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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD TO .
COMMISSION FILE NUMBER
NEBCO EVANS HOLDING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1444203
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
545 STEAMBOAT ROAD
GREENWICH, CT 06830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(203) 661-2500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting shares of common
stock held by non-affiliates of the registrant is not applicable as there is not
a public market for such stock. All shares of the registrant's common stock are
held by one affiliate. As of March 26, 1998, there were 6,508 shares of Class A
Common Stock and 1,733 shares of Class B Common Stock of the registrant
outstanding.
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FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding the business strategy, operations, cost-saving initiatives,
economic performance, financial condition and liquidity and capital resources of
Nebco Evans Holding Company ("NEHC") or AmeriServe Food Distribution, Inc.
(which, unless the context indicates or otherwise requires, including its
predecessors, is referred to in this Annual Report on Form 10-K as "AmeriServe"
or the "Company"). Such statements are subject to various risks and
uncertainties. Actual results could differ materially from those projected in
such forward-looking statements and readers are cautioned not to place undue
reliance on the forward-looking statements which speak only as of the date
hereof. Certain factors that could cause NEHC's or the Company's actual results
to differ materially from expected, implied or historical results include the
factors set forth under "Forward-Looking and Cautionary Statements" in Item 7 of
this Annual Report on Form 10-K (this "Report"), the additional factors set
forth under "Risk Factors" in NEHC's amended Registration Statement on Form S-4
filed with the Securities and Exchange Commissions (the "SEC") on November 10,
1997 (the "NEHC Registration Statement") and NEHC's other filings with the SEC
as well as general economic and business and market conditions, especially in
the chain restaurant business, and increased competitive and/or customer
pressure. Neither NEHC nor the Company undertakes any obligations to update
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence or nonoccurrence of anticipated events.
ITEM 1. BUSINESS
NEHC is a Delaware corporation and the parent company of AmeriServe, a
Delaware corporation, and Holberg Warehouse Properties, Inc., a Delaware
corporation ("HWPI"). AmeriServe accounts for substantially all of NEHC's assets
and NEHC conducts substantially all of its business through AmeriServe. HWPI's
sole operation consists of the ownership of two distribution centers occupied by
AmeriServe. AmeriServe operates in a single business segment, as described
below.
NEHC is a wholly owned subsidiary of Nebco Evans Distributors, Inc.
("NED"), which is a majority owned subsidiary (92.9%) of Holberg Industries,
Inc. ("Holberg"). Holberg is a privately held diversified service company with
subsidiaries operating within the food service distribution and parking services
industries in North America. Holberg was formed in 1986 to acquire and manage
food service distribution businesses. 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 and AmeriServ Food Company ("AmeriServ"), a
distributor of food products and supplies to chain restaurants in such systems
as Wendy's, Dairy Queen, Burger King, KFC and Applebee's, in January 1996. In
conjunction with the AmeriServ acquisition, on January 25, 1996, NEHC was formed
as a wholly-owned subsidiary of NED and acquired all of the stock of NEBCO
EVANS. In April 1997, NEBCO EVANS, a Nebraska corporation, changed its name to
AmeriServe Food Distribution, Inc. (as such, "Nebraska AmeriServe").
AmeriServe is North America's largest systems foodservice distributor
specializing in distribution to chain restaurants. 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 currently serves over 30 different restaurant chains
and over 25,500 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.
On July 11, 1997, the Company acquired (the "PFS Acquisition") the U.S. and
Canadian operations of PFS ("PFS"), a division of PepsiCo, Inc. ("PepsiCo"). PFS
distributed food products and supplies and restaurant equipment to franchised
and company-operated restaurants in the Pizza Hut, Taco Bell and KFC systems.
These systems were spun-off by PepsiCo in October 1997 and are now operating as
TRICON Global
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Restaurants, Inc. ("Tricon"). In addition, in connection with the PFS
Acquisition, the Company entered into a distribution agreement (the
"Distribution Agreement") whereby it became the exclusive distributor of
selected products until July 11, 2002 to the approximately 9,800 Pizza Hut, Taco
Bell and KFC restaurants in the continental United States owned by Pizza Hut,
Inc., Taco Bell Corp., Kentucky Fried Chicken Corporation and, Kentucky Fried
Chicken of California, Inc. (all subsidiaries of Tricon) and their subsidiaries
(the foregoing, collectively, the "Tricon Subsidiaries,") and previously
serviced by PFS. In October 1997, AmeriServe also acquired PFS de Mexico, S.A.
de C.V., a regional systems distributor based in Mexico City, Mexico for
approximately $8 million.
On July 11, 1997, in connection with the PFS Acquisition, the Company
issued and sold $500.0 million principal amount of its 10 1/8% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes") pursuant to an
Indenture, dated as of July 11, 1997, by and among the Company, the Company's
subsidiaries (the "Subsidiary Guarantors") and State Street Bank and Trust
Company as Trustee (the "Senior Subordinated Note Indenture"). The Senior
Subordinated Notes were sold pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act of 1933, as
amended, (the "Securities Act") and applicable state securities laws. On
December 12, 1997, the Company consummated an offer to exchange the Senior
Subordinated Notes for new Senior Subordinated Notes, which are registered under
the Securities Act with terms substantially identical to the Senior Subordinated
Notes.
Also on July 11, 1997, NEHC issued and sold $100.4 million in aggregate
principal amount at maturity of its 12-3/8% Senior Discount Notes due 2007 (the
"Senior Discount Notes") pursuant to an Indenture, dated as of July 11, 1997, by
and among NEHC and State Street Bank and Trust Company, as trustee. The Senior
Discount Notes were sold pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act. On December 12,
1997, NEHC consummated an offer to exchange the Senior Discount Notes for new
Senior Discount Notes, which are registered under the Securities Act, with terms
substantially identical to the Senior Discount Notes.
On October 15, 1997, AmeriServe issued and sold $350,000,000 in aggregate
principal amount of its 8 7/8% Senior Notes due 2006 (the "Senior Notes")
pursuant to an Indenture, dated October 15, 1997, by and among the Company, the
Subsidiary Guarantors and State Street Bank and Trust Company, as trustee (the
"Senior Note Indenture"). The Senior Notes were sold pursuant to an exemption
from, or in transactions not subject to, the registration requirements of the
Securities Act. On December 12, 1997, AmeriServe consummated an offer to
exchange the Senior Notes for New Senior Notes, which are registered under the
Securities Act, with terms substantially identical to the Senior Notes.
For further information about financings by NEHC and AmeriServe in
connection with the PFS Acquisition and subsequently, see Notes 6 and 7 to the
Consolidated Financial Statements of NEHC included in this Report.
On December 28, 1997, pursuant to an Agreement and Plan of Merger by and
among Nebraska AmeriServe, Nebraska AmeriServe's wholly owned subsidiary
AmeriServ and AmeriServ's wholly owned subsidiary The Harry H. Post Company
("Post"), Nebraska AmeriServe merged with and into AmeriServ and Post merged
with and into AmeriServ, in each case with AmeriServ, a Delaware corporation, as
the surviving corporation. In the mergers, AmeriServ changed its name to
AmeriServe Food Distribution, Inc. (the surviving corporation is referred to in
this Report as "AmeriServe" or the "Company"). In the mergers, all of the
outstanding equity securities of AmeriServ and Post were cancelled, and all of
the outstanding equity securities of Nebraska AmeriServe were converted into
substantially identical securities of the Company. The Company effected the
mergers to rationalize its corporate organization and to reduce various
compliance and regulatory costs arising from having subsidiaries incorporated in
various jurisdictions and to move its jurisdiction of incorporation from
Nebraska to Delaware.
RECENT DEVELOPMENTS
On January 29, 1998, AmeriServe, Steamboat Acquisition Corp., a newly
formed Delaware corporation and wholly owned subsidiary of AmeriServe, and
ProSource, Inc., a Delaware corporation ("ProSource"), entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which AmeriServe will
acquire all outstanding shares of ProSource (the "ProSource Acquisition") for
cash. ProSource provides
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foodservice distribution to restaurants in North America. ProSource also
provides purchasing and logistics services to the foodservice market in North
America. ProSource's 3,400 employees serve approximately 12,700 restaurants,
including Burger King, Chick-fil-A, Chili's, Long John Silver's, Olive Garden,
Red Lobster, Sonic, TCBY, TGI Friday's and Wendy's, from a nationwide network of
distribution centers and its Corporate Support Center in Coral Gables, Florida.
The ProSource Acquisition is subject to the approval of ProSource's stockholders
and certain other customary conditions. In connection with the Merger Agreement,
certain stockholders of ProSource have entered into a voting agreement with
AmeriServe pursuant to which such stockholders have agreed to vote their shares
in favor of the ProSource Acquisition. Such shares are sufficient to assure the
approval of the ProSource Acquisition. ProSource and AmeriServe have been
granted early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
On March 6, 1998, NEHC consummated the offering and sale (the "Offering')
of $250 million of its 11 1/4% Senior Redeemable Exchangeable Preferred Stock
due 2008 (the "Preferred Stock") in transactions not requiring registration
under the Securities Act. Approximately $148 million of the net proceeds of the
Offering was used by NEHC to repurchase all of its 13 1/2% Senior Exchangeable
Preferred Stock due 2009 (the "Senior Preferred Stock"), 15% Junior Exchangeable
Preferred Stock due 2009 (the "Junior Preferred Stock"), and Junior
Non-Convertible Preferred Stock. NEHC expects to use the remaining net proceeds
for general corporate purposes, including contributions to the capital of
AmeriServe. Dividends on the Preferred Stock are cumulative at 11 1/4% per
annum, payable quarterly in either cash or additional shares of Preferred Stock,
at NEHC's option. The Preferred Stock is redeemable, at NEHC's option, at any
time after March 1, 2003 and is exchangeable, also at NEHC's option, into
11 1/4% Subordinated Exchange Debentures due 2008, in each case, subject to
certain terms and conditions. The Offering was not registered under the
Securities Act and the Preferred Stock may not be offered or sold within the
United States or to U.S. Persons (as defined in the Securities Act) except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Pursuant to the terms and
conditions of a Registration Rights Agreement entered into with Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC"), as the initial purchaser of
the Preferred Stock, NEHC is required to exchange the Preferred Stock for
preferred stock registered under the Securities Act.
FOODSERVICE DISTRIBUTION INDUSTRY
The foodservice distribution business involves the purchasing, receiving,
warehousing, marketing, selecting, loading and delivery of fresh and frozen meat
and poultry, seafood, frozen foods, canned and dry goods, fresh and preprocessed
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 $134 billion in sales in 1997.
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).
The Company operates as a systems distributor that specializes in servicing
chain restaurants. Systems specialists, such as the Company, typically purchase
and inventory between 1,100 and 5,500 different food and foodrelated items and
often serve as a single source of supply for their customers. Broadline food
service 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.
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BUSINESS STRATEGY
The Company's strategy is 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 integrating and consolidating the PFS and, following the
consummation of the ProSource acquisition, the ProSource businesses and by
pursuing selective acquisitions within the fragmented foodservice distribution
industry.
CUSTOMERS
The Company's customers are generally individual franchisees or
franchiser-owned restaurants of chain restaurant concepts. The Company's
customers include over 30 restaurant concepts with over 25,500 restaurant
locations prior to the ProSource Acquisition. The corporate owner or franchiser
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.
Including sales to franchiser-owned and franchised restaurants, the
Company's sales to the following restaurant concepts as an approximate
percentage of total pro forma sales (including PFS for all of 1997 and Post for
all of 1997 and 1996 but without giving effect to the ProSource Acquisition)
were:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Pizza Hut................................................... 28% --
Taco Bell................................................... 28% --
KFC......................................................... 13% 9%
Wendy's..................................................... 11% 35%
Burger King................................................. 5% 17%
</TABLE>
On a pro forma basis, assuming the inclusion of PFS and Post for the full
year, restaurants owned by the Tricon Subsidiaries would have accounted for
approximately 40% of the Company's 1997 sales. No other customer accounted for
more than 10% of 1997 sales on either a pro forma or reported basis. One
customer, a franchiser, accounted for approximately 11% of 1996 net sales on a
reported basis.
The Distribution Agreement entered into with the Tricon Subsidiaries
provides 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 expiring on July 11, 2002. Gross profit and net pretax profit on
certain sales to Pizza Hut under the Distribution Agreement are limited. Tricon
is actively engaged in the sale to franchisees of Taco Bell and Pizza Hut
restaurants covered by the Distribution Agreement. While the Distribution
Agreement provides that prior to such sales, such franchisees will enter into
distribution agreements on substantially similar terms, there can be no
assurance that the transition from company-operated to franchised status will
not affect the Company's results. In addition, the Company's future results may
be impacted by the planned closure of poorly performing Tricon Subsidiaries'
restaurants announced by Tricon in December, 1997.
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 services these restaurants
together with three other cooperating distributors. The cooperating distributors
currently serve Arby's restaurants located outside the Company's pre-PFS
Acquisition primary service territories.
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
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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 40 distribution centers, its fleet of approximately 900
tractors and 1,200 trailers and its management information systems.
Substantially all of the Company's products are purchased, stored and delivered
in sealed cases which the Company does not open or alter. In connection with the
PFS Acquisition, the Company expects to reduce the number of current
distribution centers from 40 to 25. In order to accomplish this consolidation,
the Company will operate its business in new and larger facilities.
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.
Product Storage
The Company currently warehouses approximately 1,100 to 5,500 stock keeping
units ("SKU's") (excluding the redistribution and equipment distribution
centers) for its customers at 40 facilities in 33 metropolitan areas. Upon
receipt of the product at the distribution centers, the product is inspected and
stored on 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. The Company expects to begin operations at a new distribution center in
Orlando, Florida (269,000 sq. ft.) in April 1998. The Company expects to begin
operations at a new distribution center in Denver, Colorado (161,000 sq. ft.) in
September, 1998.
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
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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.
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 tractors 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 the former PFS business currently operate with different
computer systems. AmeriServe utilizes a variety of personal computers 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.
The Company is in the process of replacing 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 be substantially completed by
mid-1999 and will result in all of the Company's distribution centers operating
with the same computer systems and the same operating policies and practices.
For certain risks related to this project, see "Computer Systems and Potential
Year 2000 Issue" under Item 7 of this Report.
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 preprocessed produce, beverages, dairy products, paper goods, cleaning
supplies and equipment. 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 and other chains. 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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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.
COMPETITION
The foodservice distribution industry is highly competitive. Competitors
include other systems distribution companies focused on the chain restaurants
and captive, multi-unit franchiser-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., Performance Food Group, U.S. Foodservice (formerly JP
Foodservice), 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 basis 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.
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.
REGULATORY MATTERS
The Company is 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. The Company believes
that it is in compliance, in all material respects, with all such laws,
regulations and codes. The Company, however, is not
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able to predict the impact of any changes in the requirements or mode of
enforcement of these laws, regulations and codes on its operating results.
ENVIRONMENTAL MATTERS
Under applicable environmental laws, the Company and/or HWPI 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 the Company and/or
HWPI leases or owns the land in question and regardless of whether such
environmental conditions were created by the Company or by a prior owner or
tenant.
NEHC believes the Company and HWPI currently conduct their respective
businesses, and in the past have conducted their respective businesses, 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 either the Company or HWPI.
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 the Company or HWPI.
In connection with the PFS Acquisition, the Company 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 the Company. The Company has obtained final reports on the
results of such audit with regard to PFS, which concluded that there are no
environmental matters that are likely to have a material adverse effect on the
Company.
EMPLOYEES
NEHC has no paid employees. As of December 27, 1997, the Company had
approximately 5,000 full-time employees, approximately 500 of whom were employed
in corporate support functions and approximately 4,500 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 and which expired in January 1998 is in the
process of being renewed. The other such collective bargaining agreement,
covering approximately 75 employees, will expire at the end of November 1998.
The Company has not experienced any labor disputes or work stoppages and
believes that its relationships with its employees are good.
ITEM 2. PROPERTIES
The Company currently operates 40 distribution centers located throughout
the United States, Canada and Mexico and is constructing two new distribution
centers as follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET LEASED/OWNED
-------- ----------- ------------
<S> <C> <C>
Albany, NY................................................. 104,000 Leased
Albuquerque, NM............................................ 65,000 Leased
Arlington, TX.............................................. 105,600 Leased
Canton, MS................................................. 80,500 Leased
Charlotte, NC.............................................. 158,500 Owned
Charlotte, NC.............................................. 91,771 Leased
Columbus, OH............................................... 143,903 Leased
Denver, CO................................................. 119,000 Leased
Denver, CO................................................. 74,360 Leased
Denver, CO(2).............................................. 165,000 Leased
Fort Worth, TX............................................. 113,000 Leased
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET LEASED/OWNED
-------- ----------- ------------
<S> <C> <C>
Gainesville, FL............................................ 53,000 Leased
Grand Rapids, MI........................................... 180,000 Owned
Gulfport, MS............................................... 63,792 Leased
Hebron, KY................................................. 124,000 Leased
Houston, TX................................................ 69,800 Leased
Indianapolis, IN........................................... 115,200 Leased
Indianapolis, IN(3)........................................ 180,100 Leased
Jacksonville, FL........................................... 119,600 Leased
Jonesboro, GA.............................................. 124,076 Leased
Lemont, IL(1).............................................. 105,000 Leased
Lenexa, KS................................................. 105,600 Leased
Madison, WI(1)............................................. 123,000 Leased
Manassas, VA............................................... 100,337 Owned
Memphis, TN................................................ 70,750 Leased
Mexico City, MX............................................ 35,000 Owned
Milwaukee, WI.............................................. 123,185 Leased
Mississauga, Ontario....................................... 53,487 Leased
Mt. Holly, NJ.............................................. 126,637 Leased
Norcross, GA............................................... 169,900 Owned
Novi, MI................................................... 72,830 Leased
Oklahoma City, OK(4)....................................... 52,500 Leased
Omaha, NE.................................................. 105,000 Owned
Ontario, CA................................................ 201,454 Leased
Orlando, FL(2)............................................. 269,000 Leased
Orlando, FL................................................ 115,240 Leased
Plymouth, MN............................................... 104,200 Leased
Portland, OR............................................... 81,815 Leased
Salt Lake City, UT......................................... 31,000 Leased
Stockton, CA............................................... 105,000 Leased
Tempe, AZ.................................................. 67,660 Leased
Waukesha, WI(5)............................................ 196,000 Leased
</TABLE>
- ---------------
(1) Re-distribution facilities
(2) Under construction
(3) Restaurant equipment distribution center
(4) This facility is scheduled to close in April, 1998.
(5) NEHC capital lease
Within four years of December 27, 1997, 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. In addition, in
connection with the PFS Acquisition the Company expects to reduce the number of
current distribution centers from 40 to 25. In order to accomplish this
integration and consolidation, the Company will operate its business in expanded
or new and larger facilities. NEHC believes that the Company's existing
distribution centers, together with planned modifications, expansions and new
distribution centers provide sufficient space to support the Company's expected
expansion over the next several years.
9
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the common stock of NEHC is owned by NED and there is no public
trading market for such security. In connection with the PFS Acquisition, on
July 11, 1997, NEHC issued and sold 2,400,000 shares of Senior Preferred Stock,
2,200,000 shares of Junior Preferred Stock, and warrants to purchase shares of
NEHC Class A Common Stock, with an exercise price of $0.01 per share,
representing the right to acquire an aggregate of up to 22.5% of the Common
Stock of NEHC on a fully diluted basis for aggregate consideration of $115.0
million. The Senior Preferred Stock and the Junior Preferred Stock and warrants
were sold to DLJ Merchant Banking Partners II, L.P. and certain of its
affiliates ("DLJMBII"). The offering was a private placement.
NEHC has not paid a cash dividend in the 1997 or 1996 fiscal years. Under
the indenture relating to the Senior Discount Notes and the Certificate of
Designations relating to the Preferred Stock, NEHC is restricted from paying
cash dividends on its capital stock, subject to certain exceptions. For
additional information regarding these restrictions, see the Indenture, dated as
of July 11, 1997, by and between NEHC and State Street Bank and Trust Company,
relating to the Senior Discount Notes and the Certificate of Designations
relating to the Preferred Stock, included as an amendment to NEHC's Amended and
Restated Certificate of Incorporation, each of which has been incorporated by
reference as an exhibit hereto.
Under the Company's Credit Facility, the Company is restricted from paying
cash dividends on its capital stock until January 11, 2003, except to the extent
necessary to enable NEHC to pay corporate overhead expenses. From and after
January 11, 2003, the Company may pay additional dividends of up to $13,000,000
annually, subject to certain conditions, to enable NEHC to service the Senior
Discount Notes. The indentures relating to the Senior Notes and the Senior
Subordinated Notes also limit the Company's ability to pay cash dividends. For
additional information regarding these restrictions, see the Company's Second
Amended and Restated Credit Agreement, the Indenture, dated as of October 15,
1997, by and between the Company and the State Street Bank and Trust Company,
relating to the Senior Notes and the Indenture, dated as of July 11, 1997, by
and between the Company and State Street Bank and Trust Company, relating to the
Senior Subordinated Notes, each of which has been incorporated by reference as
an exhibit hereto. There are currently no restrictions on the ability of the
Company's wholly-owned subsidiaries, other than AmeriServe Funding, to pay cash
dividends to the Company.
10
<PAGE> 12
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------
1997(A) 1996(B) 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $3,508,332 $1,389,601 $400,017 $358,516 $327,606
Gross profit........................... 348,975 140,466 40,971 37,914 35,153
Operating expenses..................... 358,958(c) 122,430 36,695 34,488 32,054
---------- ---------- -------- -------- --------
Operating income (loss)................ (9,983) 18,036 4,276 3,426 3,099
Interest expense, net.................. (54,016) (16,423) (3,936) (3,294) (2,759)
Loss on sale of accounts receivable.... (6,757)(d) -- -- -- --
Interest income-affiliates............. 632 528 749 533 150
Minority interest...................... -- (2,345) -- -- --
---------- ---------- -------- -------- --------
Income (loss) before income taxes,
extraordinary loss, and cumulative
effect of accounting change......... (70,124) (204) 1,089 665 490
Provision for income taxes............. 1,030 1,300 583 523 172
---------- ---------- -------- -------- --------
Income (loss) before extraordinary loss
and cumulative effect of accounting
change.............................. (71,154) (1,504) 506 142 318
Extraordinary loss on early
extinguishment of debt.............. (15,935) -- -- -- (613)
Cumulative effect of change in method
of accounting for income taxes...... -- -- -- -- (495)
---------- ---------- -------- -------- --------
Net income (loss)...................... $ (87,089) $ (1,504) $ 506 $ 142 $ (790)
========== ========== ======== ======== ========
BALANCE SHEET DATA AT END OF YEAR:
Cash and cash equivalents.............. $ 231,450 $ 2,224 $ 575 $ 1,025 $ 1,682
Total assets........................... 1,478,790 314,946 77,503 79,218 75,265
Long-term debt, including current
portion............................. 948,736 164,444 32,779 32,160 34,170
Total stockholders' equity............. 44,802 18,519 10,157 17,205 14,779
</TABLE>
- ---------------
(a) Includes the effects of the acquisition of PFS effective June 11, 1997.
(b) Includes the effects of the acquisition of AmeriServ on January 25, 1996.
(c) Includes $52.4 million in impairment, restructuring and other unusual
charges. See Note 3 to the Consolidated Financial Statements.
(d) Relates to an ongoing program to provide additional financing capacity
through sales of accounts receivable. See Note 7 to the Consolidated
Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
NEHC is the parent of the Company and Holberg Warehouse Properties, Inc.
(HWPI). The Company accounts for substantially all of NEHC's assets and
operations. HWPI's operations consist entirely of the leasing of two warehouse
facilities to the Company. The Company is North America's largest foodservice
distributor to chain restaurants, distributing a wide variety of items,
including meat, poultry, frozen foods, canned and dry goods, produce, beverages,
dairy products, paper goods, cleaning and other supplies and equipment to
approximately 25,500 restaurants. The Company's major customers are franchisers
and/or franchisees in the Pizza Hut, Taco Bell, KFC, Wendy's, Arby's, Burger
King and Dairy Queen restaurant systems.
On July 11, 1997, the Company acquired the U.S. and Canadian operations of
PFS. The effective date of the acquisition was June 11, 1997, the end of PFS'
second quarter. PFS distributed food products, supplies and
11
<PAGE> 13
equipment to franchised and company-owned restaurants in the Pizza Hut, Taco
Bell and KFC systems, which were spun-off by PepsiCo, Inc. in October 1997 and
are now operating as TRICON Global Restaurants, Inc. (Tricon). As the
acquisition has been accounted for under the purchase method, twenty-eight weeks
of PFS' operating results are included in the Company's operating results for
the year ended December 27, 1997. Because of the relative sizes of the Company
and PFS, which had net sales of $1.3 billion and $3.4 billion, respectively, for
fiscal 1996, the comparisons of operating results for 1997 to 1996 presented
below are significantly impacted by the PFS acquisition.
In April 1997, the Company began providing foodservice distribution to
approximately 2,600 Arby's restaurants under a three-year contract. While the
majority of Arby's restaurants are serviced directly by the Company, some are
serviced by other cooperating independent distributors.
On January 25, 1996, the Company acquired AmeriServ, a distributor of food
products and supplies to chain restaurants in such systems as Wendy's, Dairy
Queen, Burger King, KFC and Applebee's. Because of the relative sizes of the
Company and AmeriServ, which had net sales of $400 million and $939 million,
respectively, for fiscal 1995, the comparisons of operating results for 1996 to
1995 presented below are significantly impacted by the AmeriServ acquisition.
RECENT DEVELOPMENTS
On January 29, 1998, the Company entered into a definitive merger agreement
pursuant to which the Company will acquire all of the approximately 9.4 million
outstanding shares of ProSource for $15.00 per share in cash. The Company will
also refinance the existing indebtedness of ProSource of approximately $174
million. The transaction is expected to close in the second quarter of 1998.
ProSource, which reported sales of $3.9 billion for its fiscal year ended
December 27, 1997, is in the foodservice distribution business, specializing in
quick-service and casual dining chain restaurants. ProSource services
approximately 12,700 restaurants, principally in the United States, in such
chains as Burger King, Red Lobster, Olive Garden, TGI Friday's, Long John
Silver's, Chili's, Sonic, Chick-fil-A, Wendy's and TCBY. The Company will fund
the acquisition with cash and cash equivalents on hand as well as additional
capital expected from the accounts receivable sale program as discussed below.
Because of similarities in activities, the Company intends to consolidate
certain operations of ProSource with those of the Company. With opportunities to
combine certain warehousing, transportation and administrative activities, the
Company believes that significant cost efficiencies are achievable.
On March 6, 1998, NEHC issued $250 million of 11 1/4% Senior Redeemable
Exchangeable Preferred Stock due 2008 in a Rule 144A private placement.
Approximately $148 million of proceeds from the issuance were used to repurchase
all NEHC's outstanding 13 1/2% senior exchangeable preferred stock, $25,000
series junior nonconvertible preferred stock and 15% junior exchangeable
preferred stock. The remaining proceeds will be used for general corporate
purposes, including contributions to the capital of the Company. See Note 17 to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table presents certain financial information of NEHC,
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0%
Cost of goods sold............................ 90.1 89.9 89.8
Gross profit.................................. 9.9 10.1 10.2
Distribution, selling and administrative
expenses.................................... 8.3 8.5 8.8
Operating income before amortization of
intangible assets and impairment,
restructuring and other unusual charges..... 1.7 1.6 1.4
</TABLE>
12
<PAGE> 14
Fiscal 1997 compared to Fiscal 1996
Net sales increased $2.1 billion, or 152% to $3.5 billion in 1997. The
acquisition of PFS accounted for $1.8 billion of the increase. The remaining
sales growth was largely due to the addition of service to Arby's.
Gross profit increased $208.5 million, or 148%, to $349.0 million in 1997
due primarily to the acquisition of PFS. The gross profit margin decreased from
10.1% in 1996 to 9.9% in 1997 reflecting a customer mix shift towards business
with relatively higher product costs.
Distribution, selling and administrative expenses increased $172.1 million,
or 146%, to $289.7 million in 1997 due primarily to the acquisition of PFS.
Distribution, selling and administrative expenses as a percent of net sales
decreased from 8.5% in 1996 to 8.3% in 1997. This change reflects the impact of
PFS' lower operating expense margin, as well as leveraging of the incremental
Arby's business.
Operating income before amortization of intangible assets and impairment,
restructuring and other unusual charges increased $36.4 million, or 159%, to
$59.3 million in 1997 due primarily to the acquisition of PFS. As a percent of
net sales, this income measure rose from 1.6% in 1996 to 1.7% in 1997. This
change was driven by the lower distribution, selling and administrative expense
as a percent of net sales as discussed above.
Amortization of intangible assets increased $12.0 million to $16.8 million
in 1997, reflecting the amortization of the intangible assets arising from the
allocation of the PFS purchase price.
Impairment, restructuring and other unusual charges in 1997 totaled $52.4
million. This charge includes (a) impairment of property, equipment and other
assets ($12.4 million), (b) restructuring (exit) costs for future lease
terminations and employee severance ($13.4 million), (c) costs incurred to date
to integrate the AmeriServ and PFS operations, and other unusual items ($13.0
million) and (d) bridge financing fees, commitment fees for the accounts
receivable sale program (see discussion below) and other one-time costs
associated with the acquisition of PFS ($13.6 million). The impairment charge
and the accrued restructuring (exit) costs reflect actions to be taken with
respect to the Company's existing facilities as a result of the acquisition of
PFS. During the third quarter of 1997, management performed an extensive review
of the existing and recently acquired PFS operations with the objective of
developing a business plan for the restructuring and consolidation of the
organizations. The business plan, which was approved by the Company's Board of
Directors late in the third quarter, identified a number of actions designed to
improve the efficiency and effectiveness of the combined entity's warehouse and
transportation network and operations support infrastructure. These actions,
which are expected to be completed by mid-1999, include construction of new
strategically located warehouse facilities, closures of certain existing
warehouse facilities and expansions of others, dispositions of property and
equipment, conversion of computer systems, reductions in workforce and
relocation of the Company's headquarters from Brookfield, Wisconsin to Dallas,
Texas. The costs incurred to date to integrate the AmeriServ and PFS operations
include start-up costs of new warehouse facilities and employee relocation and
other expenses to realign the operations support infrastructure. Ongoing
integration costs will continue to be reported as a separate component of
operating expenses.
Interest expense net of interest income increased $37.6 million to $54.0
million in 1997, reflecting interest on additional debt primarily to finance the
acquisition of PFS.
Loss on sale of accounts receivable relates to an ongoing program
established by the Company to provide additional financing capacity. Under the
program, accounts receivable are sold to a consolidated, wholly owned special
purpose bankruptcy remote subsidiary, which in turn transfers the receivables to
a master trust. The loss on sale of accounts receivable of $6.8 million
represents the return to investors in certificates issued by the master trust.
In a transaction expected to be completed in April 1998, the current series of
certificates issued by the master trust will be restructured, resulting in
additional proceeds to the Company under the program of approximately $50
million. See Note 7 to Consolidated Financial Statements.
Provision for income taxes represents estimated current income taxes
payable. NEHC's net deferred tax assets are offset entirely by a valuation
allowance, reflecting a net operating loss carryforward position.
13
<PAGE> 15
Extraordinary loss of $15.9 million in 1997 resulted from early
extinguishment of debt. This charge represents the unamortized balance of
deferred financing costs and unaccreted interest associated with previous credit
facilities and other indebtedness.
Net loss of $87.1 million in 1997 compared to net loss of $1.5 million in
1996 was driven by the impairment, restructuring and other unusual charges, as
well as the increased interest expense.
Fiscal 1996 Compared to Fiscal 1995
Net sales increased $989.6 million, or 247%, to $1.4 billion in 1996 due
primarily to the AmeriServ acquisition. 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 increased $99.5 million, or 243%, to $140.5 million in 1996
due primarily to the AmeriServ acquisition. Gross margin declined slightly from
10.2% in 1995 to 10.1% in 1996, due to the slightly higher cost of products
purchased by customers added through the AmeriServ acquisition.
Distribution, selling and administrative expenses increased $82.2 million,
or 232%, to $117.6 million in 1996 due primarily to the AmeriServ acquisition.
Distribution, selling and administrative expenses as a percent of net sales
decreased from 8.8% in 1995 to 8.5% in 1996, due largely to a gain on sale of
property of $4.7 million.
Operating income before amortization of intangible assets increased $17.3
million, or 310%, to $22.9 million in 1996 due primarily to the AmeriServ
acquisition and the gain on sale of property. As a percent of net sales, this
income measure rose from 1.4% in 1995 to 1.6% in 1996, due primarily to the
operating expense margin change discussed above.
Amortization of intangible assets increased $3.6 million to $4.8 million in
1996 reflecting the amortization of intangible assets arising from the
allocation of the AmeriServ purchase price.
Interest expense net of interest income increased $12.5 million to $16.4
million in 1996, reflecting interest on additional debt primarily to finance the
acquisition of AmeriServ.
Provision for income taxes represents estimated current income taxes
payable. NEHC's net deferred tax assets are offset entirely by a valuation
allowance, reflecting a net operating loss carryforward position.
Net loss of $1.5 million in 1996 compared to net income of $.5 million in
1995 primarily reflected the increased interest expense, partially offset by the
operating income from the acquired AmeriServ business.
LIQUIDITY AND CAPITAL RESOURCES
Capital resources are expected to be sufficient to support ongoing business
needs as well as activities to integrate acquisitions. These resources include
cash provided by operating activities, capital lease financing of capital
expenditures, cash and cash equivalents on hand and an available revolving
credit facility of approximately $137 million at March 15, 1998.
Fiscal 1997 compared to Fiscal 1996
Net cash provided by operating activities increased $46.0 million to $50.2
million in 1997. Net cash provided by operating activities in 1997 included
$13.6 million in cash outflows for bridge financing fees, commitment fees
related to the accounts receivable sale program and other indirect costs
associated with the PFS acquisition and $13.8 million of cash extraordinary
loss. Excluding these nonrecurring items, net cash provided by operating
activities was $77.5 million in 1997, compared to $4.2 million in 1996. This
increase reflects favorable working capital changes due primarily to timing of
payments as well as the cash earnings generated by the PFS operations, partially
offset by higher interest payments.
14
<PAGE> 16
Unusual charges in 1997 also included $12.4 million in noncash impairment
of property, equipment and other assets and $13.4 million in restructuring
(exit) cost accruals for future lease terminations and employee severance. These
exit costs represent cash outflows in future periods.
Net cash used for investing activities increased $774.7 million to $880.1
million in 1997 reflecting the $841 million acquisition of PFS. Capital
expenditures increased $10.6 million to $23.3 million in 1997, driven by the
impact of the acquisition of PFS as well as additional warehouse capacity. Cash
capital expenditures (excluding capital leases) are expected to approximate $50
million in 1998, including spending related to new computer systems, warehouse
equipment purchases and leasehold improvements.
Net cash provided by financing activities in 1997 reflected debt and equity
financing transactions to support both the acquisition of PFS and future capital
needs and to refinance existing borrowings. The debt transactions included the
Company's issuance in July 1997 of $500 million of 10 1/8% Senior Subordinated
Notes due 2007 and $205 million in term loans. The term loans were repaid in
October 1997 with proceeds from the Company's issuance of $350 million of 8 7/8%
Senior Notes due 2006. In July 1997, NEHC received $55 million in proceeds upon
issuance of 12 3/8% Senior Discount Notes due 2007, and repaid subordinated
loans due 2006 with a carrying value of $26.8 million. Also included in net cash
provided by financing activities is $225 million in proceeds from the initial
sale under the Company's accounts receivable program described above and $115.0
million in proceeds from issuance of preferred stock and warrants by NEHC.
Fiscal 1996 compared to Fiscal 1995
Net cash provided by operating activities decreased $.4 million to $4.2
million in 1996. This change reflected an increase in working capital required
to service the customer base of the acquired AmeriServ business, partially
offset by an increase in cash earnings driven by the AmeriServ acquisition.
Net cash used for investing activities increased $99.8 million to $105.4
million in 1996 reflecting the $92.9 million acquisition of AmeriServ. Capital
expenditures increased $10.2 million to $12.7 million in 1996 as a result of
expenditures to modify and expand certain distribution centers.
Net cash provided by financing activities in 1996 reflected a net increase
of $116.7 million in borrowings under credit facilities and $30.0 million in
proceeds from issuance of subordinated loans and warrants to fund the
acquisition of AmeriServ and refinance existing borrowings.
SEASONALITY AND INFLATION
Historically, the Company'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 is 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 experienced significant adverse
effects of food price deflation in recent years.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Integration of Acquisitions
The Company's acquisition of PFS presents an opportunity to significantly
improve operating efficiencies of the combined business by eliminating redundant
facilities, achieving warehouse economies of scale with expanded or new and
larger facilities and improving truck fleet utilization through increased
deliveries per route. The impairment and restructuring charges recorded in 1997
primarily reflect actions designed to begin taking advantage of these
synergistic opportunities.
While the Company anticipates significant cost efficiencies upon the
completion of these and other future actions under consideration, future results
of operations will be negatively impacted by integration costs,
15
<PAGE> 17
including start-up costs of new warehouse facilities, employee hiring and
training expenses and the costs of other operating inefficiencies associated
with the consolidation activities. These future cash consolidation costs, for
the actions that have been decided upon to date, are expected to approximate $20
million over the remaining period of the consolidation activities, which are
expected to be completed in mid-1999. While management believes it has the
resources to meet its objectives, the ultimate level and timing of cost
efficiencies is subject to the organization's ability to manage through the
complexities of the consolidation and respond to unanticipated events.
While the Company anticipates significant cost efficiencies upon the
consolidation of the operations of the Company and ProSource, activities to
integrate and consolidate ProSource are expected to result in additional noncash
and cash impairment, restructuring, new warehouse start-up and other expenses
associated with the reconfiguration of the distribution network and operations
support infrastructure. The Company has not yet quantified such expenses.
Computer Systems and Potential Year 2000 Issue
An important component of the consolidation effort is the replacement of
most existing management information systems with a new software platform and
hardware configuration. The new computer system will complement the
consolidation effort by providing the flexibility to support the varied
processes of the combined business as well as allowing greater centralization of
support functions. The Company expects to incur significant internal staff costs
as well as significant consulting and other expenditures to implement the new
system. Another critical benefit of the new system is that it replaces
applications that are not Year 2000 compliant. The implementation of the new
system is underway and expected to be completed in mid-1999. Because of the Year
2000 issue, a delay in the implementation of the new system could have a
significant adverse impact on the Company's operations. Further, the Company is
working with vendors and customers who are at various stages in analyzing this
issue. There can be no assurance that the systems of other companies on which
the Company's systems rely on or interface with will be timely converted. While
the cost to implement the new system is significant ($40-50 million), the
anticipated expenses to resolve Year 2000 issues with other peripheral systems
used by the Company are not expected to be significant.
Industry and Customer Risk
The Company's future results are subject to economic and competitive risks
and uncertainties in the chain restaurant and food service industries. Further,
although the Company provides foodservice distribution to Tricon under a
five-year exclusive distribution agreement effective July 1997, the Company is
subject to the inherent risk of customer concentration, as approximately 40% of
net sales are to Tricon-owned restaurants. Tricon is actively engaged in the
sale to franchisees of restaurants covered by the distribution agreement. While
the distribution agreement provides that prior to certain such sales, such
franchisees will enter into distribution agreements on substantially similar
terms, there can be no assurance that the transition from company-owned to
franchised status will not affect the Company's results. In addition, the
Company's future results may be impacted by the planned closure of poorly
performing restaurants announced by Tricon in December 1997.
Risk of Leverage
NEHC and the Company are and will continue to be highly leveraged as a
result of the indebtedness incurred in connection with the acquisition of PFS.
The ability of NEHC and the Company to meet interest payments, refinance the
debt or ultimately repay the debt is subject to the risks and uncertainties
discussed above.
For additional factors that could cause NEHC's actual results to differ
materially from expected and historical results, see the "Risk Factors" set
forth in NEHC's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission on November 10, 1997.
16
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are attached to and are
hereby incorporated into this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 27, 1998,
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................... 41 Director, Chairman and Chief Executive Officer
John R. Evans.................... 58 Director and Vice Chairman
Raymond E. Marshall.............. 48 Director, President and Treasurer
Daniel W. Crippen................ 46 Director and Executive Vice President
Gunnar E. Klintberg.............. 49 Director and Assistant Secretary
A. Petter Ostberg................ 36 Vice President
Diana M. Moog.................... 38 Senior Vice President and Chief Financial Officer
Leif F. Onarheim................. 62 Director
Peter T. Grauer.................. 51 Director
Benoit Jamar..................... 42 Director
</TABLE>
John V. Holten. Mr. Holten has served as Chairman and Chief Executive
Officer of Holberg since its inception in 1986 and of NEHC since its inception
in 1996. Mr. Holten was Managing Director of DnC Capital Corporation, a merchant
banking firm in New York City, from 1984 to 1986. Mr. Holten has been a member
of the NEHC Board since 1996, and the AmeriServe Board since 1986.
John R. Evans. 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. Mr. Evans serves on the Board of Directors of each of M&I Northern Bank,
Aerial Company, Inc., and AFI Inc. Mr. Evans has been an officer of NEHC and a
member of the NEHC Board since 1996, and an officer of AmeriServe and a member
of its Board since 1990.
Raymond E. Marshall. Mr. Marshall has 28 years of food service
distribution experience, including 24 years with AmeriServe or its predecessors.
Mr. Marshall served as President and Chief Executive Officer of NEBCO from 1980
to 1989. Mr. Marshall has served as President of AmeriServe since 1990. Mr.
Marshall serves on the Board of Directors of Independent Distributors of America
("IDA"). Mr. Marshall has been an officer of NEHC and a member of the NEHC Board
since 1996, and a member of the AmeriServe Board since 1986.
Daniel W. Crippen. Mr. Crippen has spent the last 21 years in the
foodservice distribution business beginning with The Harry H. Post Company. In
addition, Mr. Crippen was appointed to his present position as Executive Vice
President of AmeriServe in 1997. He is Chairman of the Board of Directors of
IDA. Mr. Crippen has been an officer of NEHC and a member of the NEHC Board
since 1997, and an officer of AmeriServe and a member of its Board since 1997.
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 City, from 1983 to 1986. Mr.
Klintberg has been an officer of NEHC and a member of the NEHC Board since 1996,
and an officer of AmeriServe and its Board since 1986.
17
<PAGE> 19
A. Petter Ostberg. Mr. Ostberg was appointed Vice President of NEHC in
1996. He joined Holberg in 1994 and was appointed as Senior Vice President and
Chief Financial Officer of Holberg 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.
Diana M. Moog. Ms. Moog was named Sr. Vice President and Chief Financial
Officer in January 1998. Ms. Moog joined AmeriServe as Senior Vice President and
Treasurer at the time of its acquisition of PFS in 1997. Previously, she had
served as Vice President, Controller of PFS. Ms. Moog had held various positions
at PepsiCo, Inc. from 1989 to 1997 including Manager, Financial Reporting for
PepsiCo and Assistant Controller, Frito-Lay.
Leif F. Onarheim. In 1996, Mr. Onarheim was elected chairman of NHO, the
country's largest association of business and industry. From 1992 to 1997, Mr.
Onarheim served as President of Norway's largest business school and was Vice
Chairman of the Board of the Norwegian School of Management. 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. 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 of Wilhelm Wihelmsen Ltd. (shipping). He has been a
director of NEHC since 1996, a director of AmeriServe since 1986, and a director
of Holberg since 1997.
Peter T. Grauer. Mr. Grauer has been a Managing Director of Donaldson,
Lufkin & Jenrette Merchant Banking, Inc. since September 1992. Mr. Grauer serves
on the Board of Directors of each of Doane Products Co. and Total Renal Care,
Inc. Mr. Grauer has been a member of the NEHC Board since January 1996, and the
AmeriServe Board since January 1996.
Benoit Jamar. Mr. Jamar is a Managing Director in the Mergers &
Acquisitions group at Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC"). He joined DLJSC in 1989. Mr. Jamar has been a member of the NEHC
Board since 1997, and the AmeriServe Board since 1997.
The directors of NEHC are elected annually and each serves until his
successor has been elected and qualified, or until his or her death, resignation
or removal. The officers of NEHC are elected by the Board of Directors, and each
serves until his or her successor is elected and qualified, or until his or her
death, resignation or removal.
ITEM 11. EXECUTIVE COMPENSATION
NEHC has no paid employees. The following table sets forth the information
for the three most recently completed fiscal years 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.
18
<PAGE> 20
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER
ANNUAL ALL OTHER
FISCAL SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($) ($)(2)
--------------------------- ------ ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John V. Holten....................... 1997 -- -- -- --
Chairman and Chief Executive
Officer 1996 -- -- -- --
1995 -- -- -- --
Raymond E. Marshall.................. 1997 301,375 500,000(3) 191,021(4) 11,600
President and Treasurer 1996 273,793 265,000(5) -- 11,600
1995 212,492 109,200 -- 10,400
Daniel W. Crippen.................... 1997 283,942 500,000(3) -- 9,659
Executive Vice President 1996 246,764 265,076 -- 9,659
1995 202,538 129,464 -- 9,788
Donald J. Rogers(6).................. 1997 190,811 350,000(3) 63,662(4) 11,600
Chief Financial Officer 1996 158,629 125,000(5) 33,000(7) 11,600
and Vice President 1995 115,671 45,000 33,000(7) 10,400
John R. Evans........................ 1997 260,000 -- -- 4,800
Vice Chairman 1996 263,000 -- -- 4,800
1995 262,832 -- -- 4,800
</TABLE>
- ---------------
(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 AmeriServe for
services provided during 1997 in connection with the PFS acquisition.
(4) These amounts were paid to Messrs. Marshall and Rogers to reimburse
relocation expenses.
(5) These amounts include discretionary cash bonuses paid by Holberg for
services provided during 1995 in connection with the acquisition of
AmeriServ.
(6) As of January 5, 1998, Mr. Rogers is no longer an employee of NEHC or the
Company.
(7) This amount reflects forgiveness by the Company of a portion of a $100,000
relocation assistance loan.
The Company pays 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.
DIRECTOR COMPENSATION
Directors of NEHC do not receive compensation for serving on NEHC's Board
of Directors or any committee thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee in fiscal 1997. Executive
officer compensation is determined by the Board of Directors of the Company. The
Company intends to form a compensation committee in fiscal 1998. The members of
such committee have not yet been determined. During fiscal 1997, no executive
officer of NEHC served as a member of the compensation committee of another
entity.
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 January 1, 1999, with default annual
renewals, and an annual base salary of $285,000,
19
<PAGE> 21
which will increase for 1998 to $315,000, plus an annual bonus to be determined
by the Board of Directors after considering the Company's Reported Operating
Profit (as defined in the employment agreement), 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 27, 1998,
regarding the beneficial ownership of the common stock of NEHC by (i) each
person known to NEHC to own beneficially more than 5% of any class of the common
stock of NEHC, (ii) each director of NEHC, (iii) each Named Executive Officer of
NEHC and (iv) all executive officers and directors of NEHC as a group. All
information with respect to beneficial ownership has been furnished to NEHC 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>
NED.......................................... 6,508 shares of Class A Common Stock 100%(+)
1,733 shares of Class B Common Stock 100%(+)
Orkla........................................ (1)
DLJ Merchant Banking Partners, L.P. and Warrants to purchase 3,540 shares of
certain of its affiliates ("DLJMB")........ Class A Common Stock 30%(++)
Warrants to purchase 370 shares of
Class B Common Stock 30%(++)
Holberg...................................... Warrants to purchase 753 shares of
Class A Common Stock 6%(++)
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)
Diana M. Moog................................ --
</TABLE>
- ---------------
(+) Computed with respect to the currently outstanding shares of Class A Common
Stock of NEHC (the "Class A Common Stock") and Class B Common Stock of NEHC
(the "Class B Common Stock"), and without taking into account any options or
convertible interests of NEHC.
(++) Computed with respect to the currently outstanding shares of Class A Common
Stock and Class B Common Stock of NEHC and the warrants held by DLJMB and
Holberg, but without taking into account any other options or convertible
interests of NEHC. On January 6, 1998, Holberg consummated a repurchase
from DLJMB and affiliates of (i) 49% of the Junior Preferred Stock acquired
by DLJMB and affiliates in connection with the PFS Acquisition (see Item
13. "Certain Relationships and Related Party Transactions"), and (ii)
warrants conferring the right to acquire 753.30 shares of the Class A
Common Stock.
(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
20
<PAGE> 22
interest in the common stock of NED of approximately 75% through certain
preferred stock convertible 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, dated as of July 11, 1997, among DLJMB, NEHC,
NED, Holberg, Holberg Incorporated ("Incorporated") and Orkla.
(2) Mr. Holten owns all of the outstanding common stock of Incorporated,
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 DLJSC, 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DLJMB, an affiliate of DLJSC, and certain of its affiliates beneficially
own approximately 30% of the common stock of NEHC. Mr. Grauer, a principal of
DLJSC, is a member of the Board of Directors of NEHC and the Company; Mr. Jamar,
a principal of DLJSC, is a member of the Board of Directors of NEHC and the
Company. Holberg indirectly owns a majority of the issued and outstanding
capital stock of NEHC. See "Security Ownership of Certain Beneficial Owners and
Management." Subject to the rights of holders of Preferred Stock, Holberg and
affiliates of DLJSC collectively have sufficient voting power to elect the
entire Board of Directors of each of NEHC, and through NEHC, the Company.
In connection with the PFS Acquisition, DLJSC received a merger advisory
fee of $4.0 million in cash from the Company upon consummation of the PFS
Acquisition and related financings. An affiliate of DLJ also received customary
fees in connection with their commitment to finance a portion of the purchase
price for PFS, in the event that the Company could not arrange alternative
financing prior to the closing.
In connection with the Credit Facility, DLJ Capital Funding, Inc., an
affiliate of DLJSC, acted as documentation agent (see note 6 to the Consolidated
Financial Statements) for which it received certain customary fees and expenses.
21
<PAGE> 23
DLJSC has acted as an initial purchaser in connection with each of the
offerings of the Senior Discount Notes, the Senior Subordinated Notes, the
Senior Notes and the Preferred Stock for which it received certain customary
underwriting fees and discounts.
In connection with the ProSource Acquisition, it is expected that DLJSC
will receive a merger advisory fee from the Company, at such time as the
acquisition is consummated.
Holberg has received customary investment banking and advisory fees from
the Company and its affiliates in connection with certain prior transactions,
including a $4.0 million merger advisory fee in connection with the PFS
Acquisition. Holberg also received fees of $1.0 million in connection with the
offering of the Senior Notes.
Holberg also receives an annual management fee from the Company of $4.0
million, commencing in 1997. In addition, in connection with the ProSource
Acquisition, it is expected that Holberg will receive a merger advisory fee from
the Company, at such time as the acquisition is consummated.
A portion of the net proceeds of the Preferred Stock offering was used to
finance the repurchase cost of the Senior Preferred Stock and the Junior
Preferred Stock held by Holberg and certain affiliates of DLJSC and the Junior
Non-Convertible Preferred Stock held by NED.
With the January 1996 acquisition of AmeriServ, the Company acquired a
minority interest in Post Holdings Company ("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 and NEHC's
Executive Vice President, 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.
In connection with the PFS 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, then a wholly-owned subsidiary of the Company; (iv)
Post's $10.6 million of outstanding indebtedness was refinanced; and (v)
AmeriServ's investment in NEHC preferred stock of $2.5 million was cancelled.
In connection with the PFS Acquisition, NEHC contributed $130.0 million of
cash to the Company. This contribution was financed in part through NEHC's sale
of the Senior Discount Notes, Senior Preferred Stock and the Junior Preferred
Stock, as well as warrants to purchase NEHC Class A Common Stock, to affiliates
of DLJSC. On January 6, 1998, Holberg purchased from DLJ Merchant Banking
Partners II, L.P. and certain of its affiliates ("DLJMBII") warrants to purchase
753.30 shares of Class A Common Stock, which had originally been issued to
DLJMBII in connection with the PFS Acquisition in July 1997.
In addition to the equity contribution to AmeriServe, the proceeds from the
offering of the Senior Discount Notes were used to redeem the 12 1/2% Senior
Secured Notes of NEHC (the "Old NEHC Notes"), with an initial purchase amount of
$22.0 million beneficially owned by DLJMB and Old NEHC Notes, with an initial
principal amount of $8.0 million held by Orkla. The respective accrued principal
and interest of the Old NEHC Notes held by DLJMB and Orkla as of June 28, 1997
were $26.2 million and $9.5 million, respectively.
In connection with the PFS Acquisition, NEHC contributed to the Company an
aggregate principal amount of $45.0 million of outstanding non-convertible
preferred stock of the Company.
Prior to the PFS Acquisition, HWPI was owned 55% by Holberg and 45% by the
Company. In connection with the PFS Acquisition, NEHC purchased for $1.5 million
Holberg's 55% interest in HWPI. HWPI's sole operations consist of the ownership
of two distribution centers, located in Omaha, Nebraska and Waukesha, Wisconsin,
occupied by the Company.
22
<PAGE> 24
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.
The Company and Holberg also periodically engage in bi-lateral
interest-bearing loans and advances. (See Note 12 to the Consolidated Financial
Statements.)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements.
Report of Independent Auditors
Audited Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial statement schedule.
Schedule II -- Valuation and Qualifying Accounts
3. Exhibits:
<TABLE>
<C> <S>
2.1 Asset Purchase Agreement between PepsiCo, Inc. and Nebco
Evans Holding Company (incorporated by reference to Exhibit
2.2 to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
2.2 Agreement and Plan of Merger, dated as of January 29, 1998,
by and among AmeriServe Food Distribution, Inc., Steamboat
Acquisition Corp. and ProSource, Inc. (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K, dated January 29, 1998).
2.3 Voting Agreement, dated as of January 29, 1998, by and among
AmeriServe Food Distribution, Inc., Steamboat Acquisition
Corp. and Onex DHC LLC and certain of its affiliates
(incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K, dated January 29,
1998).
3.1 Restated Certificate of Incorporation of NEHC.*
3.2 By-Laws of the NEHC (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
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 (incorporated by reference to Exhibit
4.1 to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
4.2 Form of New Senior Discount Note (incorporated by reference
to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-4, No. 333-33223 filed August 8, 1997).
10.1 Purchase Agreement, by and among NEHC and Donaldson, Lufkin
& Jenrette Securities Corporation, dated as of February 27,
1998.*
10.2 Registration Rights Agreement, dated as of March 6, 1998, by
and among NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation.*
10.3 Purchase Agreement, by and among NEHC and Donaldson, Lufkin
& Jenrette Securities Corporation, dated as of July 9, 1997
(incorporated by reference to Exhibit 2.1 to the
Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
</TABLE>
23
<PAGE> 25
<TABLE>
<C> <S>
10.4 Registration Rights Agreement, dated as of July 11, 1997, by and among NEHC and Donaldson, Lufkin &
Jenrette Securities Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's
Registration Statement on Form S-4, No. 333-33223 filed August 8, 1997).
10.5 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 (incorporated by reference to Exhibit 10.2 to the Registrant's Registration
Statement on Form S-4, No. 333-33223 filed August 8, 1997).
10.6 First Amendment to Second Amended and Restated Credit Agreement, dated as of October 7, 1997.*
10.7 Second Amendment to Second Amended and Restated Credit Agreement, dated as of December 22, 1997
(incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, dated December
28, 1997).
10.8 Securities Purchase Agreement, dated as of July 11, 1997, by and among NEHC, Holberg Industries, Inc. and
certain DLJ Merchant Banking entities listed as parties thereto (incorporated by reference to Exhibit
10.3 to the Registrant's Registration Statement on Form S-4, No. 333-33223 filed August 8, 1997).
10.9 Amended and Restated Investors Agreement, dated as of July 11, 1997 among the Registrant, certain DLJ
Merchant Banking entities listed as parties thereto, Nebco Evans Distributors, Inc., Holberg Industries,
Inc., Holberg Incorporated and Orkla ASA.*
10.10 Sales and Distribution Agreement dated as of May 6, 1997 by and among PFS, Pizza Hut, Inc., Taco Bell
Corp., Kentucky Fried Chicken Corporation and Kentucky Fried Chicken of California, Inc. (the
"Distribution Agreement") (incorporated by reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-4, No. 333-33223 filed August 8, 1997).
10.11 Amendment Agreement, dated May 29, 1997, to the Distribution Agreement.*
21 Subsidiaries of the Registrant.*
27.1 Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(b) Reports on Form 8-K.
During the fiscal first quarter of 1998, NEHC made the following filings
on Form 8-K:
1. Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 31, 1997 disclosing, under Item 5, the merger of
AmeriServe and Post with and into AmeriServ.
2. Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 30, 1998, disclosing, under Item 5, the ProSource
Acquisition.
3. Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 16, 1998, disclosing, under Item 5, the Offering and
certain fourth quarter results relating to ProSource.
4. Amendment to the Current Report on Form 8-K/A filed with the Securities
and Exchange Commission on March 20, 1998, disclosing, under Item 5,
certain fourth quarter results relating to ProSource and, under Item 9,
the Offering.
24
<PAGE> 26
NEBCO EVANS HOLDING COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 27
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 (NEHC) as of December 27, 1997 and December 28, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 27, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the NEHC's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NEHC at
December 27, 1997 and December 28, 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 27, 1997, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
March 24, 1998
F-2
<PAGE> 28
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 231,450 $ 2,224
Accounts receivable....................................... 43,625 85,810
Undivided interest in accounts receivable trust........... 154,371 --
Allowance for doubtful accounts........................... (15,566) (5,336)
Inventories............................................... 150,148 52,246
Due from affiliate........................................ 8,066 3,793
Prepaid expenses and other current assets................. 21,871 8,437
---------- --------
Total current assets.............................. 593,965 147,174
Property and equipment, net................................. 142,138 35,772
Other assets:
Intangible assets, net.................................... 737,870 126,212
Note receivable from Holberg.............................. 3,516 3,516
Other noncurrent assets................................... 1,301 2,272
---------- --------
$1,478,790 $314,946
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 5,127 $ 3,389
Accounts payable.......................................... 345,603 98,700
Accrued liabilities....................................... 101,219 19,276
---------- --------
Total current liabilities......................... 451,949 121,365
Long-term debt.............................................. 943,609 136,196
Subordinated loans.......................................... -- 24,859
Other noncurrent liabilities................................ 38,430 14,007
Commitments Stockholders' equity:
13 1/2% Senior exchangeable preferred stock, $.01 par
value per share; 5,000,000 shares authorized, 2,400,000
shares outstanding..................................... 59,186 --
8% Senior preferred stock, $.01 par value per share; 300
shares authorized, 235 shares outstanding, $2,374
liquidation value...................................... 2,350 2,350
15% Junior exchangeable preferred stock, $.01 par value
per share; 5,000,000 shares authorized, 2,200,000
shares outstanding..................................... 56,819 --
Junior nonconvertible preferred stock, $.01 par value per
share; 600 shares authorized and outstanding, $16,875
liquidation value...................................... 15,000 15,000
Class A voting common stock, $.01 par value per share;
30,000 shares authorized, 6,508 shares outstanding..... -- --
Class B nonvoting common stock, $.01 par value per share;
20,000 shares authorized, 1,733 shares outstanding..... -- --
Additional paid-in capital................................ 4,889 7,522
Accumulated deficit....................................... (93,442) (6,353)
---------- --------
Total stockholders' equity........................ 44,802 18,519
---------- --------
$1,478,790 $314,946
========== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 29
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $3,508,332 $1,389,601 $400,017
Cost of goods sold.................................... 3,159,357 1,249,135 359,046
---------- ---------- --------
Gross profit.......................................... 348,975 140,466 40,971
Distribution, selling and administrative expenses..... 289,679 117,581 35,396
Amortization of intangible assets..................... 16,830 4,849 1,299
Impairment, restructuring and other unusual charges... 52,449 -- --
---------- ---------- --------
Operating income (loss)............................... (9,983) 18,036 4,276
Other income (expense):
Interest expense, net............................... (54,016) (16,423) (3,936)
Loss on sale of accounts receivable................. (6,757) -- --
Interest income -- affiliates....................... 632 528 749
Minority interest................................... -- (2,345) --
---------- ---------- --------
(60,141) (18,240) (3,187)
---------- ---------- --------
Income (loss) before income taxes and extraordinary
items............................................... (70,124) (204) 1,089
Provision for income taxes............................ 1,030 1,300 583
---------- ---------- --------
Income (loss) before extraordinary items.............. (71,154) (1,504) 506
Extraordinary loss.................................... 15,935 -- --
---------- ---------- --------
Net income (loss)..................................... $ (87,089) $ (1,504) $ 506
========== ========== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 30
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
8%
SENIOR JUNIOR
13 1/2% PREFERRED 15% PREFERRED
SENIOR STOCK JUNIOR STOCK ADDITIONAL
PREFERRED $10,000 PREFERRED $25,000 PREFERRED COMMON PAID-IN ACCUMULATED
STOCK SERIES STOCK SERIES STOCK STOCK CAPITAL DEFICIT
--------- --------- --------- --------- --------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994...................... $ -- $ -- $ -- $ -- $ 15,000 $ 6 $ 4,852 $ (2,653)
Dividends:
Preferred stock......... -- -- -- -- -- -- -- (2,494)
Common stock............ -- -- -- -- -- -- (6,086) (208)
Contribution of capital... -- -- -- -- -- -- 1,234 --
Net income................ -- -- -- -- -- -- -- 506
------- ------ ------- ------- -------- --- ------- --------
BALANCE, DECEMBER 30,
1995...................... -- -- -- -- 15,000 6 -- (4,849)
Formation of NEHC......... -- -- -- 15,000 (15,000) (6) 6 --
Issuance of 235 shares of
preferred stock......... -- 2,350 -- -- -- -- -- --
Issuance of common stock
warrants................ -- -- -- -- -- -- 7,516 --
Net loss.................. -- -- -- -- -- -- -- (1,504)
------- ------ ------- ------- -------- --- ------- --------
BALANCE, DECEMBER 28,
1996...................... -- 2,350 -- 15,000 -- -- 7,522 (6,353)
Issuance of preferred
stock and warrants...... 57,300 -- 55,000 -- -- -- 2,700 --
Preferred stock
dividends............... 1,785 -- 1,819 -- -- -- (3,604) --
Preferred stock
accretion............... 101 -- -- -- -- -- (101) --
Loss on transfer of
subsidiary from Holberg
to NEHC................. -- -- -- -- -- -- (1,628) --
Net loss.................. -- -- -- -- -- -- -- (87,089)
------- ------ ------- ------- -------- --- ------- --------
BALANCE, DECEMBER 27,
1997...................... $59,186 $2,350 $56,819 $15,000 $ -- $-- $ 4,889 $(93,442)
======= ====== ======= ======= ======== === ======= ========
<CAPTION>
TOTAL
-------
<S> <C>
BALANCE, DECEMBER 31,
1994...................... $17,205
Dividends:
Preferred stock......... (2,494)
Common stock............ (6,294)
Contribution of capital... 1,234
Net income................ 506
-------
BALANCE, DECEMBER 30,
1995...................... 10,157
Formation of NEHC......... --
Issuance of 235 shares of
preferred stock......... 2,350
Issuance of common stock
warrants................ 7,516
Net loss.................. (1,504)
-------
BALANCE, DECEMBER 28,
1996...................... 18,519
Issuance of preferred
stock and warrants...... 115,000
Preferred stock
dividends............... --
Preferred stock
accretion............... --
Loss on transfer of
subsidiary from Holberg
to NEHC................. (1,628)
Net loss.................. (87,089)
-------
BALANCE, DECEMBER 27,
1997...................... $44,802
=======
</TABLE>
See accompanying notes.
F-5
<PAGE> 31
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (87,089) $ (1,504) $ 506
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 34,493 10,372 2,762
Gain on sale of property.................................. -- (4,652) --
Interest accreted on subordinated loans................... 5,513 4,193 --
Minority interest in subsidiary........................... -- 2,345 --
Impairment of property, equipment and other assets........ 12,404 -- --
Extraordinary loss -- noncash portion..................... 2,156 -- --
Contribution of capital................................... -- -- 1,234
Other..................................................... -- -- 179
Changes in assets and liabilities, net of acquisitions:
Accounts receivable..................................... 151,390 (5,510) (1,645)
Undivided interest in accounts receivable trust......... (154,371) -- --
Inventories............................................. (14,090) (5,657) (5)
Prepaid expenses and other current assets............... (13,578) 823 (3,070)
Accounts payable........................................ 74,663 7,030 5,035
Accrued liabilities..................................... 42,908 (7,083) (393)
Noncurrent liabilities.................................. (4,402) 1,669 --
Other................................................... 182 2,125 (98)
---------- -------- -------
Net cash provided by operating activities................... 50,179 4,151 4,505
---------- -------- -------
INVESTING ACTIVITIES
Businesses acquired, net of cash acquired................... (851,019) (96,765) --
Capital expenditures........................................ (23,300) (12,701) (2,496)
Proceeds from disposals of property and equipment........... -- 9,699 22
Amounts received from affiliate............................. 20,485 11,121 28,969
Amounts paid to affiliate................................... (23,878) (14,291) (30,659)
Net increase in deposits with affiliates.................... (2,355) (2,480) (315)
Expenditures for intangible and other assets................ -- -- (1,095)
---------- -------- -------
Net cash used in investing activities....................... (880,067) (105,417) (5,574)
---------- -------- -------
FINANCING ACTIVITIES
Proceeds from issuance of subordinated loans................ -- 22,484 --
Proceeds from issuance of warrants.......................... 2,700 7,516 --
Proceeds from issuance of long-term debt.................... 1,110,000 -- --
Proceeds from sale of accounts receivable................... 225,000 -- --
Proceeds from issuance of preferred stock................... 112,300 -- --
Debt financing fees incurred................................ (26,325) -- --
Net increase (decrease) in borrowings under revolving line
of credit................................................. (77,374) 116,708 4,635
Repayments of long-term debt................................ (287,187) (43,793) (4,016)
---------- -------- -------
Net cash provided by financing activities................... 1,059,114 102,915 619
---------- -------- -------
Net increase (decrease) in cash and cash equivalents........ 229,226 1,649 (450)
Cash and cash equivalents at beginning of year.............. 2,224 575 1,025
---------- -------- -------
Cash and cash equivalents at end of year.................... $ 231,450 $ 2,224 $ 575
========== ======== =======
Supplemental cash flow information:
Cash paid during the year for:
Interest................................................ $ 24,468 $ 10,683 $ 3,622
Income taxes, net of refunds............................ 2,668 1,256 322
Businesses acquired:
Fair value of assets acquired........................... $1,102,103 $210,357 $ --
Cash paid............................................... (851,019) (96,765) --
---------- -------- -------
Liabilities assumed..................................... $ 251,084 $113,592 $ --
========== ======== =======
Supplemental noncash investing and financing activities:
Payment of dividends to reduce deposits and advances with
Holberg and affiliate................................... -- -- (8,788)
Property and equipment purchased with capital leases
(included in long-term debt)............................ $ 22,029 $ 13,363 $ --
</TABLE>
See accompanying notes.
F-6
<PAGE> 32
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1997
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Nebco Evans Holding Company (NEHC) is the parent company of AmeriServe Food
Distribution, Inc. (the Company) and Holberg Warehouse Properties, Inc. (HWPI).
The Company accounts for substantially all of NEHC's assets and operations.
HWPI's operations consist entirely of the ownership of two warehouse facilities
occupied by the Company. The Company is a foodservice distributor specializing
in distribution to chain restaurants. The Company distributes a wide variety of
food items as well as paper goods, cleaning and other supplies and equipment.
The Company's major customers are franchisers and/or franchisees in the
Pizza Hut, Taco Bell, KFC, Arby's, Burger King, Wendy's and Dairy Queen
restaurant systems. The Company services approximately 25,500 restaurants, the
vast majority of which are in the United States. The Company also operates
foodservice distribution businesses in Canada and Mexico, which are not material
to the consolidated financial statements of the Company.
NEHC is an indirect subsidiary of Holberg Industries, Inc. (Holberg).
Holberg is a privately held 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 NEHC and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Year
NEHC has a 52- or 53-week fiscal year ending on the last Saturday of the
calendar year. The fiscal years ended December 27, 1997 (fiscal 1997), December
28, 1996 (fiscal 1996) and December 30, 1995 (fiscal 1995) are 52-week periods.
Cash and Cash Equivalents
Cash equivalents represent funds temporarily invested (with original
maturities not exceeding three months) as part of NEHC's and the Company's
active management of working capital. Cash and cash equivalents are stated at
cost, which approximates market value.
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 net realizable
value.
Property and Equipment
Property and equipment are stated at cost, except for assets that have been
impaired. 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. Amortization of
leasehold improvements and assets under capital
F-7
<PAGE> 33
leases is included in depreciation expense. Useful lives for amortization and
depreciation calculations are as follows:
<TABLE>
<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>
Goodwill and Other Intangible Assets
Costs in excess of the net identifiable assets of businesses acquired are
amortized on a straight-line basis over 40 years. Assembled workforce, 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.
Impairment of Long-Lived Assets
Property and equipment, goodwill and other intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected undiscounted
cash flows is less than the carrying value of the related asset or group of
assets, a loss will be recognized for the difference between the fair value and
carrying value of the asset or group of assets. Such analyses necessarily
involve significant judgment.
Computer Software
Costs of computer software developed or obtained for internal use are
capitalized and amortized on a straight-line basis over the estimated useful
life of the software (generally 3-8 years). Business process reengineering costs
associated with implementation of new software are expensed as incurred.
Revenue Recognition
Revenue from the sale of products is recognized upon shipment to the
customer.
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.
Income Taxes
NEHC accounts for income taxes in accordance with Statement of Financial
Accounting Standards (Statement) No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax assets or liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as net operating loss carryforwards. Because of prior operating
losses in certain taxable entities, a valuation allowance has been established
to offset the entire amount of the net deferred tax assets.
Effective July 1997, NEHC and its subsidiaries will file consolidated
federal income tax returns. Prior to that date, NEHC and the Company were part
of the Holberg consolidated group for income tax purposes. The Company made tax
sharing payments to Holberg, under a tax sharing agreement, for those entities
within the Company's subgroup that had taxable income.
F-8
<PAGE> 34
Recently Issued Accounting Standards
Accounting standards issued in 1997 included Statement No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and losses)
as part of a full set of financial statements, and Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Statement
No. 131 establishes standards for reporting information about a company's
operating segments and related disclosures about its products, services,
geographic areas of operations and major customers. Both statements will be
adopted by NEHC in 1998. The adoption of these statements will not impact NEHC's
results of operations, cash flows or financial position.
Reclassifications
Certain amounts previously presented in the financial statements of prior
years have been reclassified to conform to the current year presentation.
2. ACQUISITIONS
On July 11, 1997, the Company acquired the U.S. and Canadian operations of
PFS, a Division of PepsiCo, Inc. (PFS), in an asset purchase transaction for
approximately $842 million in cash, including direct costs. PFS posted net sales
of $3.4 billion for the fiscal year ended December 25, 1996. Financing of the
acquisition included an equity contribution of $130 million by NEHC and other
transactions as described in Notes 6 and 7. PFS is engaged in the distribution
of food products, supplies and equipment to franchised and company-owned
restaurants in the Pizza Hut, Taco Bell and KFC systems, which were spun-off by
PepsiCo, Inc. on October 6, 1997 and are now operating as TRICON Global
Restaurants, Inc. (Tricon).
The effective date of the acquisition was June 11, 1997, the end of PFS'
second quarter. The acquisition has been accounted for under the purchase
method; accordingly, its results are included in the consolidated financial
statements from the effective date of the acquisition. 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, as
follows (in millions):
<TABLE>
<S> <C>
Accounts receivable......................................... $322.3
Inventories................................................. 83.1
Property and equipment...................................... 71.5
Goodwill.................................................... 562.7
Identifiable intangible assets.............................. 36.9
Other assets................................................ 1.4
Accounts payable............................................ (168.6)
Accrued liabilities......................................... (38.8)
Restructuring reserves...................................... (23.0)
Other noncurrent liabilities................................ (5.9)
------
$841.6
======
</TABLE>
The restructuring reserves of $23 million were included in the purchase
price allocation above in connection with the business plan to consolidate the
operations of PFS and the Company. The reserves consist principally of accruals
for costs related to the displacement of employees ($6.4 million) and lease
termination costs associated with the closures of duplicative PFS warehouses
($15.7 million). There were no material charges against the restructuring
reserves as of December 27, 1997. See Note 3 for additional discussion.
F-9
<PAGE> 35
The following unaudited pro forma results of operations for fiscal 1997 and
1996 assume the acquisition of PFS and related transactions occurred at the
beginning of each period presented (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net sales................................... $5,006,926 $4,875,479
Loss before extraordinary items............. (76,181) (69,378)
Net loss.................................... (92,115) (85,313)
</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.
On October 29, 1997, the Company acquired the stock of a food distribution
business in Mexico for approximately $8 million in cash. The business
distributes food products and supplies to franchised and company-owned
restaurants, primarily in Mexico, in Tricon's Pizza Hut and KFC systems. The
acquisition has been accounted for under the purchase method. The operating
results of the business are not material to the consolidated results of the
Company.
On January 25, 1996, the Company acquired the common and preferred stock of
AmeriServ Food Company (AmeriServ), a foodservice distributor specializing in
distribution of food products and supplies to chain restaurants. AmeriServ
reported net sales of $939.1 million for its fiscal year ended December 30,
1995. 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 by
the Company through borrowings under a new credit agreement and issuance of $30
million of preferred stock to NEHC. NEHC issued $30 million of subordinated
notes and warrants to fund the purchase of the Company's preferred stock.
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 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 year ended
December 30, 1995 assume the acquisition of AmeriServ occurred at the beginning
of the fiscal year (in thousands):
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Net sales................................................ $1,224,200
Net loss................................................. (7,134)
</TABLE>
In connection with the acquisition of AmeriServ, NEHC and the Company each
acquired a minority interest in the Harry H. Post Company (Post), also a
foodservice distributor to chain restaurants. In November 1996, the Company sold
its interest in Post to NEHC in exchange for $2.5 million in NEHC preferred
stock. Through certain transactions in 1996 and 1997, NEHC acquired the
remaining outstanding common stock of Post. In July 1997, NEHC transferred its
investment in Post to the Company in exchange for the NEHC preferred stock. The
transactions between NEHC and the Company had no impact on the consolidated
statements of operations. Post generated net sales of $119.4 million for its
fiscal year ended December 28, 1996. The results of Post are included in the
consolidated financial statements of NEHC from the AmeriServ acquisition date.
F-10
<PAGE> 36
3. IMPAIRMENT, RESTRUCTURING AND OTHER UNUSUAL CHARGES
Included in "Impairment, restructuring and other unusual charges" in the
accompanying consolidated statements of operations for fiscal 1997 are the
following (in millions):
<TABLE>
<S> <C>
Impairment of property, equipment and other assets.......... $12.4
Accrued restructuring expense, principally exit costs for
future lease terminations and employee severance.......... 13.4
One-time indirect costs incurred in connection with the PFS
acquisition, principally bridge financing fees and costs
to implement the Accounts Receivable Program (Note 7)..... 13.6
Costs incurred in integrating acquisitions, and other
unusual items............................................. 13.0
-----
$52.4
=====
</TABLE>
The noncash impairment charge and the accrued restructuring expense reflect
actions to be taken with respect to the Company's existing facilities as a
result of the PFS acquisition. During the third quarter of 1997, management
performed an extensive review of the existing and recently acquired PFS
operations with the objective of developing a business plan for the
restructuring and consolidation of the organizations. The business plan, which
was approved by the Company's Board of Directors late in the third quarter,
identified a number of actions designed to improve the efficiency and
effectiveness of the combined entity's warehouse and transportation network and
operations support infrastructure.
These actions, which are expected to be completed by mid-1999, include
construction of new strategically located warehouse facilities, closures of
certain existing warehouse facilities and expansions of others, dispositions of
property and equipment, conversion of computer systems, reductions in workforce
and relocation of the Company's headquarters from Brookfield, Wisconsin to
Dallas, Texas.
There were no material charges against the restructuring accrual as of
December 27, 1997.
The costs incurred in fiscal 1997 in integrating the AmeriServ and PFS
acquisitions included start-up costs of new warehouse facilities and employee
relocation and other expenses to realign the operations support infrastructure.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Land............................................. $ 3,833 $ 1,479
Buildings and improvements....................... 44,612 10,115
Delivery and automotive equipment................ 86,879 17,422
Warehouse equipment.............................. 11,359 4,803
Furniture, fixtures and equipment................ 17,393 12,213
Construction in progress......................... 5,538 2,412
-------- -------
169,614 48,444
Less accumulated depreciation and amortization... 27,476 12,672
-------- -------
$142,138 $35,772
======== =======
</TABLE>
F-11
<PAGE> 37
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Goodwill, less accumulated amortization of $15,849 and
$5,341................................................ $661,570 $103,877
Assembled workforce, customer lists, deferred financing
costs and other intangibles, less accumulated
amortization of $9,861 and $8,371..................... 76,300 22,335
-------- --------
$737,870 $126,212
======== ========
</TABLE>
6. LONG-TERM DEBT AND SUBORDINATED LOANS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
8 7/8% Senior Notes due 2006............................. $350,000 $ --
10 1/8% Senior Subordinated Notes due 2007............... 500,000 --
12 3/8% Senior Discount Notes due 2007................... 58,200 --
Revolving credit facilities under credit agreements...... -- 77,374
Term loans under Credit Agreement........................ -- 45,000
Other notes payable...................................... 3,493 6,034
-------- --------
911,693 128,408
Capital lease obligations (see Note 13).................. 37,043 11,177
-------- --------
948,736 139,585
Less current portion (capital lease obligations only in
1997)................................................. 5,127 3,389
-------- --------
$943,609 $136,196
======== ========
Subordinated loans......................................... $ -- $ 24,859
======== ========
</TABLE>
The weighted average interest rate on the amounts outstanding under credit
agreements at December 28, 1996 was 7.99%.
In January 1996, in connection with the AmeriServ acquisition (see Note 2),
the Company refinanced its borrowings under a new Credit Agreement. The credit
facility provided for term loans of $45 million (amended to $50 million in March
1997) and up to $85 million under a revolving credit facility (amended to $100
million in March 1997). Interest rates on these borrowings were indexed to
certain key variable rates.
Also, in January 1996, NEHC received $30 million in exchange for $22.5
million of 12 1/2% subordinated notes due 2006 and warrants, valued at $7.5
million, to purchase shares of Class A and Class B common stock (see Note 15).
Interest on the subordinated notes was accreted, increasing the carrying value.
In connection with the PFS acquisition, on July 11, 1997, the Company
issued $500 million principal amount of 10 1/8% Senior Subordinated Notes due
July 15, 2007 in a private placement not requiring registration under the
Securities Act of 1933, as amended, and entered into a new credit facility
providing for term loans totaling $205 million and a revolving credit facility
of up to $150 million that expires on June 30, 2003. A portion of the proceeds
was used to repay all outstanding borrowings of $133.8 million (including
accrued interest) under the previous Credit Agreement. A portion of the proceeds
was also used to repay outstanding borrowings of $12,557,000 under a revolving
line of credit agreement that Post had entered into with a financial
institution. The amount outstanding under Post's revolving credit facility was
$8,274,000 at December 28, 1996.
F-12
<PAGE> 38
In addition, on July 11, 1997, NEHC received $55 million in proceeds upon
issuance, in a private placement not requiring registration under the Securities
Act of 1933, as amended, of $100,387,000 principal amount of 12 3/8% Senior
Discount Notes due July 15, 2007. A portion of the proceeds was used to redeem
the 12 1/2% subordinated notes with a carrying value of $26.8 million and a
principal amount of $33.4 million (with accretion of interest).
On October 15, 1997, the Company issued $350 million principal amount of
8 7/8% Senior Notes due October 15, 2006 in a private placement not requiring
registration under the Securities Act of 1933, as amended, and used a portion of
the proceeds to repay the $205 million principal amount of term loans and the
accrued interest thereon of $1.3 million.
In connection with the early extinguishment of debt on July 11 and October
15, 1997, NEHC recorded an extraordinary loss of $15.9 million, which represents
the unamortized balance of deferred financing costs and unaccreted interest
associated with the repaid indebtedness of the Company and NEHC. Because of
NEHC's net operating loss carryforward position, the charge was recorded without
tax benefit.
Effective December 12, 1997, the Company and NEHC completed offers to
exchange all the outstanding Senior Subordinated Notes due 2007, the Senior
Notes due 2006 and the Senior Discount Notes due 2007 with new notes with
substantially identical terms that are registered under the Securities Act of
1933, as amended.
Interest on the Company's Senior Subordinated Notes and the Senior Notes
(collectively, the Notes) is payable semiannually. The Notes are fully,
unconditionally, jointly and severally guaranteed by the Company's operating
subsidiaries. The Notes contain covenants that limit the Company from incurring
additional indebtedness and issuing preferred stock, restrict dividend payments,
limit transactions with affiliates and certain other transactions. The Senior
Subordinated Notes are subordinated to all existing and future senior
indebtedness of the Company but rank equally in right of payment with any future
senior subordinated indebtedness of the Company.
Under certain provisions and covenants of the Notes issued by the Company
and the Company's Credit Agreement, the Company's ability to pay dividends is
limited. Substantially all of the Company's net assets of approximately $98
million are restricted under these provisions and covenants.
Interest on the Senior Discount Notes is accreted to the principal amount
until 2002, at which time interest is payable semiannually. The notes rank
equally to all existing and future senior indebtedness of NEHC but rank senior
to all subordinated indebtedness of NEHC. The notes are effectively subordinated
to all indebtedness of the Company.
On March 6, 1998, NEHC issued Senior Redeemable Exchangeable Preferred
Stock that is exchangeable into 11 1/4% Subordinated Exchange Debentures due
2008. See Note 17.
As of March 15, 1998, there have been no borrowings under the Company's
$150 million revolving credit facility; however, available borrowings are
reduced for letters of credit outstanding ($13.5 million at that date). A
commitment fee of .25% to .50% per annum is payable on the unused portion of the
revolving credit facility. The covenants contained in the revolving credit
facility restrict the payment of dividends, capital expenditures and certain
other transactions and require the Company to maintain leverage, fixed charge
and interest coverage ratios.
In early 1996, the Company entered into interest rate swap agreements to
modify interest on a portion of the outstanding borrowings under the Credit
Agreement. Under these agreements, the Company received variable rates and paid
fixed rates. Details of these swap agreements at December 27, 1997 and December
28, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Notional amount.................................... $60 million $60 million
Weighted average receive rate...................... 5.80% 5.63%
Weighted average pay rate.......................... 5.52% 5.52%
</TABLE>
F-13
<PAGE> 39
The swap agreements were terminated in February 1998 with a net
insignificant gain.
7. ACCOUNTS RECEIVABLE PROGRAM
In July 1997, the Company entered into a five-year Accounts Receivable
Program (the Program)to provide additional financing capacity. Under the
Program, the Company established a consolidated wholly owned subsidiary,
AmeriServe Funding Corporation (Funding), which is a special purpose
bankruptcy-remote entity that acquires, on a daily basis, substantially all of
the trade receivables generated by the Company and its subsidiaries. The
purchases by Funding are financed through the sale of the receivables to
AmeriServe Master Trust (the Trust) and the issuance of a series of certificates
by the Trust representing undivided interests in the assets of the Trust. As of
December 27, 1997, the Company had transferred $379.4 million of accounts
receivable to Funding in exchange for $225 million in cash, and an undivided
interest in the Trust of $154.4 million.
In accordance with the provisions of Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
the transactions have been recorded as a sale of receivables to a qualified
special purpose entity. The ongoing cost associated with the Program, which
represents the return to investors in the certificates, is reported in the
accompanying consolidated statements of operations as "Loss on sale of accounts
receivable." The interest rate on the certificates at December 27, 1997 was
6.94%. The Company has accounted for its investment in Funding as a
held-to-maturity security in accordance with Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
In a transaction expected to be completed in April 1998, the current series
of certificates issued by the Trust will be restructured, resulting in
additional capital to the Company under the program of approximately $50
million.
The accompanying consolidated balance sheets reflect an allowance for
doubtful accounts at December 27, 1997 that relates, in large part, to accounts
receivable representing the undivided interest in the Trust. The Company's
accounts receivable generally are unsecured.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable, investment in
accounts receivable trust, accounts payable and accrued liabilities approximate
fair value because of their short-term maturities. The carrying amounts reported
for long-term debt at December 28, 1996 approximate fair value because the
majority of the instruments carry variable rates of interest. The carrying
amounts and fair values of long-term debt at December 27, 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
8 7/8% Senior Notes.................................... $350,000 $350,000
10 1/8% Senior Subordinated Notes...................... 500,000 515,000
12 3/8% Senior Discount Notes.......................... 58,200 65,252
</TABLE>
Related party financial instruments are recorded at cost.
9. GUARANTOR SUBSIDIARIES
The Company's operating subsidiaries fully, unconditionally, jointly and
severally guarantee the Senior Subordinated Notes and the Senior Notes discussed
in Note 6.
The guarantor subsidiaries are direct or indirect wholly owned subsidiaries
of the Company. The Company and the guarantor subsidiaries conduct substantially
all of the operations of the Company and its subsidiaries on a consolidated
basis. Separate financial statements of the guarantor subsidiaries are not
separately presented because, in the opinion of management, such financial
statements are not material to investors.
F-14
<PAGE> 40
The only significant subsidiary of the Company that is not a guarantor
subsidiary is Funding, which is a wholly owned special purpose bankruptcy-remote
subsidiary. Funding has no operating revenues or expenses, and its only asset is
an undivided interest in an accounts receivable trust (the Trust -- see Note 7).
Funding's interest in the Trust is junior to the claims of the holders of
certificates issued by the Trust. Accordingly, as creditors of the Company, the
claims of the holders of the Senior Subordinated Notes and Senior Notes against
the accounts receivable held in the Trust are similarly junior to the claims of
holders of the certificates issued by the Trust.
On the first day of fiscal 1998, two of the Company's operating
subsidiaries, AmeriServ and Post, were effectively merged with and into the
Company. Accordingly, the following summarized combined financial information
(in accordance with Rule 1-02(bb) of Regulation S-X) at December 27, 1997 and
for the year then ended is for the guarantor subsidiaries of the Company
remaining after the mergers (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 7,901
Current liabilities......................................... 5,666
Noncurrent assets........................................... 52,085
Noncurrent liabilities...................................... 13,530
Net sales................................................... $135,640
Operating income............................................ 1,288
Net income.................................................. 1,027
</TABLE>
10. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal................................. $ 515 $1,100 $437
State................................... 299 200 98
Foreign................................. 95 -- --
------ ------ ----
909 1,300 535
Deferred (foreign in 1997)................ 121 -- 48
------ ------ ----
$1,030 $1,300 $583
====== ====== ====
</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 and
extraordinary loss, as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Provision (benefit) at statutory rate..... $(23,842) $ (69) $370
State income taxes, net of federal tax
benefit................................. 197 129 66
Foreign income taxes, net of federal tax
benefit................................. 143 -- --
Nondeductible goodwill.................... 891 758 167
Increase in valuation allowance........... 23,571 -- --
Other..................................... 70 482 (20)
-------- ------ ----
Provision for income taxes................ $ 1,030 $1,300 $583
======== ====== ====
</TABLE>
F-15
<PAGE> 41
The components of deferred income tax assets and liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment........................... $ -- $ 369
Intangible assets other than nondeductible
goodwill...................................... 43,980 8,499
-------- --------
Total deferred tax liabilities........... 43,980 8,868
Deferred income tax assets:
Allowances and reserves.......................... 14,658 3,516
Property and equipment........................... 4,758 --
Accrued liabilities.............................. 34,793 10,521
Federal net operating loss carryforwards......... 39,558 10,971
-------- --------
93,767 25,008
Valuation allowance for deferred tax assets...... (49,787) (16,140)
-------- --------
Total deferred tax assets................ 43,980 8,868
-------- --------
Net deferred tax asset............................. $ -- $ --
======== ========
</TABLE>
As of December 27, 1997, and, giving effect to the merger into the Company
of Post and AmeriServ, NEHC has net operating loss carryforwards of
approximately $102 million. NEHC has not yet determined whether it incurred a
change in control on July 11, 1997 under Section 382 of the Internal Revenue
Code. Under that Section, after a change of control, the amount of such net
operating loss carryforwards that may be used annually during the permitted
carryforward period is limited.
The net operating loss carryforwards will expire between 2006 and 2012.
Because of uncertainty as to whether any benefit will be realized from the use
of such losses and other deferred tax assets, a valuation reserve has been
provided to offset any deferred tax assets in excess of deferred tax
liabilities. As of the date of its acquisition by the Company, AmeriServ had net
operating losses and other deferred tax benefits (the Acquired Tax Attributes)
of $49 million, which were entirely offset by a valuation reserve. Goodwill will
be reduced to the extent of any tax benefit realized from the Acquired Tax
Attributes.
11. EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have sponsored 401(k) retirement savings
plans covering substantially all employees. The Company has matched the
contributions of participating employees in accordance with the provisions of
the plans. In August 1997, the various plans were merged into a single plan that
was enhanced as of January 1, 1998.
Under the enhanced plan, eligible employees may contribute up to 18% of
eligible compensation, subject to limits imposed by law. The Company matches 50%
of the first 4% of compensation contributed by employees and 25% of additional
amounts contributed up to 6%. The Company will make additional contributions for
eligible employees of 0.8% to 2.0% of eligible compensation, depending on years
of service. Company contributions have certain vesting schedules, with all such
contributions vesting after 5 years of service. The Company may also elect to
make a discretionary contribution that would be allocated to employees based on
a predetermined formula.
Company contributions expensed under the plans approximated $961,000,
$515,000 and $109,000 in fiscal 1997, 1996 and 1995, respectively.
12. RELATED-PARTY TRANSACTIONS
With respect to related party assets and liabilities presented in the
accompanying consolidated balance sheets, the current amounts due from/to
affiliate represent interest-bearing advances to Holberg which are
F-16
<PAGE> 42
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.
In 1997, distribution, selling and administrative expenses include
$4,000,000 in management fees to Holberg.
Prior to 1996, the Company participated in a self-insured casualty
(including workers' compensation and auto liability) and group health risk
program with an affiliate of Holberg, which determined the insurance expense to
be allocated to the Company. In fiscal 1995, the affiliate paid $1,128,000 of
casualty insurance and $378,000 of health insurance expenses of the Company.
These payments have been charged to operations and are reflected as contributed
capital in the accompanying consolidated financial statements. In connection
with the insurance program, the Company has deposits with an affiliate for
insurance collateral purposes of $4,835,000 and $2,480,000 at December 27, 1997
and December 28, 1996, respectively. These amounts are included in prepaid
expenses and other current assets in the accompanying consolidated balance
sheets.
Interest income from Holberg and an affiliate of approximately $632,000,
$528,000 and $749,000 in fiscal 1997, 1996 and 1995, respectively, represents
interest on the advances and note receivable from Holberg and interest on the
insurance deposits with an affiliate, less debt guarantee fees to Holberg of
$180,000 in 1995.
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.
13. LEASE COMMITMENTS
The Company has noncancelable commitments under both capital and long-term
operating leases, primarily for office and warehouse facilities and
transportation and office equipment. Many leases provide for rent escalations,
purchase and renewal options, contingent rentals based on miles driven and
payment of executory costs by the Company. Rent expense was approximately
$15,786,000, $15,384,000 and $5,709,000 (including contingent rentals) in fiscal
1997, 1996 and 1995, respectively.
Property and equipment include the following amounts under capital leases
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Land............................................... $ 692 $ --
Buildings and improvements......................... 6,891 --
Delivery and automotive equipment.................. 28,778 9,876
Warehouse equipment................................ 2,227 --
Furniture, fixtures and equipment.................. 3,312 3,487
------- -------
41,900 13,363
Less accumulated amortization...................... 6,456 1,831
------- -------
Property and equipment under capital leases, net... $35,444 $11,532
======= =======
</TABLE>
F-17
<PAGE> 43
The following is a schedule of aggregate future minimum lease payments
(excluding contingent rentals) required under terms of the aforementioned leases
at December 27, 1997 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING LEASES LEASES
------------------ ------- ---------
<S> <C> <C>
1998.................................................... $ 8,935 $ 13,658
1999.................................................... 8,275 13,896
2000.................................................... 7,262 12,528
2001.................................................... 6,452 12,302
2002.................................................... 5,704 11,393
Thereafter.............................................. 21,168 69,835
------- --------
Total................................................... 57,796 $133,612
========
Less amount representing interest....................... 20,753
-------
Present value of net minimum lease commitments.......... $37,043
=======
</TABLE>
14. CONCENTRATION OF CREDIT RISK
On a pro forma basis, assuming the inclusion of PFS and Post for the full
year, Tricon accounted for approximately 40% of the Company's 1997 sales. No
other customer accounted for more than 10% of 1997 pro forma sales. Tricon is
the franchiser of, and through its subsidiaries operates restaurants within, the
Pizza Hut, Taco Bell and KFC systems. One customer, a franchiser, accounted for
approximately 11% of 1996 reported net sales.
In connection with the PFS acquisition, the Company was assigned and
assumed a sales and distribution agreement dated May 1997 between PFS and the
Pizza Hut, Taco Bell and KFC businesses. The agreement provides that the Company
is the exclusive distributor of a substantial majority of products purchased by
the domestic Tricon-owned restaurants for a five-year period beginning July 12,
1997, subject to certain service performance standards. The agreement also
covers restaurants sold to certain franchisees within the five-year period.
Including sales to franchiser-owned and franchised restaurants, the
Company's sales to the following restaurant concepts as an approximate
percentage of total pro forma sales were (including PFS for all of 1997 and Post
for all of 1997 and 1996):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Pizza Hut................................................... 28% --
Taco Bell................................................... 28% --
KFC......................................................... 13% 9%
Wendy's..................................................... 11% 35%
Burger King................................................. 5% 17%
</TABLE>
15. STOCKHOLDERS' EQUITY
At December 27, 1997, the authorized capital of NEHC consisted of 5,000,000
shares of 13 1/2% senior exchangeable preferred stock at a par value of $.01 per
share; 300 shares of 8% senior convertible, nonvoting preferred stock with a
liquidation preference of $10,000 per share and cumulative dividends at a rate
of $800 per share; 5,000,000 shares of 15% junior exchangeable preferred stock
at a par value of $.01 per share; 600 shares of junior nonconvertible preferred
stock with a liquidation preference of $25,000 per share and cumulative
dividends at a rate of $1,563 per share; 30,000 shares of Class A voting common
stock at a par value of $.01 per share; and 20,000 shares of Class B nonvoting
common stock at a par value of $.01 per share. Accumulated dividends in arrears
at December 27, 1997 are $1,875,000.
In connection with the acquisition of PFS, NEHC received proceeds of $115
million upon issuance in July 1997 of the 13 1/2% senior exchangeable preferred
stock, the 15% junior preferred stock and warrants,
F-18
<PAGE> 44
valued at $2.7 million, to purchase up to an aggregate of 2,904 shares of the
Class A common stock. The warrants expire in 2009. See Note 17 for transactions
subsequent to fiscal 1997.
In connection with the formation of NEHC on January 25, 1996, NEHC issued
the Class A and Class B common stock and the junior preferred stock, $25,000
series. The 8% senior preferred stock was issued in November 1996 to the
minority owner of Post to increase NEHC's ownership interest in Post (see Note
2). In connection with the AmeriServ acquisition in January 1996 and the
issuance of the 12 1/2% subordinated notes (see Note 6), NEHC issued 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 warrants expire in
2006.
16. CONDENSED UNCONSOLIDATED FINANCIAL STATEMENTS
Provided below are the condensed unconsolidated financial statements of
NEHC (parent company only).
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Condensed balance sheets:
Cash and cash equivalents................................ $ 320 $ --
Due from affiliate....................................... 5,046 4,700
Investment in subsidiaries............................... 176,500 51,851
--------- --------
$ 181,866 $ 56,551
========= ========
Accounts payable......................................... $ 188 $ 3,820
Due to affiliate......................................... -- 4,700
Subordinated loans....................................... 58,199 24,859
Stockholders' equity..................................... 123,479 23,172
--------- --------
$ 181,866 $ 56,551
========= ========
Condensed statements of income:
Selling, general and administrative expenses............. $ 177 $ --
Interest expense......................................... 5,821 4,194
Extraordinary loss....................................... 6,562 --
--------- --------
$ (12,560) $ (4,194)
========= ========
Condensed statements of cash flows:
Net cash used in operating activities...................... $ (11,007) $ --
--------- --------
Investing activities:
Business acquired, net of cash acquired.................. (1,500) --
Investment in subsidiary................................. (130,000 (30,000)
--------- --------
Net cash used in investing activities...................... (131,500) (30,000)
--------- --------
Financing activities:
Proceeds from issuance of preferred stock and warrants... 115,000 --
Proceeds from issuance of subordinated loans and
warrants.............................................. -- 30,000
Proceeds from issuance of long-term debt................. 55,000 --
Repayment of debt........................................ (27,173) --
--------- --------
142,827 30,000
--------- --------
Net increase in cash and cash equivalents.................. 320 --
Cash and cash equivalents at beginning of year............. -- --
--------- --------
Cash and cash equivalents at end of year................... $ 320 $ --
========= ========
</TABLE>
F-19
<PAGE> 45
17. SUBSEQUENT EVENTS
On January 29, 1998, the Company entered into a definitive merger agreement
pursuant to which the Company will acquire all of the approximately 9.4 million
outstanding shares of ProSource, Inc. (ProSource) for $15.00 per share in cash.
The Company will also refinance the existing indebtedness of ProSource of
approximately $174 million. The transaction is expected to close in the second
quarter of 1998. ProSource, which reported sales of $3.9 billion for its fiscal
year ended December 27, 1997, is in the foodservice distribution business,
specializing in quick-service and casual dining chain restaurants. ProSource
services approximately 12,700 restaurants, principally in the United States, in
such chains as Burger King, Red Lobster, Olive Garden, TGI Friday's, Long John
Silver's, Chili's, Sonic, Chick-fil-A, Wendy's and TCBY.
On March 6, 1998, NEHC received proceeds of $250 million upon issuance of
2,500,000 shares of 11 1/4% Senior Redeemable Exchangeable Preferred Stock
(Preferred Stock) due 2008, with a liquidation preference of $100 per share, in
transactions not requiring registration under the Securities Act of 1933, as
amended. Approximately $148 million of proceeds from the issuance were used to
repurchase all NEHC's outstanding 13 1/2% senior exchangeable preferred stock,
$25,000 series junior nonconvertible preferred stock and 15% junior exchangeable
preferred stock. Dividends on the Preferred Stock are payable quarterly in cash
or in additional shares of Preferred Stock, at NEHC's option. The Preferred
Stock is exchangeable into 11 1/4% Subordinated Exchange Debentures due 2008, at
NEHC's option, subject to certain conditions, on any scheduled dividend payment
date.
F-20
<PAGE> 46
NEBCO EVANS HOLDING COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACQUISITIONS AT END
OF YEAR EXPENSES ACCOUNTS BALANCE DEDUCTIONS(1) OF YEAR
---------- ---------- ---------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 30, 1995:
Deducted from asset accounts
Allowance for doubtful
accounts.................... $1,440 $ 134 $ -- $ -- $ (404) $1,170
Year ended December 28, 1996:
Deducted from asset accounts
Allowance for doubtful
accounts.................... 1,170 1,306 -- 3,385 (525) 5,336
Year ended December 27, 1997:
Deducted from asset accounts
Allowance for doubtful
accounts.................... 5,336 2,019 -- 10,032 (1,821) 15,566
</TABLE>
- ---------------
(1) Represents uncollectible accounts written off, net of recoveries.
F-21
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEBCO EVANS HOLDING COMPANY
(Registrant)
By /s/ JOHN V. HOLTEN
-----------------------------------
John V. Holten
Chairman and Chief Executive
Officer
Date: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN V. HOLTEN Chairman, Director and Chief March 27, 1998
- ----------------------------------------------------- Executive Officer
John V. Holten
/s/ DIANA M. MOOG Senior Vice President and March 27, 1998
- ----------------------------------------------------- Chief Financial Officer
Diana M. Moog
/s/ STANLEY J. SZLAUDERBACH Controller March 27, 1998
- -----------------------------------------------------
Stanley J. Szlauderbach
/s/ JOHN R. EVANS Director March 27, 1998
- -----------------------------------------------------
John R. Evans
/s/ RAYMOND E. MARSHALL Director March 27, 1998
- -----------------------------------------------------
Raymond E. Marshall
/s/ GUNNAR E. KLINTBERG Director March 27, 1998
- -----------------------------------------------------
Gunnar E. Klintberg
/s/ LEIF F. ONARHEIM Director March 27, 1998
- -----------------------------------------------------
Leif F. Onarheim
/s/ PETER T. GRAUER Director March 27, 1998
- -----------------------------------------------------
Peter T. Grauer
/s/ BENOiT JAMAR Director March 27, 1998
- -----------------------------------------------------
Benoit Jamar
/s/ DANIEL W. CRIPPEN Director March 27, 1998
- -----------------------------------------------------
Daniel W. Crippen
</TABLE>
<PAGE> 48
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
2.2 Asset Purchase Agreement between PepsiCo, Inc. and Nebco
Evans Holding Company (incorporated by reference to Exhibit
2.2 to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
2.3 Agreement and Plan of Merger, dated as of January 29, 1998,
by and among AmeriServe Food Distribution, Inc., Steamboat
Acquisition Corp. and ProSource, Inc. (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K, dated January 29, 1998).
2.4 Voting Agreement, dated as of January 29, 1998, by and among
AmeriServe Food Distribution, Inc., Steamboat Acquisition
Corp. and Onex DHC LLC and certain of its affiliates
(incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K, dated January 29,
1998).
3.1 Restated Certificate of Incorporation of NEHC.*
3.2 By-Laws of NEHC (incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
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 (incorporated by reference to Exhibit
4.1 to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
4.2 Form of new Senior Discount Note (incorporated by reference
to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-4, No. 333-33223 filed August 8, 1997).
10.1 Purchase Agreement, by and among NEHC and Donaldson, Lufkin
& Jenrette Securities Corporation, dated as of February 27,
1998.*
10.2 Registration Rights Agreement, dated as of March 6, 1998, by
and among NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation.*
10.3 Purchase Agreement, by and among NEHC and Donaldson, Lufkin
& Jenrette Securities Corporation, dated as of July 9, 1997
(incorporated by reference to Exhibit 2.1 to the
Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
10.4 Registration Rights Agreement, dated as of July 11, 1997, by
and among NEHC and Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference to Exhibit 10.1 to
the Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
10.5 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 (incorporated by reference to
Exhibit 10.2 to the Registrant's Registration Statement on
Form S-4, No. 333-33223 filed August 8, 1997).
10.6 First Amendment to Second Amended and Restated Credit
Agreement, dated as of October 7, 1997.*
10.7 Second Amendment to Second Amended and Restated Credit
Agreement, dated as of December 22, 1997 (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report
on Form 8-K, dated December 28, 1997).
10.8 Securities Purchase Agreement, dated as of July 11, 1997, by
and among NEHC, Holberg Industries, Inc. and certain DLJ
Merchant Banking entities listed as parties thereto
(incorporated by reference to Exhibit 10.3 to the
Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
10.9 Amended and Restated Investors Agreement, dated as of July
11, 1997 among the Registrant, certain DLJ Merchant Banking
entities listed as parties thereto, Nebco Evans
Distributors, Inc., Holberg Industries, Inc., Holberg
Incorporated and Orkla ASA.*
10.10 Sales and Distribution Agreement dated as of May 6, 1997 by
and among PFS, Pizza Hut, Inc., Taco Bell Corp., Kentucky
Fried Chicken Corporation and Kentucky Fried Chicken of
California, Inc. (the "Distribution Agreement")
(incorporated by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-4, No.
333-33223 filed August 8, 1997).
10.11 Amendment, dated as of May 29, 1997, to the Distribution
Agreement.*
21 Subsidiaries of the Registrant.*
27.1 Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
Exhibit 3.1
1-25-96
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> 2
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
-2-
<PAGE> 3
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
-3-
<PAGE> 4
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> 5
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> 6
(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> 7
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> 8
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> 9
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
-9-
<PAGE> 10
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> 11
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> 12
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> 13
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> 14
NEBCO EVANS HOLDING COMPANY
-------------------------------
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-------------------------------
8% Senior 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 300 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 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):
<PAGE> 15
1. Designation and Amount. This series of Preferred
Stock shall be 8% Senior Convertible Preferred Stock (the "Senior
Convertible Preferred"), and the authorized number of shares
constituting such series shall be 300. The liquidation preference of
the Convertible Preferred shall be $10,000 per share, plus any
accumulated and unpaid dividends as required pursuant to Section 3
hereof.
2. Dividends. The holders of record of shares of
Senior 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 $800 per share per annum,
-2-
<PAGE> 16
accruing and earned monthly, payable annually on January 15, 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 Convertible Preferred shall
accumulate, whether or not declared, from the date of its issuance. The
holders of shares of Senior 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
dividend on the Senior Convertible Preferred for any preceding annual
period and until all unpaid dividends payable, whether or not declared,
on the outstanding Senior 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 Convertible Preferred shall be entitled to receive out of 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.
4. Conversion. Holders of shares of Senior
Convertible Preferred shall, after giving notice to the Corporation as
required pursuant to this Section 4, be entitled to convert each such
share into 0.8766 (the "Conversion Ratio") of a share of Class A Common
Stock of the Corporation, par value $0.01 per share (the "Common
Stock") (i) in the event of an initial registered public offering of
the shares of Common Stock (an "IPO"), (ii) in the event of the
acquisition of a majority of the outstanding shares of
-3-
<PAGE> 17
Common Stock by a person or entity other than (a) Nebco Evans
Distributors, Inc. ("Distributors"), (b) a person or entity that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, Distributors or
the Corporation (an "Affiliate") or (c) a successor or assign of
Distributors or an Affiliate (any of (a) through (c), a "Sale," and,
together with an IPO, an "Extraordinary Transaction"), or (iii) on
January 15, 2004. If as of the date of the conversion there are any
accrued but unpaid dividends on the outstanding Senior Convertible
Preferred (including any monthly dividends that have accrued for the
current annual period but are not otherwise payable until the end of
the annual period), such dividends shall be paid in full to the holders
of the Senior Convertible Preferred as of the date of Conversion. A
holder of shares of Senior Convertible Preferred wishing to effect a
conversion pursuant to Section 4(i) or 4(ii) hereof shall give notice
to the Corporation of such holder's decision to exercise the conversion
rights (a "Conversion Notice") at least twenty (20) days prior to the
date on which the relevant Extraordinary Transaction is scheduled to
occur, as set forth in the Corporation Notice issued pursuant to
Section 9 hereof (such date, the "Announced Transaction Date"), unless
such holder receives such Corporation Notice fewer than twenty-five
(25) days prior to the Announced Transaction Date, in which case the
Conversion Notice must be received by the Corporation at the earlier of
(A) the day which is 5 days after the date on which such holder
received the Corporation Notice or (B) 10 a.m. New York City time on
the day before the Announced Transaction Date. Any conversion effected
pursuant to Section 4(i) or 4(ii) hereof shall occur simultaneously
with the consummation of the relevant Extraordinary Transaction,
provided that in the event such Extraordinary Transaction does not
occur within 120 days of the Announced Transaction Date, the holder of
shares who issued the Conversion Notice shall have the right to rescind
such notice by notification to the Corporation to that effect. Any
Conversion effected pursuant to Section 4(iii) shall occur at 5 p.m.
New York City time on January 15, 2004.
In the event of a stock split or a declaration of a
dividend payable in the common shares of the Corporation, the
Conversion Ratio shall be equitably adjusted, but no adjustment shall
be required in the event additional common shares of the Corporation
are issued due to the exercise of stock options, warrants or pursuant
to other arrangements or sales to third parties, other than as set
forth below. In case the Corporation shall issue Common Stock (or
options, rights or warrants to purchase shares of Common Stock)
(collectively, "Options") or other securities convertible into or
exchangeable or exercisable for shares of Common Stock (such other
securities, collectively, "Convertible Securities") at a price per
share (or having an effective exercise, exchange or conversion price
per share together with the purchase price thereof) less than the Fair
Market Value (as defined below) on the date such Common Stock (or
Options or Convertible Securities) is sold or issued (provided that no
sale of securities pursuant to an Extraordinary Transaction or any
underwritten public offering shall be deemed to be for less than Fair
Market Value), then in each such case the Conversion Ratio shall
thereafter be adjusted by multiplying the Conversion Ratio immediately
prior to the date of issuance of such Common Stock (or Options or
Convertible Securities) by a fraction, the numerator of which shall
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<PAGE> 18
be (x) the sum of (i) the number of shares of Common Stock on a fully
diluted basis ("Common Share Equivalents") represented by all
securities outstanding immediately prior to such issuance and (ii) the
number of additional Common Share Equivalents represented by all
securities so issued multiplied by (y) the Fair Market Value
immediately prior to the date of such issuance, and the denominator of
which shall be (x) the product of (A) the Fair Market Value immediately
prior to the date of such issuance and (B) the number of Common Share
Equivalents represented by all securities outstanding immediately prior
to such issuance plus (y) the aggregate consideration received by the
Corporation for the total number of securities so issued plus, (z) in
the case of Options or Convertible Securities, the additional
consideration required to be received by the Corporation upon the
exercise, exchange or conversion of such securities; provided that no
adjustment shall be required in respect of issuance of Common Stock (or
options to purchase Common Stock) pursuant to stock option or other
employee benefit plans in effect on the date hereof, or approved by the
Board of Directors of the Corporation after the date hereof; provided
further that in the event that issuances of Common Stock (or options to
purchase Common Stock) after the date hereof pursuant to stock option
or other employee benefit plans approved by the Board of Directors of
the Corporation after the date hereof exceed in the aggregate eight (8)
percent of the total Common Share Equivalents represented by all
securities outstanding immediately subsequent to the issuance of the
Senior Convertible Preferred (the "8 Percent Mark"), the Conversion
Ratio shall be adjusted according to the formula set forth in Section 4
hereof for any such issuance in excess of the 8 Percent Mark.
Notwithstanding anything herein to the contrary, (1) no further
adjustment to the Conversion Ratio shall be made upon the issuance or
sale of Common Stock pursuant to (x) the exercise of any Options or (y)
the conversion or exchange of any Convertible Securities, if in each
case the adjustment in the Conversion Ratio was made as required hereby
upon the issuance or sale of such Options or Convertible Securities or
no adjustment was required hereby at the time such Option or
Convertible Security was issued, (2) no adjustment to the Conversion
Ratio shall be made upon the issuance or sale of Common Stock upon the
exercise of any Options existing on the date hereof, without regard to
the exercise price thereof; and (3) no adjustment to the Conversion
Ratio shall be made upon the issuance or sale of Common Stock (or
Options or Convertible Securities) to any Person or group that, at the
time of such issuance or sale, is not (A) an Affiliate or (B) a holder,
directly or indirectly, of at least five percent (5%) of the
outstanding equity securities of the Corporation, provided that this
clause (B) shall be of no force or effect from and after an IPO. "Fair
Market Value" as at any date of determination shall mean the fair
market value of the Common Stock as determined in good faith by a
nationally recognized firm of investment bankers reasonably acceptable
to the Corporation and the holders of a majority of the outstanding
shares of Senior Convertible Preferred (the fees for which shall be
shared equally by the holders of the Senior Convertible Preferred and
the Corporation); provided however that if, at any date of
determination of the fair market value of the Common Stock, shares of
Common Stock shall then be publicly traded, the fair market value shall
be the market price of the Common Stock on such date.
-5-
<PAGE> 19
The Corporation shall, so long as any share of this
Series is outstanding, reserve and keep available out of its authorized
and unissued common shares sufficient number of shares of Common Stock
required to effect conversion of all shares of this Series. The number
of shares of Common Stock into which shares of Senior Convertible
Preferred are convertible shall be rounded to the nearest whole share.
5. Mandatory Redemption. On January 15, 2004 (the
"Redemption Date"), all outstanding shares of Convertible Preferred
shall be redeemed 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 Redemption Date.
6. Optional Redemption. If an Extraordinary
Transaction has occurred or is to occur, a Corporate Notice has been
given in accordance with Section 9 hereof and a Conversion Notice has
not been given in the required time pursuant to Section 4 hereof, then,
at the option of the Corporation, shares of Senior Convertible
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.
7. Voting Rights. No holder of shares of Senior
Convertible Preferred shall be entitled to vote on any matters brought
to a vote before the shareholders of the Corporation, except as
otherwise provided herein or by the General Corporation Law of the
State of Delaware.
8. Consideration for Issuance of Shares. All shares
of Convertible Preferred shall be deemed to be fully paid and
nonassessable upon the issuance thereof.
9. Notice of Holders of Certain Transactions. The
Corporation shall cause a notice (the "Corporation Notice") to be
mailed to the holders of record of shares of Senior 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;
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<PAGE> 20
d. Of an Extraordinary Transaction.
Such Corporation Notice shall be mailed at least
twenty (20) days prior to the applicable record date or other date
hereinafter referred to, and in the case of an Extraordinary
Transaction, by the later of (i) sixty (60) days prior to the date on
which the Extraordinary Transaction is then scheduled to occur or (ii)
within two (2) days after such time as the Board of Directors resolves
to pursue the Extraordinary Transaction. The Corporation Notice shall
specify (A) 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, (B) the date on which, in
connection with such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up or other Extraordinary
Transaction, 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, and (iii) the date on which an Extraordinary Transaction is
scheduled to occur. Any Corporation Notice delivered in connection with
an Extraordinary Transaction shall be accompanied by any proxy
materials provided to holders of Common Stock at such time as such
materials are so provided.
10. No Other Rights. The shares of Senior 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.
11. Certificates. Each certificate for shares of
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.
12. Senior Stock. The Corporation shall not issue or
create Senior Stock without the consent of the holders of Senior
Convertible Preferred.
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<PAGE> 21
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. Petter Ostberg
---------------------------------
A. Petter Ostberg
-8-
<PAGE> 22
CERTIFICATE OF MERGER
OF
POST HOLDING COMPANY
INTO
NEBCO EVANS HOLDING COMPANY
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
Nebco Evans Holding Company organized and existing under and by virtue of
the General Corporation Law of the State of Delaware hereby certifies:
First: That the name and state of incorporation of each of the constituent
corporations of the merger are as follows:
State of
Name Incorporation
---- -------------
NEBCO EVANS HOLDING COMPANY ................................ Delaware
POST HOLDING COMPANY ....................................... Colorado
Second: That an Agreement and Plan of Merger (the "Agreement") between the
parties to the merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with the
provisions of subsection (c) of Section 252 of the General Corporation Law of
the State of Delaware.
Third: That the name of the Surviving Corporation of the merger is Nebco
Evans Holding Company, a Delaware corporation.
Fourth: That the Restated Certificate of Incorporation of Nebco Evans
Holding Company, a Delaware corporation which is surviving the merger, shall be
the Certificate of Incorporation of the Surviving Corporation.
Fifth: That the executed Agreement as approved is on file at the principal
place of business of the Surviving Corporation, the address of which is Nebco
Evans Holding Company, 545 Steamboat Road, Greenwich, Connecticut 06830.
<PAGE> 23
Sixth: That a copy of the Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of any constituent
corporation to the merger.
Seventh: That the authorized capital stock of Post Holding Company is
50,000 shares of Common Stock, no par value, of which 200 shares are issued and
outstanding, and 5,000,000 shares of Preferred Stock, par value $0.01 per
share, of which no shares are issued and outstanding.
-2-
<PAGE> 24
IN WITNESS WHEREOF, Nebco Evans Holding Company has caused this
certificate to be signed by A. Petter Ostberg, its Vice President and
Secretary, on the 20th day of November, 1996.
NEBCO EVANS HOLDING COMPANY
a Delaware corporation
By: /s/ A. Petter Ostberg
----------------------------------------
Name: A. PETTER OSTBERG
Title: VP - SECRETARY
-3-
<PAGE> 25
CERTIFICATE OF AMENDMENT
OF
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
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 of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a proposed amendment
of the Amended and Restated Certificate of Incorporation of the Corporation and
declaring said amendment to be advisable. The resolution setting forth the
proposed amendment is as follows:
"RESOLVED, that Article IV of the Amended and Restated Certificate of
Incorporation of the Corporation be amended to delete the first section
thereof in its entirety and insert the following in lieu thereof:
Section 1. CAPITAL STOCK. The aggregate number of shares of all
classes of capital stock which the Corporation has authority to issue is
30,050,000 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");
<PAGE> 26
20,000 shares of Class B Non-Voting Common Stock of the par value
of $0.01 per share ("Non-Voting Common"); and
30,000,000 shares of Preferred Stock of the par value of $0.01
per share ("Preferred Stock")."
SECOND: That the first section of Article IV of the Amended and
Restated Certificate of Incorporation of the Corporation be amended to read in
its entirety as set forth in such resolution.
THIRD: That in lieu of a meeting and vote of stockholders, the holder
of all the issued and outstanding voting stock of the Corporation has given its
written consent to said amendment and said amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
-2-
<PAGE> 27
IN WITNESS WHEREOF, said Nebco Evans Holding Company has caused this
certificate to be signed by Raymond G. Marshall, its President, this 11th day
of July, 1997.
NEBCO EVANS HOLDING COMPANY
By: /s/ Raymond E. Marshall
--------------------------------
Raymond E. Marshall
President
Attest:
By: /s/ A. Petter Ostberg
----------------------------
A. Petter Ostberg
Secretary
-3-
<PAGE> 28
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
11-1/4% SENIOR REDEEMABLE EXCHANGEABLE
PREFERRED STOCK DUE 2008
OF
NEBCO EVANS HOLDING COMPANY
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
Nebco Evans Holdings Company (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies that pursuant to the authority contained in Article IV of
its Amended and Restated Certificate of Incorporation, as amended to date (the
"Certificate of Incorporation") and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of
Directors, by unanimous written consent dated February 27, 1998 duly approved
and adopted the following resolution (this "Certificate of Designations") which
resolution remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board
of Directors by the Amended and Restated Certificate of Incorporation, as
amended, the Board of Directors does hereby designate, create, authorize and
provide for the issue of 11-1/4% Senior Redeemable Exchangeable Preferred Stock
due 2008 (the "Preferred Stock"), par value $0.01 per share, with a liquidation
preference of $100 per share, consisting of 8,000,000 shares of Preferred Stock:
(i) 2,500,000 of which will be issued on March 6, 1998 and (ii) 5,500,000 shares
to be reserved for future issuance if the Company elects to pay dividends on the
Preferred Stock in additional shares of Preferred Stock in accordance with the
terms of the Certificate of Designations. Pursuant to the terms of the
Certificate of Designations the Corporation may exchange the Preferred Stock for
shares of new 11-1/4% Senior Redeemable Exchangeable Preferred Stock due 2008
(the "New Preferred Stock" and, together with the Preferred Stock, the
"Exchangeable Preferred Stock"), provided that no shares of the New Preferred
Stock may be issued, except upon the surrender and cancellation of such number
of shares of the Preferred Stock having an aggregate Liquidation Preference
equal to the aggregate Liquidation Preference of the shares of the New Preferred
Stock so issued. The Exchangeable Preferred Stock shall have the following
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof as follows:
<PAGE> 29
1. CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
"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.
For purposes of this Certificate of Designations, beneficial ownership of 10% or
more of the Voting Stock of a Person shall be deemed to be control.
"Applicable Redemption Price" means a price per share equal to
the following redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), plus, in each case, without duplication,
accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for any partial dividend period) and Liquidated Damages, if
any, thereon to the date of redemption if redeemed during the 12-month period
commencing on March 1 of each of the years set forth below:
<TABLE>
<S> <C>
2003................................... 105.625%
2004................................... 103.750%
2005 .................................. 101.875%
2006 and thereafter.................... 100.000%
</TABLE>
"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 the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Section 8 hereof and/or
Section 14 and not by the provisions of Section 9 hereof), and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company'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.
2
<PAGE> 30
Notwithstanding the foregoing: (i) a transfer of assets by the Company to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance
of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that
is permitted by Section 11 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).
"Board of Directors" means the Board of Directors of the
Company or any authorized committee of the 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, partnership
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 one year 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 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 or on demand 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 and (v)
commercial paper having the highest rating at acquisition 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.
3
<PAGE> 31
"Certificated Securities" has the meaning set forth in Section
25 below.
"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 the Company 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 the Company, (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 the Company (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 the Company are not Continuing Directors or
(v) the Company 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, the Company, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company 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).
"Change of Control Offer" has the meaning set forth in Section
8 below.
"Change of Control Payment" has the meaning set forth in
Section 8 below.
"Change of Control Payment Date" has the meaning set forth in
Section 8 below.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Closing Date" means the date on which shares of Preferred
Stock are first issued.
"Commission" means the Securities and Exchange Commission.
4
<PAGE> 32
"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 good faith by the Company or one of
its Restricted Subsidiaries, as 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 the Company 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
5
<PAGE> 33
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 the
Company or one of its Restricted Subsidiaries for purposes of Section 12 hereof.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Closing Date 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.
"Depositary" has the meaning set forth in Section 25(a) below.
"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 Preferred Stock 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 under Section 8 hereof applicable to the Holders of
the Preferred Stock.
"Dividend Payment Date" has the meaning set forth in Section 3
below.
"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).
"Exchange Act" means the Securities and Exchange Act of 1934,
as amended.
"Exchange Debentures" means the Company's 11-1/4% Subordinated
Exchange Debentures due 2008 issuable in exchange for the Company's Exchangeable
Preferred Stock pursuant to Section 5.
6
<PAGE> 34
"Exchange Debenture Indenture" means that certain indenture
under which the Exchange Debentures would be issued and which shall be
substantially in the form approved by the Board of Directors, a form of which is
attached hereto as Exhibit B.
"Exchange Debenture Trustee" means the trustee under the
Exchange Debenture Indenture.
"Exchange Offer" means the exchange offer of the Preferred
Stock for the New Preferred Stock, or, if the Preferred Stock is exchanged for
Exchange Debentures in accordance with the provisions of the Certificate of
Designations, the exchange offer of the Exchange Debentures for the New Exchange
Debentures, as applicable, pursuant to the Registration Rights Agreement.
"Executive Officer" means any officer of the Company that
would be deemed to be an "executive officer" within meaning of the rules and
regulations of the Commission.
"Existing Indebtedness" means the Indebtednesss outstanding in
respect of the Senior Discount Notes and all other Indebtedness of the Company
and its Subsidiaries in existence on the Closing Date.
"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 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 the
Company, 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 the Company 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
7
<PAGE> 35
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 the Company 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 Closing Date.
"Global Certificates" has the meaning set forth in Section
25(a) below.
"Global Certificate Holder" has the meaning set forth in
Section 25(a) below.
"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.
8
<PAGE> 36
"Holder" means the record holder of one or more shares of
Exchangeable Preferred Stock, as shown on the books and records of the Transfer
Agent.
"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.
"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 the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company 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 Section 11 hereof.
"Junior Securities" has the meaning set forth in Section 2
below.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.
"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, without limitation, 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
9
<PAGE> 37
financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Liquidation Preference" means $100 per share of Exchangeable
Preferred Stock.
"Mandatory Redemption Date" has the meaning set forth in
Section 5 below.
"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
the Company 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 July 11, 1997, by and among AmeriServe and Bank of America,
providing for up to $150.0 million of revolving 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
the Company 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 of the
Company 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 the
Company or any of its Restricted Subsidiaries.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"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, any Assistant Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 20 hereof.
"Parity Securities" has the meaning set forth in Section 2
below.
"Paying Agent" has the meaning set forth in Section 2(c)
below.
"Preferred Stock" for any Person means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Permitted Investments" means (a) any Investment in the
Company or in a Wholly Owned Restricted Subsidiary of the Company that is
engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company 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,
the Company or a Wholly Owned Restricted Subsidiary of the Company 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 9 hereof; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) loans and advances made after the
Closing Date to Holberg Industries, Inc. not to exceed $12.0 million at any time
outstanding; and (g) other Investments made after the Closing Date 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.
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"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company 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 the Company 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 the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including, without
limitation, any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Principals" means Holberg Industries, Inc., John V. Holten,
Orkla, Nebco Evans Distributors, Inc. and DLJ Merchant Banking, L.P.
"Public Equity Offering" means a public offering of Equity
Interests (other than Disqualified Stock) of (i) the Company; 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
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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 the Company 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, the Company or its Subsidiaries receive at least 80% of the
aggregate principal amount of any Receivables financed in such transaction.
"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) or 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.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Note Indenture" means the indenture relating
to the Senior Discount Notes.
"Senior Discount Notes" means the Company's 12-3/8% Senior
Discount Notes due 2007.
"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 Closing Date.
"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
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<PAGE> 41
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).
"Transfer Agent" means the entity designated from time to time
by the Company to act as the registrar and transfer agent for the Exchangeable
Preferred Stock.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"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 the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company 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
the Company 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 the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Transfer Agent by filing with the Transfer
Agent 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 11 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 Certificate of Designations and any Indebtedness
of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 12 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company 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 the Company of any
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outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section 12
hereof, and (ii) no Voting Rights Triggering Event 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.
2. RANKING
The Preferred Stock will, with respect to dividends and rights on the
liquidation, winding-up and dissolution of the Company, rank (i) senior to each
class of capital stock of the Company outstanding or established after the Issue
Date by the Board of Directors of the Company the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the Preferred
Stock as to dividends and rights on the liquidation, winding-up and dissolution
of the Company (collectively referred to, together with the common stock of the
Company, as "Junior Securities") and (ii) subject to certain conditions, on a
parity with each other class of preferred stock established after the Issue Date
by the Board of Directors of the Company the terms of which expressly provide
that such class or series will rank on a parity with the Preferred Stock as to
dividends and rights on the liquidation, winding-up and dissolution of the
Company (collectively referred to as the "Parity Securities"). The Company may
not authorize or issue any Parity Securities (other than additional Preferred
Stock issued as dividends on the Preferred Stock and the New Preferred Stock)
without the approval of the holders of at least a majority of the Preferred
Stock then outstanding, voting or consenting as a separate class.
3. DIVIDENDS
The holders of shares of the Preferred Stock are entitled to receive,
whether or not dividends are declared by the Board of Directors out of funds of
the Company, cumulative preferential dividends from the Issue Date of the
Preferred Stock accruing at a rate of 11 1/4% per annum quarterly from the date
of issuance, payable per share on March 1, June 1, September 1,
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and December 1, or, if any such date is not a Business Day, on the next
succeeding Business Day (each, a "Dividend Payment Date"), to the holders of
record as of the next preceding February 15, May 15, August 15 and November 15,
(each, a "Record Date"). Dividends may be paid, at the Company's option, in cash
or by the issuance of additional shares of Preferred Stock (including fractional
shares) having an aggregate Liquidation Preference equal to the amount of such
dividends. The issuance of such additional shares of Preferred Stock will
constitute "payment" of the related dividend for all purposes of the Certificate
of Designations. The first dividend payment of Preferred Stock will be payable
on June 1, 1998. Dividends payable on the Preferred Stock will be computed on
the basis of a 360-day year consisting of twelve 30-day months and will be
deemed to accrue on a daily basis.
Dividends on the Preferred Stock will accrue whether or not the Company
has earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
Dividends will accumulate to the extent they are not paid on the Dividend
Payment Date for the period to which they relate. In the event that dividends on
the Preferred Stock are in arrears and unpaid for three or more quarterly
dividend periods (whether or not consecutive), holders of Preferred Stock will
be entitled to certain voting rights pursuant to Section 4 hereof. The Company
shall take all actions required or permitted under the Delaware General
Corporation Law (the "DGCL") to permit the payment of dividends on the Preferred
Stock, including, without limitation, through the revaluation of its assets in
accordance with the DGCL, to make or keep funds legally available for the
payment of dividends.
Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to holders of
record of Preferred Stock on such date, not more than forty-five (45) days prior
to the payment thereof, as may be fixed by the Board of Directors of the
Company.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of Preferred
Stock with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividend, upon all outstanding shares of
Preferred Stock. No full dividends may be declared or paid or funds set apart
for the payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment set apart for such payment on the
Preferred Stock. If full dividends are not so paid, the Preferred Stock will
share dividends pro rata with the Parity Securities. So long as any Preferred
Stock is outstanding and unless and until full cumulative dividends have been
paid (or are deemed paid) in full on the Preferred Stock: (i) no dividend (other
than a dividend payable solely in shares of additional Junior Securities) shall
be declared or paid upon, or any sum set apart for the payment of dividends
upon, any shares of Junior Securities; (ii) no other distribution shall be
declared or made upon, or any sum set apart for the payment of any distribution
upon, any shares of Junior Securities, other than a distribution consisting
solely of Junior Securities; (iii) no shares of Parity
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Securities or Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for shares of other Junior
Securities) by the Company or any of its Subsidiaries; (iv) no warrants, rights,
calls or options to purchase any Parity Securities or Junior Securities shall be
directly or indirectly issued by the Company or any of its Subsidiaries; and (v)
no monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or retirement
for value of any shares of Parity Securities or Junior Securities by the Company
or any of its Subsidiaries. Holders of the Preferred Stock will not be entitled
to any dividends, whether payable in cash, property or stock, in excess of the
full cumulative dividends as herein described.
4. VOTING RIGHTS; AMENDMENT
Holders of record of shares of the Preferred Stock shall have no voting
rights, except as required by law and as provided herein. Upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Preferred Stock
in an amount equal to three or more quarterly dividend periods (whether or not
consecutive) in the aggregate; (b) the failure of the Company to make, pursuant
to any required Change of Control Offer) or mandatory redemption obligation with
respect to the Preferred Stock or (c) the failure of the Company to comply with
any of the other covenants or agreements set forth in the Certificate of
Designations and the continuance of such failure for 30 consecutive days or more
after receipt of notice of such failure from the holders of at least 25% of the
Preferred Stock then outstanding, then the holders of a majority of the
outstanding shares of Preferred Stock and New Preferred Stock, with the holders
of shares of any Parity Securities, issued after the Closing Date, upon which
the voting rights have been conferred and are exercisable, voting as a single
class, will be entitled to elect lesser of the two directors or that number of
directors constituting at least 25% of the Company's Board of Directors (each of
the events described in clauses (a), (b) and (c) being referred to herein as a
"Voting Rights Triggering Event"). The voting rights provided for herein shall
be the holder's exclusive remedy at law or in equity.
The Company shall not, without the approval of the holders of at least
a majority of the Preferred Stock then outstanding amend, alter or repeal any of
the provisions of the Company's Certificate of Incorporation (including this
Certificate of Designations) or the bylaws of the Company so as to affect
adversely the powers, preferences or rights of the holders of the Preferred
Stock or reduce the time for any notice to which the holders of the Preferred
Stock may be entitled. Subject to Section 2 hereof, an amendment of the
Company's Certificate of Incorporation to authorize or create, or to increase
the amount of Junior Securities or Parity Securities shall not be deemed to
affect adversely the powers, preferences or rights of the holders of the
Preferred Stock.
5. EXCHANGE
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The Company may, at its option, on any Dividend Payment Date, exchange,
in whole, but not in part, the then outstanding shares of Preferred Stock for
Exchange Debentures with a principal amount equal to the liquidation preference
of the Preferred Stock; provided that (i) on the date of such exchange there are
no accumulated and unpaid dividends and Liquidated Damages, if any, on the
Preferred Stock (including the dividend payable on such date) or other
contractual impediments to such exchange; (ii) there shall be legally available
funds sufficient therefor; (iii) immediately after giving effect to such
exchange, no Default or Event of Default (each as defined in the Senior Discount
Note Indenture) would exist under the Senior Discount Note Indenture with
respect to the Senior Discount Notes or would be caused thereby; (iv) the
Exchange Indenture (as defined) has been qualified under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), if such qualification is
required at the time of exchange; and (v) the Company shall have delivered a
written opinion to the Trustee (as defined herein) to the effect that all
conditions to be satisfied prior to such exchange have been satisfied.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding Preferred Stock will be entitled to receive, subject to the second
succeeding sentence of this paragraph, $1.00 principal amount of Exchange
Debentures for each $1.00 of the aggregate Liquidation Preference, plus, without
duplication, accrued and unpaid dividends, plus any additional Exchange
Debentures issued from time to time in lieu of cash interest, of Preferred Stock
held by them. The Exchange Debentures will be issued in registered form, without
coupons and will contain terms substantially similar to the Company's
outstanding Senior Discount Notes. The Exchange Debentures will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issuable in principal amounts less than $1,000 so
that each holder of Preferred Stock will receive certificates representing the
entire amount of Exchange Debentures to which such holder's shares of Preferred
Stock entitle such holder; provided that the Company may pay cash in lieu of
issuing an Exchange Debenture having a principal amount less than $1,000. Notice
of the intention to exchange will be sent by or on behalf of the Company not
more than 60 days nor less than 30 days prior to the Exchange Date, by first
class mail, postage prepaid, to each holder of record of Preferred Stock at its
registered address. In addition to any information required by law or by the
applicable rules of any exchange upon which Preferred Stock may be listed or
admitted to trading, such notice will state: (i) the date of exchange (the
"Exchange Date"); (ii) the place or places where certificates for such shares
are to be surrendered for exchange, including any procedures applicable to
exchanges to be accomplished through book-entry transfers; and (iii) that
dividends on the shares of Preferred Stock to be exchanged will cease to accrue
on the Exchange Date. If notice of any exchange has been properly given, and if
on or before the Exchange Date the Exchange Debentures have been duly executed
and authenticated and deposited with the Transfer Agent, then on and after the
close of business on the Exchange Date, the shares of Preferred Stock to be
exchanged will no longer be deemed to be outstanding and may thereafter be
issued in the same manner as the other authorized but unissued preferred stock,
but not as Preferred Stock, and all rights of the holders thereof as
stockholders of the Company will cease, except the right of the holders to
receive upon surrender of their certificates the Exchange Debentures and all
accrued interest, if any, thereon.
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6. REDEMPTION
Mandatory Redemption
On the Mandatory Redemption Date, the Company will be required to
redeem (subject to the legal availability of funds therefor) all outstanding
shares of Preferred Stock at a price in cash equal to the Liquidation Preference
thereof, plus accrued and unpaid dividends (including an amount in cash equal to
a prorated dividend for any partial Dividend Period) and Liquidated Damages, if
any, to the date of redemption. The Company will not be required to make sinking
fund payments with respect to the Preferred Stock. The Company shall take all
actions required or permitted under Delaware law to permit such redemption.
Optional Redemption
The Preferred Stock may be redeemed, in whole or in part, at the option
of the Company on or after March 1, 2003, at the Applicable Redemption Price at
such time, together with accrued and unpaid dividends (including an amount in
cash equal to a prorated dividend for any partial dividend period) and
Liquidated Damages, if any, to the date of redemption, upon not less than 30 nor
more than 60 days' prior written notice.
Notwithstanding the foregoing, at any time the Company may, at its
option, redeem in whole or in part, outstanding shares of the Preferred Stock at
a price per share of $109.00, plus accrued and unpaid dividends to the
redemption date with the net cash proceeds from one or more Public Equity
Offerings; provided that any such redemption shall occur within 45 days of the
date of the closing of such Public Equity Offerings.
7. LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock, each holder of shares of the Preferred Stock will
be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the Liquidation Preference per share of
Preferred Stock held by such holder, plus accrued and unpaid dividends and
Liquidated Damages, if any, to the date fixed for liquidation, dissolution,
winding-up or reduction or decrease in capital stock, before any distribution is
made on any Junior Securities, including, without limitation, common stock of
the Company. After payment in full of the Liquidation Preference and all accrued
dividends and Liquidated Damages, if any, to which holders of Preferred Stock
are entitled, such holders will not be entitled to any further participation in
any distribution of assets of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Preferred Stock and the Parity Securities will share
equally and ratably in any
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distribution of assets of the Company in proportion to the full liquidation
preference and accumulated and unpaid dividends and Liquidated Damages to which
each is entitled. However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding-up of the Company or reduction or decrease in capital stock, unless such
sale, conveyance, exchange or transfer shall be in connection with a
liquidation, dissolution or winding-up of the business of the Company or
reduction or decrease in capital stock.
8. CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall make an
offer (the "Change of Control Offer") to each holder of shares of Preferred
Stock to repurchase all or any part (but not, in the case of any holder
requiring the Company to purchase less than all of the shares of Preferred Stock
held by such holder, any fractional shares) of such holder's Preferred Stock at
an offer price in cash equal to 101% of the aggregate Liquidation Preference
thereof plus, without duplication, all accrued and unpaid dividends per share to
the date of purchase (including an amount in cash equal to a prorated dividend
for the period from the Dividend Payment Date immediately prior to the date of
purchase (as defined below) to the date of purchase) (the "Change of Control
Payment"); provided that the Company shall not be required to repurchase or
redeem any shares of Preferred Stock pursuant to the foregoing provision prior
to the Company's repurchase of any Senior Discount Notes that are required to be
repurchased pursuant to the Change of Control covenant in the Senior Discount
Note Indenture.
Prior to complying with the foregoing paragraph, but in any event
within 90 days following a Change of Control, the Company will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of the
Preferred Stock required by this covenant.
Within 30 days following any Change of Control, the Company shall mail
a notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Preferred Stock 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 this Certificate
of Designations and described in such notice. The Company 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 Preferred Stock as a result
of a Change of Control.
The Change of Control provisions described above shall be applicable
whether or not any other provisions hereof are applicable.
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The Company shall not be required to make a Change of Control Offer to
the holders of Preferred Stock upon a Change of Control if a third party makes
the Change of Control Offer described above in the manner, at the times and
otherwise in compliance with the requirements set forth and purchases all shares
of Preferred Stock validly tendered and not withdrawn under such Change of
Control Offer.
9. ASSET SALES
The Company 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)
the Company (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 the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Preferred Stock or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are converted by the Company 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, the Company may apply such Net Proceeds, at its option, to permanently
repay Indebtedness, 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, the Company may invest such Net Proceeds
in any manner that is not prohibited by the Certificate of Designations. 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, the Company
will be required to make an offer to all holders of Preferred Stock (an "Asset
Sale Offer") to purchase the maximum principal amount of Preferred Stock that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Preferred Stock tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate liquidation preference
of Preferred Stock surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select
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the Preferred Stock 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.
10. REMEDIES FOR BREACH OF COVENANTS
The sole remedy to holders of Preferred Stock in the event of a breach
of any of the following covenants, including Section 6 hereof, will be the
voting rights arising from Section 4 hereof and such breach by the Company will
not cause any action taken by the Company to be invalid or unauthorized under
its charter documents.
11. RESTRICTED PAYMENTS
From and after the Issue Date, the Company 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 the Company's Junior Securities (including, without limitation, any payment
in connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's Equity Interests in their capacity
as such (other than dividends or distributions payable in Junior Securities of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Junior Securities of the Company or any direct or
indirect parent of the Company; or (iii) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iii) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Voting Rights Triggering Event shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company 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 12 hereof; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Subsidiaries after March 6, 1998 (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 the Company
for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after March 6, 1998 to the end of
the Company'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
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<PAGE> 50
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate
net cash proceeds received by the Company from the issue or sale since
the Issue Date of Junior Securities of the Company, plus (iii) to the
extent that any Restricted Investment that was made after the Issue
Date 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
the Company or any of its Restricted Subsidiaries, 50% of any such cash
dividends or cash distributions made after the Issue Date.
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 here; (ii)
the redemption, repurchase, retirement, defeasance or other acquisition of any
Junior Securities of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale or issuance (other than to a
Restricted Subsidiary of the Company) of, other Junior Securities of the
Company; 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 Junior
Securities with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company 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 the Company 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 the Company or
Holberg held by any member of the Company's (or any of their Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the Issue Date; provided,
however, the aggregate amount paid pursuant to the foregoing clauses (a) through
(f) does not exceed $10.0 million in any fiscal year; (vii) Investments in any
Person (other than the Company or a Wholly-Owned Restricted Subsidiary) engaged
in a Permitted Business in an amount not to exceed $7.0 million; (viii) other
Investments in Unrestricted Subsidiaries having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (viii)
that are at that time outstanding, not to exceed $3.0 million; (ix) Permitted
Investments; (x) 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, and (xi) 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 Voting Rights
Triggering Event; provided that in no event shall the business currently
operated by any Subsidiary Guarantor be transferred to or held by an
Unrestricted Subsidiary. For purposes of making such determination, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated shall 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 shall 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 the Company 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, the Company 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
Section 11 hereof were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
12. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company 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 the
Company will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of Preferred Stock; provided, however that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the 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 pro forma application
of the net proceeds therefrom), as if such Indebtedness had been incurred, or
such 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"):
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(i) the incurrence by the Restricted Subsidiaries of the Company 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
of the Indenture less the aggregate amount of all repayments, optional or
mandatory, of the principal of any Indebtedness under the New Credit Facility
(other than repayments that are immediately reborrowed) that have been made
since the Issue Date; provided, that the foregoing proviso shall not apply to
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (i);
(ii) the incurrence by the Restricted Subsidiaries of the Company of
revolving credit Indebtedness and letters of credit pursuant to the New Credit
Facility; provided that the aggregate principal amount of all revolving credit
Indebtedness (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Restricted Subsidiaries of the
Company thereunder) 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 Issue Date; provided,
that the foregoing proviso shall not apply to Permitted Refinancing Indebtedness
incurred to refinance or replace any Indebtedness incurred pursuant to this
clause (ii);
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Exchange Debentures issuable in accordance with the terms of the Certificate of
Designations;
(v) the incurrence by the Company 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 the Company 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 million;
(vi) the incurrence by the Company 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 the Company or one of its Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company 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;
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(vii) the incurrence by the Company 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 Certificate of Designations to be incurred;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Wholly Owned Restricted Subsidiaries; provided, however, that (A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be;
(ix) the incurrence by the Company 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 the Certificate of Designations
to be outstanding;
(x) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
(xi) the incurrence by the Company'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 the
Company;
(xii) Asset Sales in the form of Receivables Transactions;
(xiii) Indebtedness incurred by the Company 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 the Company 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
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proceeds actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(xv) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary in
the ordinary course of business;
(xvi) guarantees incurred in the ordinary course of business in an
aggregate principal amount not to exceed $7.0 million at any time outstanding;
and
(xvii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness, including Attributable Debt incurred
after the Issue Date, 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 (xvii), not to exceed $30.0 million.
For purposes of determining compliance with this Section 12, 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 (xvii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company 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.
13. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company 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
the Company 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 the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company 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 Issue Date, (b) the New Credit Facility as in effect as of the
Issue Date, 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 Issue Date, (c) this Certificate of
Designations, the Preferred Stock, the New Preferred Stock, the Exchange
Debentures and the New Exchange Debentures (if issued), (d) any applicable law,
rule, regulation or order, (e) any instrument governing Indebtedness or Capital
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Stock of a Person acquired by the Company 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 of the Certificate of
Designations 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.
14. MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company may not consolidate or merge with or into (whether or not
the Company 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) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made 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 the Company) 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 the Company under the
Preferred Stock and the Certificate of Designations; (iii) immediately after
such transaction no Voting Rights Triggering Event exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made 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 Section 12 hereof.
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15. TRANSACTIONS WITH AFFILIATES
The Company 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 the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Transfer Agent (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
Transactions: (q) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary, (r)
transactions between or among the Company and/or its Restricted Subsidiaries,
(s) Permitted Investments and Restricted Payments that are permitted by Section
11 hereof, (t) customary loans, advances, fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultant of
the Company or any of its Restricted Subsidiaries, (u) annual management fees
paid to Holberg Industries, Inc. not to exceed $10.0 million in any one year,
(v) transactions pursuant to any contract or agreement in effect on the Issue
Date of the Certificate of Designations 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 the Company 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 the Company, (w) transactions between
the Company 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 the Company 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 the Company and
its Subsidiaries and an Affiliate of Holberg that are not less favorable to the
Company 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.
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16. SALE AND LEASEBACK TRANSACTIONS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to Section 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 the Company applies the proceeds of such transaction in compliance with,
Section 9 hereof.
17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES
The Company (i) will not, and will not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary of the Company), 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 9 hereof and
(ii) will not permit any Wholly Owned Restricted Subsidiary of the Company 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 the Company or a Wholly Owned Restricted Subsidiary of the Company.
18. BUSINESS ACTIVITIES
The Company 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 the Company and its Restricted Subsidiaries taken as a
whole.
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19. REPORTS
Whether or not required by the rules and regulations of the Securities
and Exchange Commission (the "Commission"), so long as any Preferred Stock, New
Preferred Stock, Exchange Debentures or New Exchange Debentures (if issued) are
outstanding, the Company will furnish to the holders of Preferred Stock, New
Preferred Stock, Exchange Debentures or New Exchange Debentures, as applicable,
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants; (ii) all current reports that would be required to be
filed with the Commission on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Company 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, the Company has agreed
that, for so long as any Preferred Stock, New Preferred Stock, Exchange
Debentures or New Exchange Debentures, as the case may be, 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.
20. OFFICERS' CERTIFICATE
Each Officers' Certificate provided for in this Certificate of
Designations shall include:
a. a statement that the Officers making such certificate or
opinion have 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 each such Officer, 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
d. a statement as to whether or not, in the opinion of each
such Officer, such condition or covenant has been satisfied.
21. PAYMENT
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a. All amounts payable in cash with respect to the
Exchangeable Preferred Stock shall be payable in United States dollars at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of dividends (if
any) may be made by check mailed to the Holders of the Exchangeable Preferred
Stock at their respective addresses set forth in the register of Holders of
Exchangeable Preferred Stock maintained by the Transfer Agent; provided that all
cash payments with respect to the Global Shares (as defined below) and shares of
Exchangeable Preferred Stock the Holders of which have given wire transfer
instructions to the Company shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
b. Any payment on the Exchangeable Preferred Stock due on any
day that is not a Business Day need not be made on such day, but may be made on
the next succeeding Business Day with the same force and effect as if made on
such due date.
c. The Company has initially appointed the Transfer Agent to
act as the "Paying Agent." The Company may at any time terminate the appointment
of any Paying Agent and appoint additional or other Paying Agents; provided that
until the Exchangeable Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference of the
Exchangeable Preferred Stock plus, without duplication, accumulated and unpaid
dividends (including an amount in cash equal to a prorated dividend for any
partial Dividend Period) and Liquidated Damages, if any, on the Exchangeable
Preferred Stock shall have been made available for payment and either paid or
returned to the Company as provided in this Certificate of Designations, the
Company shall maintain an office or agency in the Borough of Manhattan, The City
of New York for surrender of Exchangeable Preferred Stock for payment and
exchange.
d. Dividends payable on the Exchangeable Preferred Stock on
any redemption date or repurchase date that is a Dividend Payment Date shall be
paid to the Holders of record as of the immediately preceding Record Date.
e. All moneys and shares of Exchangeable Preferred Stock
deposited with any Paying Agent or then held by the Company in trust for the
payment of the Liquidation Preference and accumulated and unpaid dividends and
Liquidation Damages, if any, on any shares of Exchangeable Preferred Stock which
remain unclaimed at the end of two years after such payment has become due and
payable shall be repaid to the Company, and the Holder of such shares of
Exchangeable Preferred Stock shall thereafter look only to Company for payment
thereof.
22. EXCLUSION OF OTHER RIGHTS
Except as may otherwise be required by law, the shares of
Exchangeable Preferred Stock shall not have any powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designations (as
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<PAGE> 60
this Certificate of Designations may be amended from time to time) and in the
Certificate of Incorporation. The shares of Exchangeable Preferred Stock shall
have no preemptive or subscription rights.
23. HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
24. SEVERABILITY OF PROVISIONS
If any powers, preferences and relative, participating,
optional and other special rights of the Exchangeable Preferred Stock and the
qualifications, limitations and restrictions thereof set forth in this
Certificate of Designations (as it may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other powers, preferences and relative, participating, optional and
other special rights of the Exchangeable Preferred Stock and the qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designations (as so amended) which can be given effect without the invalid,
unlawful or unenforceable powers, preferences and relative, participating,
optional and other special rights of the Exchangeable Preferred Stock and the
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no powers, preferences and relative,
participating, optional or other special rights of the Exchangeable Preferred
Stock and the qualifications, limitations and restrictions thereof herein set
forth shall be deemed dependent upon any other such powers, preferences and
relative, participating, optional or other special rights of Exchangeable
Preferred Stock and qualifications, limitations and restrictions thereof unless
so expressed herein.
25. FORM OF EXCHANGEABLE PREFERRED STOCK
(a) The Exchangeable Preferred Stock shall initially be issued in the
form of one or more Global Certificates ("Global Certificates"). The Global
Certificates shall be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to as the "Global
Certificate Holder").
(b) The Exchangeable Preferred Stock offered and sold in reliance on
Rule 144A shall be issued initially in the form of a Rule 144A Global
Certificate (the "Rule 144A Global Certificate"). Exchangeable Preferred Stock
offered and sold in reliance on Regulation S shall be issued initially in the
form of a Regulation S Temporary Global Certificate (the "Regulation S Temporary
Global Certificate"), which shall be deposited on behalf of the purchasers with
the Transfer Agent, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary.
Following the termination of the 40-day Restricted Period (as defined in Rule
144A), beneficial interests in the Regulation S Temporary Global Certificate
shall be exchanged for beneficial interests in a Regulation S Permanent Global
Certificate pursuant to the applicable procedures of the Depositary.
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<PAGE> 61
(c) So long as the Global Certificate Holder is the registered owner of
any Exchangeable Preferred Stock, the Global Certificate Holder shall be
considered the sole holder under this Certificate of Designations of the shares
of Exchangeable Preferred Stock evidenced by the Global Certificate. Beneficial
owners of shares of Exchangeable Preferred Stock evidenced by the Global
Certificate shall not be considered the owners or holders thereof under this
Certificate of Designations for any purpose.
(d) Payments in respect of the Liquidation Preference of and
accumulated and unpaid dividends and Liquidated Damages, if any, on any
Exchangeable Preferred Stock registered in the name of the Global Certificate
Holder on the applicable record date shall be payable by the Company to or at
the direction of the Global Certificate Holder in its capacity as the registered
holder under this Certificate of Designations. The Company may treat the persons
in whose names Exchangeable Preferred Stock, including, without limitation, the
Global Certificate, are registered as the owners thereof for the purpose of
receiving such payments.
(e) Any person having a beneficial interest in a Global Certificate
may, upon request to the Company, exchange such beneficial interest for
Exchangeable Preferred Stock in the form of registered definitive certificates
(the "Certificated Securities"). Upon any such issuance, the Company shall
register such Certificated Securities in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). If (i) the
Company notifies the holders in writing that the Depositary is no longer willing
or able to act as a depositary and the Company is unable to locate a qualified
successor within 90 days or (ii) the Company, at its option, notifies the
holders in writing that it elects to cause the issuance of Exchangeable
Preferred Stock in the form of Certificated Securities under this Certificate of
Designations, then, upon surrender by the Global Security Holder of its Global
Certificate, Exchangeable Preferred Stock in such form will be issued to each
person that the Global Certificate Holder and the Depositary identify as being
the beneficial owner of the related Exchangeable Preferred Stock.
(f) (i) Each Global Certificate shall bear a legend in substantially
the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR A SECURITY IN DEFINITIVE FORM, THIS SECURITY 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.
THE DEPOSITARY TRUST COMPANY SHALL ACT AS THE
DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY
THE COMPANY AND THE TRANSFER AGENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY 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
34
<PAGE> 62
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.
(ii) In addition, the Regulation S Temporary Global
Certificate shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY
GLOBAL CERTIFICATE, AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES
ARE AS SPECIFIED IN THE CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
OF SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK OF
NEBCO EVANS HOLDING COMPANY DATED AS OF MARCH 6,
1998. NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF
THIS REGULATION S TEMPORARY GLOBAL CERTIFICATE SHALL
BE ENTITLED TO RECEIVE CASH DIVIDEND PAYMENTS HEREON.
NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT
DIVIDENDS FROM ACCRUING AND ACCUMULATING ON THIS
SECURITY."
(g) All shares of Exchangeable Preferred Stock and the Debentures
issuable upon exchange thereof will bear a legend to the following effect,
unless the Company determines otherwise in compliance with applicable law:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION."
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO (A) OFFER, SELL, PLEDGE OR OTHERWISE
TRANSFER THIS SECURITY ONLY (1) TO THE COMPANY, (2)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
35
<PAGE> 63
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A, (4)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "IAI") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRANSFER AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT) OR (6) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH
OF THE FOREGOING CASES TO APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTIONS AND (B) THAT IT 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."
36
<PAGE> 64
IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by A. Petter Ostberg, Vice President of the Company, and attested by
Gunnar E. Klintberg, its Assistant Secretary, this 5th day of March, 1998.
NEBCO EVANS HOLDING COMPANY
By:
-------------------------------
Name: A. Petter Ostberg
Title: Vice President
ATTEST:
By:
-----------------------------
Name: Gunnar E. Klintberg
Title: Assistant Secretary
37
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
Nebco Evans Holding Company
----------------------------------------
$250,000,000
11 1/4% Senior Redeemable Exchangeable Preferred Stock due 2008
----------------------------------------
-------------------
PURCHASE AGREEMENT
DATED AS OF FEBRUARY 27, 1998
-------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
<PAGE> 2
Nebco Evans Holding Company
$250,000,000
11 1/4% Senior Redeemable Exchangeable Preferred Stock due 2008
PURCHASE AGREEMENT
February 27, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Nebco Evans Holding Company, a Delaware corporation ("the Company"),
proposes to issue and sell an aggregate of $250,000,000 in principal amount of
11 1/4% Senior Redeemable Exchangeable Preferred Stock due 2008 (the "Preferred
Stock") of the Company, to Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ" or the "Initial Purchaser") to be issued pursuant to a Certificate of
Designation of Preferences and Relative, Participating, Optional or other
Special Rights and Qualification, Limitations and Restrictions (the "Certificate
of Designation") to be filed with the Secretary of State of Delaware. The
Transfer Agent for the Preferred Stock will be State Street Bank and Trust
Company. The Preferred Stock and the New Preferred Stock (as defined below)
issuable in exchange therefor are collectively referred to herein as the
"Preferred Stock" under certain circumstances set forth in the Certificate of
Designation, the Preferred Stock may be exchanged for the Company's 11 1/4%
Subordinated Exchange Debentures due 2008 (the "Exchange Debentures"). The
Exchange Debentures (as defined below) issuable in exchange therefor are
collectively referred herein as the "Debentures." The Preferred Stock is more
fully described in the Offering Memorandum referred to below. Capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Indenture.
1. ISSUANCE OF SECURITIES. The Preferred Stock 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"). The
Company has prepared a final offering memorandum, dated March 6, 1998 (the
"Offering Memorandum"), relating to the Preferred Stock.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Preferred
Stock (and all securities issued in exchange therefor (other than securities
registered under the Securities Act), in substitution thereof or upon conversion
thereof) shall bear the following legend:
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<PAGE> 3
"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 THE COMPANY 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 TRANSFER AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRANSFER AGENT) 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 THE COMPANY SO REQUESTS), (2) TO THE COMPANY
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, the Company agrees to issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, all of the Preferred Stock offered in the Offering at a purchase price
of $100 per share (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchaser will make offers (the "Exempt
Resales") of the Preferred Stock 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
Preferred Stock to Eligible Purchasers initially at the price set forth herein.
Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Preferred Stock will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the
2
<PAGE> 4
Closing Date (as defined below), in substantially the form of Exhibit A hereto,
for so long as such Preferred Stock constitute "Transfer Restricted Securities"
(as defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company 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) the Company's New Senior Redeemable
Exchangeable Preferred Stock due 2008 (the "New Preferred Stock") to be offered
in exchange for the Preferred Stock, (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 Preferred Stock,
and to use their best efforts to cause such Registration Statements to be
declared effective and consummate the Registered Exchange Offer. This Agreement,
the Certificate of Designation, the indenture pursuant to which the Exchange
Debentures will be issued (the "Indenture"), the Preferred Stock, the Exchange
Debenture 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 Preferred Stock 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 March 6, 1998 or at such other time as shall be
agreed upon by the Company and the Initial Purchaser. The time and date of such
delivery and the payment are herein called the "Closing Date."
(b) One or more certificates representing Preferred Stock 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 the Company, having an aggregate principal
amount corresponding to the aggregate principal amount of Preferred Stock sold
pursuant to Exempt Resales to Eligible Purchasers (collectively, the "Master
Preferred Stock"), shall be delivered by the Company to the Initial Purchaser
(or as the Initial Purchaser directs) in each case with any taxes thereon duly
paid by the Company, against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company or
as the Company may direct. The Master Preferred Stock 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 THE COMPANY. The Company covenants and agrees with the
Initial Purchaser as follows:
(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 Preferred Stock
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. The Company
shall use its best efforts to prevent the issuance of any stop order or
order suspending
3
<PAGE> 5
the qualification or exemption from qualification of the Preferred Stock
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 Preferred Stock under any state securities or Blue Sky laws,
the Company 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 the Company, without charge, as many copies of the
Offering Documents, and any amendments or supplements thereto, as the
Initial Purchaser may reasonably request. The Company 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 Preferred Stock 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 believes 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 the Company 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
Preferred Stock under the state securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may request, to continue 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 the Company shall not be required in connection
therewith to register or qualify as a foreign corporation in any
jurisdiction in which the Company is not now so qualified, or take any
action that would subject the Company 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 the Company is not now so
subject.
(f) For so long as the Preferred Stock are outstanding, to furnish
without charge to the Initial Purchaser promptly upon their becoming
available (i) all reports or other publicly available information that the
Company shall mail or otherwise make available to the Company's
stockholders and (ii) all reports, financial statements and proxy or
information statements filed by
4
<PAGE> 6
the Company or its subsidiaries with the Commission or any national
securities exchange and such other publicly available information
concerning the business and financial condition of the Company 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 Preferred Stock 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 Preferred
Stock.
(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 the Company of the
Preferred Stock to the Initial Purchaser;
(4) the registration or qualification of the Preferred Stock 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 Offering Memorandum, and all
amendments and supplements thereto, as may be requested for use in
connection with the Exempt Resales;
(6) the preparation of certificates for the Preferred Stock
(including, without limitation, printing and engraving thereof);
(7) the rating of the Preferred Stock by investment rating
agencies;
(8) the fees, disbursements and expenses of the Company's counsel
and accountants;
(9) all expenses and listing fees in connection with the
application for quotation of the Preferred Stock in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL");
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<PAGE> 7
(10) all fees and expenses (including fees and expenses of
counsel to the Company) of the Company in connection with approval of
the Preferred Stock by DTC for "book-entry" transfer; and
(11) the performance by the Company 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 the Company shall be unable or unwilling to perform their
obligations hereunder, the Company 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 the Company, a
copy of any consolidated financial statements of the Company 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 Preferred Stock 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 Preferred Stock in a manner that would
require the registration under the Act of the sale to the Initial Purchaser
or the Eligible Purchasers of the Preferred Stock.
(n) For so long as any of the Preferred Stock remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Exchange Act, to make available to any holder of Preferred
Stock in connection with any sale thereof and any prospective purchaser of
such Preferred Stock from such holder, the information ("Rule 144A
Information") required by Rule 144A(d)(4) under the Act.
(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 the Company to DTC relating to the approval of
the Preferred Stock by DTC for "book-entry" transfer.
(p) To cause the Exchange Offer to be made in the appropriate form to
permit registered New Preferred Stock to be offered in exchange for the
Preferred Stock 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 Preferred Stock to be
eligible for trading through PORTAL and to obtain approval of the Preferred
Stock by DTC for "book-entry" transfer.
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<PAGE> 8
6. REPRESENTATIONS AND WARRANTIES. the Company represents and warrants to
the Initial Purchaser that:
(a) The Offering Documents have been prepared in connection with the
Exempt Resales. The Offering Memorandum will 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 the Company in writing by the Initial
Purchaser expressly for use therein. The Company 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 forth sentence of the sixth and the eight paragraph under
the caption "Plan of Distribution" in the Offering Memorandum constitute
the only written information furnished to the Company 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 the Company and its subsidiaries (i) has been duly
organized and validly existing as a corporation in good standing under the
laws of its respective jurisdiction, (ii) has 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 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 the Company and its subsidiaries, taken 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 Preferred Stock or
the consummation of this Agreement.
(c) All of the issued and outstanding shares of capital stock of the
Company 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 the Company. 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 a credit facility of AmeriServe Food Distribution, Inc., a
Delaware Corporation and wholly owned subsidiary (the "New Credit
Facility"). There are not currently 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, the Company or any of its subsidiaries.
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<PAGE> 9
(d) The Company 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 Preferred Stock to the Initial
Purchaser.
(e) Neither the Company nor any of its subsidiaries is (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 the Company, to which the Company is a party or by which it
or any of the Company'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 the Company,
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 the
Company, 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 the Company
of this Agreement and the other Operative Documents, (ii) the issuance and
sale of the Preferred Stock by the Company and (iii) the consummation by
the Company of the transactions described in the Offering Memorandum under
the caption "Use of Proceeds," 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 the Company
or an acceleration of indebtedness pursuant to, (1) the charter or bylaws
of the Company, (2) any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party or
by which any of its property is bound, or (3) any law or administrative
regulation applicable to the Company 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 the Company 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 Preferred Stock. 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, that could not reasonably be expected to have a Material
Adverse Effect.
(g) This Agreement has been duly authorized and, when validly executed
by the Company and (assuming the due execution and delivery thereof by the
Initial Purchaser) is a legally valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
8
<PAGE> 10
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) The Certificate of Designation has been duly authorized by all
necessary corporate and any necessary stockholder action and, on the
Closing Date will have been duly executed by the Company and filed with the
Secretary of State of the State of Delaware and will conform in all
material respects to the description thereof in the Offering Memorandum.
(i) The Company has duly authorized the Indenture, and when the
Company 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 the Company,
enforceable against the Company 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).
(j) The Company has duly authorized the Preferred Stock and, when
issued and authenticated in accordance with the terms of the Certificate of
Designation 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 the Company, enforceable against the Company 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).
(k) The Company has duly authorized the New Preferred Stock and, when
issued and authenticated in accordance with the terms of the Registered
Exchange Offer and the Certificate of Designation, the New Preferred Stock
will be the legally valid and binding obligations of the Company,
enforceable against the Company 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).
(l) The Exchange Debentures have been duly and validly authorized by
the Company and, if and when issued by the Company will conform in all
material respects to the description thereof in the Offering Memorandum.
When the Exchange Debentures are issued and delivered in accordance with
the Indenture, the Exchange Debentures will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The Exchange Debentures will
conform in all material respects to the description thereof in the Offering
Memorandum.
(m) The New Exchange Debentures have been duly and validly authorized
by the Company and, if and when issued and delivered by the Company in
accordance with the terms of
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<PAGE> 11
the Indenture and the Exchange Offer, will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The New Exchange Debentures
will conform in all material respects to the description thereof in the
Offering Memorandum.
(n) The Registration Rights Agreement has been duly authorized and
when validly executed by the Company will be (assuming the due execution
and delivery thereof by the Initial Purchaser) the legally valid and
binding obligation of the Company, enforceable against the Company 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).
(o) There is (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 the
Company, contemplated to which the Company is or may be a party or to which
the business or property of the Company is or 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 the Company,
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 the Company 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 Preferred Stock.
(p) There are no holders of any security of the Company who by reason
of the execution by the Company 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 the Company register
under the Act, or analogous foreign laws and regulations, securities held
by them.
(q) The Company is not involved in any material labor dispute nor, to
the knowledge of the Company, is any material dispute threatened which, if
such dispute were to occur, could have a Material Adverse Effect.
(r) The Company 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 promulgated thereunder, except for such instances of
noncompliance that, either singly or in the aggregate, could not have a
Material Adverse Effect.
(s) The Company is 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
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<PAGE> 12
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 the Company,
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 the Company 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 the
Company or any of its subsidiaries or at any location currently or
previously used or leased by the Company 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.
(t) The Company and each of its Subsidiaries has and 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; the Company and each of its
Subsidiaries has 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 the Company or
any of its Subsidiaries.
(u) The Company 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 the Company 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 the Company and its subsidiaries does not to the Company's
knowledge, infringe on the rights or claimed rights of any person. No other
person is, to the Company's knowledge, infringing upon any of the
Intellectual Property of the Company or has notified the Company or any of
its subsidiaries that it is claiming ownership of, or the right to use any
Intellectual Property owned by the Company or its subsidiaries. the Company
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
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<PAGE> 13
Effect on the Company. Other than in connection with the use of so-called
"off-the-shelf" software and except as otherwise disclosed in the Offering
Memorandum, neither the Company 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
the Company 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 the Company.
(v) All tax returns required to be filed by the Company 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 the Company, there are no material proposed additional tax assessments
against the Company, any of its subsidiaries or the assets or property of
the Company or any of its subsidiaries.
(w) The Company and its subsidiaries have 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 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 the Company; all such Authorizations are
valid and in full force and effect; the Company 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 the Company
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 the
Company, (i) the Company and its subsidiaries 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 the Company or any of its subsidiaries is
a party are valid and binding and, to the best of the Company's knowledge,
no default has occurred or is continuing thereunder which could reasonably
be expected to have a Material Adverse Effect on the Company, and the
Company and its subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which the Company and its subsidiaries are a party
as lessee with such exceptions as do not materially interfere with the use
currently made by the Company or its subsidiaries, as the case may be.
(y) The Company maintains 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 the Company's knowledge, all
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<PAGE> 14
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 the Company 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 the Company. 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) The Company maintains a system of internal accounting controls
sufficient 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.
(bb) 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 the Company has notified the Initial Purchaser: (i)
the Company has not incurred any liabilities or obligations, direct or
contingent, which are expected to have a Material Adverse Effect on the
Company, nor has the Company entered into any material transactions not in
the ordinary course of business; (ii) there has not been any decrease in
the Company's capital stock or any increase in long-term indebtedness to
meet working capital requirements or any material increase in short-term
indebtedness of the Company or any payment of or declaration to pay any
dividends or any other distribution with respect to the Company'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.
(cc) Prior to and immediately after the issuance of the Preferred
Stock (i) the present fair saleable value of the assets of the Company 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 the Company and its subsidiaries as they become
absolute and matured, (ii) the assets of the Company 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) the Company 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.
(dd) Except as would not otherwise be unlawful, the Company has not
(i) taken, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which
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<PAGE> 15
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Preferred Stock.
(ee) Neither the Company 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 Preferred
Stock 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.
(ff) Neither the Company nor any of its subsidiaries is an "investment
company" or a company "controlled" by an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(gg) The accountants, Ernst & Young LLP, that have certified certain
of 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.
(hh) When the Preferred Stock are issued and delivered pursuant to
this Agreement, such Preferred Stock will not be of the same class (within
the meaning of Rule 144A under the Act) as securities of the Company 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.
(ii) 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 the Company
and (iv) that each of the Eligible Purchasers is a QIB or is purchasing the
Preferred Stock pursuant to the exemption provided for under Regulation S,
the purchase and resale of the Preferred Stock 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 the Company or any of its representatives (other
than the Initial Purchaser, as to whom the Company makes no representation)
in connection with the offer and sale of the Preferred Stock, 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 Preferred Stock have been issued and sold by the Company
within the six-month period immediately prior to the date hereof.
(jj) 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 the Company. The representation made by the
Company 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."
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<PAGE> 16
(kk) 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.
(ll) None of the Company, 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 Preferred Stock, and the Company, its subsidiaries 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 Preferred Stock outside
the United States.
(mm) There is no "substantial U.S. market interest" as defined in rule
902(n) of Regulation S for the Preferred Stock or any security of the same
class as the Preferred Stock.
(nn) The sale of the Preferred Stock in offshore transactions pursuant
to Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(oo) The Company 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 the Company 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 Preferred Stock.
(b) The Initial Purchaser (i) is not acquiring the Preferred Stock
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 Preferred Stock
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 Preferred Stock, 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 Preferred Stock only from, and
will offer to sell the Preferred Stock only to, Eligible Purchasers. The
Initial Purchaser further agrees that it will offer to sell the Preferred
Stock only to, and will solicit offers to buy the Preferred Stock only
from, persons who in
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<PAGE> 17
purchasing such Preferred Stock will be deemed to have represented and
agreed (i) if such Eligible Purchasers are QIBs, that they are purchasing
the Preferred Stock 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 Preferred Stock 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 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 the Company
so requests), (2) to the Company 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 Preferred Stock,
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 Preferred
Stock 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 Preferred Stock (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 Preferred Stock
from it during the Restricted Period a confirmation or notice to
substantially the following effect:
"The Preferred Stock 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 Preferred Stock, except with its affiliates or with the
prior written consent of the Company.
(g) The Initial Purchaser agrees that it will not offer, sell or
deliver any of the
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<PAGE> 18
Preferred Stock 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 Preferred Stock 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.
(h) The Initial Purchaser agrees not to cause any advertisement of the
Preferred Stock to be published in any newspaper or periodical or posted in
any public place and not to issue any circular relating to the Preferred
Stock, except such advertisements as include the statements required by
Regulation S.
(i) The sale of the Preferred Stock in offshore transactions pursuant
to Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(j) The Initial Purchaser is not a pension or welfare plan (as defined
in Section 3 of ERISA) and is not acquiring the Preferred Stock on behalf
of a pension or welfare plan.
(k) 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.
(l) The Initial Purchaser also understands that the Company and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant
to Sections 9(d) and (e) hereof, counsel to the Company 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) The Company 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 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 Offering Memorandum or any
Rule 144A Information provided by the Company to any holder or prospective
purchaser of Preferred Stock pursuant to Section 5(n) (or any amendment or
supplement thereto), or any omission or
17
<PAGE> 19
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 the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser expressly for use in the Offering
Memorandum (or any amendment or supplement thereto); provided that the
Company 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. The Company 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). The Company 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 the
Company 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 the Company, such Indemnified Person shall promptly
notify the Company in writing (provided, that the failure to give such
notice shall not relieve the Company of its obligations pursuant to this
Agreement) and the Company 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 the Company, (ii) the
Company 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 the Company 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 the Company (in which case the Company shall not have
the right to assume the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Company 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). The Company shall not
be liable for any settlement of any such action or proceeding effected
without the prior written consent of the Company, but if settled with the
written consent of the Company, which consent will not be unreasonably
withheld, the Company 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 the Company to
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, the Company agrees
that it shall be liable for any settlement of any proceeding effected
without the Company's written consent if (i) such settlement is entered
into more than thirty (30) business days after receipt by the Company of
the aforesaid request, and (ii) the Company 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. The Company shall not, without the
prior written consent of each Indemnified Person (which consent
18
<PAGE> 20
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 the
Company, any person controlling (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) the Company and the officers,
directors, partners, employees, representatives and agents of each such
person to the same extent as the foregoing indemnity from the Company 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 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 Preferred Stock 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 any other
relevant equitable considerations. The relative benefits received by the
Company 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 the Company 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 the Company, 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 the Company, 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.
the Company 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
19
<PAGE> 21
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 Preferred Stock 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 the Company contained
in this Section 8 are in addition to any liability or obligation which the
Company 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 the Company, any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company 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 Preferred Stock
as provided herein, shall be subject to the satisfaction of each of the
following conditions:
(a) All the representations and warranties of the Company 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. The Company 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.
(b) (1) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchaser not later than 48 hours prior to
the 9:00 a.m. on the Closing Date 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 Preferred Stock;
(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 the
Company, threatened against, the Company which would prevent the
issuance of the Preferred Stock; 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 Preferred Stock
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 the Company's knowledge, contemplated.
20
<PAGE> 22
(c) (1) (i)Since the date of the latest balance sheet in the Offering
Memorandum, and except as provided therein, 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 the Company and its subsidiaries, taken as a whole, (ii) since the
date of the latest balance sheet included in the Offering Memorandum,
and except as provided therein, 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 the Company 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 the Company nor any of its subsidiaries shall have any
liability or obligation, direct or contingent, which is material to
the Company;
(2) the Company 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 the Company by (i) the President
and (ii) the Chief Financial Officer of the Company, 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 or opinions (satisfactory to the Initial Purchaser and counsel to
the Initial Purchaser) dated the Closing Date, of Wachtell, Lipton, Rosen &
Katz, counsel for the Company, or Kevin J. Rogan, Vice President and
General Counsel of the Company, substantially to the effect that:
(1) Each of the Company and its subsidiaries (i) is organized and
validly existing as a corporation in good standing under the laws of
its respective jurisdiction, (ii) has 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
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, the
Company 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 the Company. 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 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, the Company or any of its
subsidiaries other than warrants held by
21
<PAGE> 23
affiliates of the Initial Purchaser or affiliates of NEHC.
(3) the Company 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 Preferred Stock to
the Initial Purchaser.
(4) Neither the Company nor any of its subsidiaries is (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 the Company, to which the Company is a party or by which
it or any of the Company'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 the Company, 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 the Company, 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 the
Company of this Agreement and the other Operative Documents, (ii) the
issuance and sale of the Preferred Stock by the Company and (iii) the
consummation by the Company of the transactions described in the
Offering Memorandum under the caption "Use of Proceeds," will conflict
with or constitute a breach of, or a default under, or result in the
imposition of a lien or encumbrance on any properties of the Company
or an acceleration of indebtedness pursuant to, (1) the charter or
bylaws of the Company (2) to the best of its knowledge, any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which any of its
property is bound, or (3) any law or administrative regulation
applicable to the Company 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 the Company 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
Preferred Stock. 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
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<PAGE> 24
the Company and (assuming the due execution and delivery thereof by
the Initial Purchaser) is a legally valid and binding obligation of
the Company, enforceable against the Company 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) The Company has duly authorized the Indenture, and if and
when the Company 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 the Company, enforceable against the Company 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) The Company has duly authorized the Preferred Stock and, when
issued and authenticated in accordance with the terms of the
Certificate of Designation 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 the Company, enforceable
against the Company 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).
(9) The Company has duly authorized the New Preferred Stock and,
when issued and authenticated in accordance with the terms of the
Registered Exchange Offer and the Certificate of Designation, the New
Preferred Stock will be the legally valid and binding obligations of
the Company, enforceable against the Company 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 Exchange Debentures have been duly and validly
authorized for issuance and, if and when issued and delivered by the
Company in accordance with the terms of the Indenture and the
Certificate of Designation, the Exchange Debentures will be the valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of
the Indenture, except that (a) such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium (whether general or specific) or similar laws now or
hereafter in effect relating to or affecting creditors' rights and
remedies generally, (b) such enforceability may be limited by the
effects of general principals of equity and by the discretion of the
court before which any proceeding therefor may be brought (whether
such proceeding is at law or in equity or in a bankruptcy proceeding),
(c) rights to contribution or indemnification may be limited by the
laws, rules or regulations of any governmental authority or agency
thereof or by public policy, and (d) waivers as to
23
<PAGE> 25
usury, stay or extension laws may be unenforceable.
(11) The New Exchange Debentures have been duly and validly
authorized for issuance and, if and when issued and delivered by the
Company in accordance with the terms of the Indenture and the
Certificate of Designation, the Exchange Debentures will be the valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of
the Indenture, except that (a) such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium (whether general or specific) or similar laws now or
hereafter in effect relating to or affecting creditors' rights and
remedies generally, (b) such enforceability may be limited by the
effects of general principals of equity and by the discretion of the
court before which any proceeding therefor may be brought (whether
such proceeding is at law or in equity or in a bankruptcy proceeding),
(c) rights to contribution or indemnification may be limited by the
laws, rules or regulations of any governmental authority or agency
thereof or by public policy, and (d) waivers as to usury, stay or
extension laws may be unenforceable.
(12) The Registration Rights Agreement has been duly authorized
and when validly executed by the Company will be (assuming the due
execution and delivery thereof by the Initial Purchaser) the legally
valid and binding obligation of the Company, enforceable against the
Company 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).
(13) To the best knowledge of such counsel, there is (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 the Company,
contemplated to which the Company is or may be a party or to which the
business or property of the Company is 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 the Company, 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 the Company 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 Preferred Stock.
(14) To the best knowledge of such counsel, there are no holders
of any security of the Company who by reason of the execution by the
Company 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 the Company register under the
Act, or analogous foreign laws and regulations, securities held by
them.
(15) The statements under the captions "Description of Preferred
Stock," "Description of Indebtedness," "The Transactions," 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.
24
<PAGE> 26
(16) Neither the Company 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
Preferred Stock 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.
(17) Neither the Company nor any of its subsidiaries is 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 Preferred Stock are issued and delivered pursuant
to this Agreement, such Preferred Stock will not be of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Company 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
the Company and (iv) that each of the Eligible Purchasers is a QIB,
the purchase and resale of the Preferred Stock pursuant hereto
(including pursuant to the Exempt Resales) is exempt from the
registration requirements of the Act.
(21) 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 the Company, representatives of the
Company's accountants, the Initial Purchaser's 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
25
<PAGE> 27
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 the
Company 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) The Company shall have authorized, executed and filed the
Certificate of Designation in accordance with Delaware law and the Initial
Purchaser shall have received an original copy, duly executed by the
Company.
(h) The Company 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) The Company shall have fully performed or complied with any of the
agreements herein contained and required to be performed or complied with
by the Company 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 the Company if any of the following has occurred: (i) since the
respective dates as of which information is given in the Offering
Documents, any adverse change or development involving a prospective
adverse change which would cause a Material Adverse Effect on the Company,
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 Preferred Stock 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 Preferred Stock 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
26
<PAGE> 28
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 Preferred Stock in an aggregate principal amount that
exceeds 10% of the total principal amount of the Preferred Stock and
arrangements satisfactory to the Company for the purchase of such Preferred
Stock are not made within 48 hours after such default, this Agreement shall
terminate without liability on the part of the Company, 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 the Company 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 the Company to comply with the terms
or to fulfill any of the conditions of this Agreement, the Company 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, the Company 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 the Company 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 Preferred Stock pursuant to such document until (i) the Initial
Purchaser receives from the Company copies of an amended or supplemented
document that the Company states in writing may be used by the Initial Purchaser
or (ii) the Initial Purchaser is advised in writing by the Company 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 the Company, 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
27
<PAGE> 29
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 Preferred Stock,
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
Preferred Stock 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 the Company, 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 Preferred Stock 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 the Company and
the Initial Purchaser.
(f) All representations and warranties hereunder made by the Company
and the opinion of Wachtell, Lipton, Rosen & Katz are qualified by the
information contained in the Offering Memorandum.
[signature pages follow]
28
<PAGE> 30
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: ______________________________________________
Name:
Title:
<PAGE> 31
EXHIBIT A
Form of Registration Rights Agreement
<PAGE> 1
Exhibit 10.2
EXECUTION COPY
Nebco Evans Holding Company
----------------------------------------
$250,000,000
SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
DUE 2008
----------------------------------------
-------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MARCH 6, 1998
-------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 6, 1998, by and between Nebco Evans Holding Company, a Delaware
corporation ("the Company") and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ" or the "Initial Purchaser"), who have agreed to purchase an
aggregate of $250,000,000 in principal amount of 11 1/4% Senior Redeemable
Exchangeable Preferred Stock due 2008 (the "Preferred Stock") of the Company
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated February
27, 1998 (the "Purchase Agreement"), by and between the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Preferred
Stock, the Company 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.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: New Preferred Stock or New
Exchange Debentures that are acquired by a Broker-Dealer in the Exchange Offer
in exchange for Preferred Stock or Exchange Debentures, as the case may be, that
such Broker-Dealer acquired for its own account as a result of market-making
activities or other trading activities (other than Preferred Stock or Exchange
Debentures acquired directly from the Company or any of its respective
affiliates).
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.
Certificated Securities: As defined in the Certificate of Designation and
Indenture.
Certificate of Designations: The Certificate of Designations, Preferences
and Relative, Participating, Optional and other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions thereof of the Preferred
Stock dated March 6, 1998.
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 Preferred
Stock or if the Preferred Stock has been exchanged for the Exchange Debentures,
the New Exchange Debentures 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
<PAGE> 3
less than the minimum period required pursuant to Section 3(b) hereof and (c)
the delivery by the Company to the Transfer Agent of shares of New Preferred
Stock in the same aggregate Liquidation Preference or the aggregate Liquidation
Preference of Preferred Stock tendered by Holders thereof pursuant to the
Exchange Offer, or if the Preferred Stock has been exchanged for Exchange
Debentures, the delivery by the Company to the Trustee of New Exchange
Debentures in the same aggregate principal amount as the aggregate principal
amount of Exchange Debentures tendered by Holders thereof pursuant to the
Exchange Offer.
Damages Payment Date: Each Dividend Payment Date or Interest Payment Date,
as the case may be.
Debentures: The Exchange Debentures and the New Exchange Debentures.
Dividend Payment Date: As defined in the Certificate of Designations.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Debentures: The Company's 11 1/4% Subordinated Exchange Debentures
due 2008, including, without limitation, all such debentures issued in lieu of
payment of cash interest.
Exchange Offer: The registration by the Company under the Act of the New
Preferred Stock or if the Preferred Stock has been exchanged for Exchange
Debentures, the New Exchange Debentures pursuant to the Exchange Offer
Registration Statement pursuant to which the Company 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 Preferred Stock with the same aggregate Liquidation Preference as the
Preferred Stock tendered in such exchange offer by such Holders, or New Exchange
Debentures in an aggregate principal amount equal to the aggregate principal
amount of the Exchange Debentures tendered in such exchange offer by such Holder
as, the case may be.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exchangeable Preferred Stock: The Preferred Stock and the New Preferred
Stock.
Exempt Resales: The transactions in which the Initial Purchaser proposes to
sell the Preferred Stock (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 Security Holder: As defined in the Certificate of Designations with
respect to Prefered Stock and the Indenture with respect to the Exchange
Debentures.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
2
<PAGE> 4
Indenture: The Indenture, to be entered into between the Company and
pursuant to which the State Street Bank and Trust Company, trustee (the
"Trustee"), upon the exchange of the Exchangeable Preferred Stock for Debentures
in accordance with the Certificate of Designation, Debentures 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 Exchange
Debentures.
Liquidation Preference: As defined in the Certificate of Designation.
NASD: National Association of Securities Dealers, Inc.
New Exchange Debentures: The Company's 11 1/4% Subordinated Exchange
Debentures due 2008 to be issued pursuant to the Indenture (i) in the Exchange
Offer or (ii) upon the request of any Holder of Exchange Debentures covered by a
Shelf Registrations Statement, in exchange for such Exchange Debentures,
including, without limitation, all such debentures issued in lieu of payment of
cash interest thereon.
New Preferred Stock: The Company's 11 1/4% Senior Cumulative Exchangeable
Preferred Stock due 2008 to be issued pursuant to the Certificate of
Designations (i) in the Exchange Offer or (ii) upon the request of any Holder of
Preferred Stock covered by a Shelf Registration Statement, in exchange for such
Preferred Stock, including without limitation, all such Preferred Stock issued
in lieu of payment of cash thereon.
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 Preferred Stock or Debentures, as the case may be, on the
record date with respect to the Dividend Payment Date or Interest Payment Date,
respectively, on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of New Preferred Stock pursuant to an Exchange Offer or (b)
the registration for resale of Transfer 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
3
<PAGE> 5
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
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: Prefered Stock or Debentures, until the
earliest to occur of (a) the date on which such Prefered Stock or Debenture 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 Prefered Stock or Debenture has been
disposed of in accordance with a Shelf Registration Statement, (c) the date on
which such Prefered Stock or Debenture 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 Prefered Stock or Debenture is distributed to
the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in which
securities of the Company 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. 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), the Company shall (i) cause to be filed with the Commission, on or prior
to 60 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 Preferred Stock or the New Exchange Debentures, as the
case may be, 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 the Company 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 Preferred Stock or
4
<PAGE> 6
the New Exchange Debentures, as the case may be, to be offered in exchange for
the Preferred Stock or the Exchange Debentures, as the case may be, 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) The Company 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. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchangeable
Preferred stock and the Debentures shall be included in the Exchange Offer
Registration Statement. The Company 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.
(c) The Company 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 Preferred Stock or Exchange
Debentures 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 Preferred Stock or Exchange
Debentures (other than Transfer Restricted Securities acquired directly from the
Company or any affiliate of the Company) 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 Preferred Stock
received by such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such 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.
The Company 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.
The Company 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) the Company is not required to file an
Exchange Offer Registration Statement with respect to the New Preferred Stock
because the Exchange Offer is not permitted by applicable
5
<PAGE> 7
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 the
Company within 20 Business Days following the Consummation of the Exchange Offer
that (A) such Holder is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Preferred Stock or New Exchange Debentures 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
Preferred Stock or Exchange Debentures acquired directly from the Company or one
of its respective affiliates, then the Company shall (x) cause to be filed on or
prior to the earliest of (1) 45 days after the date on which the Company 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 the Company 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 the Company becomes obligated to file such Shelf
Registration Statement. If, after the Company has filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a) above,
the Company 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 Date as defined in Section 5 below. The Company 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
the Company 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 the
Company all information required to be disclosed in order to make the
information previously furnished to the Company 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
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<PAGE> 8
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"), the Company 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 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
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 Security 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 the Company 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, the Company 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
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<PAGE> 9
Exchange Offer, such that in the reasonable judgment of counsel to the
Company there is a substantial question as to whether the Exchange Offer is
permitted by applicable federal law or Commission policy, the Company
hereby agrees to seek a no-action letter or other favorable decision from
the Commission allowing the Company to Consummate an Exchange Offer for
such Preferred Stock or Exchange Debentures, as the case may be. The
Company 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, the Company 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 the Company 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 the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
(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 the Company, (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 Preferred Stock or the New
Exchange Debentures, as the case may be, to be issued in the Exchange Offer
and (C) it is acquiring the New Preferred Stock, the New Exchange
Debentures in its ordinary course of business. In addition, all such
holders of Transfer Restricted Securities shall otherwise cooperate in the
Company'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 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 Preferred
Stock or New Exchange Debentures, as the case may be obtained by such
Holder in exchange for Preferred Stock or Exchange Debentures as the case
may be, acquired by such Holder directly from the Company or an affiliate
thereof.
(iii) To the extent required by the Commission, prior to effectiveness
of the Exchange Offer Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the Company 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 the Company has not entered into
8
<PAGE> 10
any arrangement or understanding with any Person to distribute the New
Preferred Stock or the New Exchange Debentures, as the case may be, to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the New Preferred Stock or the New Exchange Debentures, as the
case may be, in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the New
Preferred Stock or New Exchange Debentures, as the case may be, 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, the Company 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 the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company 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), the Company 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 during the period required by this
Agreement, the Company 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, the Company may allow the Shelf Registration Statement to
cease to be effective and usable if (x) the Board of Directors of the
Company determines in good faith that it is in the best interests of the
Company not to disclose the existence of or facts surrounding any proposed
or pending material corporate transaction involving the Company, and the
Company 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
9
<PAGE> 11
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, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(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 the Company 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
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<PAGE> 12
to the underwriter(s) in connection with such sale, if any, make the
Company'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 the Company's principal
place of business for inspection by the selling Holders of transfer who
shall certify to the Company 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 the Company and
cause the Company'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 the Company 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
the Company 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 the Company is notified of the matters to be 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; the Company 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
11
<PAGE> 13
supplement thereto. Notwithstanding the foregoing, at any time after
Consummation of the Exchange Offer, the Company may allow the Shelf
Registration Statement to cease to be effective and usable if (x) the Board
of Directors of the Company determines in good faith that it is in the best
interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving the Company, and the Company 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, the Company 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 the Company 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, the Company 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
the Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company
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 the
Company, 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
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<PAGE> 14
(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 the
Company'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 be 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 the Company
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 the Company contemplated in
(A)(1) above cease to be true and correct, the Company 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 the Company 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 Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Preferred Stock or
Exchange Debentures, as the case may be, covered by any Shelf Registration
Statement contemplated by this Agreement, New Preferred Stock or New
Exchange Debentures, as the case may be, having an aggregate liquidation
preference or an aggregate principal amount, as the case may be, equal to
the aggregate liquidation preference of Preferred Stock or aggregate
principal amount of Exchange Debentures, as the case may be, surrendered to
the Company by such Holder in exchange therefor or being sold by such
Holder; such New Preferred Stock or New Exchange Debentures to be
registered in the name of such Holder or in the name of the purchaser(s) of
such Preferred Stock or such Exchange
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<PAGE> 15
Debentures, as the case may be; in return, the Preferred Stock or the
Exchange Debentures, as the case may be, held by such Holder shall be
surrendered to the Company 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 underwriters in such an
offering beginning with the first month of the Company's first fiscal
quarter commencing a further effective date of the Registration Statement;
(xix) if Debentures are being included in Registration Statement,
cause the Indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement
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<PAGE> 16
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 the Company 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 the Company 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 the Company, each Holder will deliver to the Company (at the
Company'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 the Company 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.
The Company 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 the Company such information regarding such Holder
and such Holder's intended method of distribution of the applicable Transfer
Restricted Securities as the Company 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 the Company as promptly
as practicable of (i) any inaccuracy or change in information previously
furnished by such Holder to the Company, 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 f 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 the Company 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 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.
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<PAGE> 17
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, 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 Preferred
Stock or New Exchange Debentures, as the case may be, to be issued in the
Exchange Offer and printing of Prospectuses); (iv) all fees and disbursements of
counsel for the Company and, in accordance with Section 7(b) below, the Holders
of Transfer Restricted Securities; (v) all messenger and delivery services and
telephone expenses of the Company; (vi) all application and filing fees in
connection with listing the Exchangeable Preferred Stock or Debentures, as the
case may be, 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 the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
(b) the Company 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 the Company.
(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), the Company 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.
8. INDEMNIFICATION
(a) The Company 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
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<PAGE> 18
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 the Company by the Initial Purchaser or any of
the Holders expressly for use therein; and except insofar as(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 Exchangeable Preferred Stock or Debentures, as the
case may be, from any Initial Purchaser in an Exempt Resale, (2) the Initial
Purchasers failed to deliver or provide a copy of the Offering Memorandum to
such person at or prior to the confirmation of the sale of the Notes and (3) the
Offering Memorandum, (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages, liabilities, judgments, actions, or
expenses. The Company 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). The Company 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 the Company 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 the
Company, such Indemnified Holder shall promptly notify the Company in writing
(provided, that the failure to give such notice shall not relieve the Company of
its obligations pursuant to this Agreement), and the Company 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 of
such Indemnified Holder unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company 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 the Company, 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 the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Holder, it being understood, however,
that the Company 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). the Company shall not be
liable for any settlement of any such action or proceeding effected without the
prior written consent of the Company, but if settled with the written consent of
the Company, which consent will not be unreasonably withheld, the Company 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
17
<PAGE> 19
foregoing sentence, if at any time an Indemnified Holder shall have requested
the Company to reimburse the Indemnified Holder for fees and expenses of counsel
as contemplated by the second sentence of this paragraph, the Company agrees
that it shall be liable for any settlement of any proceeding effected without
the Company's written consent if (i) such settlement is entered into more than
thirty (30) business days after receipt by the Company of the aforesaid request,
and (ii) the Company 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. The Company shall not, without
the prior written consent of the Indemnified Holder (which consent shall not be
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 the Company, any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, and the officers, directors, partners, employees, representatives
and agents of each such person (the "the Company Indemnified Parties"), to the
same extent as the foregoing indemnity from the Company 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 the Company
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 the Company, and the Company 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, 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 the Company shall be deemed to be equal to the
18
<PAGE> 20
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 Preferred Stock . The relative fault of the
Company, 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 the Company 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.
The Company, 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 the Company contained in this
Section 8 are in addition to any liability or obligation which the Company 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 to each officer and director of the Company
and to each person, if any, who controls the Company within the meaning of the
Act.
9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company 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
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<PAGE> 21
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 Transfer Restricted Securities, the
investment banker or investment bankers and manager or managers for any
Underwritten Offering, 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 the Company.
Such investment bankers and managers are referred to herein as the
"underwriters."
12. MISCELLANEOUS
(a) Remedies. The Company 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. The Company 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. The Company 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 the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Preferred Stock or Exchange, Debentures. The
Company will not take any action, or voluntarily permit any change to occur,
with respect to the Preferred Stock or Exchange Debentures 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, 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), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company 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.
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<PAGE> 22
(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 the Company:
Nebco Evans Holding Company
545 Steamboat Road
Greenwich, Connecticut 06830
Telecopier No.: (203) 661-5756
Attention: Diane Moog
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier No.: (212) 403-2000
Attention: Adam O. 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 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
21
<PAGE> 23
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> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
\
NEBCO EVANS HOLDING COMPANY
By: _______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _________________________
Name:
Title:
23
<PAGE> 1
Exhibit 10.6
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of October 7, 1997 (this "Amendment"), amends the Second Amended and Restated
Credit Agreement, dated as of July 11, 1997 (the "Credit Agreement"), among
AMERISERVE FOOD DISTRIBUTION, INC., a Nebraska corporation (the "Company"), the
various financial institutions parties thereto (collectively, the "Lenders"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as letter of credit
issuing lender, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
administrative agent (the "Administrative Agent") and DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION, as documentation agent (together with the
Administrative Agent, the "Agents"). Terms defined in the Credit Agreement are,
unless otherwise defined herein or the context otherwise requires, used herein
as defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement, which
provides for the Lenders to extend certain credit facilities to the Company from
time to time; and
WHEREAS, the Company proposes to issue certain senior unsecured notes and
to apply a portion of the proceeds thereof to repay the Term Loans; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective as of October 14, 1997, the Credit
Agreement shall be amended in accordance with Sections 1.1 through 1.5 below.
SECTION 1.1 Definitions. Section 1.1 of the Credit Agreement is hereby
amended by inserting in proper alphabetical order the following definitions:
"First Amendment Effective Date" means the date on or before October
31, 1997 on which the First Amendment hereto shall become effective.
"Senior Unsecured Notes means the up to $375,000,000 senior unsecured
notes dated on or about October 14, 1997 due 2007, in the form described in
the draft Offering Memorandum, a true and correct copy of which has been
delivered to the Administrative Agent."
<PAGE> 2
SECTION 1.2 Commitment Reduction. The last sentence of Section 2.7(c) of
the Credit Agreement is hereby amended to state in its entirety as follows:
"Once all of the Term Loans have been paid in full, any prepayment
pursuant to this Section 2.7 shall be applied to the Revolving Loans; and
the Revolving Loan Commitments shall be correspondingly reduced, except
that no reduction of the Revolving Loan Commitments shall result from the
issuance of the Senior Unsecured Notes."
SECTION 1.3 Indebtedness. Section 9.5 of the Credit Agreement is hereby
amended by adding the following at the end:
"(m) Senior Unsecured Notes in a principal amount not in excess of
$375,000,000."
SECTION 1.4 Contingent Obligations. Section 9.8 of the Credit Agreement is
hereby amended by adding the following immediately before the period at the end
of clause (f) thereof: "and the Senior Unsecured Notes."
SECTION 1.5 Negative Pledges, Restrictive Amendments, etc. Section 9.17 is
hereby amended by inserting the following immediately after the words "Closing
Date" in the first parenthetical contained therein: "or permitted by clause (m)
of Section 9.5 as in effect as of the First Amendment Effective Date."
SECTION 2 CONDITIONS PRECEDENT. This Amendment shall become effective when
each of the conditions precedent set forth in this Section 2 shall have been
satisfied, so long as such conditions shall be met before October 31, 1997, and
notice thereof shall have been given by the Administrative Agent to the Company
and the Lenders.
SECTION 2.1 Receipt of Documents. The Administrative Agent shall have
received all of the following documents duly executed, dated the date hereof or
such other date as shall be acceptable to the Administrative Agent, and in form
and substance satisfactory to the Administrative Agent:
(a) Amendment. This Amendment, duly executed by the Company, the
Agents and the Required Lenders.
(b) Consents. Copies, certified by the secretary or an assistant
secretary of the Company, of all documents evidencing any necessary
corporate action, consents and governmental approvals (if any) with respect
to this Amendment and the other documents described herein.
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<PAGE> 3
(c) Secretary's Certificate. A certificate of the secretary or an
assistant secretary of the Company, as to (i) resolutions of the Board of
Directors of the Company then in full force and effect authorizing the
execution, delivery and performance of this Amendment and each other
document described herein, and (ii) the incumbency and signatures of those
officers of the Company authorized to act with respect to this Amendment
and each other document described herein.
(d) Guarantors Consents. The consents of the Guarantors in the form
attached hereto.
SECTION 2.2 Senior Unsecured Notes. The Company shall have issued the
Senior Unsecured Notes and repaid the Term Loans in full with the proceeds
thereof.
SECTION 2.3 Compliance with Warranties, No Default, etc. Both before and
after giving effect to the effectiveness of this Amendment, the following
statements by the Company shall be true and correct (and the Company, by its
execution of this Amendment, hereby represents and warrants to the Agents and
each Lender that such statements are true and correct as at such times):
(a) the representations and warranties set forth in Article VII of the
Credit Agreement shall be true and correct with the same effect as if then
made (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date); and
(b) no Default or Event of Default shall have then occurred and be
continuing, and neither the Company nor any Guarantor shall be in material
violation of any law or governmental regulation or court order or decree.
SECTION 2.4 Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of the Company or any Guarantor shall be
satisfactory in form and substance to the Administrative Agent and its counsel;
and the Administrative Agent and its counsel shall have received all
information, approvals, opinions, documents or instruments as the Administrative
Agent or its counsel may reasonably request.
SECTION 3 REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the
Agents to enter into this Amendment, the Company represents and warrants to each
Agent and each Lender as follows:
SECTION 3.1 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Company of this Amendment and the execution and
delivery by each Guarantor of its consent executed or to be executed by it in
connection with this Amendment, are within the Company's and each such
Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, and do not
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<PAGE> 4
(a) contravene the Company's or any such Guarantor's Organization
Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Company or
any such Guarantor; or
(c) result in, or require the creation or imposition of, any Lien on
any of the Company's or any Guarantor's properties.
SECTION 3.2 Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Company or any other Guarantor of this Amendment
or any consent to be executed by it in connection with this Amendment.
SECTION 3.3 Validity, etc. This Amendment constitutes the legal, valid and
binding obligation of the Company enforceable in accordance with its respective
terms; and each consent executed pursuant hereto by each other Guarantor will,
on the due execution and delivery thereof by such Guarantor, be the legal, valid
and binding obligation of such Guarantor enforceable in accordance with its
terms.
SECTION 4 MISCELLANEOUS.
SECTION 4.1 Continuing Effectiveness, etc. This Amendment shall be deemed
to be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, shall remain in full force and effect and is hereby ratified, approved
and confirmed in each and every respect. After the effectiveness of this
Amendment in accordance with its terms, all references to the Credit Agreement
in the Loan Documents or in any other document, instrument, agreement or writing
shall be deemed to refer to the Credit Agreement as amended hereby.
SECTION 4.2 Payment of Costs and Expenses. The Company agrees to pay on
demand all expenses of the Administrative Agent (including Attorney Costs) in
connection with the negotiation, preparation, execution and delivery of this
Amendment.
SECTION 4.3 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Amendment
or affecting the validity or enforceability of such provision in any other
jurisdiction.
-4-
<PAGE> 5
SECTION 4.4 Headings. The various headings of this Amendment are inserted
for convenience only and shall not affect the meaning or interpretation of this
Amendment or any provisions hereof.
SECTION 4.5 Execution in Counterparts. This Amendment may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
SECTION 4.6 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF ILLINOIS; PROVIDED THAT THE AGENTS, THE LENDERS AND THE COMPANY
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAWS.
SECTION 4.7 Successors and Assigns. This Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/
-------------------------------
Title: CFO
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
-------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Lender
By: /s/ William J. Stafeh
-------------------------------
Title: Vice President
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Documentation Agent
By: /s/ Harold Phillips
-------------------------------
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
By:
-------------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY,
By: /s/ Paul P. Malecki
-------------------------------
Title: Vice President
-6-
<PAGE> 7
BANK ONE, WISCONSIN
By: /s/ Eric L. Thomas
-------------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
By:
-------------------------------
Title:
THE DAI-ICHI KANGYO BANK, LIMITED
By:
-------------------------------
Title:
DEBT STRATEGIES FUND, INC.
By: /s/ Anthony R. Clemente
-------------------------------
Title: Authorized Signatory
DLJ CAPITAL FUNDING, INC.
By:
-------------------------------
Title:
FLEET NATIONAL BANK
By: /s/
-------------------------------
Title: Senior Vice President
THE FUJI BANK, LIMITED
By: /s/
-------------------------------
Title: Joint General Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By:
-------------------------------
Title:
-7-
<PAGE> 8
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Anthony R. Clemente
-------------------------------
Title: Authorized Signatory
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/
-------------------------------
Title: Chief Manager
NATEXIS BANQUE (BFCE)
By:
-------------------------------
Title:
NATIONAL WESTMINSTER BANK PLC
By: /s/ Andrew S. Weinberg
-------------------------------
Title: Vice President
SOUTHERN PACIFIC THRIFT & LOAN
ASSOC.
By: /s/ Chris Kelleher
-------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By:
-------------------------------
Title:
TRANSAMERICA BUSINESS CREDIT CORP.
By: /s/
-------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
-------------------------------
Title:
-8-
<PAGE> 9
AGREEMENT AND CONSENT
The undersigned hereby agree and consent to the terms and provisions of the
foregoing First Amendment to Second Amended and Restated Credit Agreement, and
agree that the Loan Documents executed by the undersigned shall remain in full
force and effect notwithstanding the provisions of the foregoing First
Amendment.
Dated: October 14, 1997
NEBCO EVANS HOLDING COMPANY
By: /s/
-------------------------------
Title: Chief Financial Officer
NORTHLAND TRANSPORTATION SERVICES,
INC.
By: /s/
-------------------------------
Title: Chief Financial Officer
AMERISERV FOOD COMPANY
By: /s/
-------------------------------
Title: Chief Financial Officer
DELTA TRANSPORTATION, LTD.
By: /s/
-------------------------------
Title: Chief Financial Officer
CHICAGO CONSOLIDATED CORPORATION
By: /s/
-------------------------------
Title: Chief Financial Officer
AMERISERVE TRANSPORTATION, INC.
By: /s/
-------------------------------
Title: Chief Financial Officer
-9-
<PAGE> 10
AMERISERVE FUNDING CORPORATION
By: /s/
-------------------------------
Title: President
-10-
<PAGE> 1
Exhibit 10.9
AMENDED AND RESTATED
INVESTORS AGREEMENT
dated as of
July 11, 1997
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.,
DLJMB FUNDING II, INC.,
DLJ FIRST ESC LLC,
DLJ EAB PARTNERS, L.P.,
DLJ MILLENNIUM PARTNERS, L.P.,
UK INVESTMENT PLAN 1997 PARTNERS,
NEBCO EVANS HOLDING COMPANY,
NEBCO EVANS DISTRIBUTORS, INC.,
HOLBERG INDUSTRIES, INC.,
HOLBERG INCORPORATED
and
ORKLA ASA
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions....................................................2
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.1. Composition of the Boards of Directors.........................9
SECTION 2.2. Removal........................................................9
SECTION 2.3. Vacancies......................................................9
SECTION 2.4. Actions Requiring Consent of the DLJ Directors................10
SECTION 2.5. Termination of Rights and Obligations.........................12
SECTION 2.6. Action by the Board...........................................13
SECTION 2.7. Articles of Incorporation and Bylaws..........................13
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.1. General.......................................................13
SECTION 3.2. Legend on Securities..........................................15
SECTION 3.3. Permitted Transferees.........................................15
SECTION 3.4. Certain Optional Redemptions..................................16
ARTICLE 4
RIGHT OF FIRST OFFER; RIGHT TO PARTICIPATE IN A TRANSFER; PREEMPTIVE
RIGHTS; IMPROPER TRANSFER
SECTION 4.1. Right of First Offer..........................................16
SECTION 4.2. Right to Participate in a Transfer............................18
SECTION 4.3. Preemptive Rights.............................................20
SECTION 4.4. Improper Transfer.............................................21
SECTION 4.5. Certain Provisions Relating to Orkla With Respect
to Sections 4.2 and 4.3.....................................21
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.1. Demand Registration...........................................22
i
<PAGE> 3
PAGE
----
SECTION 5.2. Incidental Registration, Rules 144 and 144A...................24
SECTION 5.3. Holdback Agreements...........................................26
SECTION 5.4. Registration Procedures.......................................26
SECTION 5.5. Indemnification by the Issuer.................................29
SECTION 5.6. Indemnification by Participating Holders......................30
SECTION 5.7. Conduct of Indemnification Proceedings........................30
SECTION 5.8. Contribution..................................................31
SECTION 5.9. Participation in Public Offering..............................32
SECTION 5.10. Other Indemnification.........................................32
ARTICLE 6
RIGHT TO REQUIRE REPURCHASE; HOLBERG CALL
SECTION 6.1. Right to Require Repurchase...................................33
SECTION 6.2. Method of Exercising Repurchase Right.........................33
SECTION 6.3. Holberg Call..................................................33
ARTICLE 7
CERTAIN COVENANTS AND AGREEMENTS
SECTION 7.1. Confidentiality...............................................34
SECTION 7.2. Indirect Action; No Inconsistent Agreements...................35
SECTION 7.3. Certain Matters Relating to Orkla Warrants....................35
SECTION 7.4. Dilution of Initial Warrants; Consent to Issuance of Notes....36
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Entire Agreement..............................................37
SECTION 8.2. Binding Effect; Benefit.......................................37
SECTION 8.3. Assignability.................................................37
SECTION 8.4. Amendment; Waiver; Termination................................37
SECTION 8.5. Notices.......................................................38
SECTION 8.6. Headings......................................................39
SECTION 8.7. Counterparts..................................................39
SECTION 8.8. Applicable Law................................................39
SECTION 8.9. Specific Enforcement..........................................40
SECTION 8.10. Consent to Jurisdiction.......................................40
SECTION 8.11. Orkla/Holberg Letter Agreement................................40
ii
<PAGE> 4
AMENDED AND RESTATED
INVESTORS AGREEMENT
AMENDED AND RESTATED AGREEMENT dated as of July 11, 1997 among DLJ Merchant
Banking Partners, L.P., a Delaware limited partnership ("DLJMB"), 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, exccept in
connection with such limited liability company's acquisition or holding of
Senior Preferred Stock (as defined below), Junior Preferred Stock (as defined
below), in which case such limited liability company shall be referred to as a
New DLJ Entity (as defined below), and the other foregoing entities, an "INITIAL
DLJ ENTITY" and, collectively, the "INITIAL DLJ ENTITIES"), 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, DLJMB Funding II, Inc., a Delaware corporation, DLJ EAB
Partners, L.P., a Delaware limited partnership, DLJ Millennium Partners, L.P., a
Delaware limited partnership, UK Investment Plan 1997 Partners, a Delaware
partnership (each of the foregoing, excluding the Initial DLJ Entities, but
including DLJ First ESC LLC in its capacity as described above a "NEW DLJ
ENTITY" and collectively, the "NEW DLJ ENTITIES" and each of the foregoing,
together with each of the Initial DLJ Entities, a "DLJ ENTITY", and
collectively, the "DLJ ENTITIES"), Nebco Evans Distributors, Inc. (formerly NED
Holdings, Inc.), a Delaware corporation ("NED"), Orkla ASA, a Norwegian
corporation ("ORKLA"), Holberg Industries, Inc., a Delaware corporation
("HOLBERG") (NED, Orkla and Holberg are referred to as the "OTHER INVESTORS"
and, together with the DLJ Entities and Holberg, Incorporated,, the
"INVESTORS"), Nebco Evans Holding Company, a Delaware corporation (the "ISSUER")
and Holberg Incorporated, a Delaware corporation,
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase and Exchange Agreement dated
as of the date hereof (the "SECURITIES PURCHASE AGREEMENT") among the DLJ
Entities, Holberg and the Issuer, the New DLJ Entities, concurrently with the
execution of this Agreement, are acquiring securities of the Issuer;
WHEREAS, the Initial DLJ Entities, the Other Investors, the Issuer and
Holberg, Incorporated entered into an Investors Agreement dated January 25,
1996; and
WHEREAS, the parties hereto desire to amend and restate such Investors
Agreement to govern certain of their rights, duties and obligations after
consummation of the transactions contemplated by the Securities Purchase
Agreement;
The parties hereto agree as follows:
<PAGE> 5
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as used herein, have the
following meanings:
"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 purpose of this definition, the term "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 no securityholder of the Issuer shall be
deemed an Affiliate of any other securityholder solely by reason of any
investment in the Issuer.
"AFFILIATED EMPLOYEE BENEFIT TRUST" means any trust that is a successor to
the assets held by a trust established under an employee benefit plan subject to
ERISA or any other trust established directly or indirectly under such plan or
any other such plan having the same sponsor.
"AMERISERVE" means AmeriServe Food Distribution, Inc., a Nebraska
corporation.
"AMERISERVE SHARES" means the shares of common stock, par value $10.00 per
share, of AmeriServe and any other equity securities of AmeriServe.
"BOARD" or "BOARD OF DIRECTORS" means the board of directors of the Issuer.
"BONA FIDE INITIAL PUBLIC OFFERING" means an Initial Public Offering in
which the Issuer receives at least $100,000,000 of net proceeds.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"BYLAWS" means the Bylaws of the Issuer as in effect as of the Closing
Date.
"CHARTER" means the Restated Certificate of Incorporation of the Issuer, as
amended and in effect as of the Closing Date.
"CLOSING DATE" means July 11, 1997.
"COMMON STOCK" means the Class A and Class B Common Stock, par value $.01
per share, of the Issuer.
"COMPETITOR" means any Person which is in the food service distribution and
related services businesses and which competes substantially and directly with
the business of the Issuer or any of its Subsidiaries.
"CONTROL" shall have the meaning set forth in the definition of
"AFFILIATE".
-2-
<PAGE> 6
"DLJ AFFILIATE" shall have the meaning set forth in the definition of
"PERMITTED TRANSFEREE".
"DLJ ASSOCIATE" shall have the meaning set forth in the definition of
"PERMITTED TRANSFEREE".
"DLJ ENTITY" and "DLJ ENTITIES" shall have the respective meanings set
forth in the first paragraph hereof, subject to Section 1.1(b).
"DLJ PARTNER" shall have the meaning set forth in the definition of
"PERMITTED TRANSFEREE".
"DLJ WARRANTS" means the warrants exercisable to purchase Common Stock
issued to the DLJ Entities pursuant to the Securities Purchase Agreement.
"DLJ WARRANT SHARES" means the shares of Common Stock issuable by the
Issuer upon the exercise of the DLJ Warrants.
"DLJMB" shall have the meaning set forth in the first paragraph hereof.
"DLJMB II" shall mean DLJ Merchant Banking II, Inc., a Delaware
corporation.
"EQUITY SECURITIES" means Common Stock, securities convertible into or
exchangeable for Common Stock and options, warrants or other rights to acquire
Common Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FULLY DILUTED" means, with respect to Common Stock and without
duplication, all outstanding shares and all shares issuable in respect of
securities convertible into or exchangeable for Common Stock, stock appreciation
rights or options, warrants and other irrevocable rights to purchase or
subscribe for Common Stock or securities convertible into or exchangeable for
Common Stock, and any Person shall be deemed to own such number of Fully Diluted
shares of Common Stock as such Person has the right to acquire from any other
Person (including the Issuer).
"HOLBERG" shall have the meaning set forth in the first paragraph hereof.
"INDENTURE" means that certain Indenture dated as of the Closing Date by
and between the Issuer and State Street Bank and Trust Company of Connecticut as
trustee, as amended from time to time, relating to the Notes.
"INITIAL DLJ ENTITIES" and "INITIAL DLJ ENTITY" shall have the respective
meanings set forth in the first paragraph hereof.
-3-
<PAGE> 7
"INITIAL DLJ WARRANTS" means the warrants exercisable to purchase Common
Stock issued to the Initial DLJ Entities pursuant to the Initial Securities
Purchase Agreement.
"INITIAL PUBLIC OFFERING" means the initial sale after the date hereof of
Common Stock pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or any successor
form).
"INITIAL REGISTRATION DATE" means (a) with respect to the Initial Warrants,
the earlier of (i) the date of the successful completion of an Initial Public
Offering and (ii) January 25, 2001, and (b) with respect to all other
Registerable Securities, the one-year anniversary of the Closing Date.
"INITIAL SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement dated January 25, 1996 by and among the Initial DLJ Entities, the
Other Investors and the Issuer.
"INITIAL WARRANTS" means the warrants exercisable to purchase Common Stock
issued to the Initial DLJ Entities pursuant to the Initial Securities Purchase
Agreement and any warrants exercisable for Common Stock issued to Orkla in
replacement of the Orkla Warrants.
"INITIAL WARRANT SHARES" means the shares of Common Stock issuable by the
Issuer upon the exercise of the Initial Warrants and any shares of Common Stock
issued to Orkla in respect of the Orkla Warrants or Warrants.
"INVESTORS" shall have the meaning set forth in the first paragraph hereof.
"IPO PRICE" means the per share offering price to the public of Common
Stock issued pursuant to the Initial Public Offering at the time of the Initial
Public Offering.
"ISSUER" shall have the meaning set forth in the first paragraph hereof.
"JUNIOR PREFERRED STOCK" means the Issuer's 15% Junior Exchangeable
Preferred Stock due 2009.
"NASD" shall have the meaning set forth in the definition of "REGISTRATION
EXPENSES".
"NEW DLJ ENTITIES" and "NEW DLJ ENTITY" shall have the respective meanings
set forth in the first paragraph hereof.
"NED" shall have the meaning set forth in the first paragraph hereof.
"NOTES" means the Issuer's 12-3/8% Senior Discount Notes issued pursuant to
the Indenture.
"ORKLA" shall have the meaning set forth in the first paragraph hereof.
-4-
<PAGE> 8
"ORKLA WARRANTS" means the warrants exercisable for common stock $0.01 par
value per share of NED representing, at the time of their original issuance, a
6.40% (subject to adjustment) indirect interest in the Issuer.
"ORKLA WARRANT SHARES" means the shares of NED common stock issuable upon
the exercise of the Orkla Warrants.
"OTHER INVESTORS" shall have the meaning set forth in the first paragraph
hereof, subject to Section 1.1(c).
"PERCENTAGE OWNERSHIP" means, with respect to any Investor or any group of
Investors at any time, (i) the number of shares of Fully Diluted Common Stock
that such Investor or group of Investors owns at such time, divided by (ii) the
total number of shares of Fully Diluted Common Stock at such time; provided that
for purposes of any such calculation the Initial DLJ Entities and New DLJ
Entities shall each be considered a separate group of Investors.
"PERMITTED TRANSFEREE" means:
(i) in the case of any DLJ Entity, (A) any other DLJ Entity, (B) any
general or limited partner of any such entity (a "DLJ PARTNER"), and any
corporation, partnership, Affiliated Employee Benefit Trust or other entity
which is an Affiliate of any DLJ Partner (collectively, the "DLJ
AFFILIATES"), (C) any managing director, general partner, director, limited
partner, officer or employee of such DLJ Entity or a DLJ Affiliate, or the
heirs, executors, administrators, testamentary trustees, legatees or
beneficiaries of any of the foregoing Persons referred to in this clause
(C) (collectively, "DLJ ASSOCIATES"), (D) any trust, the beneficiaries of
which, or any corporation, limited liability company or partnership, the
stockholders, members or general or limited partners of which, include only
such DLJ Entity, DLJ Affiliates, DLJ Associates, their spouses or their
lineal descendants and (E) a voting trustee for one or more DLJ Entities,
DLJ Affiliates or DLJ Associates under the terms of a voting trust; and
(ii) in the case of any Other Investor, (A) the Issuer, (B) any
Subsidiary of such Other Investor, (C) any Affiliate of such Other Investor
or (D) any director, officer or employee of such Other Investor or any
Affiliate of such Other Investor.
"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.
"PRE-EXISTING HOLBERG LOAN" means the loan from the Issuer to Holberg
existing as of the date hereof in the amount of $2.6 million.
"PREFERRED STOCK" means at any time, all shares of each class or series of
preferred stock of the Issuer outstanding at such time, other than the Senior
Preferred Stock and the Junior Preferred Stock.
-5-
<PAGE> 9
"PRINCIPAL COMMITTEE" shall mean any of the executive, audit, compensation
or similar committees of the Board of Directors.
"REGISTERABLE SECURITIES" means (A) with respect to the DLJ Entities and
their successors and permitted assigns, the Senior Preferred Stock, the Junior
Preferred Stock, Warrants, the Warrant Shares and any shares of Common Stock
which are acquired by any of the DLJ Entities and (B) with respect to Orkla and
its successors and permitted assigns, any shares of Common Stock which are
acquired by Orkla in accordance with this Agreement, in each case until (i) a
registration statement covering such securities has been declared effective by
the SEC and such securities have been disposed of pursuant to such effective
registration statement, (ii) such Securities are sold under circumstances in
which all of the applicable conditions of Rule 144 (or any similar provisions
then in force) under the Securities Act are met or such shares may be sold
pursuant to Rule 144(k) or (iii) such securities are otherwise transferred, the
Issuer has delivered a new certificate or other evidence of ownership for such
securities not bearing the legend required pursuant to this Agreement and such
securities may be resold without subsequent registration under the Securities
Act.
"REGISTRATION EXPENSES" means (i) all registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the securities registered), (iii) printing expenses, (iv)
internal expenses of the Issuer (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(v) reasonable fees and disbursements of counsel for the Issuer and customary
fees and expenses for independent certified public accountants retained by the
Issuer (including expenses relating to any comfort letters or costs associated
with the delivery by independent certified public accountants of a comfort
letter or comfort letters requested pursuant to Section 5.4(h) hereof), (vi) the
reasonable fees and expenses of any special experts retained by the Issuer in
connection with such registration, (vii) reasonable fees and expenses of one
counsel for the Investors participating in the offering, selected by the DLJ
Entities, (viii) fees and expenses in connection with any review of underwriting
arrangements by the National Association of Securities Dealers, Inc. (the
"NASD") including fees and expenses of any "QUALIFIED INDEPENDENT UNDERWRITER",
and (ix) fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, excluding underwriting fees, discounts or commissions..
"RULE 144 OR RULE 144A" means Rule 144 and Rule 144A, respectively, (or any
successor provisions) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Common Stock, the Preferred Stock, the Senior
Preferred Stock, the Junior Preferred Stock, the Warrants and any other
securities of the Issuer.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" shall have the meaning set forth in the
recitals hereto.
-6-
<PAGE> 10
"SENIOR PREFERRED STOCK" means the Issuer's 13-1/2% Senior Exchangeable
Preferred Stock due 2009.
"SHARES" means all shares of Common Stock and any other voting securities
of the Issuer held by the Investors.
"SUBSIDIARY" means, with respect to any Person, 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.
"THIRD PARTY" means a prospective purchaser of Shares in an arm's-length
transaction from an Investor where such purchaser is not a Permitted Transferee
of such Investor.
"TRANSACTION DOCUMENTS" means this Agreement, the Initial Securities
Purchase Agreement, the Securities Purchase Agreement, the Certificate of
Designations of the Senior Preferred Stock, the Certificate of Designations of
the Junior Preferred Stock and the Warrants..
"UNDERWRITTEN PUBLIC OFFERING" means an underwritten public offering of
Registrable Securities of the Issuer pursuant to an effective registration
statement under the Securities Act.
"WARRANTS" means the DLJ Warrants and the Initial Warrants.
"WARRANT SHARES" means the DLJ Warrant Shares and the Initial Warrant
Shares.
(a) The term "INITIAL DLJ ENTITIES", or "NEW DLJ ENTITIES", as the case may
be, to the extent such entities shall have transferred any of their Securities
to "PERMITTED TRANSFEREES", shall mean the Initial DLJ Entities or the New DLJ
Entities, as the case may be, and the Permitted Transferees of the Initial DLJ
Entities or the New DLJ Entities, as the case may be, taken together, and any
right or action that may be taken at the election of the Initial DLJ Entities or
the New DLJ Entities, as the case may be, may be taken at the election of the
Initial DLJ Entities or the New DLJ Entities, as the case may be, and such
Permitted Transferees, as the case may be.
(b) With respect to each Other Investor the term "OTHER INVESTOR", to the
extent such Other Investor shall have transferred any of its Securities to
"PERMITTED TRANSFEREES", shall mean such Other Investor and the Permitted
Transferees of such Other Investor, as the case may be, and any right or action
that may be taken at the election of such Other Investor may be taken at the
election of such Other Investor and the Permitted Transferees of such Other
Investor, as the case may be.
-7-
<PAGE> 11
(c) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
AmeriServe Board 2.1(b)
Cause 2.2
Confidential Information 7.1(b)
Demand Registration 5.1(a)
Disposition Date 2.5
DLJ Director 2.1
Holberg Restriction Termination Date 3.1(c)
Holders 5.1(a)(ii)
Incidental Registration 5.2(a)
Indemnified Party 5.7
Indemnifying Party 5.7
Inspectors 5.4(g)
Investor 7.3
Maintenance Securities 4.3(a)
Maximum Offering Size 5.1 (d)
Number of Shares 4.2(a)
Preemptive Rights 4.3(a)
Private Transaction 3.1(a)
Records 5.4(g)
Representatives 7.1(b)
Restriction Termination Date 3.1(a)
Section 4.1 Offer 4.1(a)
Section 4.1 Offer Notice 4.1(a)
Section 4.1 Offer Price 4.1(a)
Section 4.2 Agreement 4.2(a)
Section 4.2 Notice 4.2
Section 4.2 Notice Period 4.2(a)
Section 4.2 Pro Rata Portion 4.2(a)
Section 4.2 Sale 4.2(a)
Section 4.2 Sale Price 4.2(a)
Section 4.2 Seller 4.2(a)
Section 4.2/4.3 Entities 4.2(a)
Selling Entities 6.1
Selling Party 4.1(a)
Selling Investor 5.1(a)
transfer 3.1(a)
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ARTICLE 2.
CORPORATE GOVERNANCE
SECTION 2.1. Composition of the Boards of Directors. (a) Subject
to Section 2.5, the Board shall initially consist of not less than five members
and not more than ten members, of whom one (the "DLJMB DIRECTOR") shall be
designated by DLJMB, one (the "DLJMB II DIRECTOR") shall be designated by DLJMB
II, and the remainder of whom shall be designated by Holberg. Each Investor
entitled to vote for the election of directors to the Board agrees that it will
vote its Shares or execute consents, as the case may be, and take all other
necessary action (including causing the Issuer to call a special meeting of
shareholders) in order to ensure that the composition of the Board is as set
forth in this Section 2.1.
(a) The composition of the board of directors (the "AMERISERVE
BOARD") of AmeriServe shall be identical to that of the Board, and the
provisions applicable to members of the Board set forth in this Agreement shall
apply, mutatis mutandis, to members of the AmeriServe Board.
SECTION 2.2. Removal. (a) Each Investor agrees that if, at any
time, it is then entitled to vote for the removal of directors of the Issuer, it
will not vote any of its Shares in favor of the removal of any director who
shall have been designated pursuant to Section 2.1 unless such removal shall be
for Cause (as defined below) or the Person entitled to designate such director
shall have consented to such removal in writing.
(a) Removal for "CAUSE" shall mean removal of a director because
of such director's (i) willful and continued failure to perform substantially
his duties with the Issuer in such director's established position, (ii) willful
conduct which is significantly injurious to the Issuer monetarily or otherwise,
(iii) abuse of any illegal drug or other controlled substance or habitual
intoxication, (iv) conviction for, or guilty plea to, a crime involving moral
turpitude or (v) conviction for, or guilty plea to, a felony. Subject to Section
2.3, nothing contained in this Section 2.2 shall affect the right of any
Investor to designate a member of the Board pursuant to Section 2.1.
SECTION 2.3. Vacancies. (a) If, as a result of the death,
disability, retirement, resignation, removal (with or without Cause) or
otherwise there shall exist or occur any vacancy on the Board, then the Person
entitled under Section 2.1 to designate or nominate such director whose death,
disability, retirement, resignation or removal resulted in such vacancy, may,
subject to the provisions of Sections 2.1 and 2.5, designate another individual
to fill such capacity and serve as a director of the Issuer. Each Investor
agrees that if such Investor is then entitled to vote for the election of such
designee as a director of the Issuer, it will vote its Shares, or execute a
written consent, as the case may be, in order to ensure that the designee be
elected to the Board.
(b) The Board shall create compensation and audit committees
within 180 days from the date hereof, as well as such other committees as it may
determine. Each party hereto agrees that the DLJMB Director or the DLJMB II
Director shall be a member on each Principal Committee.
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SECTION 2.4. Actions Requiring Consent of the DLJ Directors. Until the
earlier of such time as (a) the Issuer has completed a Bona Fide Initial Public
Offering and all the Senior Preferred Stock and the Junior Preferred Stock owned
by the DLJ Entities have either been redeemed by the Issuer or transferred to
Persons other than the DLJ Entities or (b) the DLJ Entities and their Permitted
Transferees shall own, or have the right to acquire, in the aggregate less than
fifty percent (50%) of the total shares of Common Stock (with, for purposes
hereof, any DLJ Warrants and any Initial DLJ Warrants being counted on an
as-exercised basis as Common Stock) initially acquired by the DLJ Entities from
the Issuer pursuant to the Initial Securities Purchase Agreement and pursuant to
the Securities Purchase Agreement (the percentage set forth above shall be
subject to appropriate downward adjustment in the event of an acquisition of
securities by Holberg pursuant to Section 6.3 hereof or the operation of either
of the special adjustments described in Section 8 of the Initial Warrants or in
Section 8 of the DLJ Warrants), the Issuer shall not (and each Other Investor
shall not permit the Issuer to), and the Issuer shall not permit any of its
Subsidiaries to, take or commit to take any of the following actions without the
affirmative approval of (x) a majority of the Board of Directors and (y) the
DLJMB Director and the DLJMB II Director:
(i) issue, sell, dividend, exchange, cancel, retire or otherwise
dispose of any shares of its capital stock or any warrants, options or
other rights to purchase, substitute for or acquire shares of capital stock
or securities convertible into or exchangeable for any shares of capital
stock of the Issuer, AmeriServe or any other Subsidiary of the Issuer or
amend, alter or otherwise change the capital structure of the Issuer,
AmeriServe or any other Subsidiary of the Issuer, except for shares of
Common Stock issued pursuant to the Warrants or shares of capital stock
issued to officers or employees of the Issuer, AmeriServe or any other
Subsidiary of the Issuer in accordance with stock option or other employee
benefit plans of the Issuer or AmeriServe, provided the amount of shares
issuable under such stock option or employee benefit plans is not in excess
of 7.5% of the outstanding shares of the Issuer on a fully diluted basis or
as contemplated by the AmeriServe Documents (as defined in the Securities
Purchase Agreement) and transactions not resulting in a wholly-owned
Subsidiary of either the Issuer or another Subsidiary of the Issuer ceasing
to be such;
(ii) incur, assume, guarantee, refinance, renew, or alter the material
terms of indebtedness for borrowed money of the Issuer involving a
principal amount in excess of $5,000,000;
(iii) amend or alter any key business strategy;
(iv) enter into or amend any contract, agreement or obligation
involving an amount in excess of $2,000,000 and which entry or amendment is
not in the ordinary course of business;
(v) enter into any line of business other than the food service
distribution and related services businesses;
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(vi) enter into any contract or agreement or otherwise transact, or
permit any of its Subsidiaries to enter into any contract or agreement or
otherwise transact, with any Other Investor or Affiliate of the Issuer or
any of its Subsidiaries, where the transaction in question involves an
amount in excess of $100,000, other than (A) transactions pursuant to and
in accordance with any agreement or arrangement in effect as of the date
hereof (and identified on Schedule 3.23 to the Securities Purchase
Agreement), (B) any transaction between or among any wholly-owned
subsidiary of the Issuer which is wholly owned by the Issuer at the time of
such transaction, (C) the purchase by the Issuer of Holberg's interest in
Holberg Warehouse Properties for $1.5 million in cash, (D) loans and
advances from AmeriServe to Holberg (to the extent permitted by the terms
of the Notes and the Credit Agreement (as defined in the Securities
Purchase Agreement)) not to exceed $5 million in aggregate, and (E) loans
and advances to be made only on the Closing Date from the Issuer to Holberg
not to exceed $2.4 million in the aggregate (excluding the Pre-Existing
Holberg Loan); provided that, subject to clause (1) below, any such loan or
advance made pursuant to this Clause (E) (excluding the Pre-Existing
Holberg Loan) shall be required by its terms to be repaid in full not later
than the fourth anniversary of the Closing Date and to have an annual
interest rate of 8% on all outstanding principal and interest; and provided
further that no dividend or other distribution on Common Stock may be made
without the consent of DLJMB and DLJMB II until the principal and interest
of any such loan or advance (together with that of the Pre-Existing Holberg
Loan) is paid in full; and provided further that, for so long as any amount
of principal or interest of any loan or advance made pursuant to this
Clause (E) or Clause (D) of this Section 2.4 (including the Pre-Existing
Holberg Loan) is outstanding, (1) Holberg shall repay on any demand made by
the Issuer all or any portion of any such loan or advance (including the
Pre-Existing Holberg Loan) in order that the proceeds thereon may be used
to pay any third-party expenses of the Issuer as such expenses become due,
(2) the Issuer shall make any such demand promptly and in advance of the
payment of the relevant third-party expense in order that it shall have
sufficient proceeds from the repayment by Holberg as a result of such
demand to pay such third-party expense promptly, and (3) the Issuer shall,
upon receipt of such repayment as a result of such demand, promptly pay all
third-party expense to which such demand related;
(vii) effect or enter into any contract or agreement providing for the
acquisition or disposition of assets (by merger, stock purchase or
otherwise), in one transaction or a series of related transactions, having
a fair market value in excess of $30,000,000, other than the acquisition of
the PFS Business and the PFS Canadian Business (as defined in the Asset
Purchase Agreement dated May 23, 1997, as amended, between PepsiCo, Inc.
and the Issuer), which shall not require such approval;
(viii) (A) dissolve or liquidate, or adopt any plan of dissolution or
liquidation, (B) consent to or commence any suit, proceeding or other
action or file a petition or consent to a petition (1) under any existing
or future law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding up,
liquidation, dissolution,
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composition or other relief with respect to it or (2) seeking appointment
of a receiver, liquidator, assignee, trustee, custodian or other similar
official for it or all or any substantial part of its assets, (C) make any
assignment for the benefit of creditors, (D) admit in writing its inability
to pay its debts generally as they become due, or (E) voluntarily dissolve
itself;
(ix) alter, repeal, amend or adopt any provision of the articles or
certificate of incorporation, by-laws or other constituent documents of the
Issuer or any of its Subsidiaries or increase the number of directors
constituting the full Board or the full AmeriServe Board above 10 members;
provided, however, that the DLJ Entities hereby consent, in connection with
an Initial Public Offering, to an amendment to the Issuer's certificate of
incorporation and to its bylaws in which shares of Common Stock (including
shares of Common Stock obtainable through the exercise of Warrants) held by
all holders, including, without limitation, the DLJ Entities, NED and
Orkla, immediately prior to the Initial Public Offering, become, on a
pro-rata basis, shares of Common Stock with a higher number of votes per
share than all other shares of Common Stock (including, without limitation,
all shares issued in connection with the Initial Public Offering) or
pursuant to which a new class of low-voting common stock is created and
sold in such Initial Public Offering; or
(x) enter into any contract or agreement providing for the merger of
the Issuer, AmeriServe or any other Subsidiary of the Issuer, other than
(i) a merger between any of the Issuer, AmeriServe or any other
wholly-owned Subsidiary of the Issuer or (ii) in connection with any
acquisition permitted by clause (vii) above.
SECTION 2.5. Termination of Rights and Obligations. The right of DLJMB, on
the one hand, or DLJMB II, on the other hand, to designate one member of the
Board pursuant to this Article 2 shall terminate at such date as the Initial DLJ
Entities and their Permitted Transferees, or the New DLJ Entities and their
Permitted Transferees, as the case may be, in the aggregate own and have the
right to acquire less than twenty percent (20%) of the total shares of Common
Stock (with, for purposes hereof, any Warrants being counted on an as-exercised
basis as Common Stock) initially acquired by the Initial DLJ Entities from the
Issuer pursuant to the Initial Securities Purchase Agreement, on the one hand,
or by the New DLJ Entities from the Issuer pursuant to the Securities Purchase
Agreement, on the other hand (each such date, but only as to the group of
investors whose ownership level declines beneath the 20% level referred to
above, the "DISPOSITION DATE"). The percentage set forth above shall be subject
to appropriate downward adjustment in the event of an acquisition of Securities
by Holberg pursuant to Section 6.3 hereof or the operation of either of the
special adjustments described in Section 8 of the Initial Warranty or in Section
8 of the DLJ Warrants. The occurrence of a Disposition Date with respect to
either of DLJMB or DLJMB II shall not affect the right of the other to designate
a member of the Board as described above. Subject to the foregoing, the
obligations imposed on Other Investors to give effect to the right of DLJMB, on
the one hand, and DLJMB II, on the other hand, to designate a director set forth
in Section 2.1 shall terminate on the relevant Disposition Date, if any, with
respect to DLJMB or DLJMB II, as the case may be.
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SECTION 2.6. Action by the Board. A quorum of the Board and of each
Principal Committee shall consist of a majority of the directors, or a majority
of the members of such Principal Committee, as the case may be, including the
DLJMB Director and the DLJMB II Director, or such of them as may serve on such
Principal Committee, as the case may be, provided that neither the DLJMB
Director nor the DLJMB II Director shall be required to constitute a quorum of
the Board or of any Principal Committee ( but without derogation of the
requirement set forth herein as to actions requiring the consent of the DLJMB
Director and the DLJMB II Director, which shall in any event require such
consent) if the DLJMB Director and/or the DLJMB II Director, as the case may be,
shall have been provided with at least 20 days' notice of a proposed meeting by
certified mail, and shall have been unavailable at the proposed time of such
meeting or at any other reasonably convenient time not more than 10 days
following such proposed time. Subject to Section 2.4, all actions of the Board
shall require the affirmative vote of at least a majority of the directors at a
duly convened meeting of the Board at which a quorum is present or the unanimous
written consent of the Board; provided that, in the event there is a vacancy on
the Board in the DLJMB Director position or the DLJMB II Director position and
an individual has been nominated to fill such vacancy, the first order of
business shall be to fill such vacancy and provided, further, that the DLJ
Entities agree that the DLJMB Director and the DLJMB II Director shall use
reasonable efforts to be present (either personally or otherwise) for each duly
called meeting of the Board. DLJMB agrees to nominate promptly a replacement
DLJMB Director in the event of a vacancy in such position, and DLJMB II agrees
to nominate promptly a replacement DLJMB II Director in the event of a vacancy
in such position.
SECTION 2.7. Articles of Incorporation and Bylaws. (a) The Charter and
Bylaws are attached hereto as Exhibits A and B.
(b) Each Investor shall vote all of its Shares, if any, and shall take all
other actions necessary, to ensure that the Charter and Bylaws facilitate and do
not at any time conflict with any provision of this Agreement.
(c) All Preferred Stock outstanding immediately prior to the Closing Date
(other than that portion of the $2.35 million initial face amount of 8% Senior
Convertible Preferred Stock of the Issuer which remains outstanding at such
time) and all Junior Preferred Stock purchased by Holberg from the DLJ Entities
pursuant to and in accordance with Section 6.3 that, upon the occurrence of an
Initial Public Offering, would otherwise be outstanding or treasury shares will,
upon the Initial Public Offering, convert to Common Stock at the IPO Price.
ARTICLE 3.
RESTRICTIONS ON TRANSFER
SECTION 3.1. General. (a) Until the date of the completion of an Initial
Public Offering (the "RESTRICTION TERMINATION DATE"), neither any Initial DLJ
Entity nor Orkla may, directly or indirectly, sell, assign, transfer, grant a
participation in, pledge or otherwise dispose of ("TRANSFER") any Initial
Warrants or Initial Warrant Shares (or solicit any offers to buy or otherwise
acquire, or to take a pledge of, any of its Initial Warrants or Initial Warrant
Shares)
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except (i) transfers permitted by Section 3.3, (ii) transfers in a bona fide
Underwritten Public Offering upon exercise of registration rights pursuant to
Article 5, (iii) transfers pursuant to Rule 144 or Rule 144A (or any successor
provisions under the Securities Act) and (iv) subject to Section 4.1, transfers
to any other Person in any Private Transaction (as defined below); provided that
no Securities may be transferred pursuant to clause (iv) to any Person unless
such Person shall have agreed in writing to be bound by the terms of this
Agreement applicable to such Investor; and provided further that no Securities
may be transferred to a Competitor. As used herein, "PRIVATE TRANSACTION" means
any transfer not covered by clause (i), (ii) or (iii) above. Until the date of
the Restriction Termination Date, Orkla may not, directly or indirectly,
transfer any Orkla Warrants or Orkla Warrant Shares (or solicit any offers to
buy or otherwise acquire, or to take a pledge of, any of its Orkla Warrants or
Orkla Warrant Shares) except subject to Section 4.1, transfers permitted by
Section 3.3 and transfers to any Person in any Private Transaction provided that
no Orkla Warrants or Orkla Warrant Shares may be transferred pursuant to this
sentence to any Person unless such Person shall have agreed in writing to be
bound by the terms of this Agreement applicable to such Investor; and provided
further that no Orkla Warrants or Orkla Warrant Shares may be transferred to a
Competitor.
(b) At any time and from time to time, any DLJ Entity may, subject to
applicable securities laws, transfer freely without restriction, or solicit any
offers to buy or otherwise acquire or to take a pledge of, any or all of its
Senior Preferred Stock, Junior Preferred Stock and DLJ Warrants. The Issuer
shall use its reasonable efforts to assist any DLJ Entity and Orkla in any sale
of Securities permitted hereunder, including pursuant to a registration (or Rule
144/144A transaction) of such Securities pursuant to Article 5 hereof.
(c) Prior to the repayment in full of the Senior Preferred Stock and the
Junior Preferred Stock (the "HOLBERG RESTRICTION TERMINATION DATE"), Holberg and
NED and their Permitted Transferees may not transfer any Securities (or solicit
any offers to buy or otherwise acquire, or to take a pledge of, any of such
Securities), except transfers permitted by Section 3.3; provided that from and
after the Holberg Restriction Termination Date, Holberg and NED and their
respective Permitted Transferees may, subject to Sections 4.2, 4.4 and 5.2,
transfer Securities, provided, however, that NED and Holberg and their
respective Permitted Transferees may not (and Holberg and NED may not
indirectly) transfer any shares of Preferred Stock, other than pursuant to
Section 3.3, until the earlier of (i) the Disposition Date and (ii) the
successful completion of an Initial Public Offering.
(d) No Investor may transfer any Securities at any time except in
compliance with applicable federal or state securities laws.
(e) Until the Holberg Restriction Termination Date, Holberg Incorporated
and Orkla shall continue to own, directly or through their controlled Affiliates
who are or become bound by this Agreement, in the aggregate at least 51% of the
outstanding voting securities, on a fully diluted basis, of Holberg. Prior to
the Holberg Restriction Termination Date, NED shall not, and Holberg and Orkla
shall not, and shall not permit NED to, without the prior consent of the DLJMB
Director and the DLJMB II Director, transfer, issue or cause or permit to be
transferred any equity securities of NED (including any securities convertible
into or exchangeable for
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equity securities of NED) to any Person other than an Investor and Permitted
Transferees of an Investor who become parties to this Agreement and bound by the
terms hereof. From and after the Holberg Restriction Termination Date, NED,
Holberg, Orkla and their respective Permitted Transferees may transfer equity
securities of NED, provided that any such transfer shall be structured in such a
manner that the DLJ Entities shall be entitled to exercise fully rights
substantially equivalent to the rights that would have been available under
Sections 4.2 and 5.2 had the transfer in question been of Securities of the
Issuer and in a manner and on a basis consistent with the economic and other
terms in such Sections, it being understood and agreed by the parties hereto
that the rights and benefits under this Agreement and the Securities owned by
the DLJ Entities shall in no event be impaired or diminished as a result of any
such actions. It is also agreed that the activities of NED shall be limited to
owning and holding the equity securities of the Issuer, and that NED will not
incur material debt or other material liabilities without the prior consent of
DLJMB, DLJMB II and Orkla, whose consent shall not be unreasonably withheld.
SECTION 3.2. Legend on Securities. (a) In addition to any other legend that
may be required, each certificate for Securities that is issued to any Investor
shall bear a legend in substantially the following form:
"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
AMENDED AND RESTATED INVESTORS AGREEMENT DATED AS OF JULY
11, 1997, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM
NEBCO EVANS HOLDING COMPANY."
(a) If any Registerable Securities cease to be Registerable Securities, the
Issuer shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such securities without the first sentence
of the legend required by Section 3.2(a) endorsed thereon. If any Securities
cease to be subject to the restrictions on transfer set forth in this Agreement,
the Issuer shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Securities without the second sentence
of the legend required by Section 3.2(a) endorsed thereon.
SECTION 3.3. Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Investor may at any time transfer any or all of
its Securities (and in the case of Orkla, Orkla Warrants or Orkla Warrant
Shares) to one or more of its Permitted Transferees without the consent of the
Board or any other Investor or group of Investors and without compliance with
Section 4.1 or 4.2 so long as (a) such Permitted Transferee shall have agreed in
writing to be bound by the terms of this Agreement and (b) the transfer to such
Permitted Transferee is not in violation of applicable federal or state
securities laws.
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SECTION 3.4. Certain Optional Redemptions. Notwithstanding anything to the
contrary contained in the Certificates of Designations of the Senior Preferred
Stock and the Junior Preferred Stock, during the period from July 11, 1998 to
July 11, 2000, if the Issuer, at its option, redeems any of the outstanding
shares of Senior Preferred Stock and/or Junior Preferred Stock in accordance
with the provisions of Section 5(a) of the respective Certificate of
Designations of the Senior Preferred Stock and the Junior Preferred Stock, as
the case may be, the New DLJ Entities agree that the aggregate redemption price
for the shares of such securities held by the New DLJ Entities shall be 102% of
the Liquidation Value (as defined in the respective Certificates of Designations
of the Senior Preferred Stock and the Junior Preferred Stock, as the case may
be) in cash plus accrued and unpaid cash dividends on such shares to the date
fixed for redemption, without interest.
ARTICLE 4
RIGHT OF FIRST OFFER; RIGHT TO PARTICIPATE IN A TRANSFER; PREEMPTIVE
RIGHTS; IMPROPER TRANSFER
SECTION 4.1. Right of First Offer. (a) If any DLJ Entity or Orkla desires
to transfer any or all of its Initial Warrants and/or Initial Warrant Shares or
the Orkla Warrants and/or Orkla Warrant Shares to a Third Party in a Private
Transaction that is otherwise permitted under this Agreement (including, without
limitation, Section 3.1 hereof) (a "SECTION 4.1 SALE") such DLJ Entity or Orkla,
as the case may be (the "SELLING PARTY"), shall provide the Issuer and Holberg
written notice (a "SECTION 4.1 OFFER NOTICE") that such Selling Party desires to
effect such a transfer. The Section 4.1 Offer Notice shall identify the number
of Initial Warrants and/or Initial Warrant Shares or Orkla Warrants and/or Orkla
Warrant Shares (the "OFFERED SECURITIES") proposed to be transferred, the
consideration at which a sale is proposed to be made (the "SECTION 4.1 SALE
PRICE") and all other material terms and conditions of the Section 4.1 Sale.
(b) The giving of a Section 4.1 Offer Notice to the Issuer and Holberg by
any Selling Party shall constitute an offer (the "SECTION 4.1 OFFER") by such
Selling Party to sell to the Issuer, Holberg, the DLJ Entities and/or Orkla (or
their respective designees, each of whom must be a Person who would be a
Permitted Transferee of such Investor), for cash (or, subject to Section 4.1(f),
non-cash consideration), in whole and not in part, on the terms set forth in the
Section 4.1 Offer Notice, such Selling Party's Offered Securities subject to the
Section 4.1 Sale at the Section 4.1 Sale Price. Priority with respect to the
acceptance of the Section 4.1 Offer shall be in the following order: (i)
Holberg, (ii) the Issuer, and (iii) the DLJ Entities or Orkla, whichever is not
the Selling Party. Such offer shall be irrevocable for sixty (60) days after
receipt of such Section 4.1 Offer Notice by the Issuer, Holberg and the DLJ
Entities and/or Orkla, as the case may be. During such 60-day period, subject to
the priority right of exercise as set forth above, Holberg and/or the Issuer
and/or the DLJ Entities and/or Orkla, as the case may be, shall have the right
to accept such offer in whole but not in part (as provided above). The Section
4.1 Offer may be accepted by giving a written irrevocable notice of acceptance
(which acceptance may condition consummation of the purchase on receipt of any
necessary governmental approvals) to such Selling Party prior to the expiration
of such 60-day offer period.
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(c) The closing of the acquisition by the Issuer and/or Holberg and/or the
DLJ Entities or Orkla, as the case may be, of the Offered Securities upon the
terms and at the price set forth in the Section 4.1 Offer Notice shall occur
within a 30-day period following acceptance of the Section 4.1 Offer; provided
that if the purchase and sale of such Offered Securities is subject to the
expiration of any applicable statutory waiting period, the time period during
which such purchase and sale may be consummated shall be extended until the
expiration of 14 days after such waiting period shall have expired; provided
further that such time period shall not exceed 60 days from the date of
acceptance under Section 4.1(b) without the written consent of the Selling
Party. If such purchase and sale are not consummated by the Issuer and/or
Holberg and/or the DLJ Entities or Orkla, as the case may be, within such time
period, such Section 4.1 Offer shall be deemed to be rejected.
(d) Upon the rejection or deemed rejection of the Section 4.1 Offer by the
Issuer, Holberg and the DLJ Entities or Orkla, as the case may be, the failure
to obtain any required consent for the purchase of the Offered Securities
subject thereto within 60 days following an acceptance of a Section 4.1 Offer,
there shall commence a 90-day period during which the Selling Party shall have
the right to effect a transfer of any or all of the Offered Securities subject
to the Section 4.1 Offer at a price not less than 95% of the Section 4.1 Sale
Price; provided that (i) such Third Party shall have agreed in writing to be
bound by the terms of this Agreement and (ii) the transfer to such Third Party
is not in violation of applicable federal or state securities laws.
Notwithstanding the foregoing, if the purchase and sale of such Offered
Securities is subject to any prior regulatory approval, the time period during
which such transfer may be consummated shall be extended until the expiration of
14 days after all such approvals shall have been received but in no event shall
such time period exceed 150 days (from the commencement of the 90-day period
referred to above) without the consent of the Issuer. If such Selling Party does
not consummate the sale of such Offered Securities subject to the Section 4.1
Offer in accordance with the time limitations set forth above, such Selling
Party may not sell any such Offered Securities without repeating the procedures
set forth in this Section 4.1.
(e) Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 4.1 will not be applicable to transfers made pursuant
to and in compliance with Section 3.3 or Article 5.
(f) A Selling Party may transfer Offered Securities in accordance with the
foregoing provisions of this Section 4.1 for consideration other than cash only
if such Selling Party has first obtained and delivered to the Issuer and Holberg
an opinion of a mutually agreed upon investment banking firm of national
standing indicating that the fair market value of the non-cash consideration
that such Selling Party proposes to accept as consideration for such Offered
Securities together with any cash consideration, is at least equal to 95% of the
price referred to in the first sentence of paragraph (d) above.
(g) Each of the DLJ Entities and Orkla agrees that it will not, directly or
indirectly, effect a transfer subject to Section 4.1(a)-4.1(f), except in
compliance therewith and that any such purported transfer not in compliance with
Section 4.1(a)-4.1(f) shall be void. Each of the DLJ Entities, Orkla, the Issuer
and NED agree that (i) no transfer prohibited by this Section 4.1(g)
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will be recorded on the books of the Issuer or NED, and (ii) no transferee in
any such prohibited transfer shall be accorded any rights as a securityholder of
the Issuer or NED.
SECTION 4.2. Right to Participate in a Transfer. (a) If at any time, or
from time to time, prior to the consummation of an Initial Public Offering,
consistent with the limitations set forth in Section 3.1, NED or Holberg,
Permitted Transferees thereof, or a combination of such Persons (each a "SECTION
4.2 SELLER") propose to transfer, in one or more related transactions, an
aggregate of five percent (5%) or more of the then outstanding shares of Common
Stock to a Third Party other than a Permitted Transferee (excluding any
Permitted Transferee of Orkla and any DLJ Entity) and other than pursuant to an
Initial Public Offering (a "SECTION 4.2 SALE"), the Section 4.2 Seller shall
provide written notice (the "SECTION 4.2 NOTICE") of such proposed Section 4.2
Sale to the DLJ Entities and Orkla (the "SECTION 4.2/4.3 ENTITIES") and a copy
of the agreement pursuant to which such shares of Common Stock are proposed to
be transferred (the "SECTION 4.2 AGREEMENT"). The Section 4.2 Notice shall
identify the number of shares of Common Stock subject to the Section 4.2 Sale
(the "NUMBER OF SHARES"), the per share consideration for which a sale is
proposed to be made (the "SECTION 4.2 SALE PRICE"), the total number of shares
of Common Stock held by the Section 4.2 Seller and its Permitted Transferees and
all other material terms and conditions of the proposed Section 4.2 Sale. Each
Section 4.2/4.3 Entity shall have the right and option, exercisable as set forth
below, to participate in the Section 4.2 Sale; provided that if the aggregate
number of Warrants and/or Warrant Shares (the "PARTICIPATING SECURITIES") and
shares of Common Stock that the Section 4.2/4.3 Entities and the Section 4.2
Seller, respectively, propose to sell exceeds the number of shares that such
Third Party is willing to purchase on the proposed terms and conditions, then
each Section 4.2/4.3 Entity shall have the right to participate for up to the
number of Participating Securities as constitutes its Section 4.2 Pro Rata
Portion of the aggregate number of shares of Common Stock to be sold and the
amount of shares of Common Stock to be sold by the Section 4.2 Seller in the
Section 4.2 Sale shall be reduced to the extent the Section 4.2/4.3 Entities
elect to participate. "SECTION 4.2 PRO RATA PORTION" means, with respect to each
Section 4.2/4.3 Entity, at the time of the Section 4.2 Notice, the number of
shares of Common Stock such Section 4.2/4.3 Entity owns and pursuant to the
Warrants has the irrevocable right to acquire multiplied by a fraction, the
numerator of which is the number of shares of Common Stock to be sold by the
Section 4.2 Seller and its Permitted Transferees and the denominator of which is
the total number of shares of Common Stock (including any unissued shares of
Common Stock issuable pursuant to stock options, warrants and other rights to
acquire shares of Common Stock and pursuant to convertible or exchangeable
securities issued in accordance with Section 2.4) held by the Section 4.2 Seller
and its Permitted Transferees; provided that each Section 4.2/4.3 Entity that is
a holder of Warrants may, in lieu of exercising Warrants, transfer Warrants for
some or all of that number of shares of Common Stock as would otherwise have
constituted its Section 4.2 Pro Rata Portion. Each Section 4.2/4.3 Entity that
desires to exercise such option shall provide the Section 4.2 Seller with
written irrevocable notice, specifying the number of Participating Securities to
be included in such Section 4.2 Sale, within fifteen (15) Business Days after
the date the Section 4.2 Notice is given (the "SECTION 4.2 NOTICE PERIOD"). Each
accepting Section 4.2/4.3 Entity shall deliver to the Section 4.2 Seller the
certificate or certificates representing the Participating Securities of such
Section 4.2/4.3 Entity, together with a limited power-of-attorney authorizing
the Section 4.2 Seller to transfer such Participating Securities pursuant to the
terms
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of the Section 4.2 Agreement. Delivery of such certificate or certificates
representing the Participating Securities to be transferred and the limited
power-of-attorney authorizing the Section 4.2 Seller to transfer such
Participating Securities shall constitute an irrevocable acceptance of the
Section 4.2 Sale by the Section 4.2/4.3 Entity. Each Section 4.2/4.3 Entity may
assign its rights under this Section 4.2 to any other Section 4.2/4.3 Entity.
The Section 4.2 Seller shall provide to each Section 4.2/4.3 Entity a copy
of any amendment or modification of the Section 4.2 Agreement in connection with
the Section 4.2 Sale. Notwithstanding anything in this Section 4.2 to the
contrary, any material modification or amendment to the Section 4.2 Agreement
after execution thereof by an electing Section 4.2/4.3 Entity including, without
limitation, any decrease in the Section 4.2 Sale Price, any change in the form
of consideration or any amendment which would reasonably be expected to increase
the potential liability of the electing Section 4.2/4.3 Entity, shall not be
binding upon the Section 4.2/4.3 Entity unless the electing Section 4.2/4.3
Entity consents to such amendment or modification.
(b) The consideration per share of Common Stock to be paid to the Section
4.2 Seller and each Section 4.2/4.3 Entity participating in the Section 4.2 Sale
shall be the Section 4.2 Sale Price. The price per Warrant shall be the Section
4.2 Sale Price minus the applicable exercise price.
(c) Promptly after the consummation of the transfer by the Section 4.2/4.3
Entities and the Section 4.2 Seller pursuant to the Section 4.2 Sale, the
Section 4.2 Seller shall notify such Section 4.2/4.3 Entities thereof, shall
remit to each of such Section 4.2/4.3 Entities the total consideration for the
Participating Securities of such Section 4.2/4.3 Entity transferred pursuant
thereto as computed pursuant to Section 4.2(b) and shall furnish such other
evidence of the completion and time of completion of such transfer and the terms
thereof as may be reasonably requested by such Section 4.2/4.3 Entities. If the
Section 4.2 Seller does not complete the transfer of all the shares of Common
Stock and the Participating Securities, the Section 4.2 Seller shall return to
the Section 4.2/4.3 Entities the limited power-of-attorney (and all copies
thereof) together with all certificates representing the Participating
Securities which such Section 4.2/4.3 Entities delivered for transfer pursuant
to this Section 4.2, and all the restrictions on transfer contained in this
Agreement with respect to Warrants and Warrant Shares owned by the Section
4.2/4.3 Entities shall again be in effect.
(d) If at the termination of the Section 4.2 Notice Period any Section
4.2/4.3 Entity shall not have elected to participate in the Section 4.2 Sale,
such Section 4.2/4.3 Entity will be deemed to have waived any of and all of its
rights under this Section 4.2 with respect to the transfer of its Shares
pursuant to such Section 4.2 Sale. In any such case, the Section 4.2 Seller
shall have 90 days following such termination of the Section 4.2 Notice Period
in which to transfer the applicable Shares at a price not higher than 105% of
that contained in the Section 4.2 Notice and on terms not substantially more
favorable to the Section 4.2 Seller than were contained in the Section 4.2
Notice. Promptly after any transfer pursuant to this Section 4.2(d), the Section
4.2 Seller shall notify the Section 4.2/4.3 Entities of the consummation thereof
and shall furnish such evidence of the completion thereof (including time of
completion) of such
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transfer and of the terms thereof as the Section 4.2/4.3 Entities may request.
If the Section 4.2(d) Seller does not complete the transfer of the applicable
Shares within the 90-day period specified in this Section 4.2(d), such Section
4.2 Seller may not transfer such shares of Common Stock without repeating the
procedures in this Section 4.2.
SECTION 4.3. Preemptive Rights. (a) Except as provided below, the Issuer
shall not issue, sell or transfer any Equity Securities or allow any of its
Subsidiaries to issue, sell or transfer any Equity Securities (except for any
issuance to any other Subsidiary or pursuant to any employee benefit plan or
stock option plan approved, to the extent required, pursuant to Section 2.4(i))
unless the provisions of this Section 4.3 shall have been fully complied with by
the Issuer or such Subsidiary, as applicable. Prior to any proposed issuance,
sale or transfer, the Issuer shall notify each Section 4.2/4.3 Entity in writing
(the "ISSUANCE NOTICE") of the amount and class of Equity Securities proposed to
be issued, sold or transferred, the proposed price and the other terms of such
proposed issuance, sale or transfer. During the period of 20 days following the
date of such notice (the "SUBSCRIPTION PERIOD"), each Section 4.2/4.3 Entity
shall have the right to deliver to the Issuer an irrevocable notice (which
notice may condition the purchase on the receipt of necessary approvals) (a
"SUBSCRIPTION NOTICE") electing to purchase, at the proposed issuance price and
on the same terms as the proposed issuance up to an amount of Common Stock or
other securities (the "MAINTENANCE SECURITIES") as is necessary for such Section
4.2/4.3 Entity to maintain its Percentage Ownership as it existed immediately
prior to such proposed issuance (the "PREEMPTIVE RIGHTS").
(b) Any Section 4.2/4.3 Entity which does not deliver to the Issuer the
Subscription Notice within 20 days after such Section 4.2/4.3 Entity's receipt
of the Issuance Notice shall be deemed to have waived its right to purchase all
or any part of its Maintenance Securities (including, if the Maintenance
Securities include convertible securities, options, or other rights to acquire
other securities, such other securities). In any such case, the Issuer shall
have 90 days following such deemed waiver in which to issue, sell or transfer
the applicable Equity Securities at a price not higher and on terms not
substantially more favorable than that contained in the Issuance Notice.
Promptly after any issuance, sale or transfer pursuant to this Section 4.3(b),
the Issuer shall notify the Section 4.2/4.3 Entities of the consummation thereof
and shall furnish such evidence of the completion thereof (including time of
completion) of such transfer. If the Issuer does not complete the issuance, sale
or transfer of the applicable Equity Securities within the 90-day period
specified in this Section 4.3(b), the Issuer may not issue, sell or transfer
such Equity Securities without repeating the procedures in this Section 4.3(b).
(c) If the proposed issuance of the Equity Securities is consummated, each
Section 4.2/4.3 Entity delivering a Subscription Notice shall purchase from the
Issuer or such Subsidiary, and the Issuer or such Subsidiary shall be required
to issue and sell to each such Section 4.2/4.3 Entity, such Equity Securities on
such terms and at the price set forth in the Subscription Notice. The closing of
such sale shall occur, subject to receipt of necessary approvals, on the second
business day following the latest of (i) the day of consummation of the issuance
of such Equity Securities to persons other than the Section 4.2/4.3 Entities
(which may not be earlier than the date set forth in clause (ii) below), (ii)
the day that is at least 15 days after the expiration of the Subscription Period
and (iii) the 10th day after receipt by such Section 4.2/4.3 Entity or Entities
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of any and all necessary approvals, at the principal office of the Issuer, or at
such other time and place as the Issuer or such Subsidiary and the Section
4.2/4.3 Entities exercising their Preemptive Rights shall mutually agree upon.
(d) The Preemptive Rights set forth above shall not apply to (i) the
issuance of Warrant Shares, (ii) the issuance of shares of Common Stock issuable
upon exercise of any option, warrant, convertible security or other rights to
purchase, exchange other securities for, or subscribe for Common Stock, (iii)
securities issued pursuant to any stock split, stock dividend or other similar
stock recapitalization or (iv) shares of any class of common stock issued
pursuant to any public offering, provided that the action referred to in clause
(ii), (iii) or (iv), as the case may be, shall have been approved in accordance
with Section 2.4. The Issuer or its Subsidiary, as the case may be, shall not be
under any obligation to consummate any proposed issuance of Equity Securities,
regardless of whether it shall have delivered an Issuance Notice pursuant to
this Section 4.3. Notwithstanding anything contained herein to the contrary, the
Preemptive Rights set forth above shall be in addition to any rights arising out
of the anti-dilution provisions set forth in any Warrant for the holder thereof.
SECTION 4.4. Improper Transfer. Any attempt to transfer any Securities not
in compliance with this Agreement shall be null and void and neither the Issuer
nor any transfer agent shall give any effect in the Issuer's records to such
attempted transfer.
SECTION 4.5. Certain Provisions Relating to Orkla With Respect to Sections
4.2 and 4.3. All of the rights of Orkla, and all of the obligations of any other
party hereto, pursuant to Sections 4.2 and 4.3 shall be governed by the
following provisions:
(a) with respect to any measurement of the number of, or rights with
respect to, Initial Warrants, Initial Warrant Shares, or shares of Common
Stock owned by Orkla for purposes of Section 4.2 or 4.3, any Orkla Warrants
and Orkla Warrant Shares shall be taken into account on the basis of the
indirect Percentage Ownership in the Issuer represented by such Orkla
Warrants and Orkla Warrant Shares; and
(b) with respect to any shares of Common Stock transferable or
issuable to Orkla pursuant to Section 4.2 or 4.3, NED and the Issuer shall
have the option, exercisable at their sole election, to issue to Orkla
(including in lieu of any shares of Common Stock transferable to Orkla,
which otherwise transferable shares will instead be transferred to NED)
such number of shares of NED Common Stock as represent an equal indirect
Percentage Ownership in the Issuer as the shares of Common Stock so
transferable or issuable to Orkla pursuant to Section 4.2 or 4.3, would
have represented a direct Percentage Ownership in the Issuer, it being
understood and agreed by the parties hereto that the rights and benefits
under this Agreement and the Securities owned by the DLJ Entities shall in
no event be impaired or diminished as a result of any such participation
by, or adjustment with respect to, Orkla pursuant to this Section 4.5, as
compared with the circumstances that would have been in effect had Orkla
held its indirect interest in the Issuer directly rather than indirectly.
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ARTICLE 5.
REGISTRATION RIGHTS
SECTION 5.1. Demand Registration. (a) Commencing on the applicable Initial
Registration Date, the DLJ Entities may make a written request (any such
requesting Person, a "SELLING INVESTOR") that the Issuer effect the registration
under the Securities Act of all or a portion of such Selling Investor's
applicable Registerable Securities, and specifying the intended method of
disposition thereof. The Issuer will promptly give written notice of such
requested registration (a "DEMAND REGISTRATION") at least thirty (30) days prior
to the anticipated filing date of the registration statement relating to such
Demand Registration to the other Investors and thereupon will use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of:
(i) the Registerable Securities which the Issuer has been so requested
to register by the Selling Investor, then held by the Selling Investor;
(ii) subject to Section 5.2, all other Securities of the same type as
the Registerable Securities sought to be registered by the Selling Investor
which any other Investor entitled to request the Issuer to effect an
Incidental Registration (as such term is defined in Section 5.2) pursuant
to Section 5.2 (all such Investors, together with the Selling Investors,
the "HOLDERS") has requested the Issuer to register by written request
received by the Issuer within fifteen (15) days after the receipt by such
other Investors of such written notice given by the Issuer; and
(iii) shares of Common Stock desired to be registered by the Issuer as
approved pursuant to Section 2.4 hereof,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registerable Securities so to be
registered; provided that, subject to Section 5.1(c) hereof, the Issuer shall
not be obligated to effect, pursuant to this Section 5.1(a), (A) more than one
Demand Registration during any six-month period, (B) more than four Demand
Registrations in connection with the registration of the Senior Preferred Stock
(which registration may also relate to Warrants to be offered in connection with
such Senior Preferred Stock), (C) more than four Demand Registrations in
connection with the registration of the Junior Preferred Stock (which
registration may also relate to Warrants to be offered in connection with such
Junior Preferred Stock), (D) more than four Demand Registrations in connection
with the registration of the Warrants (which registration may also relate to the
Senior Preferred Stock and/or the Junior Preferred Stock to be offered in
connection with such Warrants), and (E) more than two Demand Registrations in
connection with the registration of any other Registerable Securities. If
Warrants are sold in connection with a registered or Rule 144A sale of the
Senior Preferred Stock or the Junior Preferred Stock, the Issuer shall (not
earlier than the time the Issuer registers the Senior Preferred Stock or the
Junior Preferred Stock (or exchange securities in the case of a Rule 144A
offering)) file a shelf registration statement relating to all the Common Stock
underlying such Warrants; provided that any holder of
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Warrants seeking to offer, purchase or sell any of the Common Stock underlying
such Warrants will first notify the Issuer and allow the Issuer to prepare an
appropriate prospectus supplement to be used in such transaction, and that the
Issuer's obligation to prepare such a prospectus supplement (and accordingly the
ability of the holder to effect such offer, purchase or sale) will be subject to
customary deferral provisions; and provided further that in no event shall the
Issuer be entitled to postpone or suspend the preparation and filing of such
prospectus supplement for a period exceeding ninety (90) days. The Issuer shall
not be obligated to effect a Demand Registration with respect to shares of
Common Stock unless the Common Stock requested to be included in such Demand
Registration has, in the reasonable judgment of the Board of Directors exercised
in good faith, a fair market value of at least (1) $25,000,000 if such Demand
Registration would constitute an Initial Public Offering; provided that if the
estimated proceeds from the sale of all the Common Stock to be sold by the
Selling Investor is less than such amount and the DLJ Entities and Orkla have
requested the Issuer to register all of the Registerable Securities owned by
them consisting of Warrants and/or Warrant Shares and/or Common Stock, then the
Selling Investor may require the Issuer to issue, or an Other Investor to sell,
a sufficient number of shares of Common Stock in connection with the Initial
Public Offering to result in aggregate proceeds of at least $25,000,000 or (2)
in all other cases, $15,000,000.
Promptly after the expiration of the 15-day period referred to in Section
5.1(a)(ii) hereof, the Issuer will notify all the Holders to be included in the
Demand Registration of the other Holders and the number of shares of
Registerable Securities requested to be included therein. The Selling Investors
requesting a registration under this Section 5.1(a)(ii) may, at any time prior
to the effective date of the registration statement relating to such
registration, revoke such request, without liability to any of the other
Holders, by providing a written notice to the Issuer revoking such request, in
which case such request, so revoked, shall be treated as a Demand Registration
unless the Selling Investors who requested such registration pay the
Registration Expenses or the Selling Investors requesting registration shall
have on three prior occasions revoked registration requests.
(b) The Issuer will, subject to Section 5.1(a), pay all Registration
Expenses in connection with each Demand Registration.
(c) A registration requested pursuant to this Section 5.1 shall not be
deemed to have been effected, subject to Section 5.1(a), unless the registration
statement relating thereto (i) has become effective under the Securities Act and
(ii) has remained effective for a period of at least 270 days (or such shorter
period in which all Registerable Securities of the Holders included in such
registration have actually been sold thereunder); provided that if after any
registration statement requested pursuant to this Section 5.1 becomes effective
and (i) such registration statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court and (ii) less than 85% of the Registerable Securities included in such
registration statement has been sold thereunder, such registration statement
shall be at the sole expense of the Issuer and shall not be considered a Demand
Registration.
(d) Limitations on Filings. Notwithstanding the foregoing provisions of
this Section 5.1, the Issuer shall be entitled to postpone or suspend (but not
for a period exceeding ninety (90
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days) the filing or effectiveness of the registration statement otherwise
required to be prepared and filed by it if the Issuer determines, in its
reasonable judgment, that such registration and offering or continued
effectiveness would interfere with or require premature public disclosure of any
financing, acquisition, disposition, corporate reorganization or other
transaction involving the Issuer or any of its Subsidiaries. Once the
registration statement required to be filed pursuant to this Section 5.1 has
been declared effective, any period during which the Issuer fails to keep such
registration statement effective and usable for resale of Registerable
Securities as required shall be referred to as a "DEMAND REGISTRATION SUSPENSION
PERIOD". A Demand Registration Suspension Period shall commence on and include
the date that the Issuer gives written notice to each Holder participating in
the registration of its determination that such registration statement is no
longer effective or usable for resale of Registerable Securities to and
including the date when the use of the prospectus included in such registration
statement may be resumed for the disposition of Registerable Securities. In the
event of any Demand Registration Suspension Period, the time period during which
the Issuer is obligated to keep any such registration statement effective and
usable under Section 5.1(c) or Section 5.4(a) shall be extended by the number of
days of such Demand Registration Suspension Period.
(e) If a Demand Registration involves an Underwritten Public Offering and
the managing underwriter shall advise the Issuer and the Selling Investor that,
in its view, the amount or type of Registerable Securities exceeds the largest
number of such types of Registerable Securities which can be sold without having
an adverse effect on such offering, including the price at which such
Registerable Securities can be sold (the "MAXIMUM OFFERING SIZE"), the Issuer
will include in such registration, in the priority listed below, up to the
Maximum Offering Size:
(i) first, all Registerable Securities requested to be registered by
the Selling Investors and any other DLJ Entity and Orkla, if applicable
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among the Selling Investors, any other DLJ Entity
and Orkla, if applicable, on the basis of the relative amount of each type
of Registerable Securities requested to be included in such registration);
(ii) second, all Registerable Securities of the same type as the
Selling Investor has requested be registered, requested to be registered by
any Holder, other than the Selling Investor, the DLJ Entities and Orkla, if
applicable (allocated, if necessary for the offering not to exceed the
Maximum Offering Size, pro rata among such Holders on the basis of the
relative number of shares of Registerable Securities so requested to be
included in such registration); and
(iii) third, if the Registerable Securities requested to be registered
constitute Common Stock, any Common Stock proposed to be registered by the
Issuer.
SECTION 5.2. Incidental Registration, Rules 144 and 144A. (a) If the Issuer
proposes to register any Common Stock, Senior Preferred Stock, Junior Preferred
Stock or Preferred Stock under the Securities Act (other than a registration (i)
on Form S-8 or S-4 or any successor or similar forms, (ii) relating to Common
Stock issuable upon exercise of employee stock options or
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in connection with any employee benefit, dividend reinvestment or similar plan
of the Issuer or (iii) in connection with a direct or indirect merger,
acquisition or other similar transaction) whether or not for sale for its own
account, it will each such time, subject to the provisions of Section 5.2(b)
hereof, give prompt written notice at least thirty (30) days prior to the
anticipated filing date of the registration statement relating to such
registration to each DLJ Entity and Orkla, which notice shall set forth the
rights of such DLJ Entity and Orkla under this Section 5.2 and shall offer all
DLJ Entities and Orkla the opportunity to include in such registration statement
such Registerable Securities as each such DLJ Entity and Orkla may request (an
"INCIDENTAL REGISTRATION"). Upon the written request of any such DLJ Entity or
Orkla made within 15 days after the receipt of notice from the Issuer (which
request shall specify the number and type of Registerable Securities intended to
be disposed of by such DLJ Entity or Orkla), the Issuer will use its best
efforts to effect the registration under the Securities Act of all Registerable
Securities which the Issuer has been so requested to register by such DLJ
Entities and/or Orkla, to the extent requisite to permit the disposition of the
Registerable Securities so to be registered; provided that (A) if such
registration involves an Underwritten Public Offering, all such DLJ Entities and
Orkla requesting to be included in the Issuer's registration must sell their
Registerable Securities to the underwriters selected as provided in Section
5.4(f) on the same terms and conditions as apply to the Issuer and the Selling
Investors and (B) if, at any time after giving written notice of its intention
to register any securities pursuant to this Section 5.2(a) and prior to the
effective date of the registration statement filed in connection with such
registration, the Issuer shall determine for any reason not to register or to
delay registration of such securities, the Issuer shall give written notice to
all such DLJ Entities and Orkla and, thereupon, (1) in the case of a
determination not to register, the Issuer shall be relieved of its obligation to
register any Registerable Securities in connection with such registration and
(2) in the case of a determination to delay such registration, the Issuer shall
be permitted to delay registration of any Registrable Securities requested to be
included in such Incidental Registration Statement for the same period as the
delay in registering such other securities (without prejudice, however, to the
rights of any DLJ Entity or Orkla under Section 5.1 hereof). No registration
effected under this Section 5.2 shall relieve the Issuer of its obligations to
effect a Demand Registration to the extent required by Section 5.1 hereof. The
Issuer will pay all Registration Expenses in connection with each registration
of Registerable Securities requested pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2 involves an Underwritten
Public Offering (other than in the case of an Underwritten Public Offering
requested by any DLJ Entity in a Demand Registration, in which case the
provisions with respect to priority of inclusion in such offering set forth in
Section 5.1(d) shall apply) and the managing underwriter advises the Issuer
that, in its view, the amount or type of securities which the Issuer and such
Holders intend to include in such registration exceeds the Maximum Offering
Size, the Issuer will include in such registration, in the following priority,
up to the Maximum Offering Size:
(i) first, so much of the securities proposed to be registered by the
Issuer as would not cause the offering to exceed the Maximum Offering Size;
and
(ii) second, all Registerable Securities requested to be included in
such registration by any other Holders pursuant to Section 5.2 (allocated,
if necessary for the
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offering not to exceed the Maximum Offering Size, pro rata among such
entities on the basis of the relative amount of each type of Registerable
Securities so requested to be included in such registration).
SECTION 5.3. Holdback Agreements. If any registration of Registerable
Securities shall be in connection with an Underwritten Public Offering, each
Investor agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144, or any successor provision, under the Securities Act,
of any Registerable Securities, and not to effect any such public sale or
distribution of any other Common Stock of the Issuer or of any security
convertible into or exchangeable or exercisable for any Common Stock of the
Issuer (in each case, other than as part of such Underwritten Public Offering)
during the 14 days prior to the effective date of such registration statement
(except as part of such registration) or during the period after such effective
date that such managing underwriter and the Issuer shall agree (but not to
exceed 180 days).
SECTION 5.4. Registration Procedures. Whenever any of the DLJ Entities
requests that any Registerable Securities be registered pursuant to Section 5.1
or 5.2 hereof, the Issuer will, subject to the provisions of such Sections, use
its best efforts to effect the registration of such Registerable Securities in
accordance with the intended method of disposition thereof as quickly as
reasonably practicable, and in connection with any such request:
(a) The Issuer will as quickly as reasonably practicable prepare and file
with the SEC a registration statement on any form for which the Issuer then
qualifies or which counsel for the Issuer shall deem appropriate and which form
shall be available for the sale of the Registerable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such filed registration statement to become
effective.
(b) The Issuer will, if requested, prior to filing a registration statement
or prospectus or any amendment or supplement thereto, furnish to each Holder
which is participating in a registration and each underwriter, if any, of the
Registerable Securities covered by such registration statement copies of such
registration statement as proposed to be filed, and thereafter the Issuer will
furnish to each such Holder and underwriter, if any, such number of copies of
such registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus and all amendments and supplements thereto) and such
other documents as such Holder or underwriter may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by such Holder
which are covered by such registration statement.
(c) After the filing of the registration statement, the Issuer will (i)
cause the related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, (ii) comply with the provisions of the Securities Act with
respect to the disposition of all Registerable Securities covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement or supplement to such
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prospectus and (iii) promptly notify each Holder holding Registerable Securities
covered by such registration statement of any stop order issued or threatened by
the SEC and will take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(d) The Issuer will use its best efforts to (i) register or qualify the
Registerable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Holder holding such Registerable Securities reasonably (in light of such
Holder's intended plan of distribution) requests, (ii) cause such Registerable
Securities to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Issuer and (iii) do any and all other acts and things that may be reasonably
necessary or advisable to enable such Holder to consummate the disposition of
the Registerable Securities owned by such Holder; provided that the Issuer will
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such jurisdiction or (C) consent to
general service of process in any such jurisdiction.
(e) The Issuer will promptly notify each Holder holding such Registerable
Securities covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registerable Securities, such prospectus will not contain an 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 not misleading and promptly prepare
and make available to each such Holder and file with the SEC any such supplement
or amendment.
(f) In any Demand Registration, DLJMB will have the right to select an
underwriter or underwriters in connection with any public offering, which may
include any Affiliate of any DLJ Entity. In any other case, the Issuer may,
subject to its other contractual obligations, select in its sole discretion,
such underwriter or underwriters as it may deem appropriate, which may include
any Affiliate of any DLJ Entity. The Issuer will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably necessary in order to expedite or facilitate the
disposition of such Registration Securities, including but not limited to the
engagement of a qualified independent underwriter in connection with the
qualification of the underwriting arrangements with the NASD, maintaining a
current market-making prospectus and conducting customary road show
presentations.
(g) The Issuer will make available for inspection by any Holder and any
underwriter participating in any disposition pursuant to a registration
statement being filed by the Issuer pursuant to this Section 5.4 and any
attorney, accountant or other professional retained by any such Holder or
underwriter (collectively, the "INSPECTORS"), all financial and other records,
pertinent corporate documents and properties of the Issuer (collectively, the
"RECORDS") as shall be reasonably requested by any such Person, and cause the
Issuer's officers, directors and employees to supply all information reasonably
requested by any Inspectors in connection with such registration statement
provided that prior to the release or disclosure of any such Records,
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the Inspectors enter into a confidentiality agreement in form and substance
reasonably satisfactory to the Issuer.
(h) The Issuer will obtain and furnish to each such Holder and to each such
underwriter, if any, a signed counterpart, addressed to such underwriter, of (i)
an opinion or opinions of counsel to the Issuer and (ii) a comfort letter or
comfort letters from the Issuer's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as Holder of a majority of the
aggregate amount of Registerable Securities or the managing underwriter therefor
reasonably requests.
(i) The Issuer will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and the relevant state blue sky
commissions, and make available to its securityholders, as soon as reasonably
practicable, an earnings statement covering a period of twelve (12) months,
beginning within three (3) months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
The Issuer may require each such Holder to promptly furnish in writing to
the Issuer such information regarding the distribution of the Registerable
Securities as the Issuer may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
Each such Holder agrees that, upon receipt of any notice from the Issuer of
the happening of any event of the kind described in Section 5.4(e) hereof, such
Holder will forthwith discontinue disposition of Registerable Securities
pursuant to the registration statement covering such Registerable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5.4(e) hereof, and, if so directed by the
Issuer, such Holder will deliver to the Issuer all copies, other than any
permanent file copies then in such Holder's possession, of the most recent
prospectus covering such Registerable Securities at the time of receipt of such
notice.
(j) (i) If the Issuer shall have filed a registration statement pursuant to
Section 12 of the Exchange Act or a registration statement pursuant to the
Securities Act, then for so long as it is subject to the periodic reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Issuer will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder and will take
such further action as any holder of Registerable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registerable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (A) Rule 144 as such Rule
may be amended from time to time, or (B) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any holder of Registerable
Securities, the Issuer will deliver to such holder a written statement as to
whether it has complied with such requirements.
(ii) If any DLJ Entity holding Registerable Securities desires to
transfer any such securities pursuant to Rule 144A and in accordance with
the terms of this Agreement, the
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Issuer will promptly, upon request by any one or more such DLJ Entities,
use its best efforts to facilitate the consummation of such Rule 144A
transaction by the DLJ Entities and Orkla if it so requests, in accordance
with the requirements of such Rule and with such request and shall take all
necessary or appropriate actions in connection therewith, including but not
limited to (A) preparing of an offering memorandum with respect to such
transaction containing information customarily included in connection with
Rule 144A transactions of the type contemplated by the request, (B) taking
the actions, to the extent requested by such DLJ Entity or Entities,
referred to in Section 5.4(d), 5.4(g) and 5.4(h) and (C) conducting "ROAD
SHOW" presentations as reasonably requested by such DLJ Entity or Entities,
provided that the Issuer shall not be obligated to take the foregoing
actions on more than two occasions. The Issuer shall pay all expenses in
connection with any Rule 144A transaction pursuant hereto.
(iii) The Issuer represents and warrants that the Registerable
Securities are not, and are not of the same class as any other securities,
listed on a national securities exchange registered under Section 6.1 of
the Exchange Act or quoted in an automated inter-dealer quotation system.
For so long as any Registerable Securities are restricted securities within
the meaning of Rule 144(a)(3) under the Securities Act, the Issuer
covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) of the Exchange Act, make available to any
DLJ Entity and Orkla holding of Registerable Securities in connection with
the sale of such holder Registerable Securities and any prospective
purchaser of Registerable Securities from such, in each case upon request,
the information specified in, and meeting the requirements of, Rule
144A(d)(4).
SECTION 5.5. Indemnification by the Issuer. The Issuer agrees to indemnify
and hold harmless each Holder holding Registerable Securities covered by a
registration statement, its officers, directors and agents, and each Person, if
any, who controls such Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registerable Securities (as amended or supplemented
if the Issuer shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission so made in reliance upon and in conformity
with information furnished in writing to the Issuer by such Holder or on such
Holder's behalf expressly for use therein; provided that with respect to any
untrue statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, or in any prospectus, as the case may be, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the prospectus
as amended or supplemented) was not sent or given to the Person asserting any
such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registerable Securities concerned to such Person
if the Issuer had provided such prospectus and it was the responsibility of such
Holder to provide such Person with a
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current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The Issuer also agrees
to indemnify any underwriters of the Registerable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Holder provided in this Section
5.5.
SECTION 5.6. Indemnification by Participating Holders. (a) Subject to
Section 5.6(b), each Holder holding Registerable Securities included in any
registration statement agrees, severally but not jointly, to indemnify and hold
harmless the Issuer, its officers, directors and agents and each Person, if any,
who controls the Issuer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuer to such Holder, but only (i) with respect to
untrue statements or omissions, or alleged untrue statements or omissions in a
registration statement (or any amendment thereto) or any prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
information furnished in writing by such Holder or on such Holder's behalf
expressly for use in any registration statement or prospectus relating to the
Registerable Securities, or any amendment or supplement thereto, or any
preliminary prospectus or (ii) to the extent that any loss, claim, damage,
liability or expense results from the fact that a current copy of the prospectus
(or, in the case of a prospectus, the prospectus as amended or supplemented) was
not sent or given to the Person asserting any such loss, claim, damage,
liability or expense at or prior to the written confirmation of the sale of the
Registerable Securities concerned to such Person if it is determined that it was
the responsibility of such Holder to provide such Person with a current copy of
the prospectus (or such amended or supplemented prospectus, as the case may be)
and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to such
loss, claim, damage, liability or expense. Subject to Section 5.6(b), each such
Holder also agrees to indemnify and hold harmless underwriters of the
Registerable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Issuer provided in this Section 5.6. As a condition to
including Registerable Securities in any registration statement filed in
accordance with Article 5 hereof, the Issuer may require that it shall have
received an undertaking reasonably satisfactory to it from any underwriter to
indemnify and hold it harmless to the extent customarily provided by
underwriters with respect to similar securities.
(b) No Holder shall be liable under Section 5.6(a) for any damage
thereunder in excess of the net proceeds realized by such Holder in the sale of
the Registerable Securities of such Holder.
SECTION 5.7. Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to this Article 5,
such Person (an "INDEMNIFIED PARTY") shall promptly notify the Person against
whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall
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assume the payment of all fees and expenses; provided that the failure of any
Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any and all losses, claims, damages, liabilities and expenses or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such proceeding.
SECTION 5.8. Contribution. If the indemnification provided for in this
Article 5 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such 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 or liabilities (i)
as between the Issuer and the Holders holding Registerable Securities covered by
a registration statement on the one hand and the underwriters on the other, in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer and such Holders on the one hand and the underwriters on the other,
from the offering of the Registerable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Issuer and such
Holders on the one hand and of such underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Issuer on the one hand and each such Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Issuer and of
each such Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuer and such Holders on the one hand and such underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Issuer and such Holders bear to the total underwriting discounts
and commissions received by such underwriters, in each case as set forth in the
table on the cover page of the prospectus. The
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relative fault of the Issuer and such Holders on the one hand and of such
underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer and such Holders or by such underwriters. The relative
fault of the Issuer on the one hand and of each such Holder on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Issuer and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5.8 were determined by pro rata allocation
(even if the underwriters were treated as one entity for such purpose) 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 or liabilities 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 5.9, no underwriter shall be required to contribute
any amount in excess of the amount by which the underwriting discount applicable
to Registerable Securities purchased by such underwriter in such offering
exceeds the amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no Holder shall be required to contribute any amount in
excess of the amount by which the net proceeds realized on the sale of the
Registerable Securities of such Holder exceeds 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each Holder's obligation to
contribute pursuant to this Section 5.8 is several in the proportion that the
proceeds of the offering received by such Holder bears to the total proceeds of
the offering received by all such Holders and not joint.
SECTION 5.9. Participation in Public Offering. No Person may participate in
any Underwritten Public Offering hereunder unless such Person (a) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and the provisions of this Agreement in
respect of registration rights.
SECTION 5.10. Other Indemnification. Indemnification similar to that
specified herein (with appropriate modifications) shall be given by the Issuer
and each Investor participating therein with respect to any required
registration or other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities Act.
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ARTICLE 6.
RIGHT TO REQUIRE REPURCHASE; HOLBERG CALL
SECTION 6.1. Right to Require Repurchase. At any time after July 11, 2004,
the DLJ Entities and their Permitted Transferees shall have the right (the
"REPURCHASE RIGHT") in their sole discretion, to require the Issuer to
repurchase, and the Issuer shall repurchase, all of the Senior Preferred Stock
and/or the Junior Preferred Stock owned by such DLJ Entities and their Permitted
Transferees (the "SELLING ENTITIES") at a price equal to 100% of the accreted
value thereof, together with accrued and unpaid cash interest or dividends to
the date of repurchase (the "REPURCHASE PRICE").
SECTION 6.2. Method of Exercising Repurchase Right. (a) To exercise the
Repurchase Right, the Selling Entities shall deliver to the Issuer (i) written
notice of the Selling Entities' exercise of such right, which notice shall set
forth the name of the Selling Entities, the principal amount of the Senior
Preferred Stock and the Junior Preferred Stock, as the case may be, to be
repurchased, and a statement that an election to exercise the Repurchase Right
is being made thereby and (ii) the Senior Preferred Stock and the Junior
Preferred Stock, as the case may be, or, if applicable, certificates evidencing
such Senior Preferred Stock and Junior Preferred Stock, as the case may be, with
respect to which the repurchase right is being exercised, duly endorsed for
transfer to the Issuer.
(b) In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Issuer shall (i) repurchase all Senior Preferred Stock and
Junior Preferred Stock, as the case may be, tendered pursuant to this Section
6.2 and (ii) pay the Repurchase Price to the Selling Entities.
(c) Promptly after consummation of such repurchase, the paying agent shall
mail to each Selling Entity of such Senior Preferred Stock and Junior Preferred
Stock, as the case may be, an amount equal to the purchase price for, plus any
accrued and unpaid interest or dividends on, such Senior Preferred Stock and
Junior Preferred Stock, as the case may be.
SECTION 6.3. Holberg Call. Holberg Incorporated shall have the right, at
any time prior to the expiration of 180 days after the Closing Date, to require
the New DLJ Entities to sell to it 55% of the outstanding Junior Preferred Stock
held by the New DLJ Entities, together with Warrants conferring the right to
acquire 851.84 shares of the Common Stock (or such greater or lesser number of
shares of Common Stock as may be applicable in accordance with the provisions of
Section 8 of the DLJ 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 to be sold 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 (calculated
on a basis substantially consistent with the definition of such term in the DLJ
Warrants) with respect to the Junior Preferred Stock and Warrants so sold equal
to 25%; provided that Holberg's right to require the DLJ Entities to sell such
Securities shall be conditioned upon Holberg delivering to the DLJ Entities a
binding written commitment to purchase such Securities prior to the expiration
of 90 days after the Closing Date. Holberg
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may assign all or a portion its right under this Section 6.3 to Orkla or to any
wholly-owned Subsidiary of Holberg. In any such event, Orkla or such Subsidiary
will be subject, with respect to the Junior Preferred Stock and Warrants so
acquired, to the same restrictions on transfer as are applicable to Holberg in
Section 3.1 mutatis mutandis.
ARTICLE 7.
CERTAIN COVENANTS AND AGREEMENTS
SECTION 7.1. Confidentiality. (a) Each Investor hereby agrees that
Confidential Information (as defined below) furnished and to be furnished to it
was and will be made available in connection with such Investor's investment in
the Issuer. Each Investor agrees that it will not use the Confidential
Information in any way to the competitive disadvantage of the Issuer. Each
Investor further acknowledges and agrees that it will not disclose any
Confidential Information to any Person; provided that Confidential Information
may be disclosed (i) to such Investor's Representatives (as defined below) in
the normal course of the performance of their duties as long as such Investor
Representatives are advised of the confidential nature of such information and
agree to be bound by the provisions hereof, (ii) to the extent required by
applicable law, rule or regulation (including complying with any oral or written
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process to which a Holder is subject)
provided, that in the event that such Investor is so required to disclose any
Confidential Information, such Investor will give the Issuer prompt notice of
such request so that the Issuer may seek an appropriate protective order and if
such Investor is nonetheless so compelled to disclose Confidential Information,
such Investor may disclose such information without liability hereunder, (iii)
to any Person to whom such Investor is contemplating a transfer of its
Securities (provided that such transfer would not be in violation of the
provisions of this Agreement and as long as such potential transferee is advised
of the confidential nature of such information and agrees to be bound by a
confidentiality agreement in form and substance satisfactory to the Issuer and
consistent with the provisions hereof) or (iv) if the prior written consent of
the Board shall have been obtained. Nothing contained herein shall prevent the
use of Confidential Information in connection with the assertion or defense of
any claim by or against the Issuer or any Investor.
(b) "CONFIDENTIAL INFORMATION" means any information concerning the Issuer,
its financial condition, business, operations or prospects (in each case
including the Issuer's Subsidiaries and Affiliates) in the possession of or to
be furnished to any Investor in its capacity as a shareholder or potential
shareholder of the Issuer or by virtue of its present or former right to
designate a director of the Issuer; provided that the term "CONFIDENTIAL
INFORMATION" does not include information which (i) becomes generally available
to the public other than as a result of a disclosure by an Investor or its
partners, directors, officers, employees, agents, counsel, investment advisers
or representatives (all such persons being collectively referred to as
"REPRESENTATIVES") in violation of any of the Transaction Documents, (ii) is or
was available to such Investor on a nonconfidential basis prior to its
disclosure to such Investor or its Representatives by the Issuer, or (iii) was
or becomes available to such Investor on a
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nonconfidential basis from a source other than the Issuer, provided that such
source is or was (at the time of receipt of the relevant information) not, to
the best of such Investor's knowledge, bound by a confidentiality agreement with
(or other confidentiality obligation to) the Issuer or another Person.
SECTION 7.2. Indirect Action; No Inconsistent Agreements. (a) Each party
hereto agrees not to take, or cause or permit to be taken indirectly, any action
which if taken, caused or permitted to be taken by such Person directly would
constitute a violation of this Agreement. None of the Issuer, Holberg, Holberg
Incorporated or NED is presently a party to or will hereafter enter into any
agreement which is inconsistent with the rights granted to the DLJ Entities and
Orkla by this Agreement or any other agreement relating to the Securities to
which the DLJ Entities and/or Orkla are parties or which otherwise conflicts
with the provisions hereof or thereof, or will in the future grant or cause to
be granted to any holder or prospective holder of any Securities, any rights
relating thereto, including, for example, registration rights, which are, in the
aggregate, made available on more favorable terms (including, without
limitation, terms which are more favorable than those set forth in Article 5) to
such holder than those granted to the DLJ Entities and Orkla hereunder and
thereunder, unless the DLJ Entities and Orkla are given all of the benefits of
such favorable terms and consent thereto.
(b) The Issuer agrees to, consistent with other legal obligations and good
business practice, use its good faith efforts to conduct its business and that
of its Subsidiaries in a manner, and to take such other actions as are necessary
or appropriate, to fulfill its obligations under the Certificate of Designation
of the Senior Preferred Stock and the Certificate of Designation of the Junior
Preferred Stock to pay the dividends, principal and liquidation preference on
the Senior Preferred and the Junior Preferred Stock, as the case may be, when
due, in each case, to the extent consistent with the Indenture and the Credit
Agreement (as defined in the Securities Purchase Agreement).
SECTION 7.3. Certain Matters Relating to Orkla Warrants. (a) Holberg agrees
that if there shall, directly or indirectly, be a public offering of stock of,
or any sale of, all or substantially all of the assets, merger or other
reorganization or business combination of, the Issuer (in accordance with the
provisions of Section 2.4, if applicable), it will give reasonable notice
thereof to Orkla and, if so requested by Orkla, take such actions as may be
necessary to allow Orkla to participate in any such transaction on a basis
consistent with its underlying economic interest in the Issuer represented by
the Orkla Warrants and Orkla Warrant Shares, and in any event on a no less
favorable basis than had it held such underlying economic interest directly and
on a pro rata basis with the equivalent economic interests of the DLJ Entities.
The parties hereto agree to cooperate to the extent necessary to achieve such
desired result consistent with the intention reflected in this Section 7.3 to
provide economic benefits to Orkla on a basis consistent with its underlying
economic interest in the Issuer (including the common stock owned by Orkla in
NED and received by Orkla in connection with the formation of NED and the Issuer
in exchange for Orkla's pre-existing interest in AmeriServe) and on a pro rata
basis, with respect to the Orkla Warrants and Orkla Warrant Shares, with the
equivalent interests of the DLJ Entities, it being understood and agreed by the
parties hereto that the rights and benefits under this Agreement and the
Securities owned by the DLJ Entities shall in no event be impaired or
-35-
<PAGE> 39
diminished as a result of any such action pursuant to this Section 7.3, as
compared with the circumstances that would have been in effect had Orkla held
its interest in the Issuer directly rather than indirectly.
(b) The parties hereto agree that, in the event there shall, in accordance
with the terms of the Initial DLJ Warrants, be any adjustment (other than under
Section 8.1 of the Initial DLJ Warrants) in the number of shares of Common Stock
purchasable upon exercise of any of the Initial DLJ Warrants or any other
adjustment thereunder which in any such case results from an action or event
that does not give rise to a corresponding benefit to holders of Common Stock of
the Issuer, 640 of the shares of Common Stock held by NED (as such number of
shares may be adjusted from time to time in respect of any subdivision, split or
combination of the outstanding shares of Common Stock, any capital
reorganization or any reclassification of the capital stock of the Issuer, or
otherwise, including without duplication by operation of this paragraph, and
including any such shares held by any successor in interest to NED) shall be
subject to appropriate adjustment and shall be entitled to appropriate rights as
if such shares were represented by warrants of like tenor to the Initial DLJ
Warrants in such a manner as is consistent with the intent of the parties
hereto, but in no event will such adjustment or entitlement be duplicative of
any benefit previously received by such shares of Common Stock. The shares of
Common Stock to benefit from this paragraph will be designated by NED at the
Closing and will bear an appropriate legend referring to this paragraph to
evidence such fact.
(c) In any case where this Agreement refers to the Other Investors not
permitting any action to be taken, it is understood and agreed that Orkla's
obligations, to the extent it does not control an Other Investor, shall be
limited to acting in good faith to not cause any impermissible action by such
Other Investor and not failing to act when it is capable of taking action.
(d) No repurchase of Securities shall be effected by the Issuer or any
Affiliate thereof unless the DLJ Entities and Orkla shall have been afforded an
opportunity to participate on a pro rata basis.
SECTION 7.4. Dilution of Initial Warrants; Consent to Issuance of Notes.
Each of the Initial DLJ Entities and Orkla agrees and confirms that the Initial
Warrants and Orkla Warrants, as adjusted or modified prior to the date hereof,
will not be subject to adjustment as a result of the Transactions, as such term
is defined in the Securities Purchase Agreement, and, accordingly, will be
subject to dilution as a result of the issuance of DLJ Warrants in connection
with the Transactions, as such term is defined in the Securities Purchase
Agreement. Each of the Initial DLJ Entities and Orkla hereby acknowledge that
the 12.5% Senior Secured Notes of the Issuer issued on January 25, 1996 permit
the issuance of the additional notes and preferred stock of the Issuer and
hereby consent to the issuance of the Notes, the Senior Preferred Stock, the
Junior Preferred Stock and the DLJ Warrants.
-36-
<PAGE> 40
ARTICLE 8.
MISCELLANEOUS
SECTION 8.1. Entire Agreement. The Transaction Documents constitute the
entire agreement between the parties with respect to the subject matter of the
Transaction Documents and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
this Agreement and the other Transaction Documents.
SECTION 8.2. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, shall confer on any Person other than the
parties hereto, and their respective heirs, successors, legal representatives
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
SECTION 8.3. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Issuer or any Investor, except in connection with a transfer
of securities of the Issuer pursuant to the terms hereof; provided that any
Person acquiring Securities who is required by the terms of this Agreement to
become a party hereto shall execute and deliver to the Issuer an agreement to be
bound by this Agreement and shall thenceforth be an "INVESTOR" for purposes of
this Agreement, having such rights and obligations as are consistent with those
rights and obligations applicable to the transfer of such Securities, except as
otherwise provided in this Agreement. Any Investor who ceases to beneficially
own (and no longer have the right to acquire) any securities of the Issuer shall
cease to be bound by the terms hereof (other than Sections 5.6, 5.7, 5.8, 7.1
and 7.2).
SECTION 8.4. Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the party
against whom the waiver is to be effective. No provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by
the Issuer with the approval of the Board and the DLJ Entities (together with
their Permitted Transferees), on the one hand, and Holberg (together with its
Permitted Transferees), on the other hand, so long as to either such group it
holds an equity interest of at least 10% (not giving effect to reductions in
ownership caused other than by a transfer or disposition of such equity
interest) of its investment in the Issuer immediately following the Closing
Date. The percentage set forth above shall be subject to appropriate downward
adjustment in the event of an acquisition of securities by Holberg pursuant to
Section 6.3 hereof or the operation of either of the special adjustments
described in Section 8 of the Initial Warrants or in Section 8 of the DLJ
Warrants.
(b) In addition, any amendment, modification or termination of any
provision of this Agreement that would adversely affect a DLJ Entity or Orkla
may be effected only with the consent of such DLJ Entity or Orkla, respectively.
-37-
<PAGE> 41
SECTION 8.5. Notices. All notices and other communications given or made
pursuant hereto or pursuant to any other agreement among the parties, unless
otherwise specified, shall be in writing and shall be deemed to have been duly
given or made if sent by fax (with confirmation in writing), delivered
personally or sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made upon
receipt:
if to the DLJ Entities, to: DLJ Merchant Banking Funding, Inc.
DLJ Merchant Banking Partners, L.P.
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 Diversified Partners, L.P.
DLJ Diversified Partners-A, L.P.
DLJMB Funding II, Inc.
DLJ FIRST ESC LLC
DLJ EAB Partners, L.P.
DLJ Millennium Partners, L.P.
UK Investment Plan 1997 Partners
277 Park Avenue
New York, New York 10172
Attention: Peter T. Grauer
Fax: (212) 892-7272
and to: DLJ International Partners, C.V.
DLJ Offshore Partners, C.V.
DLJ Offshore Partners II, C.V.
c/o 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.
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 the Issuer, Holberg or NED: Nebco Evans Holding Company
-38-
<PAGE> 42
c/o Holberg Industries, Inc.
545 Steamboat Avenue
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, NY 10019
Attention: Adam O. Emmerich
Fax: (212) 403-2000
if to Orkla, to: Orkla ASA
P.O. 423 Skoyen
Kareslyst alle 6
N-0212 Oslo
Norway
Attention: Tom Vidar Rygh
Fax: 011-47-22-544-595
with a copy to: Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Attention: Kenneth E. Adelsberg
Fax: (212) 858-1500
Any Person who becomes an Investor shall provide its address and fax number
to the Issuer, which shall promptly provide such information to each other
Investor.
SECTION 8.6. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 8.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
SECTION 8.8. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflicts of law rules of such state.
-39-
<PAGE> 43
SECTION 8.9. Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
SECTION 8.10. Consent to Jurisdiction. 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 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 non-exclusive 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 form. 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 8.5 shall be deemed
effective service of process on such party.
SECTION 8.11. Orkla/Holberg Letter Agreement. The parties acknowledge that
Orkla and Holberg have entered into a letter agreement dated January 25, 1996,
relating to certain obligations of Holberg with respect to Orkla's investment
referred to herein and certain related transactions.
-40-
<PAGE> 44
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 A. Schultz
--------------------------------------------------
Name: Elan A. Schultz
Title: Attorney-in-fact
DLJ INTERNATIONAL PARTNERS, C.V.
BY DLJ MERCHANT BANKING, INC., Advisory
General Partner
By: /s/ Elan A. Schultz
--------------------------------------------------
Name: Elan A. Schultz
Title: Attorney-in-fact
DLJ OFFSHORE PARTNERS, C.V.
BY DLJ MERCHANT BANKING, INC., Advisory
General Partner
By: /s/ Elan A. Schultz
--------------------------------------------------
Name: Elan A. Schultz
Title: Attorney-in-fact
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Thomas E. Siegler
--------------------------------------------------
Name: Thomas E. Siegler
Title: Secretary
-41-
<PAGE> 45
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
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
--------------------------------------------------
-42-
<PAGE> 46
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
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
DLJMB FUNDING II, INC.
By: /s/ Peter T. Grauer
--------------------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-fact
DLJ FIRST ESC LLC
-43-
<PAGE> 47
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
DLJ MILLENNIUM PARTNERS, L.P.
BY DLJ MERCHANT BANKING II, INC.,
Managing General Partner
By: /s/ Peter T. Grauer
--------------------------------------------------
Name: Peter T. Grauer
Title: Attorney-in-fact
UK INVESTMENT PLAN 1997 PARTNERS
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 Marshall
--------------------------------------------------
Name: Raymond E. Marshall
Title: President and Treasurer
-44-
<PAGE> 48
NEBCO EVANS DISTRIBUTORS, INC.
By: /s/ Raymond Marshall
--------------------------------------------------
Name: Raymond E. Marshall
Title: President and Assistant Treasurer
HOLBERG INDUSTRIES, INC.
By: /s/ A. Petter 0stberg
--------------------------------------------------
Name: A. Petter 0stberg
Title: Chief Financial Officer and Treasurer
ORKLA ASA
By: /s/ Tom Vidar Rygh
--------------------------------------------------
Name: Tom Vidar Rygh
Title: Managing Director
HOLBERG INCORPORATED
By: /s/ A. Petter 0stberg
--------------------------------------------------
Name: A. Petter 0stberg
Title: Chief Financial Officers and Assistant
Secretary
-45-
<PAGE> 1
Exhibit 10.11
AMENDMENT AGREEMENT
Amendment Agreement dated as of May 29, 1997 among PFS, an unincorporated
division of PepsiCo, Inc., a North Carolina corporation, Pizza Hut, Inc., a
Delaware corporation, Taco Bell Corp., a California corporation, Kentucky Fried
Chicken Corporation, a Delaware corporation, and Kentucky Fried Chicken of
California, Inc., a Delaware corporation.
WHEREAS, the parties hereto are parties to the Sales and Distribution
Agreement dated as of May 6, 1997 (the "Distribution Agreement") pursuant to
which PFS has been appointed as the exclusive distributor of certain food,
supplies and smallwares sold to company owned Pizza Hut, Taco Bell and KFC
Restaurants in the continental United States; and
WHEREAS, the parties hereto desire to amend the Distribution Agreement on
the terms set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
(1) Section 9 of the Distribution Agreement is hereby amended by adding
the following sentence to the end of such Section:
"Notwithstanding anything to the contrary herein, the termination of this
Agreement at the expiration of such term or otherwise shall not operate to
terminate the appointment of PFS as an approved distributor of the Restaurant
Products sold to all Pizza Hut, Taco Bell and KFC restaurants pursuant to
Section 1 hereof."
(2) Other than as specifically set forth herein, the Distribution
Agreement shall remain in full force and effect, without amendment, modification
or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first set forth above.
PFS, a division of PepsiCo, Inc.
By: /s/ Indra K. Nooji
----------------------------
Pizza Hut, Inc.
By: /s/ David Novak
----------------------------
David Novak
President, Chief Executive Officer
<PAGE> 2
Taco Bell Corp.
By: /s/ John Antioco
----------------------------------
John Antioco
President, Chief Executive Officer
Kentucky Fried Chicken Corporation
By: /s/ David Novak
----------------------------------
David Novak
President, Chief Executive Officer
Kentucky Fried Chicken of California, Inc.
By: /s/ David Novak
----------------------------------
David Novak
President, Chief Executive Officer
- 2 -
<PAGE> 1
Exhibit 21
Subsidiaries of Nebco Evans Holding Company
Jurisdiction of
Name of Entity Organization
-------------- ----------------
AmeriServe Food Distribution, Inc. Delaware
AmeriServe of Canada Ltd. Ontario
AmeriServe Funding Corporation Delaware
AmeriServe Transportation, Inc. Nebraska
Chicago Consolidated Corporation Illinois
Delta Transportation, Ltd. Wisconsin
Northland Transportation Services, Inc. Nebraska
PFS de Mexico, S.A. de C.V. Mexico
Servicios AmeriServe S.A. de C.V. Mexico
Steamboat Acquisition Corp. Delaware
Holberg Warehouse Properties, Inc. (55%) Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NEBCO EVANS HOLDING COMPANY FOR THE YEAR
ENDED DECEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> DEC-27-1997
<CASH> 231,450
<SECURITIES> 0
<RECEIVABLES> 43,625
<ALLOWANCES> 15,566
<INVENTORY> 150,148
<CURRENT-ASSETS> 593,965
<PP&E> 169,614
<DEPRECIATION> 27,476
<TOTAL-ASSETS> 1,478,790
<CURRENT-LIABILITIES> 451,949
<BONDS> 943,609
0
133,355
<COMMON> 0
<OTHER-SE> 4,889
<TOTAL-LIABILITY-AND-EQUITY> 1,478,790
<SALES> 3,508,332
<TOTAL-REVENUES> 3,508,332
<CGS> 3,159,357
<TOTAL-COSTS> 3,159,357
<OTHER-EXPENSES> 365,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,016
<INCOME-PRETAX> (70,124)
<INCOME-TAX> 1,030
<INCOME-CONTINUING> (71,154)
<DISCONTINUED> 0
<EXTRAORDINARY> 15,935
<CHANGES> 0
<NET-INCOME> (87,089)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
