honor
Date"), in an amount equal to the amount so paid by the Issuing Lender. In the
event the Company fails to reimburse the Issuing Lender for the full amount of
any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on the
Honor Date, the Issuing Lender will promptly notify the Administrative Agent and
the Administrative Agent will promptly notify each Lender thereof, and the
Company shall be deemed to have requested that Revolving Loans consisting of
Base Rate Loans be made by the Lenders to be disbursed on the Honor Date under
such Letter of Credit, subject to the amount of the unutilized portion of the
Revolving Commitment and subject to the conditions set forth in Section 6.3. Any
notice given by the Issuing Lender or the Agent pursuant to this subsection
3.3(c) may be oral if immediately confirmed in writing (including by facsimile);
provided that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(d) Each Lender shall upon any notice pursuant to subsection 3.3(e)
make available to the Administrative Agent for the account of the Issuing Lender
an amount in Dollars and in immediately available funds equal to its Revolving
Percentage of the amount of the drawing, whereupon the participating Lenders
shall (subject to subsection 3.3(e)) each be deemed to have made a Revolving
Loan consisting of a Base Rate Loan to the Company in that amount. If any Lender
so notified fails to make available to the Administrative Agent for the account
of the Issuing Lender the amount of such Lender's Revolving Percentage of the
amount of the drawing by no later than 12:00 noon (San Francisco time) on the
Honor Date, then interest shall accrue on such Lender's obligation to make such
payment, from the Honor Date to the date such Lender makes such payment, at a
rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Administrative Agent to give
any such notice on the Honor Date or in sufficient time to enable any Lender to
effect such payment on such date shall not relieve such Lender from its
obligations under this Section 3.3.
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(e) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Company in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 6.3 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Lender an L/C Borrowing in the amount of such drawing,
which L/C Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at a rate per annum equal to the Base Rate plus the
Applicable Base Rate Margin plus 2% per annum, and each Lender's payment to the
Issuing Lender pursuant to subsection 3.3(d) shall be deemed payment in respect
of its participation in such L/C Borrowing and shall constitute an L/C Advance
from such Lender in satisfaction of its participation obligation under this
Section 3.3.
(f) Each Lender's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.3,
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
Issuing Lender, the Company or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided, however, that each
Lender's obligation to make Revolving Loans under this Section 3.3 is subject to
the conditions set forth in Section 6.3.
3.4 Repayment of Participations. (a) Upon (and only upon) receipt by the
Agent for the account of the Issuing Lender of immediately available funds from
the Company (i) in reimbursement of any payment made by the Issuing Lender under
the Letter of Credit with respect to which any Lender has paid the
Administrative Agent for the account of the Issuing Lender for such Lender's
participation in the Letter of Credit pursuant to Section 3.3 or (ii) in payment
of interest thereon, the Administrative Agent will pay to each Lender, in the
same funds as those received by the Administrative Agent for the account of the
Issuing Lender, the amount of such Lender's Revolving Percentage of such funds,
and the Issuing Lender shall receive the amount of the Revolving Percentage of
such funds of any Lender that did not so pay the Agent for the account of the
Issuing Lender.
(b) If the Administrative Agent or the Issuing Lender is required at
any time to return to the Company, or to a trustee, receiver, liquidator,
custodian, or any official in any Insolvency Proceeding, any portion of the
payments made by the Company to the Administrative Agent for the account of the
Issuing Lender pursuant to subsection 3.4(a) in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each Lender shall, on
demand of the Administrative Agent, forthwith return to the Agent or the Issuing
Lender the amount of its Revolving Percentage of any amounts so returned by the
Administrative Agent or the Issuing Lender plus interest thereon from the date
such demand is made to the date such amounts are returned by such Lender to the
Administrative Agent or the Issuing Lender, at a rate per annum equal to the
Federal Funds Rate in effect from time to time.
3.5 Role of the Issuing Lender. (a) Each Lender and the Company agree
that, in paying any drawing under a Letter of Credit, the Issuing Lender shall
not have any
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responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Lender shall be liable
to any Lender for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders (including the Required Lenders, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Lender, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.6; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against the Issuing Lender, and the Issuing Lender may
be liable to the Company, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the Company which
the Company proves were caused by the Issuing Lender's willful misconduct or
gross negligence or the Issuing Lender's willful failure to pay under any Letter
of Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing
Lender may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a 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.
3.6 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Lender for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Company in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C-Related Documents;
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(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Lender or
any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related Documents or any
unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Lender under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any Insolvency
Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations of
the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
the Company or a guarantor.
3.7 Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if the
Issuing Lender has honored any full or partial drawing request on any Letter of
Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B) if,
as of the Revolving Termination Date, any Letters of Credit may for any reason
remain outstanding and partially or wholly undrawn, or (ii) the occurrence of
the circumstances described in subsection 2.7(a) requiring the Company to Cash
Collateralize Letters of Credit, then, the Company shall immediately Cash
Collateralize the Obligations in an amount equal to the L/C Obligations.
3.8 Letter of Credit Fees. (a) The Company shall pay to the Administrative
Agent for the account of each of the Lenders a letter of credit fee with respect
to the Letters of Credit equal to L/C Fee Rate of the average daily maximum
amount available to be drawn of the outstanding Letters of Credit, computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon Letters of Credit outstanding for that quarter as calculated by the
Administrative Agent. Such letter of credit fees shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Closing Date, through the Revolving Termination Date (or
such later date upon which the
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outstanding Letters of Credit shall expire), with the final payment to be made
on the Revolving Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Lender a letter of credit
fronting fee for each Letter of Credit Issued after the Closing Date by the
Issuing Lender equal to the rate set forth in the Fee Letter on the face amount
(or increased face amount, as the case may be) of such Letter of Credit. Such
Letter of Credit fronting fee shall be due and payable on each date of Issuance
of a Letter of Credit.
(c) The Company shall pay to the Issuing Lender from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Lender relating to letters
of credit as from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce
("UCP") most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Company to each Lender or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each Lender
and the Administrative Agent for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Lender or the Administrative Agent and
any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnification
shall be made within 30 days after the date the Lender or the Administrative
Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Lender or the Administrative Agent, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made;
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(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) the Company shall also pay to each Lender or the
Administrative Agent for the account of such Lender, at the time interest
is paid, all additional amounts which the respective Lender specifies as
necessary to preserve the after-tax yield the Lender would have received
if such Taxes or Other Taxes had not been imposed.
The Company shall not, however, be required to pay any amounts pursuant to
clause (i) of the preceding sentence to any Lender or the Issuing Lender, as the
case may be, organized under the laws of a jurisdiction outside of the United
States, unless such Lender or the Issuing Lender, as the case may be, has
provided to the Company, within sixty (60) days after the receipt by such Lender
or the Issuing Lender of a written request therefor, either (x) a facially
complete Internal Revenue Service Form 4224, Form 1001 or Form W-8 or other
applicable form, certificate or document prescribed by the Internal Revenue
Service of the United States certifying as to such Lender's or the Issuing
Lender's entitlement to an exemption from, or reduction of, United States
withholding tax on payments to be made hereunder or under any other Loan
Document or in respect of any Letter of Credit or tax on payments to made
hereunder or thereunder or (y) a letter stating that such Lender or the Issuing
Lender is unable lawfully to provide a properly completed and executed Form 4224
or Form 1001.
(d) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If the Company is required to pay additional amounts to any
Lender or the Administrative Agent pursuant to subsection (c) of this Section,
then such Lender shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such additional payment by the Company which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
4.2 Illegality. (a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Lender to the Company
through the Administrative Agent, any obligation of that Lender to make Offshore
Rate Loans shall be suspended until the Lender notifies the Administrative Agent
and the Company that the circumstances giving rise to such determination no
longer exist.
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(b) If a Lender determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Lender (with a copy to the Administrative Agent), prepay in
full such Offshore Rate Loans of that Lender then outstanding, together with
interest accrued thereon and amounts required under Section 4.4, either on the
last day of the Interest Period thereof, if the Lender may lawfully continue to
maintain such Offshore Rate Loans to such day, or immediately, if the Lender may
not lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Lender, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain Offshore
Rate Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Lender through the Administrative Agent that all Loans which would
otherwise be made by the Lender as Offshore Rate Loans shall be instead Base
Rate Loans.
(d) Before giving any notice to the Administrative Agent under this
Section, the affected Lender shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Lender, be illegal or otherwise disadvantageous to the Lender.
4.3 Increased Costs and Reduction of Return. (a) If any Lender determines
that, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance by that Lender
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining
any Offshore Rate Loan or participating in Letters of Credit, or, in the case of
the Issuing Lender, any increase in the cost to the Issuing Lender of agreeing
to issue, issuing or maintaining any Letter of Credit or of agreeing to make or
making, funding or maintaining any unpaid drawing under any Letter of Credit,
then the Company shall be liable for, and shall from time to time, upon demand
(with a copy of such demand to be sent to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Lender (or its Lending Office) or any corporation controlling the Lender
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) that the amount of such capital is increased as a
consequence of its Commitments, loans, credits or obligations under this
Agreement, then, upon demand of such Lender to the Company through the
Administrative Agent, the Company shall pay to the Lender, from time
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to time as specified by the Lender, additional amounts sufficient to compensate
the Lender (or such corporation) for such increase.
4.4 Funding Losses. The Company shall reimburse each Lender and hold each
Lender harmless from any loss or expense which the Lender may sustain or incur
as a consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.7) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under this Section and
under subsection 4.3(a), each Offshore Rate Loan made by a Lender (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR used in determining the Offshore Rate
for such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
4.5 Inability to Determine Rates. If the Administrative Agent determines
that for any reason adequate and reasonable means do not exist for determining
the Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection
2.9(a) for any requested Interest Period with respect to a proposed Offshore
Rate Loan does not adequately and fairly reflect the cost to the Lenders of
funding such Loan the Administrative Agent will promptly so notify the Company
and each Lender. Thereafter, the obligation of the Lenders to make or maintain
Offshore Rate Loans, hereunder shall be suspended until the Administrative Agent
revokes such notice in writing. Upon receipt of such notice, the Company may
revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Lenders shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but
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such Loans shall be made, converted or continued as Base Rate Loans instead of
Offshore Rate Loans.
4.6 Substitution of Affected Lender. At any time any Lender is an Affected
Lender, the Company may replace such Affected Lender as a party to this
Agreement with one or more other bank(s) or financial institution(s)
satisfactory to the Agent (and upon notice from the Company such Affected Lender
shall assign pursuant to an Assignment and Acceptance Agreement, and without
recourse or warranty, its Commitments, if any, its Loans, its Note, its
participation in Letters of Credit, if any, and all of its other rights and
obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under Section 4.4 as a result of such Lender receiving payment
of any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Lender hereunder).
4.7 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to the Lender hereunder and such certificate shall be conclusive
and binding on the Company in the absence of manifest error.
4.8 Survival. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
COLLATERAL AND GUARANTY
5.1 Collateral--Personal Property. The Obligations shall be secured by a
first lien and security interest, subject only to Permitted Liens, in all
personal property of the Company and the Guarantors (other than NEHC) to the
Security Agreement, covering the Company's and such Guarantor's presently
existing and after-acquired Inventory, Accounts Receivable, General Intangibles,
Equipment, and the other collateral more particularly described therein and in
all stock owned by the Company and its Subsidiaries pursuant to the Pledge
Agreement and the Subsidiary Pledge Agreement; provided, however, that (i) the
Company will pledge not more than 65% of the stock owned in foreign Subsidiaries
and (ii) the Obligations shall not be secured by Receivables Program Assets
transferred to a Receivables Subsidiary with respect to a Qualified Receivables
Transaction.
5.2 Mortgages. The Obligations shall be secured by a first lien and
security interest, subject to Permitted Liens, in all owned real property of the
Company and its Subsidiaries (except foreign Subsidiaries) pursuant to the
Mortgages.
5.3 Guaranty. The Obligations shall be guaranteed by the Guarantors
pursuant to the Guaranty and the NEHC Guaranty. The Company shall cause each
Subsidiary hereafter
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acquired (other than a foreign Subsidiary) to become a Guarantor and to become a
party to the Security Agreement and, if it owns stock, the Subsidiary Pledge
Agreement.
5.4 Company Stock. The Obligations shall be secured by a first lien and
security interest in the stock of the Company pursuant to the NEHC Pledge
Agreement.
5.5 Intercreditor Agreement. The Lenders and other parties hereto hereby
authorize and direct the Administrative Agent to enter into the Intercreditor
Agreement. All of the parties to this Agreement hereby agree to be bound by the
Intercreditor Agreement as if they were parties thereto. No Lender or other
party hereto shall assign any of its rights or obligations under this Agreement
to any other Person unless such other Person shall have agreed in writing to be
bound by the terms of the Intercreditor Agreement as if such Person were a party
thereto.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions of Restatement. The amendment and restatement of the
Existing Credit Agreement and the obligation of each Lender to make its initial
Credit Extension hereunder is subject to the condition that the Administrative
Agent shall have received on or before the date of the initial Credit Extension
all of the following, in form and substance satisfactory to the Administrative
Agent and each Lender, and in sufficient copies for each Lender:
(a) Credit Agreement and Notes. This Agreement and the Notes
executed by each party thereto;
(b) Resolutions: Incumbency.
(i) Copies of the resolutions of the board of directors of the
Company and each Subsidiary that may become party to a Loan Document
authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company, and each Subsidiary that may become party to a Loan Document
certifying the names and true signatures of the officers of the Company or
such Subsidiary authorized to execute, deliver and perform, as applicable,
this Agreement, and all other Loan Documents to be delivered by it
hereunder;
(c) Organization Documents. Each of the articles or certificate of
incorporation and the bylaws of the Company and each Subsidiary party to any
Loan Document as in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of the Company or such Subsidiary as of the Closing Date.
(d) Legal Opinions.
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(i) Opinions of Wachtell, Lipton, Rosen & Katz and Cassem,
Tierney, Adams, Gotch and Douglas, counsel to the Company and its
Subsidiaries and addressed to the Agents and the Lenders, substantially in
the form of Exhibits E and F;
(ii) To the extent required by the Administrative Agent,
opinions of local counsel to the Company and its Subsidiaries with respect
to the Mortgages in form satisfactory to the Administrative Agent.
(e) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article
VII are true and correct on and as of such date, as though made on and
as of such date;
(ii) no Default or Event of Default exists or would result
from the Credit Extension; and
(iii) there has occurred since the date of the applicable
fiscal year end financial statement referred to in Section 7.11 no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect.
(f) Collateral Documents. The Collateral Documents (excluding
Mortgages of leased property), executed by the Company or the applicable
Guarantor, in appropriate form for recording, where necessary, together with:
(i) copies of all UCC-1 and UCC-3 statements filed, registered
or recorded to perfect the security interests of the Administrative Agent
for the benefit of the Lenders, together with other evidence satisfactory
to the Administrative Agent that there has been filed, registered or
recorded all financing statements and other filings, registrations and
recordings necessary and advisable to perfect the Liens of the
Administrative Agent for the benefit of the Lenders in accordance with
applicable law;
(ii) written advice relating to such Liens and judgment
searches as the Administrative Agent shall have requested, and such
termination statements or other documents as may be necessary to confirm
that the Collateral is subject to no other Liens in favor of any Persons
(other than Permitted Liens);
(iii) all certificates and instruments representing the pledged
Collateral, together with stock transfer powers executed in blank with
signatures guaranteed as the Administrative Agent or the Lenders may
specify;
(iv) evidence that all other actions necessary or, in the
opinion of the Administrative Agent or the Lenders, desirable to perfect
and protect the first priority security interest created by the Collateral
Documents have been taken;
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(v) funds sufficient to pay any filing or recording tax or
fee in connection with any and all UCC-1 and UCC-3 financing statements
and the Mortgages;
(vi) with respect to the owned Mortgaged Property, an A.L.T.A.
1992 (or other form acceptable to the Administrative Agent and the Lenders)
mortgagee policy of title insurance or a binder issued by a title insurance
company satisfactory to the Administrative Agent and the Lenders insuring
(or undertaking to insure, in the case of a binder) that the Mortgage
creates and constitutes a valid first Lien against the Mortgaged Property
in favor of the Administrative Agent, subject only to exceptions acceptable
to the Administrative Agent and the Lenders, such endorsements and
affirmative insurance as the Administrative Agent or any Lender may
reasonably request together with copies of all title exception documents;
(vii) evidence that the Administrative Agent has been named as
loss payee under all policies of casualty insurance, and as additional
insured under all policies of liability insurance, required by the
Mortgage;
(viii) current ALTA surveys and surveyor's certification as to
all owned real property in respect of which there is delivered a Mortgage,
or as may be reasonably required by the Administrative Agent, each in form
and substance satisfactory to the Administrative and the Lenders;
(ix) proof of payment of all title insurance premiums,
documentary stamp or intangible taxes, recording fees and mortgage taxes
payable in connection with the recording of any Mortgage or the issuance of
the title insurance policies (whether due on the Closing Date or in the
future) including sums due in connection with any future advances;
(x) evidence that all other actions necessary or, in the
opinion of the Administrative Agent or the Lenders, desirable to perfect
and protect the first priority Lien created by the Collateral Documents,
and to enhance the Administrative Agent's ability to preserve and protect
its interests in and access to the Collateral, have been taken;
(g) Insurance Policies. Standard lenders' payable endorsements with
respect to the insurance policies or other instruments or documents evidencing
insurance coverage on the properties of the Company in accordance with Section
8.6;
(h) Environmental Review. Copies of all pertinent environmental due
diligence of Pilko & Associates; and
(i) Other Documents. Such other approvals, opinions, documents or
materials as the Administrative Agent or any Lender may reasonably request.
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6.2 Other Conditions to Effectiveness of Restatement. The amendment and
restatement of the Existing Credit Agreement shall be subject, in addition to
the conditions set forth in Section 6.1, to the following conditions:
(a) PFS Acquisition. The PFS Acquisition shall have occurred
pursuant to the terms of the PFS Acquisition Agreement without material
amendment or waiver and NEHC shall have assigned its rights under the PFS
Acquisition Agreement to the Company.
(b) Equity Contribution. At least $130,000,000 in proceeds shall be
contributed to the Company pursuant to a common equity contribution.
(c) Subordinated Debt. The Company shall have available to it not
less than $350,000,000 or more than $500,000,000 less underwriting spreads and
other associated fees in proceeds from the Bridge Loan on terms and conditions
satisfactory to the Administrative Agent or the Senior Subordinated Notes,
substantially on the terms described in the Preliminary Offering Memorandum
dated June 23, 1997.
(d) Accounts Receivables Securitization. Concurrently with the
initial Loan, the Company shall have received not less than $200,000,000 in
proceeds from the Receivables Bridge Facility or another Qualified Receivables
Transaction.
(e) Post. The stock of Post shall have been contributed to AmeriServ
Food Company.
(f) Existing Preferred Stock. The existing preferred stock of the
Company shall have been converted to common stock.
(g) Indebtedness. All indebtedness for borrowed money (other than
capitalized leases and industrial revenue bonds not in excess of $350,000) of
the Company, PFS and the Subsidiaries of the Company shall have been paid in
full and all related Liens shall have been released.
(h) Governmental Approvals. All governmental, shareholder and third
party consents, including Hart-Scott-Rodino clearance, and approvals necessary
in connection with the PFS Acquisition and the Post Contribution, the financings
and equity issuances contemplated hereby and the continued operations of the
business of the Company and its Subsidiaries shall have been obtained and be in
full force and effect, and 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 upon the PFS
Acquisition, the Post Contribution or the financing thereof, in each case except
for such governmental and third party approvals which the failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect.
(i) Certificate. Company shall have delivered a Certificate of its
Chief Financial Officer to the effect that all the conditions set forth in
Sections 6.2(a) - (h) above shall have been accomplished.
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(j) Purchase by Lenders. The Lenders shall have purchased and sold
appropriate amounts of the outstanding Loans under the Existing Credit
Agreement, to cause each Lender to hold its Term A Percentage, Term B
Percentage, Term C Percentage, Term D Percentage and Revolving Percentage of the
appropriate Loans, after giving effect to this amendment and restatement. Each
Lender, which shall have its Total Percentage reduced to zero, shall have no
further obligations under the Existing Credit Agreement or this Agreement. If
any Lender shall suffer a loss as a result of the effectiveness of such purchase
or sale being during an Interest Period, the Company shall reimburse such Lender
the amount of such loss. Each such Lender shall furnish the Company with a
certificate setting forth the basis for determining the amount to be paid to it
under this Section.
(k) Revolving Loans. After giving effect to the PFS Acquisition, no
Revolving Loans will be outstanding.
6.3 Conditions to All Credit Extensions. The obligation of each Lender to
make any Revolving Loan to be made by it (including its initial Revolving Loan)
or to continue or convert any Revolving Loan under Section 2.4 and the
obligation of the Issuing Lender to Issue any Letter of Credit (including the
initial Letter of Credit) is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date, Conversion/Continuation
Date or Issuance Date:
(a) Notice, Application. The Administrative Agent shall have
received (with, in the case of the initial Revolving Loan only, a copy for each
Lender) a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable, or in the case of any Issuance of any Letter of Credit, the Issuing
Lender and the Administrative Agent shall have received an L/C Application or
L/C Amendment Application, as required under Section 3.2;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VII shall be true and correct on and
as of such Borrowing Date or Conversion/Continuation Date with the same effect
as if made on and as of such Borrowing Date or Conversion/Continuation Date
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they shall be true and correct as of such earlier
date); and
(c) No Existing Default. No Default or Event of Default shall exist
or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing, L/C Application or L/C Amendment Application submitted
by the Company hereunder shall constitute a representation and warranty by the
Company hereunder, as of the date of each such notice and as of each Borrowing
Date, or Issuance Date, as applicable, that the conditions in this Section 6.3
are satisfied.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Agent and each Lender that:
7.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause (c) or clause (d), to the extent that the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
7.2 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company and its Subsidiaries of this Agreement and each other
Loan Document to which such Person is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its property is
subject; or
(c) violate any Requirement of Law.
7.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of this Agreement or any other Loan Document.
7.4 Binding Effect. This Agreement and each other Loan Document to which
the Company or any of its Subsidiaries is a party constitute the legal, valid
and binding obligations of the Company and any of its Subsidiaries to the extent
it is a party thereto, enforceable against such Person in accordance with their
respective terms, except as
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enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
7.5 Litigation. Except as specifically disclosed in Schedule 7.5, there
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
7.6 No Default. No Default or Event of Default exists or would result from
the incurring of any Obligations by the Company. As of the Closing Date, neither
the Company nor any Subsidiary is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all
such defaults, could reasonably be expected to have a Material Adverse Effect,
or that would, if such default had occurred after the Closing Date, create an
Event of Default under subsection 10.1(e).
7.7 ERISA Compliance. Except as specifically disclosed in Schedule 7.7:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of
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ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or 4212(c) or
ERISA.
7.8 Use of Proceeds: Margin Regulations. The proceeds of the Loans are to
be used solely for the purposes set forth in and permitted by Section 8.12 and
Section 9.7. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
7.9 Title to Properties. The Company and each Subsidiary have good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
7.10 Taxes. The Company and its Subsidiaries have filed all federal and
other material tax returns and reports required to be filed, and have paid all
federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
7.11 Financial Condition. (a) (i) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 28, 1996, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal year ended on that date and (ii) the unaudited
consolidated financial statements of the Company and its Subsidiaries dated
March 29, 1997, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal quarter ended on that date:
(A) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject in the case of the March 29, 1997 statements to ordinary,
good faith year end audit adjustments;
(B) fairly present the financial condition of the Company and
its Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(C) except as specifically disclosed in Schedule 7.11, show all
material indebtedness and other liabilities, direct or contingent, of the
Company and its
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consolidated Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Contingent Obligations.
(b) (i) The audited financial statements of Post dated December 28,
1996, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal year ended on that date and
(ii) the unaudited financial statements of Post dated March 29, 1997, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal quarter ended on that date:
(A) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject in the case of the March 29, 1997 statements to ordinary,
good faith year end audit adjustments;
(B) fairly present the financial condition of Post as of the
date thereof and results of operations for the period covered thereby; and
(C) except as specifically disclosed in Schedule 7.11, show all
material indebtedness and other liabilities, direct or contingent, of Post
as of the date thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
(c) The audited consolidated financial statements of PFS dated
December 28, 1994, December 27, 1995, and December 25, 1996, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal years ended on those dates:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein;
(ii) fairly present the financial condition of PFS as of
the date thereof and results of operations for the period covered
thereby; and
(iii) except as specifically disclosed in Schedule 7.11, show
all material indebtedness and other liabilities, direct or contingent, of
PFS as of the date thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
(d) The pro forma consolidated closing balance sheet of the Company
and its Subsidiaries dated as of March 29, 1997:
(i) after giving effect to the PFS Acquisition, the Post
Contribution, the repayment of indebtedness described in Section 6.2(g),
the financings and equity contributions described in Section 6.2 and any
transaction adjustments as provided in the PFS Acquisition Agreement or
related to the PFS Acquisition, fairly presents the financial condition of
the Company and its Subsidiaries as of the date thereof; and
(ii) except as specifically disclosed in Schedule 7.11,
after giving effect to the PFS Acquisition, to the Post Contribution, the
repayment of indebtedness
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described in Section 6.2(g), the financing and equity contributions
described in Section 6.2 and any transaction adjustments as provided in the
PFS Acquisition Agreement or related to the PFS Acquisition shows all
material indebtedness and other liabilities, direct or contingent, of the
Company and its consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent Obligations.
(e) The Initial Financial Projections delivered to the Agents and
the Lenders prior to the execution of this Agreement were prepared by the
Company in good faith and based upon historical financial information and
assumptions the Company deems reasonable and appropriate in light of current
circumstances.
(f) Since the dates of the financial statements referred to in
subsections (a)-(d) above, there has been no Material Adverse Effect.
7.12 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 7.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
7.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other federal
or state statute or regulation limiting its ability to incur Indebtedness.
7.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is
a party to or bound by any Contractual Obligation, or subject to any restriction
in any Organization Document, or any Requirement of Law, which, in the absence
of a default thereunder, could reasonably be expected to have a Material Adverse
Effect.
7.15 Copyrights, Patents, Trademarks and Licenses. etc. The Company or its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 7.15, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
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7.16 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries
other than those specifically disclosed in part (a) of Schedule 7.16 hereto and
has no equity investments in any other corporation or entity other than those
specifically disclosed in part (b) of Schedule 7.16.
7.17 Insurance. Except as specifically disclosed in Schedule 7.17, the
properties of the Company and its Subsidiaries are insured with insurance
companies not Affiliates of the Company rated at least "A" by A.M. Best Company,
in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.
7.18 Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Company to the Lenders prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
7.19 PFS Acquisition Agreement. The representations and warranties
contained in the PFS Acquisition Agreement (a true and correct copy of which PFS
Acquisition Agreement, together with all schedules and exhibits thereto, has
been delivered to the Lenders), are true and correct in all respects except
where the failure to be so true and correct, upon consummation of the PFS
Acquisition, could not reasonably be expected to have a Material Adverse Effect.
As of the date of the PFS Acquisition, (i) the Company shall have taken all
necessary corporate actions to authorize the PFS Acquisition; and (ii) no
representation made by the Company in any notices or filings with the
shareholders of the Company, with the SEC or any applicable state securities
commissions or with any governmental authority, including, without limitation,
any representations concerning any agreement with, or financing provided by, the
Lenders, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered. Notwithstanding the
foregoing, all representations made in this Section 7.19 with respect to
representations of the Seller, shall be made only to the best of the Company's
knowledge.
ARTICLE VIII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
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8.1 Financial Statements. The Company shall deliver to the Administrative
Agent, in form and detail satisfactory to the Administrative Agent and the
Required Lenders, with sufficient copies for each Lender:
(a) as soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Company, (i) consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, (ii) consolidated
statement of earnings and cash flow of the Company and its Subsidiaries
for such fiscal quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such fiscal quarter
setting forth in each case a comparison of the results with the
corresponding fiscal quarter of the previous year, certified by the chief
financial officer of the Company and (iii) to the extent prepared by the
Company, summary financial reports by division;
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, a copy of the annual audit report
for such fiscal year for the Company and its Subsidiaries, including
therein consolidated balance sheet of the Company and its Subsidiaries as
of the end of such fiscal year and consolidated statement of earnings and
cash flow of the Company and its Subsidiaries for such fiscal year,
together with, in comparative form, the figures for the previous fiscal
year, certified (without any Impermissible Qualification) in a manner
reasonably acceptable to the Administrative Agent and the Required Lenders
by independent public accountants reasonably acceptable to the
Administrative Agent and the Required Lenders (the "Independent Auditor");
and
(c) as soon as available and in any event by January 31 of each
year, for the three year period commencing on the first day of that Fiscal
Year, the following pro forma projected financial information, each
certified as true and correct by the president or chief financial officer
of the Company to the best of such officer's knowledge: (i) the Company's
pro forma balance sheets prepared in accordance with GAAP for the next
three fiscal years, and (ii) projected pro forma statements of earnings
and cash flows and other operating information for the Company which
information presents fairly, on a pro forma basis, the balance sheets of
the Company and the Company's best good faith estimate and projections of
the Company's financial position and results of operations as of the dates
and for the periods indicated.
8.2 Certificates; Other Information. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(b), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate or that the computation of compliance with the financial ratios and
restrictions contained in Sections 9.10 through 9.15, 9.18 and 9.21 provided to
the Lenders and the Administrative Agent does not fairly present the information
set forth therein;
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(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer and, concurrently with respect to the financial statements
referred to in subsection 8.1(b), a certificate executed by a Responsible
Officer setting forth the calculation of Excess Cash Flow for the fiscal year
then ended;
(c) annually, a schedule of insurance carried by the Company and its
Subsidiaries including the amounts of such insurance, deductibles and risks
covered;.
(d) promptly, (i) if the Company has capital stock that is publicly
traded, copies of all financial statements and reports that the Company sends to
its shareholders, and (ii) copies of all financial statements and regular,
periodical or special reports (including Forms 10K, 10Q and 8K) that the Company
or any Subsidiary may file with the SEC; and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
8.3 Notices. The Company shall promptly notify the Administrative Agent
and each Lender:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that the Company reasonably
expects will become a Default or Event of Default;
(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the Company
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any litigation or proceeding affecting the
Company or any Subsidiary, including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Administrative Agent and each Lender a copy of any
notice with respect to such event that is filed with a Governmental Authority
and any notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any
ERISA Affiliate;
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(iv) the adoption of any amendment to a Plan subject to Section
412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries;
(e) of the occurrence of any material labor dispute;
(f) of the occurrence of an "Early Amortization Event", as defined
in the Pooling and Servicing Agreement; or
(g) any event which will give rise to a prepayment pursuant to
Section 2.7(c).
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 8.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
8.4 Preservation of Corporate Existence, etc. The Company shall, and shall
cause each Subsidiary to:
(a) preserve and maintain in lull force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation except in connection with transactions permitted by Section 9.3
and sales of assets permitted by Section 9.2;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 9.3 and sales of assets permitted by Section
9.2;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation or non-renewal of which
could reasonably be expected to have a Material Adverse Effect.
8.5 Maintenance of Property. The Company shall maintain, and shall cause
each Subsidiary to maintain, and preserve all its property which is used or
useful in its business in good working order and condition, ordinary wear and
tear excepted, and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
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8.6 Insurance. The Company shall maintain, and shall cause each Subsidiary
to maintain, with financially sound and reputable independent insurers,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons.
8.7 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due arid payable, all
its respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
8.8 Compliance with Laws. The Company shall comply, and shall cause each
Subsidiary to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
8.9 Compliance with ERISA. The Company shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
8.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Administrative Agent or any Lender at the
expense of the Administrative Agent or Lender, as the case may be, to visit and
inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective directors, officers, and independent public accountants, all at
such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company; provided,
however, when an Event of Default exists the Administrative Agent or any Lender
may do any of the
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foregoing at the expense of the Company at any time during normal business hours
and without advance notice, otherwise the expenses of only one field audit by
the Administrative Agent per year shall be paid by the Company.
8.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
8.12 Use of Proceeds. The Company shall use the proceeds of the Loans to
repay existing Indebtedness, fund the PFS Acquisition and pay related fees and
expenses and to provide for working capital, capital expenditures and other
general corporate purposes not in contravention of any Requirement of Law or of
any Loan Document.
8.13 Further Assurances. Promptly upon the written request of the
Administrative Agent, or the Required Lenders, the Company shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel certificates,
financing statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other instruments the
Administrative Agent or the Required Lenders as the case may be, may reasonably
request from time to time in order (a) to ensure that (i) the Obligations are
secured by substantially all assets of the Company and (ii) the Obligations are
secured by substantially all of the assets of each Subsidiary (including,
promptly upon the acquisition or creation thereof, any Subsidiary created or
acquired after the date hereof), (b) to perfect and maintain the validity,
effectiveness and priority of any of the Loan Documents and the Liens intended
to be created thereby, and (c) to better assure, convey, grant, assign,
transfer, preserve, protect and confirm to the Administrative Agent and the
Lenders the rights granted or now or hereafter intended to be granted to the
Administrative Agent and the Lenders under any Loan Documents or under any other
document executed in connection therewith. Contemporaneously with the execution
and delivery of any document referred to above, the Company shall, and shall
cause each Subsidiary to, deliver all resolutions, opinions and corporate
documents as the Administrative Agent or the Required Lenders may reasonably
request to confirm the enforceability of such document and the perfection of the
security interest created thereby, if applicable.
8.14 INTENTIONALLY LEFT BLANK
8.15 Post-Closing Real Estate Matters. Within 90 days after the date
hereof the Company shall deliver to the Administrative Agent the following:
(a) unless otherwise agreed to by the Supermajority Lenders,
consents from the Landlord of each leased property to be subject to a Mortgage
in form and substance reasonably satisfactory to the Administrative Agent;
(b) unless otherwise agreed to by the Supermajority Lenders, the
Mortgages;
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(c) unless otherwise agreed to by the Supermajority Lenders, UCC
financing statements related to the Mortgages;
(d) unless otherwise agreed to by the Supermajority Lenders, with
respect to the Mortgaged Property, an A.L.T.A. 1992 (or other form acceptable to
the Administrative Agent and the Supermajority Lenders) mortgagee policy of
title insurance issued by a title insurance company satisfactory to the
Administrative Agent and the Supermajority Lenders insuring that the Mortgage
creates and constitutes at valid first Lien against the Mortgaged Property in
favor of the Administrative Agent, subject only to exceptions acceptable to the
Administrative Agent and the Supermajority Lenders, such endorsements and
affirmative insurance as the Administrative Agent or the Supermajority Lenders
may reasonably request;
(e) copies of all documents creating exceptions to title reflected
in the title policies delivered pursuant to (d) above; and
(f) to the extent required by the Administrative Agent, opinions of
local counsel in form and substance satisfactory to the Administrative Agent.
The Lenders and the Company hereby acknowledge and agree that (a) the Company
has previously granted to the Administrative Agent (and has obtained landlord
consents for) leasehold mortgages on certain of the distribution centers leased
by AmeriServ Food Company prior to its acquisition by the Company in January
1996 (such leased distribution centers being collectively referred to herein as
the "AmeriServ Food Company Distribution Centers"); and (b) the obligations of
the Company under this Section 8.15 shall be applicable only to the leased real
property acquired by the Company in connection with the PFS Acquisition, and the
Company has no obligation to grant to Administrative Agent any additional
leasehold mortgages with respect to the AmeriServ Food Company Distribution
Centers.
ARTICLE IX
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
9.1 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 9.1 securing Indebtedness
outstanding on such date;
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secured by any and all such purchase money security interests shall not at any
tune exceed, together with Indebtedness permitted under subsection 9.5(d),
$1,500,000;
(k) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(m) other Liens to secure obligations, so long as the aggregate
amount secured by such Liens does not exceed $2,000,000 at any time;
(n) Liens on Receivables Program Assets; and
(o) Liens on assets of foreign Subsidiaries securing Indebtedness
not in excess of $10,000,000 at any time outstanding.
9.2 Asset Dispositions, etc. The Company will not, and will not permit any
of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey,
or grant options, warrants or other rights with respect to, all or any
substantial part of its assets (including accounts receivable and capital stock
of Subsidiaries) to any Person, unless
(a) such sale, transfer, lease, contribution or conveyance is in the
ordinary course of its business or is permitted by Section 9.3, is a sale and
leaseback made prior to March 31, 1998 of the Company's property in Grand
Rapids, Michigan and is on commercially reasonable terms or is a sale and
leaseback in an amount not in excess of $10,000,000 made prior to January 11,
1998 in connection with the Transportation Equipment Sale and Leaseback;
(b) with respect to any sale, transfer, lease, contribution or
conveyance which is not made in connection with the acquisition of assets by the
Company, the net book value of such assets, together with the net book value of
all other assets sold, transferred, leased, contributed or conveyed otherwise
than in the ordinary course of business by the Company or any of its
Subsidiaries pursuant to this clause since the Closing Date, does not exceed
$10,000,000;
(c) with respect to any sale, transfer, lease, contribution or
conveyance which is made in connection with the acquisition of assets by the
Company, the net book value of such assets does not exceed the net book value of
the assets acquired by the Company in connection with any such acquisition;
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(d) such sale, transfer, lease, contribution or conveyance is of
obsolete or unuseful Equipment and the aggregate proceeds of all such sales,
transfers, leases, contributions or conveyance of such Equipment is $1,000,000
or less in any fiscal year;
(e) such sale, transfer, lease, contribution or conveyance shall be
of Receivables Program Assets pursuant to a Qualified Receivables Transaction to
a Receivables Subsidiary, and the Invested Amount with respect thereto shall not
exceed $300,000,000; or
(f) such sale, transfer, lease, contribution or conveyance shall be
of Receivables Program Assets pursuant to a Qualified Receivables Transaction by
a Receivables Subsidiary to a Special Purpose Vehicle, and the Invested Amount
with respect thereto shall not exceed $300,000,000.
9.3 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries; provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation and if any transaction shall be between
a Guarantor and a Subsidiary which is not a Guarantor, the Guarantor shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the Company or another Wholly-Owned
Subsidiary, which wholly-owned Subsidiary is a Guarantor if the selling
Subsidiary is a Guarantor; or
(c) so long as no Default has occurred and is continuing, or would
occur after giving effect thereto, the Company or any of its Subsidiaries may
purchase all or substantially all of the assets of any Person, or acquire such
Person by merger, if such acquisition is approved by the Administrative Agent
and all the Lenders; or
(d) as permitted by Section 9.2.
9.4 Loans and Investments. The Company shall not purchase or acquire, or
suffer or permit any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan, extension of credit
or capital contribution to or any other investment in, any Person including any
Affiliate of the Company, except for:
(a) investments in Cash Equivalents Investments;
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(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) in the ordinary course of business extensions of credit by the
Company to any of its Subsidiaries or by any of its Subsidiaries to another of
its Subsidiaries;
(d) until such time as a Default shall have occurred and be
continuing, loans and advances to Holberg made on or after the Closing Date not
to exceed $5,000,000 at any time outstanding; provided that upon the occurrence
of such a Default, any outstanding loans and advances permitted by this clause
(d) must be immediately repaid in full;
(e) investments in a Receivables Subsidiary, consisting of
Receivables Program Assets and Purchase Money Notes in payment for Receivables
Program Assets;
(f) investments by a Receivables Subsidiary in a Special Purpose
Vehicle;
(g) (i) Acquisitions (other than those permitted under Section
9.3(c)) and investments in amounts (including cash paid and Indebtedness assumed
or refinanced) aggregating not in excess of $25,000,000 for any single
acquisition or series of related acquisitions or $60,000,000 in the aggregate
after the date hereof, so long as, in the case of an Acquisition, (A) the entity
acquired had a positive operating income for the 12 months prior to the
Acquisition, (B) the entity acquired engaged only in lines of business in which
the Company is engaged, (C) in the case of a stock Acquisition, the Acquisition
is approved by the Board of Directors of the acquired entity, and (D) giving
effect to the Acquisition (x) the Company would have been in compliance with all
covenants hereof as if such Acquisition took place on the first day of the
fiscal quarter period ending at the end of the last fiscal quarter as
demonstrated by a certificate of a Responsible Officer delivered prior to such
Acquisition and (y) at least $50,000,000 of the Revolving Commitments remain
unused, and (ii) existing investments listed on Schedule 9.4; and
(h) loans and advances to employees not to exceed $3,000,000 at any
time outstanding.
9.5 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, other than the following ("Permitted Indebtedness"):
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 9.8;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 9.5;
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(d) Indebtedness secured by Liens permitted by subsection 9.1(j) in
an aggregate amount outstanding not to exceed $1,500,000.
(e) Subordinated Debt (including without limitation the Subordinated
Debt identified in Schedule 9.5 ("Original Indebtedness") of the Disclosure
Schedule);
(f) Indebtedness with respect to any assets acquired by the Company
or any of its Subsidiaries (or assets owned by Subsidiaries the stock of which
is acquired by the Company or any of its Subsidiaries) in existence at the time
of the acquisition of such assets or stock, which Indebtedness was not incurred
in contemplation of the acquisition; provided that such Indebtedness does not in
an aggregate amount outstanding exceed $5,000,000;
(g) Capitalized Lease Obligations not in excess of $40,000,000
created in any one fiscal year and not in excess of $75,000,000 at any time
outstanding;
(h) Other notes payable to vendors not in excess of $2,000,000 at
any time outstanding;
(i) The Bridge Loan or, if the Bridge Loan is repaid with the
proceeds of the Senior Subordinated Notes, the Senior Subordinated Notes;
(j) Indebtedness of foreign Subsidiaries not in excess of
$10,000,000 at any time outstanding;
(k) Other Indebtedness not in excess of $2,000,000 at any time
outstanding;
(l) Receivables Program Obligations, pursuant to a Qualified
Receivables Transaction.
9.6 Transactions with Affiliates. The Company will not, and will not
permit any of its Subsidiaries to, enter into, or cause, suffer or permit to
exist any arrangement or contract with any of its other Affiliates (a) unless
such arrangement or contract is fair and equitable to the Company or such
Subsidiary and is an arrangement or contract of the kind which would be entered
into by a prudent Person in the position of the Company or such Subsidiary with
a Person which is not one of its Affiliates, it being understood that any
Qualified Receivables Transaction shall be deemed to satisfy this clause (a);
(b) except (i) the arrangement between Holberg and the Company under the Tax
Sharing Agreement, and (ii) the insurance arrangement between NEHC and its
Subsidiaries and an affiliate of Holberg, the fees with respect to which shall
not exceed the usual and customary fees for such services; (c) except
arrangements or contracts which provide for investments in Affiliates of the
Company or any of its Subsidiaries to the extent such investments are permitted
pursuant to Section 9.4 provided, however, that unless an Event of Default shall
have occurred and be continuing, Corporate Allocations permitted under Section
9.11 can be paid; (d) transactions between the Company or its Subsidiaries on
the one hand and DLJ or its Affiliates on the other hand involving the provision
of financial, investment banking, lending, management, consulting or
underwriting services by DLJ or its Affiliates; provided that the fees payable
to DLJ or its Affiliates do not exceed the usual and customary fees of DLJ or
its Affiliates, as the case
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may be, for such services or the usual and customary fees of other New York
investment banking firms for such services; or (e) transactions between the
Company and Holberg involving the provision of financial, management or
consulting services in connection with acquisitions provided that (i) the fees
payable by the Company for such services do not exceed the usual and customary
fees for such services (it being agreed that a payment of $4,000,000 with
respect to PFS Acquisition and related transactions shall be permitted) and (ii)
the payment of any such fees shall be subject to the consent of the
Administrative Agent or, if in excess of $2,000,000 in any fiscal year, the
Required Lenders.
9.7 Use of Proceeds. The Company shall not, and shall not suffer or permit
any Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act.
9.8 Contingent Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Hedging Agreements entered into in the ordinary course of
business as bona fide hedging transactions;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 9.8;
(d) other Contingent Obligations so long as the aggregate amount of
such Contingent Obligations outstanding at any one time does not exceed
$1,000,000;
(e) Receivables Program Obligations; and
(f) guarantees of the Obligations and the Senior Subordinated Notes.
9.9 Joint Ventures. The Company shall not, and shall not suffer or permit
any Subsidiary to enter into any Joint Venture, other than in the ordinary
course of business and other than as permitted by Section 9.4(g).
9.10 Rental Obligations. The Company will not, and will not permit any of
its Subsidiaries to, enter into at any time any arrangement which does not
create a Capitalized Lease Liability and which involves the leasing by the
Company or any of its Subsidiaries from any lessor of any real or personal
property (or any interest therein), except arrangements which, together with all
other such arrangements which shall then be in effect, will not require the
payment of an aggregate amount of rentals by the Company and its Subsidiaries in
excess of (excluding escalations resulting from a rise in the consumer price or
similar index) $50,000,000 for any fiscal year; provided, however, that any
calculation made
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for purposes of this section shall exclude any amounts required to be expended
for maintenance and repairs, insurance, taxes, assessments, and other similar
charges.
9.11 Restricted Payments. On and at all times after the Closing Date:
(a) the Company will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class
of capital stock (now or hereafter outstanding) of the Company or on any
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Company (other than
dividends or distributions payable in its common stock or warrants to
purchase its common stock or splitups or reclassifications of its stock
into additional or other shares of its common stock) or apply, or permit
any of its Subsidiaries to apply, any of its funds, property or assets to
the purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of any
class of capital stock (now or hereafter outstanding) of the Company, or
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Company;
(b) the Company will not, and will not permit any of its
Subsidiaries to
(i) other than repayments of the Bridge Loan with proceeds of
Senior Subordinated Notes, make any payment or prepayment of principal of,
or make any payment of interest on, any Subordinated Debt on any day other
than the stated, scheduled date for such payment or prepayment set forth
in the documents and instruments memorializing such Subordinated Debt, or
which would violate the subordination provisions of such Subordinated
Debt; or
(ii) redeem, purchase or defease any Subordinated Debt;
(c) except as otherwise permitted under this Section 9.11, the
Company will not make any payment to NEHC or Holberg, including without
limitation, in respect of Corporate Allocations and will not make any payment
with respect to annual management fees; and
(d) the Company will not, and will not permit any Subsidiary to,
make any deposit for any of the foregoing purposes;
provided, however, that, unless immediately before or after giving effect
thereto, any Event of Default shall have occurred and be continuing, the Company
may declare, pay or make payments in respect of
(i) Corporate Allocations during any fiscal year of the
Company in an aggregate amount not to exceed $4,000,000 in any fiscal
year;
(ii) Payments with respect to the insurance arrangements
permitted pursuant to Section 9.6(b)(ii);
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(iii) Payments permitted pursuant to Section 9.6(e);
(iv) Payments under the Tax Sharing Agreement;
(v) commencing after five and one half years after the date of
this Agreement, payments of dividends so long as (A) the amounts of such
payments do not exceed $13,000,000 in any fiscal year after the date
hereof, and (B) the Company would be in pro forma compliance w1th all
covenants hereunder, as if such dividends were paid on the last day of the
last fiscal quarter ended before such proposed payment; and
(vi) fees and expenses not to exceed $2,500,000 incurred by
NEHC in connection with its issuance of the Senior Discount Notes due
2007.
9.12 Minimum Fixed Charge Coverage. The Company will not permit the Fixed
Charge Coverage Ratio for any Computation Period ending on or after December 31,
1997 to be less than 1.10 to 1.0.
9.13 Minimum Interest Coverage. The Company will not permit the Interest
Coverage Ratio for any Computation Period to be less than the ratio set forth
below opposite the period in which such Computation Period ends:
Period Ratio
------ -----
December 31, 1997 through March 31, 1998 1.35 to 1.0
April 1, 1998 through March 31, 2000 1.50 to 1.0
April 1, 2000 through March 31, 2001 1.75 to 1.0
April 1, 2001 through March 31, 2002 2.00 to 1.0
April 1, 2002 through March 31, 2003 2.25 to 1.0
April 1, 2003 and thereafter 2.50 to 1.0
9.14 Maximum Leverage. The Company will not permit the Leverage Ratio at
any time to exceed the following ratios during the following periods:
Period Ratio
------ -----
September 30, 1997 through June 30, 1998 6.95 to 1.0
July 1, 1998 through March 31, 1999 6.75 to 1.0
April 1, 1999 through March 31, 2000 6.50 to 1.0
April 1, 2000 through March 31, 2001 5.75 to 1.0
April 1, 2001 through March 31, 2002 5.25 to 1.0
April 1, 2002 through March 31, 2003 4.75 to 1.0
April 1, 2003 and thereafter 4.25 to 1.0
9.15 ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably expected
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to result in liability of the Company in an aggregate amount in excess of
$5,000,000 or (b) engage in a transaction that could be subject to Section 4069
or 4212(c) of ERISA.
9.16 Modification of Certain Agreements. The Company will not consent to
any amendment, supplement or other modification of any of the terms or
provisions contained in, or applicable to, the Tax Sharing Agreement or any
document or instrument evidencing or applicable to any Subordinated Debt, other
than any amendment, supplement or other modification which extends the date or
reduces the amount of any required repayment or redemption.
9.17 Negative Pledges, Restrictive Agreements, etc. The Company will not,
and will not permit any of its Subsidiaries to, enter into any agreement
(excluding this Agreement, any other Loan Document and any agreement governing
any Indebtedness permitted either by clause (c) or clause (i) of Section 9.5 as
in effect on the Closing Date or by either of clause (d) or clause (f) of
Section 9.5 as to the assets financed with the proceeds of such Indebtedness)
prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets (other than Receivables Program Assets), whether now owned or
hereafter acquired, or the ability of the Company or any Subsidiary to amend or
otherwise modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary (other than a Receivables
Subsidiary) to make any payments, directly or indirectly, to the Company by way
of dividends, advances, repayments of loans or advances, reimbursements of
management and other intercompany charges, expenses and accruals or other
returns on investments, or any other agreement or arrangement which restricts
the ability of any Subsidiary (other than a Receivables Subsidiary) to make any
payment, directly or indirectly, to the Company.
9.18 Maximum Capital Expenditures. The Company will not permit the
aggregate amount of all Capital Expenditures made by the Company and its
Subsidiaries in the period from the Closing Date through December 31, 1998, to
exceed $50,000,000, and in any fiscal year thereafter, to exceed $22,000,000;
provided, that the Company may, in addition to the foregoing, make Capital
Expenditures of up to $8,000,000 on or before March 31, 1998 in respect of the
sale and leaseback of the Grand Rapids, Michigan distribution center; provided,
further, that the Company may, in addition to the foregoing, make Capital
Expenditures of up to $10,000,000 on or before January 11, 1998 in respect of
the Transportation Equipment Sale and Leaseback and provided, further, that if
the Company and its Subsidiaries do not expend the full amount scheduled to be
permitted in any period, the amount not so expended may be carried over for
expenditures in the next fiscal year but not after such next fiscal year.
9.19 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
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9.20 Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
9.21 Restructuring Costs. The Company shall not, and shall not suffer or
permit any Subsidiary to, incur Restructuring Costs in excess of the following
amounts in the following periods:
Period Amount
------ ------
Closing Date through December 31, 1998 $55,000,000
January 1, 1999 through December 31, 1999 $20,000,000
January 1, 2000 through December 31, 2000 $ 5,000,000
Each year thereafter $ 3,000,000;
provided, however, that if the Company and its Subsidiaries do not incur the
full amount of restructuring costs scheduled to be permitted in any such period,
the amount not so incurred may be carried over for incurrence in the next period
but not after such next period.
9.22 Receivables Facility. The Company and its Subsidiaries shall not
amend or modify, or permit the amendment or modification of, any provision of a
Receivables Document if, as a result of such amendment or modification:
(a) a Receivables Subsidiary would not be required to apply all
funds available to it (after giving effect to the allocation of funds to
reserves required under the terms of the Receivables Documents and to the
payment of interest, principal and other amounts owed under the
Receivables Documents) to pay the purchase price for Receivables
(including any deferred portion of the purchase price);
(b) the degree of recourse to the Company or its Subsidiaries under
or in the respect of the Receivables Documents is increased in any
material respect; or
(c) the Invested Amount with respect thereto shall exceed
$300,000,000.
Notwithstanding anything to the contrary contained in this Section, any
changes to the Receivables Documents which relate to the Company's and/or any
other Receivables Seller's servicing or origination of Receivables Program
Assets shall be permitted.
ARTICLE X
EVENTS OF DEFAULT
10.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan or of any L/C Obligation
or (ii) within 5
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days after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by
the Company, NEHC, or any Subsidiary made or deemed made herein, in any other
Loan Document, or which is contained in any certificate, document or financial
or other statement by the Company, NEHC, any Subsidiary or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made
or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Section 8.1, 8.2, 8.3 or 8.9 or
in Article IX; or
(d) Other Defaults. The Company, any Subsidiary party thereto or
NEHC fails to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall continue unremedied
for a period of 20 days after the date upon which written notice thereof is
given to the Company by the Administrative Agent or any Lender; or
(e) Cross-Default. NEHC, the Company or any Subsidiary (other than a
Receivables Subsidiary) (i) fails to make any payment (including any mandatory
prepayment or redemption) in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $5,000,000 when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure;
or (ii) fails to perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure,
event or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee
or agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause such Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash collateral in
respect thereof to be demanded or; or
(f) Insolvency; Voluntary Proceedings. The Company, NEHC or any
Subsidiary other than a Receivables Subsidiary (i) ceases or fails to be
solvent, or generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business in the ordinary course; (iii) commences any Insolvency Proceeding with
respect to itself; or (iv) takes any action to effectuate or authorize any of
the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company, NEHC or any Subsidiary
other than a Receivables
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Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's, NEHC's
or any Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company, NEHC or any Subsidiary other
than a Receivables Subsidiary admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief (or similar
order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the
Company, NEHC or any Subsidiary other than a Receivables Subsidiary acquiesces
in the appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000
unless the ERISA Event is a contribution failure sufficient to give rise to a
Lien under Section 302(f) of ERISA in which case the dollar liability threshold
does not apply; the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $5,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company, NEHC or any Subsidiary other than a Receivables Subsidiary involving in
the aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage) as to any single or
related series of transactions, incidents or conditions, of $1,000,000 or more,
and the same shall remain unsatisfied, unvacated and unstayed pending appeal for
a period of 10 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is
entered against the Company, NEHC or any Subsidiary which does or would
reasonably be expected 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
(k) Change of Control. There occurs any Change of Control or any "Change
of Control" or like event as defined in any other indenture or other agreement
or instrument pursuant to which Indebtedness or equity is issued or Receivables
are sold by NEHC, the Company or any Subsidiary; or
(l) Impairment of Security, etc. Any Loan Document, or any Lien granted
thereunder, shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of the Company, NEHC or any Subsidiary party thereto; the
Company, NEHC, or any Subsidiary shall, directly or indirectly, contest in any
manner such effectiveness, validity, binding nature
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or enforceability; or any Lien securing any Liability shall, in whole or in
part, cease to be a perfected first priority Lien; provided, however, no Event
of Default hereunder shall exist to the extent (A) the failure of such Lien to
remain effective is due solely to the negligence of the Agent or the Lenders or
(B) the failure to maintain perfection of such Lien is due solely to the failure
of the Agent to file appropriate Uniform Commercial Code continuation
statements.
10.2 Remedies. If any Event of Default occurs, the Administrative Agent
shall, at the request of, or may, with the consent of, the Required Lenders,
(a) declare the commitment of each Lender to make Loans and any
obligation of the Issuing Lender to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and payable, and
declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 10.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans and any obligation of the Issuing Lender to Issue Letters
of Credit shall automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent, the Issuing Lender or any Lender.
10.3 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE XI
THE AGENTS
11.1 Appointment and Authorization. (a) Each Lender hereby irrevocably
(subject to Section 11.9) appoints, designates and authorizes the Administrative
Agent to take such
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action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.
(b) The Issuing Lender shall act on behalf of the Lenders with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Administrative Agent may
agree at the request of the Required Lenders to act for such Issuing Lender with
respect thereto; provided, however, that the Issuing Lender shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this
Article XI with respect to any acts taken or omissions suffered by the Issuing
Lender in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the application and agreements for letters of credit pertaining
to the Letters of Credit as fully as if the term "Administrative Agent," as used
in this Article XI, included the Issuing Lender with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
the Issuing Lender.
11.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
11.3 Liability of Administrative Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct) or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by the Company or any
Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
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11.4 Reliance by Administrative Agent. (a) The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders (or the Supermajority Lenders or all Lenders as
required herein) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 6.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender unless
such Lender has provided written notice to the Agent of its lack of consent,
approval or satisfaction.
11.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Lenders,
unless the Administrative Agent shall have received written notice from a Lender
or the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." The
Administrative Agent will promptly notify the Lenders of its receipt of any such
notice. The Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Article X; provided, however, that unless and until the
Administrative Agent has received any such request, the Administrative Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interest of the Lenders.
11.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition
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and creditworthiness of the Company and its Subsidiaries, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the
Company hereunder. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Lenders by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
11.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the Company to do
so), pro rata, from and against any and all Indemnified Obligations; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Obligations resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to the
extent that the Administrative Agent is not reimbursed for such expenses by or
on behalf of the Company. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Administrative Agent.
11.8 Administrative Agent in Individual Capacity. BofA and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company and
its Subsidiaries and Affiliates as though BofA were not the Administrative Agent
or BofA were not the Issuing Lender hereunder and without notice to or consent
of the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA
or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its Loans, BofA shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not the Administrative Agent or the Issuing Lender.
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11.9 Successor Agent. The Administrative Agent may, and at the request of
the Required Lenders shall, resign as Administrative Agent upon 30 days' notice
to the Lenders. If the Administrative Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Lenders and the Company, a successor agent from among
the Lenders. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article XI and Sections 12.4 and 12.5 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. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. Notwithstanding the foregoing, however, BofA may
not be removed as the Administrative Agent at the request of the Required
Lenders unless BofA shall also simultaneously be replaced as "Issuing Lender"
hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
11.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code or if any Lender claims exemption from withholding tax pursuant
to Section 871(h) or 881(c) of the Code, such Lender agrees with and in favor of
the Administrative Agent, to deliver to the Administrative Agent:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed
IRS Form 1001 before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such
Lender and in each succeeding taxable year of such Lender during which
interest may be paid under this Agreement, and IRS Form W-9;
(iii) in the case of any Lender that is exempt from
withholding tax pursuant to Section 881(h) or 881(c) of the Code, properly
completed IRS Form W-8 or any applicable successor form before the payment
of any interest is due; and
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(iv) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from,
or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Lender, such Lender agrees
to notify the Administrative Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Lender. To the
extent of such percentage amount, the Administrative Agent will treat such
Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Administrative Agent sells, assigns, grants
a participation in, or otherwise transfers all or part of the Obligations of the
Company to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation required
by subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Lender not providing such forms or other documentation an amount equivalent to
the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify the
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Administrative Agent.
11.11 Collateral Matters.
(a) The Administrative Agent is authorized on behalf of all the
Lenders; without the necessity of any notice to or further consent from the
Lenders, from time to time to take any action with respect to any Collateral or
the Loan Documents which may be
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necessary to perfect and maintain perfected the security interest in and Liens
upon the Collateral granted pursuant to the Loan Documents.
(b) The Lenders irrevocably authorize the Administrative Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the Commitments
and payment in full of all Loans and all other obligations known to the
Administrative Agent and payable under this Agreement or any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (iii) constituting
property in which the Company or any Subsidiary owned no interest at the time
the Lien was granted or at any time thereafter; (iv) constituting property
leased to the Company or any Subsidiary under a lease which has expired or been
terminated in a transaction permitted under this Agreement or is about to expire
and which has not been, and is not intended by the Company or such Subsidiary to
be, renewed or extended; (v) consisting of an instrument evidencing Indebtedness
or other debt instrument, if the indebtedness thereby has been paid in full; or
(vi) if approved, authorized or ratified in writing by the Required Lenders or,
if required by Section 12.1(e), all the Lenders. Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent's authority to release particular types or items of
Collateral pursuant to this subsection 11.11(b).
11.12 Documentation Agent. No Lender identified as a "Documentation Agent"
shall have any right, power, obligation, liability, responsibility or duty under
this Agreement other than those applicable to all Lenders as such. Without
limiting the foregoing, none of the Lenders so identified as a "Documentation
Agent" shall have or be deemed to have any fiduciary responsibility with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified and decided to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement, any other Loan Document or the Intercreditor Agreement, and no
consent with respect to any departure by the Company, NEHC or any applicable
Subsidiary therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by the Administrative Agent at the written
request of the Required Lenders) and the Company and acknowledged by the
Administrative Agent, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Lenders and the Company and acknowledged by the
Administrative Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to Section 10.2);
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(b) reduce the amount of, postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment or prepayment of principal,
interest, fees or other amounts due to the Lenders (or any of them) hereunder or
under any other Loan Document or amend the application of payments with respect
thereto;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
(e) release all or any substantial part of the Collateral or release
any Guarantor;
(f) extend any Letter of Credit expiration date to a date beyond the
Revolving Termination Date; or
(g) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Lenders;
and, provided further that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Required Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under this Agreement or any L/C-Related Document relating to any Letter
of Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Required Lenders or all the Lenders, as the case may be, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document, and (iii) the Fee Letters may be amended, or rights or privileges
thereunder waived, in a writing executed by the parties thereto and; provided,
further, that, at the Company's request, the Administrative Agent shall, without
the consent of any Lender, release the security interest of the Administrative
Agent and the Lenders in any property subject to Capitalized Lease Obligations
permitted under Section 9.5(g).
12.2 Notices. (a) All notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 12.2 and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on Schedule
12.2; or, as directed to the Company or the Administrative Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Company and the
Administrative Agent.
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(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or XI shall not be effective until actually
received by the Administrative Agent, and notices to the Issuing Lender pursuant
to Article III shall not be effective until actually received by the Issuing
Lender at the address specified for the Issuing Lender on Schedule 12.2.
(c) Any agreement of the Administrative Agent and the Lenders herein
to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Administrative Agent and the
Lenders shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by the Company to give such notice and the Administrative
Agent and the Lenders shall not have any liability to the Company or other
Person on account of any action taken or not taken by the Administrative Agent
or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Administrative Agent
and the Lenders to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Administrative Agent and the Lenders of a
confirmation which is at variance with the terms understood by the
Administrative Agent and the Lenders to be contained in the telephonic or
facsimile notice.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
12.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Administrative
Agent and Issuing Lender) and DLJ (including in its capacity as Documentation
Agent) within five Business Days after demand for all costs and expenses
incurred by BofA (including in its capacity as Administrative Agent and Issuing
Lender) and DLJ (including in its capacity as Documentation Agent) in connection
with the development, preparation, delivery, administration and execution of,
and any amendment, supplement, waiver or modification to (in each case, whether
or not consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Administrative Agent and
Issuing Lender) and DLJ (including in its capacity as Documentation Agent) with
respect thereto; and
(b) pay or reimburse the Administrative Agent, the Arranger and each
Lender within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document
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during the existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate proceeding).
12.5 Company Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify and hold the Agent-Related
Persons, and each Lender and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans, the termination of
the Letters of Credit and the termination, resignation or replacement of any
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or Letters of Credit or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Obligations"); provided, that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Obligations
resulting solely from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive payment of all
other Obligations.
12.6 Payments Set Aside. To the extent that the Company makes a payment to
the Administrative Agent or the Lenders, or the Administrative Agent or the
Lenders exercise their right of set-off, and such payment or the proceeds of
such set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent,
which had previously been received by such Lender.
12.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Lender.
12.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company at all times other than during the existence of
an Event of Default and the Administrative Agent, which consents shall not be
unreasonably withheld, at any time assign and delegate to one or more Eligible
Assignees (provided that no written consent of the
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Company, or the Administrative Agent shall be required in connection with an
assignment and delegation by BofA or DLJ or in connection with any assignment
and delegation by a Lender to an Eligible Assignee that is an Affiliate of such
Lender) (each an "Assignee") all, or any part of all, of the Loans, the
Revolving Commitment, the L/C Obligations and the other rights and obligations
of such Lender hereunder, in a minimum amount of $5,000,000 (provided that no
minimum amount shall be applicable to any assignment and delegation to an
existing Lender or an Affiliate of a Lender or to an assignment of the entire
remaining amount of the Loans and Commitment of a Lender) provided, however,
that the Company and the Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Administrative Agent by such Lender
and the Assignee; (ii) such Lender and its Assignee shall have delivered to the
Company and the Agent an Assignment and Acceptance substantially in the form of
Exhibit G ("Assignment and Acceptance"), together with any Note or Notes subject
to such assignment, (iii) the assignor Lender or Assignee has paid to the
Administrative Agent a processing fee in the amount of $3,000 and (iv) the
information in the Assignment and Acceptance is recorded in the Register
pursuant to subsection (d) hereof.
(b) From and after the date that the Administrative Agent notifies
the assignor Lender that it has received (and provided its consent with respect
to) an executed Assignment and Acceptance and payment of the above-referenced
processing fee and it has recorded the information in the Register, (i) 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 and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee (and provided that it consents to such
assignment in accordance with subsection 12.8(a)), the Company shall execute and
deliver to the Administrative Agent, new Notes evidencing such Assignee's
assigned Loans and Commitment and, if the assignor Lender has retained a portion
of its Loans and its Commitments, replacement Notes in the principal amount of
the Loans retained by the assignor Lender (such Notes to be in exchange for, but
not in payment of, the Notes held by such Lender). Immediately upon each
Assignee making its processing fee payment under the Assignment and Acceptance,
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(d) The Company hereby designates the Administrative Agent to serve
as the Company's agent, solely for purposes of this Section 12.8(d), to maintain
a register (the
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"Register") on which it will record the Commitments from time to time of each of
the Lenders, the address and any U.S. federal taxpayers identification number of
each Lender, the Loans made by each of the Lenders and each repayment in respect
of the principal amount of the Loans of each Lender. Failure to make any such
recordation, or any error in such recordation shall not affect Lender's
obligations in respect of such Loans. With respect to any Lender, the transfer
of the Commitments of such Lender and the rights to the principal of, and
interest on, any Loan made pursuant to such Commitments shall not be effective
until such transfer is recorded on the Register maintained by the Administrative
Agent with respect to ownership of such Commitments and loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitments
and Loans shall remain owing to the transferor. The registration of assignment
or transfer of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Acceptance pursuant to this Section 12.8. Coincident with the delivery of such
an Assignment and Acceptance to the Administrative Agent for acceptance and
registration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Lender shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Lender
and/or the new Lender. The Company agrees to indemnify the Administrative Agent
from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 12.8(d).
(e) Any Lender may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Lender and the other interests of
that Lender (the "originating Lender") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Lender's obligations
under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii) the
Company, the Issuing Lender and the Administrative Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first proviso to Section
12.1. In the case of any such participation, the Participant shall be entitled
to the benefit of Sections 4.1, 4.3 and 12.5 as though it were also a Lender
hereunder, and if amounts outstanding under this Agreement are due and unpaid,
or shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and
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interest in this Agreement and the Note held by it in favor of any Federal
Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
12.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on such Company's or Subsidiary's behalf, under this
Agreement or any other Loan Document, and neither it nor any of its Affiliates
shall use any such information other than in connection with or in enforcement
of this Agreement and the other Loan Documents or in connection with other
business now or hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by the Lender, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company known to the Lender; provided, however, that any
Lender may disclose such information (A) at the request or pursuant to any
requirement of the National Association of Insurance Commissioners or any
Governmental Authority to which the Lender is subject or in connection with an
examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Lender or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Lender's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders hereunder; (H) as to any
Lender or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Lender or such Affiliate; and
(I) to its Affiliates.
12.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the Company
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the Company against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the Company and the Administrative Agent after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
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12.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, letter of credit fee or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Administrative Agent, the
Issuing Lender, BofA or the Arranger under the Loan Documents, the Company
hereby irrevocably authorizes BofA to debit any deposit account of the Company
with BofA in an amount such that the aggregate amount debited from all such
deposit accounts does not exceed such fee or other cost or expense. If there are
insufficient funds in such deposit accounts to cover the amount of the fee or
other cost or expense then due, such debits will be reversed (in whole or in
part, in BofA's sole discretion) and such amount not debited shall be deemed to
be unpaid. No such debit under this Section shall be deemed a set-off.
12.12 Notification of Addresses, Lending Offices, etc. Each Lender shall
notify the Administrative Agent in writing of any changes in the address to
which notices to the Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Agent shall
reasonably request.
12.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
12.14 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
12.15 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Lenders, the
Agents and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
12.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE AGENT, THE LENDERS AND THE BORROWER SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENTS AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENTS AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
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HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENTS AND
THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
12.17 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENTS EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
LENDERS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
12.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Lenders and the Agents, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/ Donald J. Rogers
-----------------------------------------
Donald J. Rogers
Title: CFO
<PAGE> 109
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent
By: /s/ William J. Stafeil
-----------------------------------------
William J. Stafeil
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Issuing Lender
By: /s/ William J. Stafeil
-----------------------------------------
William J. Stafeil
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender
By: /s/ William J. Stafeil
-----------------------------------------
William J. Stafeil
Title: Vice President
<PAGE> 110
CREDIT LYONNAIS CHICAGO BRANCH,
as a Lender
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: Vice President
<PAGE> 111
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
As: Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance
Company
By: /s/ John W. Fraser
-----------------------------------------
Name: John W. Fraser
Title: Managing Director
<PAGE> 112
ORIX USA Corporation, as a Lender
By: /s/ Hiroyuki Miyauchi
-----------------------------------------
Hiroyuki Miyauchi
Title: Executive Vice President
<PAGE> 113
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By: /s/ Terrell W. Harm
-----------------------------------------
Title: Vice President
<PAGE> 114
PRIME INCOME TRUST, as a Lender
By: /s/ Rafael Scolari
-----------------------------------------
Rafael Scolari
Title: V.P. Portfolio Manager
<PAGE> 115
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., NEW YORK BRANCH, as a Lender
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: Joint General Manager
<PAGE> 116
FLOATING RATE PORTFOLIO
By: Chancellor LGT Senior Secured
Management Inc., as attorney in
fact
By: /s/ Stephen M. [ILLEGIBLE]
-----------------------------------------
Title: Managing Director
<PAGE> 117
NATEXIS BANQUE, as a Lender
By: /s/ G. K. DOOLEY
-----------------------------------------
Kevin Dooley
Title: Vice President
By: /s/ William C. Maier
-----------------------------------------
WILLIAM C. MAIER
Title: VP-GROUP MANAGER
<PAGE> 118
ROYALTON COMPANY, as a Lender
By: Pacific Investment Management
Company, as its Investment Advisor
By: /s/ Raymond Kennedy
-----------------------------------------
Raymond Kennedy
Title: Vice President
Address:
Royalton Company
c/o Pacific Investment Management
Company
840 Newport Beach, CA 92658
Attn: Raymond Kennedy
Telephone: (714) 717-7363
Facsimile: (714) 640-3419
<PAGE> 119
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH, as a Lender
By: /s/ Mikio Nishimura
-----------------------------------------
Mikio Nishimura
Title: General Manager
<PAGE> 120
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH
as a Lender
By: /s/ Masaaki Yamagishi
-----------------------------------------
Masaaki Yamagishi
Title: Chief Manager
<PAGE> 121
BankBoston, N.A.
as a Lender
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: Division Executive
<PAGE> 122
FLEET NATIONAL BANK,
as a Lender
By: /s/
-----------------------------------------
Title: Senior Vice President
<PAGE> 123
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST, as a Lender
By: /s/ Jeffrey W. Maillet
-----------------------------------------
Jeffrey W. Maillet
Title: Sr. Vice Pres. - Portfolio Mgr.
<PAGE> 124
METROPOLITAN LIFE INSURANCE COMPANY,
as a Lender
By: /s/ James R. [ILLEGIBLE]
-----------------------------------------
Title: Assistant Vice President
<PAGE> 125
CHRISTIANIA BANK OG KREDITKASSE
ASA, as a Lender
By: /s/ William S. Phillips /s/ Peter M. Dodge
------------------------------------------
William S. Phillips Peter M. Dodge
Title: Vice President First Vice President
<PAGE> 126
NATIONAL WESTMINSTER BANK PLC,
as a Lender
By: /s/ Stefanie Warner - Grise
-----------------------------------------
Title: Vice President
<PAGE> 127
BANK ONE, WISCONSIN, as a Lender
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: V.P.
<PAGE> 128
SOUTHERN PACIFIC THRIFT &
LOAN ASSOCIATION, as a Lender
By: /s/ Charles W. Martocano
-----------------------------------------
Title: Senior Vice President
<PAGE> 129
HELLER FINANCIAL, INC., as a Lender
By: /s/ Linda W. Wolf
-----------------------------------------
Title: S V P
<PAGE> 130
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY, as a Lender
By: /s/ [illegible]
-----------------------------------------
Title: Vice President
<PAGE> 131
NORTHERN LIFE INSURANCE COMPANY
By: ING Capital Advisors, Inc.,
as Investment Advisor
By: /s/ Michael D. Hatley
-----------------------------------------
Michael D. Hatley
Title: Vice President & Portfolio Manager
<PAGE> 132
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a Unit of The Chase
Manhattan Bank), as a Lender
By: /s/ Ronald W. Stewart
-----------------------------------------
Ronald W. Stewart
Title: Managing Director
<PAGE> 133
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY, as a Lender
By: /s/ John B. Wheeler
-----------------------------------------
Title: Managing Director
<PAGE> 134
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
By: /s/ J. Bowne
-----------------------------------------
Title: Authorized Agent
<PAGE> 135
THE FUJI BANK, LIMITED,
as a Lender
By: /s/ Tetsuo Kamatsu
-----------------------------------------
Tetsuo Kamatsu (K-219)
Title: Joint General Manager
<PAGE> 136
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH, as a Lender
By: /s/ John H. Kemper
-----------------------------------
Title: Senior Vice President
<PAGE> 137
PILGRIM AMERICA PRIME RATE TRUST,
as a Lender
By: /s/ Michael J. Bacevich
-----------------------------------
Michael J. Bacevich
Title: Vice President
<PAGE> 138
DEEPROCK & COMPANY, as a Lender
By: Eaton Vance Management
as Investment Advisor
/s/ Payson F. Swaffield
---------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 139
KZH-ING-I CORPORATION
By: /s/ Virginia Conway
-----------------------------------------
Title: Authorized Agent
<PAGE> 140
KZH-SOLEIL CORPORATION,
as a Lender
By: /s/ Virginia Conway
-----------------------------------------
Title: Authorized Agent
<PAGE> 141
KZH - CRESCENT CORPORATION,
as a Lender
By: /s/ Virginia Conway
-----------------------------------------
Title: Authorized Agent
<PAGE> 142
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/ Donald J. Rogers
-----------------------------------------
Donald J. Rogers
Title: VP
<PAGE> 143
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION, as
Documentation Agent
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title:
---------------------------------------
<PAGE> 144
CRESCENT - MACH I PARTNERS, L.P.
by: TCW Asset Management Company,
its investment manager
By: /s/ Justin L. Driscoll
-----------------------------------------
Justin L. Driscoll
Title: Senior Vice President
<PAGE> 145
Continental Assurance Company
Separate Account (E)
By: TCW Asset Management Company
as Attorney-in-Fact
By: /s/ Mark L. Gold
-----------------------------------------
Name: Mark L. Gold
Title: Managing Director
By: /s/ Justin L. Discoll
-----------------------------------------
Name: Justin L. Discoll
Title: Senior Vice President
<PAGE> 146
PPM AMERICA, INC., as attorney in
fact, on behalf of Jackson National
Life Insurance Company
By: /s/ Michael [ILLEGIBLE]
-----------------------------------------
Title: Managing Director
<PAGE> 1
EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
by and among
DLJ MERCHANT BANKING PARTNERS, L.P.,
DLJ INTERNATIONAL PARTNERS, C.V.,
DLJ OFFSHORE PARTNERS, C.V.,
DLJ MERCHANT BANKING FUNDING, INC.,
DLJ CAPITAL CORPORATION,
SPROUT GROWTH II, L.P.,
SPROUT CEO FUND, L.P.,
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II-A, L.P.,
DLJ OFFSHORE PARTNERS II, C.V.,
DLJ DIVERSIFIED PARTNERS, L.P.,
DLJ DIVERSIFIED PARTNERS-A, L.P.,
DLJ MILLENNIUM PARTNERS, L.P.,
DLJMB FUNDING II, INC.,
DLJ FIRST ESC LLC,
DLJ EAB PARTNERS, L.P.,
UK INVESTMENT PLAN 1997 PARTNERS,
NEBCO EVANS HOLDING COMPANY,
AND
HOLBERG INDUSTRIES, INC.
dated as of
July 11, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions......................................................2
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale................................................9
SECTION 2.02. Closing..........................................................9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NEBCO AND HOLBERG
SECTION 3.01. Corporate Existence and Power..................................10
SECTION 3.02. Corporate Authorization........................................10
SECTION 3.03. Governmental Authorization.....................................10
SECTION 3.04. Non-contravention..............................................11
SECTION 3.05. Capitalization.................................................11
SECTION 3.06. Subsidiaries...................................................12
SECTION 3.07. Financial Statements...........................................13
SECTION 3.08. Absence of Certain Changes.....................................13
SECTION 3.09. No Undisclosed Material Liabilities............................15
SECTION 3.10. Material Contracts.............................................15
SECTION 3.11. Litigation.....................................................16
SECTION 3.12. Compliance with Laws and Court Orders; No Defaults.............16
SECTION 3.13. Properties.....................................................16
SECTION 3.14. Insurance Coverage.............................................17
SECTION 3.15. Licenses and Permits...........................................18
SECTION 3.16. Due Diligence Documents; Disclosure............................18
SECTION 3.17. Finders' Fees..................................................18
SECTION 3.18. Labor Matters..................................................18
SECTION 3.19. Environmental Matters..........................................18
SECTION 3.20. Employee Benefit Plans.........................................20
SECTION 3.21. Meaning of Nebco...............................................21
SECTION 3.22. Nebco's Taxes..................................................21
SECTION 3.23. Certain Interests..............................................22
<PAGE> 3
PAGE
SECTION 3.24. Charter and Bylaws.............................................22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
SECTION 4.01. Existence and Power............................................23
SECTION 4.02. Authorization..................................................23
SECTION 4.03. Governmental Authorization.....................................23
SECTION 4.04. Non-contravention..............................................23
SECTION 4.05. Financing......................................................23
SECTION 4.06. Purchase for Investment........................................23
SECTION 4.07. Litigation.....................................................24
SECTION 4.08. Finders' Fees..................................................24
ARTICLE 5
COVENANTS OF THE BUYERS AND NEBCO
SECTION 5.01. Best Efforts...................................................24
SECTION 5.02. Certain Filings................................................25
SECTION 5.03. Public Announcements...........................................25
SECTION 5.04. Allocation of Value............................................25
ARTICLE 6
HOLBERG OBLIGATIONS
SECTION 6.01. Holberg's Taxes................................................25
SECTION 6.02. Nebco's Current Tax Sharing Agreement..........................26
SECTION 6.03. Tax Sharing....................................................27
SECTION 6.04. Tax Assets.....................................................29
SECTION 6.05. Apportionment of Section 382 Limitation........................30
SECTION 6.06. Indemnification................................................31
ARTICLE 7
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of Nebco and the Buyers...............31
SECTION 7.02. Conditions to Obligations of the Buyers.........................32
SECTION 7.03. Conditions to Obligations of Nebco..............................34
ii
<PAGE> 4
PAGE
ARTICLE 8
SURVIVAL; INDEMNIFICATION
SECTION 8.01. Survival.......................................................35
SECTION 8.02. Indemnification................................................35
SECTION 8.03. Procedures.....................................................35
SECTION 8.04. Waiver of Subrogation..........................................36
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination.........................................36
SECTION 9.02. Effect of Termination...........................................36
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices.......................................................37
SECTION 10.02. Amendments and Waivers........................................38
SECTION 10.03. Expenses......................................................38
SECTION 10.04. Successors and Assigns........................................38
SECTION 10.05. Governing Law.................................................39
SECTION 10.06. Jurisdiction..................................................39
SECTION 10.07. Counterpart; Third Party Beneficiaries........................39
SECTION 10.08. Entire Agreement..............................................39
iii
<PAGE> 5
ANNEXES
Annex A Senior Preferred Stock Purchased by the New Buyers
Annex B Junior Preferred Stock Purchased by the New Buyers
Annex C Warrants to be Issued to the New Buyers
Annex D 12.5% Senior Secured Notes of Nebco to be Redeemed
by the Original Buyers
Annex E Form of Certificate of Designations of 13 1/2% Senior
Exchangeable Preferred Stock Due 2009
Annex F Form of Certificate of Designations of 15% Junior
Exchangeable Preferred Stock Due 2009
Annex G Form of Warrant
Annex H Certificate of Incorporation
Annex I Bylaws
Annex J Sideletter of Daniel W. Crippen
SCHEDULES
Schedule 3.05 Owners of Capital Stock
Schedule 3.06 Subsidiaries
Schedule 3.08 Absence of Certain Changes
Schedule 3.09 Material Liabilities
Schedule 3.10 Material Contracts
Schedule 3.11 Litigation
Schedule 3.23 Certain Interests
<PAGE> 6
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of July 11, 1997 by and among DLJ Merchant Banking
Partners, L.P., a Delaware limited partnership ("DLJMB PARTNERS"); DLJ
International Partners, C.V., a Netherlands Antilles limited partnership; DLJ
Offshore Partners, C.V., a Netherlands Antilles limited partnership; DLJ
Merchant Banking Funding, Inc., a Delaware corporation, DLJ Capital Corporation,
a Delaware corporation, Sprout Growth II, L.P., a Delaware limited partnership,
Sprout CEO Fund, L.P., a Delaware limited partnership, DLJ First ESC LLC, a
Delaware limited liability company, (each of DLJ First ESC LLC, except in
connection with it's acquisition of Securities (as defined below) pursuant to
this Agreement in which case it shall be referred to as a New Buyer (as defined
below), and the other foregoing entities, an "ORIGINAL BUYER", and collectively,
the "ORIGINAL BUYERS"), DLJ Merchant Banking Partners II, L.P., a Delaware
limited partnership, DLJ Merchant Banking Partners II-A, L.P., a Delaware
limited partnership, DLJ Offshore Partners II, C.V., a Netherlands Antilles
limited partnership, DLJ Diversified Partners, L.P., a Delaware limited
partnership, DLJ Diversified Partners-A, L.P., a Delaware limited partnership,
DLJ Millennium Partners, L.P., a Delaware limited partnership, DLJMB Funding II,
Inc., a Delaware corporation, DLJ EAB Partners, L.P., a Delaware limited
partnership, UK Investment Plan 1997 Partners, a Delaware partnership (each of
the foregoing, excluding the Original Buyers, but including DLJ First ESC LLC in
its capacity as described above, a "NEW BUYER", and collectively, the "NEW
BUYERS", and each of the foregoing, including the Original Buyers, a "BUYER",
and collectively, the "BUYERS"), Holberg Industries, Inc., a Delaware
corporation ("HOLBERG"), and Nebco Evans Holding Company, a Delaware corporation
("NEBCO").
WITNESSETH:
WHEREAS, the New Buyers desire to purchase from Nebco, and Nebco desires to
issue and sell to the New Buyers, upon the terms and subject to the conditions
set forth herein, Senior Preferred Stock (as defined below), Junior Preferred
Stock (as defined below) and Warrants (as defined below) to purchase up to 22.5%
of the fully-diluted Nebco Common Stock (as defined below); and
WHEREAS, the Original Buyers and Nebco desire to have repaid in full all of
the issued and outstanding 12.5% Senior Secured Notes of Nebco, upon the terms
and subject to the conditions set forth herein;
1
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"ACCOUNTING REFEREE" means a nationally recognized accounting firm having
no material relationship with the Buyers, Holberg, Nebco or their Affiliates,
acceptable to all parties to the dispute which such Referee is to resolve and
appointed within 15 days after the need for such Referee arises.
"AFFILIATE" means, with respect to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with such
Person. For the purposes of this definition, "CONTROL" (including, with
correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise; provided, that none of the Buyers or other stockholders
of Nebco shall be deemed to be an Affiliate of any other Buyer solely by virtue
of their beneficial ownership of securities of Nebco.
"AMERISERVE" means AmeriServe Food Distribution, Inc., a Nebraska
corporation.
"AMERISERVE DOCUMENTS" means the Asset Purchase Agreement (the "ASSET
PURCHASE AGREEMENT") dated as of May 23, 1997 between PepsiCo, Inc., a North
Carolina corporation, and Nebco, and each other document relating to the
acquisition, directly or indirectly, by Nebco of the assets and properties of
PepsiCo, Inc. contemplated thereby.
"AMERISERVE SENIOR PREFERRED STOCK" means the Senior Non-Convertible
Preferred Stock, par value $1.00 per share, of AmeriServe.
"BALANCE SHEET" means the audited balance sheet of Nebco and its
Subsidiaries as of December 28, 1996.
2
<PAGE> 8
"BALANCE SHEET DATE" means December 28, 1996.
"BENEFIT ARRANGEMENT" means, with respect to Nebco, any employment,
severance or similar contract, arrangement or policy, or any plan or arrangement
(whether or not written) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that (i) is not an Employee Plan, (ii) is
entered into or maintained, as the case may be, by Nebco or any of its
Affiliates and (iii) covers any employee or former employee of Nebco or any of
its Subsidiaries.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banking institutions in The City of New York are authorized by
law or executive order to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any regulations promulgated thereunder.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement
dated as of July 11, 1997 among AmeriServe, Bank of America National Trust and
Savings Association, Donaldson, Lufkin & Jenrette Securities Corporation and
certain other financial institutions listed therein.
"DLJMB II" means DLJ Merchant Banking II, Inc., a Delaware corporation,
acting on behalf of the New Buyers.
"EMPLOYEE PLAN" means, with respect to Nebco, any "EMPLOYEE BENEFIT PLAN",
as defined in Section 3(3) of ERISA, that (i) is subject to any provision of
ERISA, (ii) is maintained, administered or contributed to by Nebco or any of its
Affiliates and (iii) covers any employee or any former employee of Nebco or any
of its Subsidiaries.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, treaties, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises,
3
<PAGE> 9
licenses, agreements and governmental restrictions, whether now or hereafter in
effect, relating to human health, the environment or to pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or materials.
"ENVIRONMENTAL LIABILITIES" means, with respect to Nebco, any and all
liabilities of or relating to Nebco or any of its Subsidiaries (including any
entity which is, in whole or in part, a predecessor of Nebco or any of its
Subsidiaries), whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which (i) arise under or relate to matters covered
by Environmental Laws (including without limitation any matters disclosed or
required to be disclosed in Schedule 3.19 hereto) and (ii) relate to actions
occurring or conditions existing on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"FINAL DETERMINATION" means (i) with respect to federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations) or (ii) the payment of Tax by the Buyers,
Holberg, Nebco or any of their Affiliates, whichever is responsible for payment
of such Tax under applicable law, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible party determines
that no action should be taken to recoup such payment and the other party
agrees.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance having any constituent elements
displaying any of the foregoing characteristics, including, without limitation,
petroleum, its derivatives, by-products and other hydrocarbons, and any
substance regulated under Environmental Laws.
4
<PAGE> 10
"HOLBERG GROUP" means (i) with respect to federal Taxes, the affiliated
group of corporations (as defined in Section 1504(a) of the Code) of which
Holberg is a member, and (ii) with respect to state and local taxes, the
consolidated, combined, unitary or similar group of which Holberg is a member.
"INDENTURE" means the Indenture dated as of the Closing Date, by and among
Nebco and State Street Bank and Trust Company, as trustee ("TRUSTEE"), as
thereafter amended or supplemented from time to time, relating to the Senior
Discount Notes.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
"INVESTORS AGREEMENT" means the Amended and Restated Investors Agreement
dated as of the date hereof by and among the Buyers, Nebco, Nebco Evans
Distributors, Inc. and Holberg.
"JUNIOR PREFERRED STOCK" means the 15% Junior Exchangeable Preferred Stock
Due 2009 of Nebco issued pursuant to the Certificate of Designations attached
hereto as Annex F.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
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
relating to such property or asset.
"MARCH CREDIT AGREEMENT" means the Amended and Restated Credit Agreement
dated as of March 26, 1997 among AmeriServe, Bank of America National Trust and
Savings Association, Donaldson, Lufkin & Jenrette Securities Corporation and
certain other financial institutions listed therein, which, when amended and
restated as of July 11, 1997, shall be the Credit Agreement.
"MATERIAL ADVERSE EFFECT" means, with respect to Nebco, a material adverse
effect on the condition (financial or otherwise), business, assets or results of
operations of Nebco and its Subsidiaries, taken as a whole.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer Plan
as defined in Section 3(37) of ERISA.
5
<PAGE> 11
"NEBCO, CLASS A COMMON STOCK" means the Class A Common Stock, par value
$.01 per share, of Nebco.
"NEBCO CLASS B COMMON STOCK" means the Class B Non-Voting Common Stock, par
value $.01 per share, of Nebco.
"NEBCO COMMON STOCK" means Nebco Class A Common Stock and Nebco Class B
Common Stock.
"NEBCO, PREFERRED STOCK" means the Preferred Stock, par value $.01 per
share, of Nebco.
"NEBCO SENIOR PREFERRED STOCK" means the Junior Non-Convertible Preferred
Stock, par value $.01 per share, of Nebco (previously the Senior Non-Convertible
Preferred Stock).
"NEW NEBCO, BYLAWS" means the Bylaws of Nebco as in effect immediately
prior to the Closing and in the form attached hereto as Annex I.
"NEW NEBCO CHARTER" means the Certificate of Incorporation of Nebco, as
amended, as in effect immediately prior to the Closing and in the form attached
hereto as Annex H
"1934 ACT" means the Securities Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
"ORIGINAL WARRANTS" means the warrants issued by Nebco on January 25, 1996
to the Original Buyers for the purchase of Nebco Common Stock.
"PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PFS BUSINESS" shall have the meaning ascribed to such term in the Asset
Purchase Agreement.
"SECURITIES" means, collectively, the Senior Discount Notes, the Senior
Preferred Stock, the Junior Preferred Stock and the Warrants.
"SENIOR DISCOUNT NOTES" means the 12 3/8% Senior Discount Notes due 2007 of
Nebco to be issued pursuant to the Indenture.
6
<PAGE> 12
"SENIOR PREFERRED STOCK" means the 13 1/2% Senior Exchangeable Preferred
Stock Due 2009 of Nebco issued pursuant to the Certificate of Designations
attached hereto as Annex E.
"SUBSIDIARY" means, with respect to any Person, any corporation or any
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"TAX" (and with correlative meaning, "TAXES") means, except to the extent
otherwise provided in Section 6.01 of this Agreement, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (a "TAXING AUTHORITY") responsible for the imposition of
any such tax (domestic or foreign), (ii) liability of Nebco or any of its
Subsidiaries for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability of
Nebco or any of its Subsidiaries for payment of such amounts was determined or
taken into account with reference to the liability of any other person for any
Pre-Closing Tax Period and (iii) liability of Nebco or any of its Subsidiaries
for the payments of any amounts as a result of being party to any tax sharing
agreement (including, without limitation, the Tax Sharing Agreement) or with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person.
"TAX ASSET" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including, without limitation, deductions
and credits related to alternative minimum Taxes).
"TITLE IV PLAN" means an Employee Plan, other than any Multiemployer Plan,
subject to Title IV of ERISA.
"TRANSACTION DOCUMENTS" means this Agreement, the Investors Agreement, the
Senior Discount Notes, the Certificate of Designations of the Senior Preferred
Stock and the Junior Preferred Stock and the Warrants and each such document is
sometimes referred to individually as a "TRANSACTION DOCUMENT."
7
<PAGE> 13
"TRANSACTIONS" means the transactions contemplated by the Transaction
Documents.
"TRUSTEE" shall have the meaning set forth in the definition of
"INDENTURE."
"WARRANTS" means the warrants in the form attached hereto as Annex G,
issued by Nebco to the New Buyers for the purchase of those numbers of shares of
Nebco Common Stock (subject to adjustments) set forth on Annex C hereto.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Closing 2.02
Damages 8.02
Indemnified Party 8.03
Indemnifying Party 8.03
Interim Financial Statements 3.07(b)
Nebco Securities 3.05(b)(iii)
Nebco Tax Asset 6.04(e)
Other Payments 6.03(f)
Party 3.22(b)
Permits 3.15
Pre-Closing Tax Period 3.22(a)(i)
Purchase Prices 2.01(a)(ii)
Recipient 6.05
Returns 3.22(a)(i)
Series $50,000 Preferred Stock 3.05(b)
Series $25,000 Preferred Stock 3.05(b)
Stub Period 6.03(b)
Subsidiary Securities 3.06(b)(ii)
Tax Provision 6.03(f)
Tax Sharing Agreement 3.22(b)
Tax Sharing Amount 6.03(b)
True-Up Schedule 6.03(b)
Unadjusted Tax Sharing Amount 6.03(f)
USRPHC 3.22(a)(vi)
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, (i) Nebco agrees to sell to each New Buyer and
each New Buyer agrees, severally and not jointly, to purchase from Nebco at the
Closing, the Senior Preferred Stock, the Junior Preferred Stock and Warrants set
forth opposite its name on Annex A, Annex B and Annex C hereto, respectively,
(ii) Nebco agrees to redeem and each Original Buyer agrees to have redeemed that
principal amount of 12.5% Senior Secured Notes of Nebco held by such Original
Buyers as is set forth opposite its name on Annex D, upon the terms and subject
to the conditions set forth herein. The purchase price for the Senior Preferred
Stock (the "SENIOR PREFERRED PURCHASE PRICE") applicable to each New Buyer is
set forth opposite its name on Annex A hereto. The purchase price for the Junior
Preferred Stock (the "JUNIOR PREFERRED PURCHASE PRICE", and together with the
Senior Preferred Purchase Price, the "PURCHASE PRICES") applicable to each New
Buyer is set forth opposite its name on Annex B hereto. The Purchase Prices
shall be paid as provided in Section 2.02.
SECTION 2.02. Closing. The closing (the "CLOSING") of the purchase and sale
of the Securities hereunder shall take place at the offices of Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street, New York, New York as soon as possible after
satisfaction of the conditions set forth in Article 7 or at such other time or
place as the Buyers and Nebco may agree. At the Closing:
(a) Each New Buyer shall deliver to Nebco the amount of (i) the applicable
Senior Preferred Purchase Price, and (ii) the applicable Junior Preferred
Purchase Price, in immediately available funds by wire transfer to the accounts
of Nebco, designated by Nebco.
(b) Each Original Buyer shall deliver to Nebco the aggregate principal
amount of 12.5% Senior Secured Notes of Nebco set forth opposite such Original
Buyer's name in Annex D.
(c) Nebco shall issue and deliver to each New Buyer the Securities being
purchased hereunder by such New Buyer, in each case registered in the name of
such Buyer, and to each Original Buyer the amount being paid in redemption by
Nebco for all 12.5% Senior Secured Notes of Nebco held by such Original Buyer.
Each Warrant shall be for the amount of Warrant Shares set forth opposite such
applicable New Buyer's name on Annex C and the Senior Preferred Stock and Junior
Preferred Stock shall be in such denominations as such Buyer may designate by
notice to Nebco not later than one Business Day prior to the Closing.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NEBCO AND HOLBERG
Each of Nebco and Holberg represents and warrants to each Buyer as of the
date hereof that:
SECTION 3.01. Corporate Existence and Power. Each of Nebco and Holberg (i)
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, (ii) has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on such Person's business as now conducted and (iii) is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for purposes of
clauses 3.01(a)(ii) and 3.01(a)(iii) where the failure to have such licenses,
authorizations, permits, consents or approvals or to be in good standing as a
foreign corporation would not reasonably be expected to have a Material Adverse
Effect. Nebco has heretofore delivered to the Buyers true and complete copies of
the certificate of incorporation and bylaws of Nebco and its Subsidiaries as
currently in effect.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by Nebco, AmeriServe and Holberg of each of the Transaction
Documents and the AmeriServe Documents to which such Person is a party are
within such Person's corporate powers and have been duly authorized by all
necessary corporate action on the part of such Person. This Agreement
constitutes (and when executed and delivered, each other Transaction Document
and AmeriServe Document to which Nebco, AmeriServe or Holberg is a party will
constitute) a valid and binding agreement of Nebco, AmeriServe and Holberg,
enforceable against such Person in accordance with its terms, except as such
validity, enforceability and binding effect may be limited by bankruptcy,
insolvency, moratorium and other laws affecting creditors' rights generally and
by equitable principles.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by Nebco, AmeriServe and Holberg of each of the Transaction
Documents and the AmeriServe Documents to which such Person is a party require
no action by or in respect of, or filing with, any governmental body, agency or
official for the consummation of the transactions contemplated thereby, other
than as required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the Competition Act (Canada), as amended.
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SECTION 3.04. Non-contravention. The execution, delivery and performance by
Nebco, AmeriServe and Holberg of each of the Transaction Documents and the
AmeriServe Documents to which such Person is a party and the consummation by
such Person of the Transactions and the transactions contemplated by the
AmeriServe Documents do not and will not (i) violate the certificate of
incorporation or bylaws of any such Person, (ii) assuming compliance with the
matters referred to in Section 3.03, violate any applicable material law, rule,
regulation, judgment, injunction, order or decree, (iii) other than pursuant to
the Credit Agreement, require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any material right or obligation of such Person
or any of its Subsidiaries to a loss of any material benefit to which such
Person or any of its Subsidiaries is entitled under, any agreement or other
instrument binding upon such Person or any of its Subsidiaries or any license,
franchise, permit or other similar authorization held by such Person or any of
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
material asset of such Person or any of its Subsidiaries.
SECTION 3.05. Capitalization. (a) As of the date hereof, and after giving
effect to the Transactions, the authorized capital stock of Nebco consists of
(i) 50,000 shares of Nebco Common Stock, consisting of 30,000 shares of Nebco
Class A Common Stock and 20,000 shares of Nebco Class B Common Stock and (ii)
30,000,000 shares of Nebco Preferred Stock, of which 600 shares of Nebco Senior
Preferred Stock, 5,000,000 shares of Senior Preferred Stock, 5,000,000 shares of
Junior Preferred Stock and 300 shares of 8% Senior Convertible Preferred Stock
are authorized. As of the date hereof and after giving effect to the
Transactions, there are outstanding 6,508 shares of Nebco Class A Common Stock,
1,733 shares of Class B Common Stock, 2,400,000 shares of Senior Preferred
Stock, 2,200,000 shares of Junior Preferred Stock, 600 shares of Nebco Senior
Preferred Stock and 235 shares of 8% Senior Convertible Preferred Stock. As of
the date hereof and after giving effect to the Transactions, (i) 1,759 Original
Warrants have been issued to the Original Buyers and are outstanding, and 1,389
shares of Nebco Class A Common Stock and 370 shares of Nebco Class B Common
Stock are reserved for issuance in connection with the exercise of the Original
Warrants; and (ii) 2,904 Warrants have been issued to the New Buyers and are
outstanding, and 2,904 shares of Nebco Class A Common Stock are reserved for
issuance in connection with the exercise of such Warrants. The record owners of
all of the issued and outstanding capital stock of Nebco as of the moment
immediately prior to the Closing are as set forth on Schedule 3.05(a) attached
hereto and effective upon the Closing shall be as set forth on Schedule 3.05(b)
attached hereto. NED shall, effective on the Closing, own no other assets other
than the securities it owns as set forth on Schedule 3.05(b).
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(b) All outstanding shares of capital stock of Nebco have been duly
authorized and validly issued and are fully paid and non-assessable and free and
clear of any preemptive or similar rights except as contemplated by the
Investors Agreement. The issuance and sale of the Senior Preferred Stock, the
Junior Preferred Stock and the Warrants have been duly authorized by Nebco and
all necessary corporate and shareholder action in respect thereof have been
taken, the Senior Preferred Stock, the Junior Preferred Stock and the Warrants
issued to the Buyers on the date hereof are valid and binding obligations of
Nebco, except as may be limited by bankruptcy, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by laws of
general application limiting the availability of equitable remedies. The Senior
Preferred Stock and Junior Preferred Stock when issued pursuant hereto will be
validly issued and fully paid and nonassessable. All shares of Nebco Common
Stock to be issued upon the exercise of the Warrants and Original Warrants, when
issued, will be duly authorized and validly issued, fully paid and nonassessable
and free and clear of any preemptive or similar rights except as contemplated by
the Investors Agreement. Except as set forth in this Section 3.05, there are no
outstanding (i) shares of capital stock or voting securities of Nebco, (ii)
securities of Nebco convertible into or exchangeable for shares of capital stock
or voting securities of Nebco or (iii) options or other rights to acquire from
Nebco, or other obligation of Nebco to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Nebco (the items in clauses 3.05(b)(i), 3.05(b)(ii) and
3.05(b)(iii), collectively, with respect to Nebco, the "NEBCO SECURITIES").
Other than as provided in the Transaction Documents, there are no outstanding
obligations of Nebco or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Nebco Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary of Nebco is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except where the failure to have such licenses,
authorizations, permits, consents or approvals or to be in good standing as a
foreign corporation would not reasonably be expected to have a Material Adverse
Effect. All Subsidiaries of Nebco and their respective jurisdictions of
incorporation are identified in Schedule 3.06.
(b) Except as disclosed in Schedule 3.06, all of the outstanding capital
stock of, or other voting securities or ownership interests in, each Subsidiary
of Nebco is owned by Nebco, directly or indirectly, free and clear of any Lien
and free of any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
voting securities or ownership
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interests). Except as disclosed in Schedule 3.06, there are no outstanding (i)
securities of Nebco or any of its Subsidiaries convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any of Nebco's Subsidiaries or (ii) except for the Original Warrants, options or
other rights to acquire from Nebco or any of its Subsidiaries, or other
obligation of Nebco or any of its Subsidiaries to issue, any capital stock or
other voting securities or ownership interests in, or any securities convertible
into or exchangeable for any capital stock or other voting securities or
ownership interests in, any of Nebco's Subsidiaries (the items in clauses
3.06(b)(i) and 3.06(b)(ii), the "SUBSIDIARY SECURITIES"). Other than as
expressly contemplated by the Transaction Documents, there are no outstanding
obligations of Nebco or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding Subsidiary Securities of Nebco.
SECTION 3.07. Financial Statements. (a) The audited consolidated financial
statements of Nebco and its Subsidiaries as of December 28, 1996 present fairly,
in all material respects, the consolidated financial position of Nebco and its
Subsidiaries as of such date and their consolidated results of operations and
cash flows for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis.
(b) The unaudited interim consolidated financial statements of Nebco and
its Subsidiaries as of March 29, 1997 (the "INTERIM FINANCIAL STATEMENTS")
present fairly, in all material respects, the consolidated financial position of
Nebco and its Subsidiaries as of such date and their consolidated results of
operations and cash flows for the period then ended in conformity with generally
accepted accounting principles applied on a consistent basis.
SECTION 3.08. Absence of Certain Changes. Since the Balance Sheet Date and
except pursuant to the March Credit Agreement, as contemplated by the AmeriServe
Documents or the Credit Agreement, or as set forth on Schedule 3.08, the
business of Nebco and its Subsidiaries has been conducted in the ordinary course
consistent with past practices and there has not been:
(i) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have a Material
Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Nebco Securities, or any repurchase,
redemption or other acquisition by Nebco or any of its Subsidiaries of any
Nebco Securities or Subsidiary Securities, except the repurchases by The
Harry H. Post Company of all of its Class B Common Stock;
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(iii) any amendment of any material term of any outstanding Nebco
Security or Subsidiary Security by Nebco or any of its Subsidiaries, except
for amendments to the Certificate of Designations of the Senior
Non-Convertible Preferred Stock and a sideletter from Daniel W. Crippen
consenting to the amendment of the Certificate of Designations of 8% Senior
Convertible Preferred Stock of Nebco;
(iv) other than pursuant to the Credit Agreement, any incurrence,
assumption or guarantee by Nebco or any of its Subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of
business consistent with past practices and in no event for an aggregate
amount greater than $150,000;
(v) any creation or assumption by Nebco or any of its Subsidiaries of
any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(vi) any making of any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of Nebco made
in the ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Nebco or any of
its Subsidiaries which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or any contract or
agreement entered into, by Nebco or any of its Subsidiaries relating to its
assets or business (including the acquisition or disposition of any assets)
or any relinquishment by Nebco or any of its Subsidiaries of any contract
or other right, in either case, material to Nebco and its Subsidiaries,
taken as a whole, other than transactions and commitments in the ordinary
course of business consistent with past practices and those contemplated by
this Agreement or by the AmeriServe Documents;
(ix) any material change in any method of accounting or accounting
practice by Nebco or any of its Subsidiaries;
(x) other than as set forth on Schedule 3.08, any (A) employment,
deferred compensation, severance, retirement or other similar agreement
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entered into with any director, officer or employee of Nebco or any of its
Subsidiaries (or any amendment to any such existing agreement), (B) grant
of any severance or termination pay to any director, officer or employee of
Nebco or any of its Subsidiaries or (C) change in compensation or other
benefits payable to any director, officer or employee of Nebco or any of
its Subsidiaries pursuant to any severance or retirement plans or policies
thereof, other than any such change made in the ordinary course of business
but in no event greater than $500,000;
(xi) any labor dispute, other than routine individual grievances or
disputes involving an amount less than $50,000, or any activity or
proceeding by a labor union or representative thereof to organize any
employees of Nebco or any if its Subsidiaries, which employees were not
subject to a collective bargaining agreement at the Balance Sheet Date, of
Nebco, or any lockouts, strikes, slowdowns, work stoppages or, to its
knowledge, threats thereof by or with respect to any employees of Nebco or
any of its Subsidiaries; or
(xii) any resignation, retirement or any termination of employment of
any executive officer or other key employee of Nebco or any of its
Subsidiaries nor has Nebco or any of its Subsidiaries received any notice
of any such resignation or retirement from any such officer or employee.
SECTION 3.09. No Undisclosed Material Liabilities. There are no liabilities
of Nebco or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities provided for in the Balance Sheet or disclosed in the notes
thereto;
(b) liabilities disclosed on Schedule 3.09; and
(c) other undisclosed liabilities which, individually or in the aggregate,
are not material to Nebco or any of its Subsidiaries, as applicable, and in any
event do not exceed $1,000,000 in the aggregate.
SECTION 3.10. Material Contracts. (a) Except as disclosed in Schedule 3.10,
neither Nebco nor any of its Subsidiaries is a party to or bound by:
(i) any agreement with any director or officer of Nebco or any of its
Subsidiaries or with any "ASSOCIATE" or any member of the "IMMEDIATE
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FAMILY" (as such terms are respectively defined in Rules 12b-2 and 16a-1 of
the 1934 Act) of any such director or officer; or
(ii) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to Nebco and its
Subsidiaries, taken as a whole.
(b) Each agreement, commitment, arrangement or plan disclosed in any
Schedule to this Agreement or required to be disclosed pursuant to this Section
3.10 is a valid and binding agreement of Nebco or its Subsidiaries, as the case
may be, and is in full force and effect (except as such validity and binding
effect may be limited by bankruptcy, insolvency, moratorium or other laws
affecting creditors' rights generally and by equitable principles), and neither
Nebco nor any of its Subsidiaries is nor, to the knowledge of Nebco, is any
other party thereto in default or breach in any material respect under the terms
of any such agreement, contract, plan, lease, arrangement or commitment except
for defaults or breaches which, individually or in the aggregate, would not
reasonably be expected to have Material Adverse Effect.
SECTION 3.11. Litigation. Other than as set forth on Schedule 3.11,
there is no action, suit, investigation or proceeding pending against, or to the
knowledge of Nebco threatened against or affecting, Nebco or any of its
Subsidiaries or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by the Transaction Documents.
SECTION 3.12. Compliance with Laws and Court Orders; No Defaults. (a)
Neither Nebco nor any of its Subsidiaries is in violation of, and has not since
January 1, 1995, violated, any applicable law, rule, regulation, judgment,
injunction, order or decree, except for violations which are not material.
(b) Neither Nebco nor any of its Subsidiaries is in material default under,
and no condition exists that with notice or lapse of time or both would
constitute a material default under, any agreement or other instrument binding
upon Nebco or any of its Subsidiaries or any license, franchise, permit or
similar authorization held by Nebco or any of its Subsidiaries.
SECTION 3.13. Properties. (a) Except as set forth on Schedule 3.13, Nebco
and its Subsidiaries have good title to, or in the case of leased property have
valid leasehold interests in, all property and assets (whether real or personal,
tangible or intangible) reflected on the Balance Sheet or material property and
assets acquired after
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the Balance Sheet Date, and none of such property or assets is subject to any
Liens, except:
(i) Liens reflected on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the
Balance Sheet);
(iii) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or
assets; or
(iv) Liens created pursuant to the Credit Agreement.
(b) There are no developments affecting any such property or assets
(whether real or personal) pending or, to the knowledge of Nebco threatened,
which might materially detract from the value of such property or assets, or
materially interfere with any present or intended use of any such property or
assets.
(c) All such leases of real property are valid, binding and enforceable in
accordance with their respective terms and there does not exist under any such
lease any material default by Nebco or its Subsidiaries beyond the expiration of
any applicable notice or grace period.
(d) The plant and equipment owned by Nebco and/or its Subsidiaries is in
good operating condition, and is reasonably adequate and suitable for its
present and intended uses and, in the case of plants, buildings and other
structures is structurally sound, subject to ordinary wear and tear and except
for such instances where the failure to meet such operating condition or
structural soundness would not have a Material Adverse Effect.
SECTION 3.14. Insurance Coverage. All insurance policies and fidelity bonds
relating to the assets, business, operations, employees, officers or directors
of Nebco or any of its Subsidiaries are in full force and effect, and such
policies and bonds are of the type and in amounts customarily carried by Persons
conducting businesses similar to those of Nebco and each of its Subsidiaries.
There is no material claim by Nebco or any of its Subsidiaries pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds or in respect of which
such underwriters have reserved their rights. All premiums payable under all
such policies and bonds have been paid timely and Nebco and its Subsidiaries
have otherwise complied fully with the terms and conditions of all such policies
and bonds. Nebco does not know of any threatened termination of,
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premium increase with respect to, or material alteration of coverage under, any
of such policies or bonds. Except as disclosed in Schedule 3.14, Nebco and its
Subsidiaries shall after the Closing continue to have coverage under such
policies and bonds with respect to events occurring prior to the Closing.
SECTION 3.15. Licenses and Permits. Each license, franchise, permit or
other similar authorization affecting, or relating in any way to, the assets or
business of Nebco and its Subsidiaries (the "Permits") is valid and in full
force and effect and none of the Permits will be terminated or impaired or
become terminable, in whole or in part, as a result of the transactions
contemplated hereby, except to the extent that the failure of the
representations contained in this Section 3.15 to be true is not, and could not
reasonably be expected to be, a Material Adverse Effect.
SECTION 3.16. Due Diligence Documents; Disclosure. The documents or
information delivered to the Buyers in connection with the Transactions and the
AmeriServe Documents, taken as a whole, contain no untrue statement of a
material fact and do not omit to state any material fact necessary in order to
make the statements contained therein not misleading, which untrue statements or
omissions could reasonably be expected to be material to the Buyers' evaluation
of such information. The financial projections relating to Nebco, any of its
Subsidiaries, AmeriServe and the combination thereof delivered to the Buyers are
made in good faith and are based upon reasonable assumptions, and neither Nebco
nor Holberg is aware of any fact or set of circumstances that would lead it to
believe that such projections are incorrect or misleading in any material
respect.
SECTION 3.17. Finders' Fees. Except as previously disclosed to the Buyers,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of Holberg, Nebco or any of
its Subsidiaries who might be entitled to any fee or commission in connection
with any of the Transactions.
SECTION 3.18. Labor Matters. Nebco and its Subsidiaries are in compliance
with all currently applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice, except for such failures to comply which
or such engagements which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.11, there is no unfair labor practice complaint pending or, to the
knowledge of Nebco, threatened against Nebco or any of its Subsidiaries before
the National Labor Relations Board.
SECTION 3.19. Environmental Matters. (a) Except as disclosed on Schedule
3.19 and except for liabilities (whether accrued, contingent, absolute,
determined,
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determinable or otherwise) resulting from the matters set forth in clauses
3.19(a)(ii), 3.19(a)(iii) and 3.19(a)(iv) below that in the aggregate do not
exceed $1,000,000:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending, or to Holberg's or to Nebco's knowledge, threatened by any
governmental entity or other Person with respect to any matters relating to
Nebco or any of its Subsidiaries and relating to or arising out of any
Environmental Law;
(ii) no polychlorinated biphenyls, radioactive material, lead, lead
paint, asbestos, asbestos-containing material or underground storage tank
(active or abandoned) is or has been present at any property now or
previously owned, leased or operated by Nebco or any of its Subsidiaries;
(iii) no Hazardous Substance has been discharged, disposed of, dumped,
injected, pumped, deposited, spilled, leaked, emitted or released at, on or
under any property now or previously owned, leased or operated by Nebco or
any of its Subsidiaries;
(iv) there are no facts, conditions or set of circumstances which
could result in or be the basis for any liability of Nebco or any of its
Subsidiaries arising under or relating to any Environmental Law;
(v) Nebco and its Subsidiaries are in material compliance with all
Environmental Laws and have obtained all permits, licenses and
authorizations necessary or proper for the business of Nebco and its
Subsidiaries as currently conducted relating to or required by
Environmental Laws; and
(vi) no property now or previously owned, leased or operated by Nebco
or any of its Subsidiaries or, to the knowledge of Nebco, any property to
which Nebco or any of its Subsidiaries has, directly or indirectly,
transported or arranged for the transportation of any Hazardous Substances
is listed or, to the knowledge of Nebco, proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as
defined in CERCLA) or on any similar federal, state or foreign list of
sites requiring investigation or clean-up.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted by Nebco or which Nebco has in its possession
in relation to the current or prior business of Nebco or any of its Subsidiaries
or any property or
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facility now or previously owned or leased by Nebco or any of its Subsidiaries
which has not been delivered to the Buyers at least five days prior to the date
hereof.
(c) Neither Nebco nor any of its Subsidiaries owns or leases or has owned
or leased any property in New Jersey constituting an "industrial establishment"
as defined in the Industrial Site Recovery Act, N.J. Stat Section 13: 1K-6 et
seq.
(d) For purposes of this Section 3.19, the terms "Nebco" and "Subsidiary"
shall include any entity which is, in whole or in part, a predecessor of Nebco
or such Subsidiary.
SECTION 3.20. Employee Benefit Plans. (a) No Employee Plan and no employee
plan or arrangement maintained or contributed to by any ERISA Affiliate of Nebco
is (i) a Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in
connection with any trust described in Section 501(c)(9) of the Code. No
"prohibited transaction", as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any Employee Plan or any other employee
benefit plan or arrangement maintained by Nebco, or any ERISA Affiliate of Nebco
which is covered by Title I of ERISA, excluding transactions effected pursuant
to a statutory or administrative exemption. Each Employee Plan is and has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the qualification and other provisions of the Code,
which are applicable to such plan, except where the failure to do so would not
have a Material Adverse Effect.
(b) Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, except where the failure to do so would
not have a Material Adverse Effect.
(c) Neither Nebco nor any of its ERISA Affiliates has any current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired or former employees of Nebco or
any of its Subsidiaries, except pursuant to the continuation coverage
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA or
other applicable law.
(d) Except as set forth on Schedule 3.20(d), there has been no amendment
to, written interpretation of or announcement (whether or not written) by Nebco
or any of its ERISA Affiliates relating to, or change in employee participation
or coverage under, any Employee Plan or Benefit Arrangement that would increase
materially the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended prior to the date hereof.
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(e) Neither Nebco nor any of its ERISA Affiliates has incurred, or
reasonably expects to incur prior to the Closing Date, any material unsatisfied
liability under Title I or any liability under Title IV of ERISA (or any
corresponding section of the Code) arising in connection with the funding or the
termination of, or complete or partial withdrawal from, any plan covered or
previously covered by Title I or Title IV of ERISA, which liability could become
a liability of Nebco or any of its Subsidiaries after the Closing Date.
SECTION 3.21. Meaning of Nebco. Except as otherwise specifically provided,
references to Nebco contained in this Article 3 shall be construed to refer to
Nebco immediately prior to the consummation of the transactions contemplated by
the AmeriServe Documents.
SECTION 3.22. Nebco's Taxes. (a) Nebco and each of its Subsidiaries: (i)
has filed or will file, in accordance with all applicable laws, all Tax returns,
statements, reports and forms (collectively, the "RETURNS") required to be filed
by it with any Taxing Authority on or before the Closing Date (taking into
account any extension of a required filing date) with respect to any Tax period
ending on or before the Closing Date (a "PRE-CLOSING TAX PERIOD"); (ii) will
file all other Returns required to be filed by it when due (taking into account
any extension of a required filing date); (iii) has timely paid all material
Taxes shown as due and payable on the Returns that have been filed by it; (iv)
has not been a member of an affiliated, consolidated, combined or unitary group
other than one of which Holberg or NEHC was the common parent; (v) has provided
the Buyers or their representatives with any tax sharing agreements to which it
is a party; and (vi) after giving effect to the transactions contemplated by the
AmeriServe Documents, Nebco is not a United States real property holding
corporation (a "USRPHC") within the meaning of section 897 of the Internal
Revenue Code of 1986, as amended, nor has it been a USRPHC within 5 years of the
date hereof.
(b) Each Party (as defined below) has, at all times during the period
beginning on (and including) the later of (i) April 14, 1989 or (ii) the date on
which such Party became a member of the Holberg Group and ending on (and
including) the date hereof, (A) acknowledged and acted in a manner consistent
with its status as a party to the Tax sharing agreement dated April 14, 1989 and
signed by Holberg, Nebco Distribution of Omaha, Inc., Nebco Distribution of Des
Moines, Inc., Nebco Distribution of Kansas City, Inc., Nebco Distribution of
Minneapolis, Inc. and Wisconsin Concession Supply, Inc. (the "TAX SHARING
AGREEMENT") and (B) treated each of the other Parties as a party to the Tax
Sharing Agreement at all times during such period that such other Party was a
member of the Holberg Group and complied with such Party's obligations to such
other Party under the Tax Sharing Agreement. For purposes of this Section
3.22(b), each of Holberg, Nebco and Nebco's Subsidiaries shall be a "PARTY."
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(c) Nebco represents further that (i) the charges, accruals and reserves
for Taxes reflected on the Balance Sheet (excluding any provision for deferred
income taxes) are adequate to cover the Tax liabilities of Nebco and its
Subsidiaries accruing through the date thereof; (ii) all state sales and use Tax
Returns (with the exception of such Returns for Iowa, North Dakota and
Wisconsin), all state income or franchise Tax Returns (with the exception of
such Returns for Minnesota and Wisconsin), and all other Returns filed with
respect to Tax years of Nebco and its Subsidiaries through the Tax year ended
December 31, 1991, have been examined and closed or are Returns with respect to
which the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired; (iii) none of Nebco or any of its
Subsidiaries is delinquent in the payment of any Tax or has requested any
extension of time within which to file any Return and, has not yet filed such
Return; (iv) none of Nebco or any of its Subsidiaries (or any member of any
affiliated, consolidated, combined or unitary group of which Nebco or any of its
Subsidiaries is or has been members) has been granted any extension or waiver of
the statute of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired; (v) there is no
claim, audit, action, suit, proceeding, or investigation now pending or
threatened against or with respect to Nebco or any of its Subsidiaries in
respect of any Tax or Tax Asset; and (vi) there are no requests for rulings or
determinations in respect of any Tax or Tax Asset pending between Nebco or any
of its Subsidiaries and any Taxing Authority.
SECTION 3.23. Certain Interests. Except as set forth in Schedule 3.23, no
stockholder, officer or director of Nebco or any of its Subsidiaries or any
relative or Affiliate of such stockholder, officer or director (a) has any
interest in any material property, real or personal, tangible or intangible,
including licenses, agencies or Intellectual Property Rights, used in or
pertaining to the business of Nebco or any of its Subsidiaries (b) has any
material interest in any business, corporate or otherwise, that is in
competition with the business of Nebco or any of its Subsidiaries or (c) has
received any loan or advance, other than for amounts not exceeding $100,000 in
the aggregate, that remains unpaid as of the date hereof or is otherwise a
debtor of, or made any loan to or advance to or is otherwise a creditor of,
Nebco or any of its Subsidiaries. Since the Balance Sheet Date, there has not
been any asset sold by Nebco or any of its Subsidiaries to, or to Nebco or any
of its Subsidiaries by, any stockholder.
SECTION 3.24. Charter and Bylaws. The New Nebco Charter, and the New Nebco
Bylaws have been approved and adopted by all required action on the part of the
shareholders and the board of directors of Nebco. The New Nebco Charter shall be
filed with the Secretary of State of the State of Delaware on or before the
Closing Date, and such document and the New Nebco Bylaws will be in full force
and effect on the Closing Date.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Each New Buyer, severally as to itself and not jointly, represents and
warrants to Nebco as of the date hereof that:
SECTION 4.01. Existence and Power. Such Buyer is either a limited
partnership, limited liability company or a corporation duly organized, validly
existing and in good standing, to the extent applicable, under the laws of its
jurisdiction of organization.
SECTION 4.02. Authorization. The execution, delivery and performance by
such Buyer of each Transaction Document to which it is a party are within the
powers (corporate, partnership or otherwise) of such Buyer and have been duly
authorized by all necessary action on the part of such Buyer. This Agreement
constitutes (and, when executed and delivered by such Buyer, each other
Transaction Document to which such Buyer is a party will constitute) a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, except as such validity, enforceability and binding effect may
be limited by bankruptcy, insolvency, moratorium and other laws affecting
creditors rights generally and by equitable principles.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by such Buyer of each of the Transaction Documents to which it is a
party require no material action by or in respect of, or material filing with,
any governmental body, agency or official.
SECTION 4.04. Non-contravention. The execution, delivery and performance by
such Buyer of each of the Transaction Documents to which it is a party do not
and will not (i) violate the organizational documents of such Buyer or (ii)
violate any applicable material law, rule, regulation, judgment, injunction,
order or decree.
SECTION 4.05. Financing. Such Buyer has sufficient cash, commitments,
available lines of credit or other sources of immediately available funds to
enable it to make payment of the applicable Purchase Prices and any other
amounts to be paid by it hereunder.
SECTION 4.06. Purchase for Investment. (a) Such Buyer is purchasing its
portion of the Securities to be sold pursuant hereto for investment for its own
account and not with a view to, or for sale in connection with, any distribution
or resale thereof in violation of applicable law. Such Buyer (either alone or
together with its advisors)
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has sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its investments in the
Securities and is capable of bearing the economic risks of such investment.
(b) Such Buyer understands that the Securities to be sold to such Buyer
shall bear a legend substantially as follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO AND HAS THE
BENEFIT OF AN INVESTORS AGREEMENT (AS HEREIN DEFINED), COPIES OF WHICH MAY
BE OBTAINED UPON REQUEST FROM THE COMPANY.
SECTION 4.07. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of such Buyer threatened against
or affecting, such Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Transactions.
SECTION 4.08. Finders' Fees. Except as previously disclosed to Nebco, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of such Buyer who might be
entitled to any fee or commission from Nebco upon consummation of the
Transactions.
ARTICLE 5
COVENANTS OF THE BUYERS AND NEBCO
Each New Buyer and Nebco agree that:
SECTION 5.01. Best Efforts. Subject to the terms and conditions of this
Agreement, such Buyer and Nebco will use their best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the Transactions.
Such Buyer and Nebco agree, and Nebco agrees to cause each of its Subsidiaries,
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the Transactions.
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SECTION 5.02. Certain Filings. Such Buyer and Nebco shall cooperate with
each other (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
Transactions and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
SECTION 5.03. Public Announcements. Nebco, DLJMB Partners and DLJMB II
shall agree upon the timing and content of the initial press release or public
statement describing the Transaction Documents or the Transactions and shall
consult with each other before issuing any press release or making any public
statement with respect to the Transaction Documents or the Transactions and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, shall not issue any such press release or make any
such public statement prior to such consultation.
SECTION 5.04. Allocation of Value. If, at any time, an allocation of value
among or between the Senior Preferred Stock, the Junior Preferred Stock and the
Warrants is required or otherwise deemed appropriate or advisable by Nebco, then
Nebco (or its representative) shall determine such allocation; provided that any
such allocation shall be subject to the review and approval of the DLJ Entities,
which approval shall not be unreasonably withheld by the DLJ Entities.
ARTICLE 6
HOLBERG OBLIGATIONS
SECTION 6.01. Holberg's Taxes. (a) Holberg and each of its subsidiaries:
(i) has filed or will file, in accordance with all applicable laws, all Tax
Returns required to be filed by or with respect to Holberg or any of its
subsidiaries with any Taxing Authority on or before the Closing Date (taking
into account any extension of a required filing date) with respect to any
Pre-Closing Tax Period; (ii) will file all other Returns required to be filed by
or with respect to Holberg or any of its subsidiaries when due (taking into
account any extension of a required filing date); (iii) has timely paid all
material Taxes shown as due and payable on the Returns that have been filed; and
(iv) has not been a member of an affiliated, consolidated, combined or unitary
group other than one of which Holberg or NEHC was the common parent.
(b) Holberg represents further that (i) the charges, accruals and reserves
for Taxes reflected on the Balance Sheet (excluding any provision for deferred
income taxes)
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are adequate to cover the Tax liabilities of Nebco and its Subsidiaries accruing
through the date thereof; (ii) all Returns filed with respect to Tax years of
Holberg through the Tax year ended December 31, 1992 have been examined and
closed or are Returns with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers, has expired;
(iii) Holberg is not delinquent in the payment of any Tax and has not requested
any extension of time within which to file any Return and not yet filed such
Return; (iv) Holberg has not been granted any extension or waiver of the statute
of limitations period applicable to any Return, which period (after giving
effect to such extension or waiver) has not yet expired; (v) there is no claim,
audit, action, suit, proceeding, or investigation now pending or threatened
against or with respect to Holberg in respect of any Tax or Tax Asset and (vi)
there are no requests for rulings or determinations in respect of any Tax or Tax
Asset pending between Holberg and any Taxing Authority.
(c) For purposes of this Section 6.0l,the term "TAX" (and with the
correlative meaning, "TAXES") shall have the same meaning as set forth in
Section 1.01(a), with the term "HOLBERG" substituted for "NEBCO"; provided,
that for purposes of Section 6.01(b)(i), "TAX" and "TAXES" shall have the
meaning set forth in Section 1.01(a), without the substitution described in the
first part of this sentence being made.
SECTION 6.02. Nebco's Current Tax Sharing Agreement. (a) For purposes of
construing and applying the provisions of this Agreement (including, without
limitation, Sections 6.02(b), 6.03 and 6.04 and clause (iii) of the definition
of "TAXES" set forth in Section 1.01(a)), Nebco and each Subsidiary of Nebco
shall be treated as if Nebco or such Subsidiary, as the case may be, were a
party to the Tax Sharing Agreement at all times during the period beginning on
(and including) the later of (i) January 1, 1989 or (ii) the date on which Nebco
or such Subsidiary became a member of the Holberg Group and ending on (and
including) the day before the Closing Date; provided, that this Section 6.02(a)
shall not create any inference to the effect that Nebco and its Subsidiaries
were not, at any time prior to the Closing Date, parties to such Agreement.
(b) Effective as of the Closing Date, the Tax Sharing Agreement and any
other Tax sharing agreements or arrangements to which Nebco or any of its
Subsidiaries is a party shall be terminated. Beginning on the Closing Date,
neither Nebco nor any of its Subsidiaries shall have any further rights or
liabilities thereunder. As of the Closing Date, this Agreement shall be the sole
Tax sharing agreement relating to each of Nebco and its Subsidiaries for all
Pre-Closing Tax Periods. Between the date hereof and the Closing Date, neither
Holberg nor Nebco or any of its Subsidiaries shall amend the Tax Sharing
Agreement or enter into any agreement (other than this Agreement) superseding
the Tax Sharing Agreement.
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SECTION 6.03. Tax Sharing. (a) Following the Closing Date, Nebco and its
Subsidiaries shall pay to Holberg, and Holberg shall pay to Nebco and its
Subsidiaries, such amounts on such dates with respect to Pre-Closing Tax Periods
as would have been required under the Tax Sharing Agreement if such Agreement
had remained in effect beyond the Closing Date; provided, however, that to the
extent that the provisions of the Tax Sharing Agreement and this Agreement are
inconsistent, this Agreement shall be controlling.
(b) On September 30, 1997 with respect to 1996 and September 30, 1998 with
respect to the period beginning on January 1, 1997 and ending on the Closing
Date (the "STUB PERIOD"), Holberg shall deliver to Nebco and the Buyers a
schedule (each such schedule, a "TRUE-UP SCHEDULE") showing the total amount
owed to Holberg by Nebco and each of Nebco's Subsidiaries with respect to
federal income Taxes (such amount, the "TAX SHARING AMOUNT") for, respectively,
1996 and the Stub Period. The Tax Sharing Amount shall be computed according to
the rules set forth in Sections 6.03(e) and 6.03(f) and without taking into
account any payments made prior to the date of such computation to Holberg by
Nebco and its Subsidiaries with respect to such Taxes. Each True-Up Schedule
shall set forth, in reasonable detail, the method used and calculations made in
computing the Tax Sharing Amount.
(c) A True-Up Schedule duly delivered by Holberg shall be binding on the
parties to this Agreement unless, within 30 days after delivery to Nebco or a
Buyer of such True-Up Schedule, Nebco or such Buyer notifies Holberg of an
objection thereto. In the event that Nebco or any Buyer timely notifies Holberg
of such an objection, Holberg and Nebco or such Buyer shall negotiate in good
faith regarding such objection and, if they cannot reach an agreement within 15
days after notice has been given by Nebco or such Buyer, shall jointly retain an
Accounting Referee to render a decision on the merits of such objection. The
parties to this Agreement shall use their best efforts to cause the Accounting
Referee to render its decision within 15 days after being retained. Holberg
shall pay 50 percent of the costs and expenses of such Accounting Referee, and
the other party to the dispute resulting in appointment of the Accounting
Referee shall pay the remainder of such Referee's costs and expenses. Any
decision reached by the Accounting Referee shall be binding on the parties to
this Agreement.
(d) Within 30 days after the Tax Sharing Amount for 1996 or for the Stub
Period, as the case may be, is finally determined pursuant to Section 6.03(c),
Nebco (acting on its own behalf and on behalf of its Subsidiaries) shall pay
Holberg the excess of (i) such Tax Sharing Amount over (ii) the sum of all
amounts previously paid by Nebco and its Subsidiaries to Holberg with respect to
federal income Taxes for the period in question; provided, however, that if the
amount specified in clause (ii) exceeds the Tax Sharing Amount, Holberg shall
(within such 30-day period) pay such excess to Nebco.
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(e) For purposes of Sections 6.03(b), 6.03(c) and 6.03(d), the Tax Sharing
Amount shall be computed by applying the rules of the Tax Sharing Agreement as
if such Agreement had remained in effect beyond the Closing Date; provided,
however, that the Tax Sharing Amount shall be computed without taking into
account (I) the restoration of any deferred gain or loss under Treasury
Regulations Sections 1.1502-13 or -13T or (II) the inclusion in income of any
excess loss account under Treasury Regulations Section 1.1502-19, if the
restoration or inclusion described in clause (I) or clause (II) occurs as a
result of the consummation of the transactions described in Article 2 of this
Agreement.
(f) Notwithstanding any other provision of this Section 6.03, if, as of the
date on which the True-Up Schedule for 1996 is delivered to Nebco, the sum of
(i) the Tax Sharing Amount for 1996, computed without regard to this Section
6.03(f) (the "UNADJUSTED TAX SHARING AMOUNT") and (ii) the excess, if any, of
(A) all payments made by Nebco and its Subsidiaries of Taxes that are
attributable to Pre-Closing Tax Periods (or portions thereof) ending on or
before the Balance Sheet Date, over (B) the aggregate amount of any payments
made to Holberg by Nebco and its Subsidiaries with respect to federal income
Taxes for 1996 (such excess of (A) over (B), the "OTHER PAYMENTS"), is
materially greater than the charges, accruals and reserves for Taxes of Nebco
and its Subsidiaries reflected on the Balance Sheet (the "TAX PROVISION"), then
Nebco and its Subsidiaries shall have no obligation to pay, and shall not be
treated as owing for purposes of this Section 6.03, to Holberg that portion of
the Unadjusted Tax Sharing Amount which, if subtracted from such Amount, would
result in the sum of such Amount and the Other Payments no longer being
materially greater than the Tax Provision. Whether the sum of the Unadjusted Tax
Sharing Amount and the Other Payments is materially greater than the Tax
Provision shall be determined by reference to the amount of the Tax Provision
and not by reference to the business or results of operations of Nebco and its
Subsidiaries or the aggregate amount of assets or liabilities reflected on the
Balance Sheet.
(g) Except as specifically provided in this Agreement, Nebco and its
Subsidiaries shall not make any payment to Holberg (or any other person or
entity other than a Taxing Authority) on account of Taxes attributable to
Pre-Closing Tax Periods at any time after the date hereof.
(h) Holberg, Nebco and each Subsidiary of Nebco shall promptly make
available to each other and to any Buyer such documents, records, Returns or
information as may reasonably be requested by, as the case may be, such other
party or such Buyer for purposes of exercising rights under, or complying with
obligations imposed by, this Section 6.03.
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SECTION 6.04. Tax Assets. (a) Subject to Section 6.04(d), if at any time
the Holberg Group uses a Nebco Tax Asset to reduce the Tax liability of the
Holberg Group for any Tax period of such Group, then Holberg shall pay to Nebco
an amount equal to the Tax benefit to the Holberg Group resulting from such
Group's use of such Nebco Tax Asset. The Tax benefit to which the preceding
sentence refers shall equal the excess (if any) of (i) the Taxes that would have
been payable by the Holberg Group for the relevant Tax period had the Nebco Tax
Asset in question not been available for use by the Holberg Group (which amount
of Taxes shall be determined without taking into account any other Nebco Tax
Assets) over (ii) the Taxes actually payable by, or taken into account in
determining any adjustment arising on audit of (or made during any other
administrative or judicial proceeding concerning the Tax liability of), the
Holberg Group in respect of such Tax period. Payment of the amount of such
benefit shall be made within 90 days after, as applicable, (y) the filing of a
Return (or claim for refund) by or on behalf of the Holberg Group with respect
to the relevant Tax period which reflects the utilization of the Nebco Tax Asset
in question by such Group or (z) a Taxing Authority (or other governmental body)
adjusts the amount of the Tax liability of the Holberg Group for the Tax period
in question during an audit (or other administrative or judicial proceeding) in
a manner which takes into account such Nebco Tax Asset.
(b) If a Nebco Tax Asset that arises in a Tax period (or portion thereof)
beginning after the Closing Date must, under applicable law, be carried back to
a Tax period of the Holberg Group, Holberg shall promptly file an amended Return
or claim for refund reflecting the utilization of such Nebco Tax Asset by the
Holberg Group in such Tax period.
(c) To the extent that a Nebco Tax Asset (i) is taken into account in
determining the amount of any payment which Nebco or a Subsidiary of Nebco, as
the case may be, is required to make to Holberg pursuant to Section 6.03(d) or
(ii) is (or has been) taken into account in determining the amount of any
payment that Nebco or such Subsidiary, as the case may be, makes (or has made)
to Holberg pursuant to Sections 2(a) and 4 of the Tax Sharing Agreement prior to
the Closing Date, Holberg shall not be required to make a payment to Nebco
pursuant to Section 6.04(a) in respect of such Nebco Tax Asset.
(d) If, after Holberg makes a payment to Nebco pursuant to Section 6.04(a)
in respect of a Tax Asset of Nebco or its Subsidiaries, there is a Final
Determination which results in (i) a disallowance or a reduction of such Tax
Asset or (ii) a decrease in the amount of the Tax benefit of the Holberg Group
resulting from its use of such Tax Asset, then Nebco shall repay to Holberg
within 90 days of such event described in (i) or (ii) any amount which would not
have been payable to Nebco pursuant to Section 6.04(a) had the amount of the
benefit been determined in light of such event. Nebco shall hold Holberg
harmless for any penalty or interest payable by any member of the Holberg Group
as a
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result of any such event. Any such amount shall be paid by Nebco to Holberg
within 90 days of the payment by Holberg of any such interest or penalty.
(e) For purposes of this Section 6.04, "NEBCO TAX ASSET" shall mean any Tax
Asset of Nebco or any of its Subsidiaries that (i) is stated on the Balance
Sheet or in the notes thereto (without taking into account any valuation
allowance or similar adjustment to the gross amount of such Asset) or, although
not stated on the Balance Sheet or in the notes thereto, is in existence as of
the Balance Sheet Date, or (ii) arises after the Balance Sheet Date.
(f) Each of Holberg, Nebco and Nebco's Subsidiaries shall promptly provide
such information as is reasonably requested by Nebco or a Buyer regarding any
Nebco Tax Asset or the utilization of Nebco Tax Assets by the Holberg Group. In
the event that there is a dispute between any of the parties to this Agreement
relating to any Nebco Tax Asset or the application of the rules of this Section
6.04, such parties shall jointly appoint an Accounting Referee to resolve such
dispute and shall use their best efforts to cause such Accounting Referee to
render its decision within 30 days after being appointed. Any Buyer or Buyers
which are parties to a dispute necessitating the appointment of an Accounting
Referee pursuant to this Section 6.04(f) shall pay 50 percent of the costs and
expenses of such Referee, and the portion of the costs or expenses of such
Referee not paid by a Buyer or Buyers shall be borne in equal amounts by each of
the other parties to such dispute. Any decision reached by the Accounting
Referee pursuant to this Section 6.04(f) shall be binding on the parties to this
Agreement.
SECTION 6.05. Apportionment of Section 382 Limitation. In the event that
(i), as of the date hereof, and without taking into account the transactions
described in Article 2 of this Agreement, the utilization of any Tax Asset of
Nebco or a Subsidiary of Nebco is subject to a limitation under Section 382 or
383 of the Code, the Regulations issued thereunder or Treasury Regulations
Sections 1.1502-91T, -92T, -93T, -94T, -95T, -96T, - 98T or -99T and (ii)
Holberg is permitted under Treasury Regulations Section 1.1502- 95T to elect to
apportion, on or following the Closing Date, such limitation to (A) Nebco, (B) a
Subsidiary of Nebco or (C), in the event that Nebco and/or any one or more of
its Subsidiaries are members of a "loss subgroup" (as defined in Treasury
Regulations Section 1.1502-91 T(d)), to such loss subgroup (the entity or
entities referred to in clause (A), (B) or (C), as applicable, the "Recipient"),
Holberg shall timely file a valid election pursuant to such Treasury Regulation
to apportion to the Recipient a portion of such limitation, which portion shall
be computed according the rules set forth in the remainder of this Section 6.05.
With respect to the "value element" (as defined in Treasury Regulations Section
1.1502-95T(c)(2)(i)) of the limitation to which the preceding sentence refers,
Holberg shall elect to apportion to the Recipient an amount equal to the product
of (A) the equity value of the Recipient (which equity value shall be calculated
in accordance with the principles of Sections 382 and 383 of the Code, the
Treasury
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Regulations issued thereunder and, if the Recipient is a loss subgroup, Treasury
Regulations Section 1.1502-93T) and (B) the applicable "long-term tax-exempt
rate" (as defined in Section 382(f) of the Code). With respect to the
"adjustment element" (as defined in Treasury Regulations Section
1.1502-95T(c)(2)(ii)) of such limitation, Holberg shall elect to apportion to
the Recipient an amount corresponding to the portion of the value element of
such limitation described in the previous sentence which has been carried
forward from prior Tax periods (provided, that the amount of such carryforward
shall be determined by taking into account only items of income, gain, loss,
expense or credit accrued of the Recipient and by applying the principles of
Section 382(b)(2) of the Code). To the extent that (i) the law of any state,
local or foreign jurisdiction contains provisions similar to those to which the
first sentence of this Section 6.05 refers and (ii) such provisions are
applicable with respect to any Tax Asset of Nebco or any of its Subsidiaries,
Holberg shall take such actions to preserve the utility of such Tax Assets as
correspond to the actions described in the preceding sentences of this Section
6.05.
SECTION 6.06. Indemnification. Holberg agrees to indemnify the Buyers and
Nebco for any liability imposed under Treasury Regulations Section 1.1502-6 or
any state or local equivalent as a result of Nebco's membership in the
affiliated group of corporations of which Holberg is the common parent.
ARTICLE 7
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of Nebco and the Buyers. The
obligations of Nebco and the Buyers to consummate the Closing are subject to the
satisfaction of the following conditions:
(i) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(ii) The closing of the transactions contemplated by the AmeriServe
Documents shall have been consummated simultaneously herewith in accordance
with their terms and without any waiver of any condition to closing
thereunder, except for such changes to the terms or waivers of conditions
to closing as are acceptable to the New Buyers.
(iii) Each of the Transaction Documents shall have been executed and
delivered by the parties thereto and each such Transaction Document shall
be in full force and effect; provided that this condition shall benefit and
be enforceable only by parties who have executed and delivered the
Transaction Documents to which they are to be parties.
31
<PAGE> 37
SECTION 7.02. Conditions to Obligations of the Buyers. The obligation of
the Buyers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(i) (A) The representations and warranties of Nebco contained in this
Agreement shall be true and correct in all material respects at and as of
the Closing Date (it being understood that where any such representation
and warranty already includes a material adverse effect or materiality
exception, no further materiality exception is to be permitted by this
Section 7.02(a)(i)(A) and that any representation and warranty made only as
of specific date shall be true and correct only as of such date), (B) Nebco
shall have performed in all material respects all of its obligations
hereunder required to be performed by it on or prior to the Closing Date
and (C) each Buyer shall have received a certificate from Nebco signed by
an executive officer of Nebco to the foregoing effect.
(ii) (A) The representations and warranties of Holberg contained in
this Agreement shall be true and correct in all material respects at and as
of the Closing Date (it being understood that where any such representation
and warranty already includes a materiality exception, no further
materiality exception is to be permitted by this Section 7.02(a)(ii)(A) and
that any representation and warranty made only as of specific date shall be
true and correct only as of such date), (B) Holberg shall have performed in
all material respects all of its obligations hereunder required to be
performed on or prior to the Closing Date and (C) each Buyer shall have
received a certificate signed by an executive officer of Holberg to the
foregoing effect.
(iii) Each Buyer shall have received all documents they may reasonably
request relating to the existence of the other parties hereto and the
Subsidiaries of such other parties and the authority of the other parties
for the Transaction Documents, all in form and substance reasonably
satisfactory to each of the Buyers.
(iv) There shall not be threatened, instituted or pending any action
or proceeding by any Person before any court or governmental authority or
agency, domestic or foreign, (A) seeking to restrain or prohibit the
ownership or operation by any of Nebco or its Subsidiaries of all or any
material portion of the PFS Business or the business or assets of Nebco or
AmeriServe or any Subsidiary of Nebco or to compel Nebco to dispose of all
or any material portion of the PFS Business or the business or assets of
Nebco or AmeriServe or any Subsidiary of Nebco, (B) seeking to impose or
confirm material limitations on the ability of any Buyer or any of its
Affiliates effectively to
32
<PAGE> 38
exercise full rights of ownership of its Securities or (C) seeking to
require divestiture by any Buyer or any of its Affiliates of any of its
Securities.
(v) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of their
Securities, by any court, government or governmental authority or agency,
domestic or foreign, that, in the reasonable judgment of any Buyer, has a
significant possibility of, directly or indirectly, resulting in any of the
consequences referred to in clauses (A) through (C) above of Section
7.02(a)(iv) hereof.
(vi) The New Nebco Charter shall have been duly delivered for filing
at the office of the Secretary of State of the State of Delaware, and such
Charter and the New Nebco Bylaws shall be in full force and effect.
(vii) Nebco shall have paid in full all reasonable fees and expenses,
including any out-of-pocket expenses, of the Buyers then due and required
to be paid by Nebco in connection with the Transactions, including in
accordance with Section 10.03 hereof.
(viii) The Buyers shall have received an opinion of Wachtell, Lipton,
Rosen & Katz, counsel for Nebco and Holberg, in form and substance
satisfactory to such Buyers.
(ix) Nebco shall have delivered a certification to the effect that
Nebco is not nor has it been within five years of the date hereof a "UNITED
STATES REAL PROPERTY HOLDING CORPORATION" as defined in Section 897 of the
Code.
(x) The board of directors of each of Nebco and AmeriServe shall have
appointed one designee of each of DLJMB Partners and DLJMB II as a director
pursuant to the Investors Agreement.
(xi) The Credit Agreement shall have been executed and delivered by
the parties thereto, the conditions to closing and the conditions to
effectiveness thereof shall have been satisfied, AmeriServe shall have
borrowed at least $205,000,000 thereunder and the Credit Agreement shall be
in full force and effect.
(xii) All outstanding shares of AmeriServe Senior Preferred Stock
shall have been duly converted into shares of common stock, par value
$10.00 per share, of AmeriServe or cancelled.
33
<PAGE> 39
(xiii) Since the Balance Sheet Date there shall have been no
disruption or adverse change in the financial or capital markets which
DLJMB II, in its reasonable discretion, deems material in connection with
any of the Transactions or Transaction Documents.
(xiv) A Certificate of Designation and Amendment to the Restated
Certificate of Incorporation whereby the Senior Non-Convertible Preferred
Stock of Nebco shall be redesignated as Junior Non-Convertible Preferred
Stock of Nebco ranking junior to the Junior Preferred Stock shall have been
duly delivered for filing at the office of the Delaware Secretary of State
of the State of Delaware and such certificate shall be in full force and
effect.
(xv) All outstanding 12.5% Senior Secured Notes of Nebco shall have
been redeemed in full and the indenture relating thereto shall have been
terminated, satisfied and discharged.
(xvi) Receipt of a sideletter from Daniel W. Crippen in the form
attached hereto as Annex J.
SECTION 7.03. Conditions to Obligations of Nebco. The obligation of
Nebco to consummate the Closing is subject to the satisfaction of the
following further conditions:
(i) (A) The representations and warranties of each of the Buyers
contained in this Agreement or in any certificate or other writing
delivered by such Buyer pursuant hereto or thereto shall be true in all
material respects at and as of the Closing Date (it being understood that
where any such representation and warranty already includes a material
adverse effect or materiality exception, no further materiality exception
is to be permitted by this Section 7.03(a)(i)(A) and that any
representation and warranty made only as of specific date shall be true and
correct only as of such date), (B) each of the Buyers shall have performed
in all material respects all of its obligations hereunder required to be
performed by such Buyer at or prior to the Closing Date and (C) Nebco shall
have received a certificate signed by an executive officer in the case of a
Buyer which is a corporation and an executive officer of a general partner
in the case of a Buyer which is a limited partnership to the foregoing
effect.
(ii) Nebco shall have received all documents it may reasonably request
relating to the existence of each Buyer and the authority of each Buyer for
the Transaction Documents, all in form and substance reasonably
satisfactory to Nebco.
34
<PAGE> 40
ARTICLE 8
SURVIVAL; INDEMNIFICATION
SECTION 8.01. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until the date which is eighteen (18) months after the Closing Date; provided
that representations and warranties contained in Section 3.22 and Article 6
shall survive until expiration of the statute of limitations applicable to the
matters covered thereby (giving effect to any waiver, mitigation or extension
thereof), if later. Notwithstanding the preceding sentence, any representation
or warranty in respect of which indemnity may be sought under this Agreement
shall survive the time at which it would otherwise terminate pursuant to the
preceding sentence, if notice of the inaccuracy or breach thereof giving rise to
such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
SECTION 8.02. Indemnification. (a) Nebco and Holberg hereby jointly and
severally indemnify each Buyer against, and agree to hold each Buyer harmless
from, any and all damage, loss, liability and expense (including without
limitation reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) ("DAMAGES")
incurred or suffered by such Buyer arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by Nebco or
Holberg pursuant to any of the Transaction Documents to which it is a party.
Notwithstanding the foregoing, liability of Holberg under Article 6 shall be
governed by Article 6 and Section 8.03.
(b) Each Buyer severally and not jointly hereby indemnifies Nebco against
and agrees to hold it harmless from any and all Damages incurred or suffered by
Nebco arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by such Buyer pursuant to this Agreement.
SECTION 8.03. Procedures. The party seeking indemnification under Section
6.06 or 8.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the party
against whom indemnity is sought (the "INDEMNIFYING PARTY") of the assertion of
any claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under such Section. The Indemnifying Party may,
and at the request of the Indemnified Party shall, participate in and control
the defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 6.06 or 8.02 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder.
35
<PAGE> 41
SECTION 8.04. Waiver of Subrogation. Holberg hereby waives any and all
rights of indemnification, contribution or subrogation against Nebco with
respect to any indemnification payment made by Holberg pursuant to this Article
8.
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(i) by mutual written agreement of Nebco and the Buyers;
(ii) by any of Nebco or the Buyers if the Closing shall not
have been consummated on or before July 31, 1997; or
(iii) by either Nebco on the one hand or any of the Buyers on
the other hand if there shall be any law or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree
or judgment of any court or governmental body having competent
jurisdiction.
The party desiring to terminate this Agreement shall give notice of
such termination to the other parties.
SECTION 9.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of any
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement; provided
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of the other parties,
failure to perform a covenant of this Agreement or breach by any party hereto of
any representation or warranty or agreement contained herein, such party shall
be fully liable for any and all Damages incurred or suffered by the other
parties as a result of such failure or breach. The provisions of Section 10
shall survive any termination hereof pursuant to Section 9.01.
36
<PAGE> 42
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
If to any Buyer except DLJ International Partners, C.V., DLJ Offshore
Partners, C.V. or DLJ Offshore Partners II, C.V., to such Buyer, at:
277 Park Avenue
New York, New York 10172
Attention: Peter T. Grauer
Fax: 212-892-3636
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: George R. Bason, Jr.
Fax: 212-450-4800
If to DLJ International Partners, C.V., or DLJ Offshore Partners, C.V.,
or DLJ Offshore Partners II, C.V., to:
DLJ Offshore Management N.V.
14 John B. Gorsiraweg
P.O. Box 3889
Willemstad, Curacao
Netherlands Antilles
Attention: Germaine Sprock
MeesPierson Trust (Curacao) N.V.
37
<PAGE> 43
if to Nebco or Holberg, to:
Holberg Industries, Inc.
545 Steamboat Road
Greenwich, Connecticut 06830
Attention: John Victor Holten
Fax: 203-661-5756
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam 0. Emmerich
Fax: 212-403-2000
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5:00 p.m. in
the place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 10.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Closing Date if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder 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, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.03. Expenses. All costs and expenses incurred in connection
with the Transaction Documents shall be paid by the party incurring such cost or
expense, except that if the Closing shall occur, Nebco shall be obligated to pay
all of the fees and expenses of the Buyers (including but not limited to its
fees and expenses of counsel and other outside professionals).
SECTION 10.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective
38
<PAGE> 44
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
SECTION 10.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 10.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in the United States
District Court for the Southern District of New York or any other New York State
court sitting in New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 10.01
shall be deemed effective service of process on such party.
SECTION 10.07. Counterpart; Third Party Beneficiaries. This Agreement
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. No provision of this Agreement shall confer upon any Person other
than the parties hereto any rights or remedies hereunder.
SECTION 10.08. Entire Agreement. This Agreement, the Investors
Agreement, the Warrants, the Certificate of Designations of the Senior Preferred
Stock, the Certificate of Designations of the Junior Preferred Stock, constitute
the entire agreement among the parties with respect to the subject matter of
this Agreement and such other agreements and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement and such other agreements. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by either party hereto. Neither this Agreement nor
any provision hereof shall confer upon any Person other than the parties hereto
any rights or remedies hereunder.
39
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By: ______________________________
Name: Elan Schultz
Title: Vice President
DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: ______________________________
Name: Elan Schultz
Title: Vice President
DLJ OFFSHORE PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: ______________________________
Name: Elan Schultz
Title: Vice President
40
<PAGE> 46
DLJ MERCHANT BANKING FUNDING, INC.
By: ______________________________
Name:
Title:
DLJ CAPITAL CORPORATION
By: ______________________________
Name:
Title:
SPROUT GROWTH II, L.P.
By DLJ CAPITAL CORPORATION,
General Partner
By: ______________________________
Name:
Title:
SPROUT CEO FUND, L.P.
By DLJ CAPITAL CORPORATION,
General Partner
By: ______________________________
Name:
Title:
41
<PAGE> 47
DLJ MERCHANT BANKING PARTNERS II, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: ______________________________
Name:
Title:
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: ______________________________
Name:
Title:
DLJ OFFSHORE PARTNERS II, C.V.
By DLJ MERCHANT BANKING II, INC.,
Advisory General Partner
By: ______________________________
Name:
Title:
42
<PAGE> 48
DLJ DIVERSIFIED PARTNERS, L.P.
By DLJ DIVERSIFIED PARTNERS, INC.,
Managing General Partner
By:_____________________________________
Name:
Title:
DLJ DIVERSIFIED PARTNERS-A, L.P.
By DLJ DIVERSIFIED PARTNERS, INC.,
Managing General Partner
By:_____________________________________
Name:
Title:
DLJ MILLENNIUM PARTNERS, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By:_____________________________________
Name:
Title:
DLJMB FUNDING II, INC.
By:_____________________________________
Name:
Title:
43
<PAGE> 49
DLJ FIRST ESC LLC
By DLJ LBO PLANS MANAGEMENT CORPORATION,
Manager
By:_____________________________________
Name:
Title:
DLJ EAB PARTNERS, L.P.
By DLJ LBO PLANS MANAGEMENT CORPORATION,
General Partner
By:_____________________________________
Name:
Title:
UK INVESTMENT PLAN 1997 PARTNERS
By DONALDSON, LUFKIN & JENRETTE, INC.,
General Partner
By:_____________________________________
Name:
Title:
NEBCO EVANS HOLDING COMPANY
By:_____________________________________
Name: A. Petter Ostberg
Title: Vice President
44
<PAGE> 50
HOLBERG INDUSTRIES, INC.
By:_____________________________________
Name: A. Petter Ostberg
Title: Vice President
45
<PAGE> 51
ANNEX A
SENIOR PREFERRED STOCK
PURCHASED
BY THE NEW BUYERS
<TABLE>
<CAPTION>
SENIOR PREFERRED AGGREGATE PURCHASE
NEW BUYER STOCK ($25/SHARE) PRICE
- ---------------------------------------- ----------------- ------------------
<S> <C> <C>
DLJ Merchant Banking Partners II, L.P. 1,511,821 $37,795,525
DLJ Merchant Banking Partners II-A, L.P. 60,208 $ 1,505,200
DLJ Offshore Partners II, C.V. 74,343 $ 1,858,575
DLJ Diversified Partners, L.P. 88,388 $ 2,209,700
DLJ Diversified Partners-A, L.P. 32,824 $ 820,600
DLJ Millennium Partners, L.P. 29,212 $ 730,300
DLJMB Funding II, Inc. 292,416 $ 7,310,400
DLJ EAB Partners, L.P. 6,788 $ 169,700
UK Investment Plan 1997 Partners 40,000 $ 1,000,000
DLJ First ESC LLC 264,000 $ 6,600,000
--------- -----------
TOTAL: 2,400,000 $60,000,000
========= ===========
</TABLE>
<PAGE> 52
ANNEX B
JUNIOR PREFERRED STOCK
PURCHASED
BY THE NEW BUYERS
<TABLE>
<CAPTION>
SHARES OF
JUNIOR PREFERRED AGGREGATE PURCHASE
NEW BUYER STOCK ($25/SHARE) PRICE
- --------------------------------------- ---------------- ------------------
<S> <C> <C>
DLJ Merchant Banking Partners II, L.P. 1,385,836 $34,645,900
DLJ Merchant Banking Partners II-A, L.P. 55,190 $ 1,379,750
DLJ Offshore Partners II C.V. 68,148 $ 1,703,700
DLJ Diversified Partners, L.P. 81,022 $ 2,025,550
DLJ Diversified Partners-A, L.P. 30,089 $ 752,225
DLJ Millennium Partners, L.P. 26,778 $ 669,450
DLJMB Funding II, Inc. 268,048 $ 6,701,200
DLJ EAB Partners, L.P. 6,222 $ 155,550
UK Investment Plan 1997 Partners 36,667 $ 916,675
DLJ First ESC LLC 242,000 $ 6,050,000
--------- -----------
TOTAL: 2,200,000 $55,000,000
========= ===========
</TABLE>
<PAGE> 53
ANNEX C
WARRANTS TO BE ISSUED TO THE NEW BUYERS
<TABLE>
<CAPTION>
CLASS A WARRANT
NEW BUYER SHARES
<S> <C>
DLJ Merchant Banking Partners II, L.P. 1,830
DLJ Merchant Banking Partners II-A, L.P. 73
DLJ Offshore Partners II, C.V. 90
DLJ Diversified Partners, L.P. 107
DLJ Diversified Partners-A, L.P. 40
DLJ Millennium Partners, L.P. 35
DLJMB Funding II, Inc. 354
DLJ EAB Partners, L.P. 8
DLJ First ESC LLC 319
UK Investment Plan 1997 Partners 48
-----
TOTAL: 2,904
=====
</TABLE>
<PAGE> 54
ANNEX D
12.5% SENIOR SECURED NOTES TO BE REDEEMED
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AGGREGATE
OF REDEMPTION
ORIGINAL BUYER NOTES AMOUNT
- ----------------------------------- ----------------- -----------------
<S> <C> <C>
DLJ Merchant Banking Partners, L.P. $ 10,987,112.43 $ 12,387,206.27
DLJ International Partners, C.V. 4,902,528.69 5,527,260.66
DLJ Offshore Partners, C.V. 284,250.47 320,472.66
DLJ Capital Corporation 47,128.86 53,134.52
Sprout Growth II, L.P. 462,770.78 521,741.92
Sprout CEO Fund, L.P. 6,576.56 7,414.61
DLJ Merchant Banking Funding, Inc. 3,903,264.32 4,400,660.26
DLJ First ESC LLC 2,704,979.00 3,049,675.17
Orkla ASA 8,472,222.22 9,551,842.21
------------- -------------
TOTAL: 31,770,833.33 35,819,408.28
============= =============
</TABLE>
<PAGE> 55
Schedule 3.05 Owners of Capital Stock
OWNERS OF CAPITAL STOCK
<PAGE> 56
Schedule 3.06 Subsidiaries
SUBSIDIARIES
<PAGE> 57
Schedule 3.09 Material Liabilities
MATERIAL LIABILITIES
<PAGE> 58
Schedule 3.10 Material Contracts
MATERIAL CONTRACTS
<PAGE> 59
Schedule 3.11 Litigation
LITIGATION
<PAGE> 60
Schedule 3.14 Insurance
INSURANCE
<PAGE> 61
Schedule 3.15 Licenses and Permits
LICENSES AND PERMITS
<PAGE> 62
Schedule 3.19 Environmental Matters
ENVIRONMENTAL MATTERS
<PAGE> 63
Schedule 3.20 Employee Plans; Benefit Arrangements
EMPLOYEE PLANS; BENEFIT ARRANGEMENTS
<PAGE> 64
Schedule 3.23 Certain Interests
CERTAIN INTERESTS
<PAGE> 65
Schedule 6.2 Tax Representations
TAX REPRESENTATIONS
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By: /s/ Elan Schultz
----------------------------------
Name: Elan Schultz
Title: Vice President
DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ Elan Schultz
----------------------------------
Name: Elan Schultz
Title: Vice President
DLJ OFFSHORE PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ Elan Schultz
----------------------------------
Name: Elan Schultz
Title: Vice President
39
<PAGE> 67
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Thomas Siegler
------------------------------------
Name: Thomas Siegler
Title: Secretary
DLJ CAPITAL CORPORATION
By: /s/ Marjorie S. White
------------------------------------
Name: Marjorie S. White
Title: Secretary and Treasurer
SPROUT GROWTH II, L.P.
By DLJ CAPITAL CORPORATION,
General Partner
By: /s/ Marjorie S. White
------------------------------------
Name: Marjorie S. White
Title: Secretary and Treasurer
SPROUT CEO FUND, L.P.
By DLJ CAPITAL CORPORATION,
General Partner
By: /s/ Marjorie S. White
------------------------------------
Name: Marjorie S. White
Title: Secretary and Treasurer
40
<PAGE> 68
DLJ MERCHANT BANKING PARTNERS II, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
DLJ OFFSHORE PARTNERS II, C.V.
By DLJ MERCHANT BANKING II, INC.,
Advisory General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
41
<PAGE> 69
DLJ DIVERSIFIED PARTNERS, L.P.
By DLJ DIVERSIFIED PARTNERS, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
DLJ DIVERSIFIED PARTNERS-A, L.P.
By DLJ DIVERSIFIED PARTNERS, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
DLJ MILLENNIUM PARTNERS, L.P.
By DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Managing Director
DLJMB FUNDING II, INC.
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-Fact
DLJ FIRST ESC LLC
42
<PAGE> 70
By DLJ LBO PLANS MANAGEMENT CORPORATION,
Manager
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-Fact
DLJ EAB PARTNERS, L.P.
By DLJ LBO PLANS MANAGEMENT CORPORATION,
General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-Fact
UK INVESTMENT PLAN 1997 PARTNERS
By DONALDSON, LUFKIN & JENRETTE, INC.,
General Partner
By: /s/ Peter T. Grauer
------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-Fact
NEBCO EVANS HOLDING COMPANY
By: /s/ Raymond E. Marshall
------------------------------------
Name: Raymond E. Marshall
Title: Treasurer and President
43
<PAGE> 71
HOLBERG INDUSTRIES, INC.
By: /s/ A. Petter Ostberg
------------------------------------
Name: A. Petter Ostberg
Title: Chief Financial Officer
and Treasurer
44
<PAGE> 72
HOLBERG INDUSTRIES, INC.
By: /s/ A. Petter Ostberg
----------------------------------
Name: A. Petter Ostberg
Title: Chief Financial Officer
and Treasurer
44
<PAGE> 1
EXHIBIT 12.1
NEBCO EVANS HOLDING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS, EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR FIRST QUARTER FISCAL YEAR
------------------------------------------- ----------------- -----------
1992 1993 1994 1995 1996 1996 1997 1996
------ ------ ------ ------ ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
income taxes............ $ 369 $ 490 $ 665 $1,089 $ (204) $(1,580) $(3,289) $ 8,501
Fixed charges............. 5,148 4,774 5,323 6,065 22,314 4,806 6,359 89,650
------ ------ ------ ------ ------- ------- ------- -----------
Earnings.................. $5,517 $5,264 $5,988 $7,154 $22,110 $ 3,226 $ 3,070 $98,151
====== ====== ====== ====== ======= ======= ======= ========
Interest expense.......... $3,404 $2,759 $3,294 $3,936 $16,423 $ 3,404 $ 4,735 $78,018
Amortization of deferred
financing costs......... 214 234 226 226 763 155 187 2,971
Interest portion of rent
expense................. 1,530 1,781 1,803 1,903 5,128 1,247 1,437 8,661
------ ------ ------ ------ ------- ------- ------- -----------
Fixed charges............. $5,148 $4,774 $5,323 $6,065 $22,314 $ 4,806 $ 6,359 $89,650
====== ====== ====== ====== ======= ======= ======= ========
Ratio of earnings to fixed
charges................. 1.07 1.10 1.12 1.18 Note 1 Note 1 Note 1 1.09
====== ====== ====== ====== ======= ======= ======= ========
</TABLE>
- ---------------
Note 1: Earnings were less than fixed charges by $204, $1,580 and $3,289 for the
fiscal year 1996, first quarter 1996 and first quarter 1997,
respectively.
<PAGE> 1
EXHIBIT 16.1
August 8, 1997
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We were previously engaged as independent certified public accountants for
NEBCO EVANS Distribution, Inc. (predecessor company to AmeriServe Food
Distribution, Inc.) (the "Company") for the years ended December 30, 1995 and
December 31, 1994. Our engagement as independent certified public accountants
ceased on or about October 1, 1996. We have read the four paragraphs under the
caption "Change in Company's Accountant" on page 96 of the Registration
Statement of Nebco Evans Holding Company on Form S-4 to be filed with the
Securities and Exchange Commission on August 8, 1997 and, except for the
statements contained in the second, third, fifth and sixth sentences of the
first paragraph and the entire third paragraph, which we have no basis to agree
or disagree with, we agree with the statements made therein.
Yours truly,
DELOITTE & TOUCHE
Milwaukee, Wisconsin
<PAGE> 1
Exhibit 21.1
Subsidiaries of Nebco Evans Holding Company
Subsidiaries
<TABLE>
<CAPTION>
Name of Entity Organized Under Laws of
- -------------- -----------------------
<S> <C>
AmeriServe Food Nebraska
Distribution, Inc.
AmeriServ Food Company Delaware
AmeriServe Funding Delaware
Corporation
AmeriServe Transportation, Nebraska
Inc.
Chicago Consolidated Illinois
Corporation
Delta Transportation, Ltd. Wisconsin
The Harry H. Post Company Colorado
Holberg Warehouse Delaware
Properties, Inc.
Northland Transportation Nebraska
Services, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts"
"Summary Selected Financial Data" and "Selected NEHC Historical Financial Data"
and to the use of our reports dated August 6, 1997, in the Registration
Statement (Form S-4) and related Prospectus of Nebco Evans Holding Company for
the registration of $100,387,000 of 12-3/8% Senior Discount Notes.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 6, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
Management of PFS
(A Division of PepsiCo, Inc. Held for Sale):
We consent to the use of our report included herein and to the reference to
our firm under the headings "Summary Selected Financial Data," "Selected PFS
Historical Financial Data" and "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Dallas, Texas
August 7, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 22, 1996, with respect to the financial
statements of AmeriServ Food Company included in the Registration Statement
(Form S-4) and related Prospectus of Nebco Evans Holding Company for the
registration of $100,387,000 of 12-3/8% Senior Discount Notes.
ERNST & YOUNG LLP
Dallas, Texas
August 6, 1997
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
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) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices)(Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(Name, address and telephone number of agent for service)
---------------------
Nebco Evans Holding Company
DELAWARE 06-1444203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
NEBCO EVANS HOLDING COMPANY
545 STEAMBOAT ROAD
GREENWICH, CT 06830
ATTENTION: SECRETARY
Address of principal executive offices) (Zip Code)
SENIOR DISCOUNT NOTES DUE 2007
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
DEPARTMENT OF BANKING AND INSURANCE OF THE COMMONWEALTH OF
MASSACHUSETTS, 100 CAMBRIDGE STREET, BOSTON, MASSACHUSETTS.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C.,
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. TRUSTEE
IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the July, 25,1997
STATE STREET BANK AND TRUST COMPANY
By: /s/ Elizabeth C. Hammer
--------------------------------------
NAME ELIZABETH C. HAMMER
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by Nebco Evans
Holding Company. of its SENIOR DISCOUNT NOTES DUE 2007, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Elizabeth C. Hammer
-------------------------------------
NAME: ELIZABETH C. HAMMER
TITLE: VICE PRESIDENT
DATED:
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................... 1,665,142
Interest-bearing balances ............................................ 8,193,292
Securities ................................................................. 10,238,113
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and its Edge subsidiary ................. 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income .. 4,936,454
Allowance for loan and lease losses ....... 70,307
Allocated transfer risk reserve ........... 0
Loans and leases, net of unearned income and allowances .............. 4,866,147
Assets held in trading accounts ............................................ 957,478
Premises and fixed assets .................................................. 380,117
Other real estate owned .................................................... 884
Investments in unconsolidated subsidiaries ................................. 25,835
Customers' liability to this bank on acceptances outstanding ............... 45,548
Intangible assets .......................................................... 158,080
Other assets ............................................................... 1,066,957
-----------
Total assets ............................................................... 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices .................................................. 8,270,845
Noninterest-bearing ................. 6,318,360
Interest-bearing .................... 1,952,485
In foreign offices and Edge subsidiary ............................... 12,760,086
Noninterest-bearing ................. 53,052
Interest-bearing .................... 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................. 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 926,821
Other borrowed money ....................................................... 671,164
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 46,137
Other liabilities .......................................................... 745,529
Total liabilities .......................................................... 31,637,223
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,426,881
Cumulative foreign currency translation adjustments ........................ (4,015)
Total equity capital ....................................................... 1,813,514
-----------
Total liabilities and equity capital ....................................... 33,450,737
===========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements of NEHC for the three fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, and for the three
quarters ended March 30, 1996 and March 29, 1997, and is qualified in its
entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-30-1995 DEC-28-1996 DEC-28-1996 DEC-28-1997
<PERIOD-START> JAN-02-1994 JAN-01-1995 DEC-31-1995 DEC-31-1995 DEC-29-1996
<PERIOD-END> DEC-31-1994 DEC-30-1995 DEC-28-1996 MAR-30-1996 MAR-29-1997
<EXCHANGE-RATE> 1 1 1 1 1
<CASH> 0 575,000 2,224,000 0 4,060,000
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 26,297,000 85,810,000 0 91,763,000
<ALLOWANCES> 0 1,170,000 5,336,000 0 5,225,000
<INVENTORY> 0 15,230,000 52,246,000 0 69,436,000
<CURRENT-ASSETS> 0 44,496,000 147,174,000 0 175,688,000
<PP&E> 0 14,718,000 48,444,000 0 51,949,000
<DEPRECIATION> 0 7,806,000 12,672,000 0 14,301,000
<TOTAL-ASSETS> 0 77,503,000 314,946,000 0 345,848,000
<CURRENT-LIABILITIES> 0 33,983,000 121,365,000 0 139,822,000
<BONDS> 0 32,779,000 161,055,000 0 176,083,000
0 0 0 0 0
0 15,000,000 17,350,000 0 17,350,000
<COMMON> 0 6,000 0 0 0
<OTHER-SE> 0 4,849,000 1,169,000 0 1,471,000
<TOTAL-LIABILITY-AND-EQUITY> 0 77,503,000 314,946,000 0 345,848,000
<SALES> 358,516,000 400,017,000 1,389,601,000 250,922,000 335,311,000
<TOTAL-REVENUES> 358,516,000 400,017,000 1,389,601,000 250,922,000 335,311,000
<CGS> 320,602,000 359,046,000 1,249,135,000 225,184,000 300,682,000
<TOTAL-COSTS> 320,602,000 359,046,000 1,249,135,000 225,184,000 300,682,000
<OTHER-EXPENSES> 34,488,000 36,695,000 122,430,000 24,013,000 33,268,000
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 3,294,000 3,936,000 16,423,000 3,404,000 4,735,000
<INCOME-PRETAX> 665,000 1,089,000 (204,000) (1,580,000) (3,289,000)
<INCOME-TAX> 523,000 583,000 1,300,000 (242,000) (649,000)
<INCOME-CONTINUING> 142,000 506,000 (1,504,000) (1,338,000) (2,640,000)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 142,000 506,000 (1,504,000) (1,338,000) (2,640,000)
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
NEBCO EVANS HOLDING COMPANY
OFFER TO EXCHANGE
ALL OUTSTANDING
12 3/8% SENIOR DISCOUNT NOTES DUE 2007
FOR
12 3/8% NEW SENIOR DISCOUNT NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 1997,
UNLESS THE OFFER IS EXTENDED
STATE STREET BANK AND TRUST COMPANY
(the "Exchange Agent")
BY MAIL, HAND OR OVERNIGHT COURIER:
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, CT 06123-0177
Attention: Corporate Trust Department
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(860) 986-7920
CONFIRM BY TELEPHONE:
(860) 986-4236
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the ones 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 hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Nebco Evans Holding Company (the
"Company") and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 12 3/8% New Senior Discount Notes due 2007 (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a part,
for each $1,000 principal amount of its outstanding 12 3/8% Senior Discount
Notes due 2007 (the "Notes"), respectively. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1997, unless the Company,
in its reasonable judgment, extends the Exchange Offer, in which case the term
shall mean the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List on the next page the Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate or Registration
Numbers and Principal Amounts should be listed on a separately signed schedule
affixed hereto.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SENIOR DISCOUNT NOTES TENDERED HEREBY
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) OF CERTIFICATE AMOUNT PRINCIPAL
REGISTERED OWNER(S) OR REGISTRATION REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBERS* BY NOTES TENDERED**
------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS.
** UNLESS OTHERWISE INDICATED, THE HOLDER WILL BE DEEMED TO HAVE TENDERED THE
FULL AGGREGATE PRINCIPAL AMOUNT REPRESENTED BY SUCH NOTES. ALL TENDERS MUST
BE IN INTEGRAL MULTIPLES OF $1,000.
- --------------------------------------------------------------------------------
This Letter of Transmittal is to be used (i) if certificates of Notes are
to be forwarded herewith, (ii) if delivery of Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company, (the "Depository") pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering Notes" in the Prospectus or (iii)
tender of the Notes is to be made according to the guaranteed delivery
procedures described in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2. Delivery of
documents to a book-entry transfer facility does not constitute delivery to the
Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name 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 Notes must complete this letter in its
entirety.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
[ ] The Depository Trust Company
Account Number
Transaction Code Number
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Name of Eligible Institution that Guaranteed Delivery
-------------------------------------------------------------------------
If delivery by book-entry transfer:
Account Number
Transaction Code Number
[ ] 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.
Name
Address
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire New Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the New Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, and (ii) neither the undersigned nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such New Notes. If the undersigned or the person receiving the
New Notes covered hereby is a broker-dealer that is receiving the New Notes for
its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, the undersigned
acknowledges that it or such other person will deliver a prospectus in
connection with any resale of such New 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. The undersigned
and any such other person acknowledge that, if they are participating in the
Exchange Offer for the purpose of distributing the New Notes, (i) they cannot
rely on the position of the staff of the Securities and Exchange Commission
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989),
Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action letters
and, in the absence of an exemption therefrom, must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
the resale transaction and (ii) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Company. If the undersigned or the person receiving the New Notes covered by
this letter is an affiliate (as defined under Rule 405 of the Securities Act) of
the Company, the undersigned represents to the Company that the undersigned
understands and acknowledges that such New Notes may not be offered for resale,
resold or otherwise transferred by the undersigned or such other person without
registration under the Securities Act or an exemption therefrom.
The undersigned also warrants that it 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 exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Notes by the Company and the issuance of New
Notes in exchange therefor shall constitute performance in full by the Company
of its obligations under the Registration Rights Agreement and that the Company
shall have no further obligations or liabilities thereunder for the registration
of the Notes or the New Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Notes tendered hereby
and, in such event, the Notes not exchanged will be returned to the undersigned
at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date.
<PAGE> 5
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instruction" in this Letter
of Transmittal, certificates for all New Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If a
New Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the New Note is to be mailed to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal at an address different than the address shown on
this Letter of Transmittal, the appropriate boxes of this Letter of Transmittal
should be completed. If Notes are surrendered by Holder(s) that have completed
either the box entitled "Special Registration Instructions" or the box entitled
"Special Delivery Instructions" in this Letter of Transmittal, signature(s) on
this Letter of Transmittal must be guaranteed by an Eligible Institution
(defined in Instruction 4).
<PAGE> 6
------------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if the New Notes are to be issued in the name of
someone other than the undersigned.
Name:
----------------------------------------------------
Address:
--------------------------------------------------
------------------------------------------------------------
Book-Entry Transfer Facility Account:
------------------------------------------------------------
Employer Identification or Social Security Number:
------------------------------------------------------------
(Please print or type)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the New Notes are to be sent to someone other
than the undersigned, or to the undersigned at an address other than that
shown under "Description of Notes Tendered Hereby."
Name:
----------------------------------------------------
Address:
--------------------------------------------------
------------------------------------------------------------
(Please print or type)
------------------------------------------------------------
REGISTERED HOLDER(S) OF NOTES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information.
(Please print or type).
Name and Capacity (full title):
- --------------------------------------------------------------------------------
Address (including zip code):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
- ---------------------------------------------------------------------
Dated:
- ---------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTION 4)
Authorized Signature:
----------------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
- --------------------------------------------------------------------------------
Name of Plan:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------------
(Please print or type)
Dated:
- ---------------------------------
<PAGE> 7
PAYOR'S NAME: NEBCO EVANS HOLDING COMPANY
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE
SUBJECT TO BACKUP WITHHOLDING.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
SUBSTITUTE PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO ------------------------
FORM W-9 BACKUP WITHHOLDING UNDER THE PROVISIONS OF SOCIAL SECURITY
SECTION 3406(A)(1)(C) OF THE INTERNAL REVENUE NUMBER OR EMPLOYEE
CODE BECAUSE (1) YOU ARE EXEMPT FROM BACKUP IDENTIFICATION NUMBER
DEPARTMENT OF THE TREASURY WITHHOLDING, (2) YOU HAVE NOT BEEN NOTIFIED THAT
INTERNAL YOU ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT
REVENUE SERVICE OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR
(3) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU
THAT YOU ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING. [ ]
---------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION: UNDER PENALTIES OF PERJURY, I PART 3 --
IDENTIFICATION CERTIFY THAT THE INFORMATION PROVIDED ON THIS AWATING TIN [ ]
NUMBER ("TIN") FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE: -------------------------DATE:
----------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO
YOU.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS
NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR
(B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I
UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN 60
DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD,
UNTIL I PROVIDE A NUMBER.
<TABLE>
<S> <C>
- ---------------------------------------------- ---------------------------------------------
SIGNATURE DATE
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERM AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at a book-entry transfer facility of Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). The method of delivery of this
Letter of Transmittal, the Notes and any other required documents 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.
If such delivery is by mail, it is suggested that registered mail with return
receipt requested, properly insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes, but whose Notes are not immediately
available and thus cannot deliver their Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the Expiration Date, may effect a tender if:
(a) the tender is made through 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 under the Exchange Act (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 Notes and the principal amount of 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), together with the Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Depository) 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), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Depository) and all other documents
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 Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
a Holder who attempted to use the guaranteed delivery procedures.
<PAGE> 9
3. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Notes Tendered Hereby." A newly issued Note for the
principal amount of Notes submitted but not tendered will be sent to such Holder
as soon as practicable after the Expiration Date. All Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at the Depository to be credited), (iii) be signed by the Holder in the
same manner as the original signature on this Letter of Transmittal (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Notes register the transfer
of such Notes into the name of the person withdrawing the tender and (iv)
specify the name in which any such notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Notes so withdrawn are validly retendered. Any Notes which have been
tendered but which are not accepted for exchange, will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alternation or enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Depository, the signature must correspond with the name as it appears on the
security position listing as the owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby 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.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in the Depository whose name appears on a security listing as the
owner of the Notes) listed and tendered hereby, no endorsements of the tendered
Notes or separate written instruments of transfer or exchange are required. In
any other case, the registered Holder (or acting Holder) must either properly
endorse the Notes or transmit properly completed bond powers with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
Holder(s) appear(s) on the Notes, and, with respect to a participant in the
Depository whose name appears on a security position listing as the owner of
Notes, exactly as the name of the participant appears on such security position
listing), with the signature on the Notes or bond power guaranteed by an
Eligible Institution (except where the Notes are tendered for the account of an
Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
<PAGE> 10
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Depository) in which the New Notes or substitute
Notes for principal amounts not tendered or not accepted for exchange are to be
issued (or deposited), if different from the names and addresses or accounts of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the tendering Holder should complete
the applicable box.
If no instructions are given, the New Notes (and any Notes not tendered or
not accepted) will be issued in the name of and sent to the acting Holder of the
Notes or deposited at such Holder's account at the Depository.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Notes to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any other reason other than the transfer
and exchange of Notes to the Company or its order pursuant to the Exchange
Offer, 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 exception therefrom is not
submitted herewith, the amount of such transfer taxes will be collected from the
tendering Holder by the Exchange Agent.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Nebco Evans Holding Company, 545 Steamboat
Road, Greenwich, Connecticut, 06830 telephone (203) 661-2500.
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered 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
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right, in its reasonable judgment, to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of 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 Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Notes received by the Exchange
Agent that 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 Holder as soon as practicable following the Expiration
Date.
<PAGE> 11
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to Notes tendered for exchange, the Holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such Holder that he or she is
no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN or Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
<PAGE> 1
EXHIBIT 99.2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: e.g.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: e.g., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
=========================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------
9. A valid trust, estate, or Legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. You may also enter your business or "doing
business as" name. Furnish the owner's social security number or the
employer identification number of the sole proprietorship.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
EXHIBIT 99.2 (CONT)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at an office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and will
continue until you furnish your taxpayer identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government or a political subdivision, agency or instrumentality
thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if (i) this interest is $600 or more, (ii) the
interest is paid in the course of the payer's trade or business and (iii)
you have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifications
or affirmations, you are subject to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
Unless otherwise noted herein, all references to section numbers or to
regulations are references to the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
<PAGE> 1
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
12 3/8% SENIOR DISCOUNT NOTES DUE 2007
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
NEBCO EVANS HOLDING COMPANY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Nebco Evans Holding Company (the "Company") made pursuant to
the Prospectus, dated , 1997 (the "Prospectus"), if certificates for
the outstanding 12 3/8% Senior Discount Notes Due 2007 of the Company (the
"Senior Discount Notes" or the "Notes") are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Exchange Agent prior to 5:00
p.m., New York time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to State Street Bank and Trust Company (the "Exchange Agent") as
set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Notes pursuant to the Exchange Offer, a completed, signed
and dated Letter of Transmittal (or facsimile thereof) must also be received by
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Capitalized terms not defined herein are defined in the Prospectus.
STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
BY MAIL, HAND OR OVERNIGHT COURIER:
State Street Bank and Trust Company
777 Main Street, 11th Floor
Hartford, CT 06123-0177
Attention: Corporate Trust Department
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(860) 986-7920
CONFIRM BY TELEPHONE:
(860) 986-4236
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Notes Tendered:*
$
- ----------------------------------------------------------
Certificate Nos. (if available):
- ------------------------------------------------------------
Total Principal Amount Represented by Certificate(s):
$
- ----------------------------------------------------------
- ---------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X____ __
X____ __
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
---------------------------------------------------------------
Must be signed by the holder(s) of Notes as their name(s) appear(s) on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
Please print name(s) and address(es)
<TABLE>
<S> <C>
Name(s): -----------------------------------------------------------------------------
=============================================================================
-----------------------------------------------------------------------------
Capacity:
=============================================================================
Address(es):
=============================================================================
Account Number:
-----------------------------------------------------------------------------
</TABLE>
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Notes being tendered hereby or confirmation of book-entry
transfer of such Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with any other documents required
by the Letter of Transmittal within three New York Stock Exchange trading days
after the Expiration Date.
Name of Firm
- --------------------------------------------------------------------------------
Address
================================================================================
Area Code & Telephone No.
- --------------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(Please Type or Print)
Title
- --------------------------------------------------------------------------------
Date
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF NOTES WITH THIS FORM. CERTIFICATES OF NOTES
SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
