<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1998
REGISTRATION NO. 333-
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- - - - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
EAGLE FAMILY FOODS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6719 13-398-3598
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
---------------
EAGLE FAMILY FOODS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2099 13-398-2757
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
---------------
220 WHITE PLAINS ROAD, TARRYTOWN, NEW YORK 10591, (914) 631-3100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JONATHAN F. RICH, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
EAGLE FAMILY FOODS HOLDINGS, INC.
EAGLE FAMILY FOODS, INC.
220 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591
(914) 631-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
WITH A COPY TO:
STEVEN J. GARTNER, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO AMOUNT TO BE OFFERING OFFERING REGISTRATION
BE REGISTERED REGISTERED PRICE(1) PRICE FEE
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<S> <C> <C> <C> <C>
8 3/4% Senior Subordinated
Notes Due 2008............... $115,000,000 100% $115,000,000 $33,925
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 16, 1998
PROSPECTUS
EAGLE FAMILY FOODS, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 8 3/4% SERIES B SENIOR
SUBORDINATED NOTES DUE 2008 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008
-----------
Eagle Family Foods, Inc., a Delaware corporation (the "Company" or "Eagle
Family Foods") and wholly-owned subsidiary of Eagle Family Foods Holdings,
Inc., a Delaware corporation ("Holdings", and together with the Company, the
"Registrants"), hereby offers to exchange (the "Exchange Offer") up to
$115,000,000 in aggregate principal amount of its 8 3/4% Series B Senior
Subordinated Notes Due 2008 (the "Exchange Notes") for up to $115,000,000 in
aggregate principal amount of its outstanding 8 3/4% Senior Subordinated Notes
Due 2008 issued in reliance upon an exemption from registration under the
Securities Act of 1933, as amended (the "Original Notes" and, together with the
Exchange Notes, the "Notes").
Upon consummation of the Exchange Offer, the terms of the Exchange Notes will
be substantially identical in all respects (including principal amount,
interest rate, maturity and ranking) to the terms of the Original Notes for
which they may be exchanged pursuant to the Exchange Offer, except that (i) the
Exchange Notes will be freely transferable by holders thereof (except as
provided below) and (ii) the Exchange Notes will be issued without any covenant
of the Registrants regarding registration. The Exchange Notes will be issued
under the indenture governing the Original Notes. The Exchange Notes will be
general unsecured obligations of the Company and will be subordinated in right
of payment to all existing and future Senior Indebtedness (as defined) of the
Company. The Exchange Notes will rank pari passu in right of payment with any
future Senior Subordinated Indebtedness (as defined) of the Company and will
rank senior in right of payment to all other subordinated indebtedness of the
Company. The Exchange Notes will be unconditionally guaranteed on a senior
subordinated and unsecured basis by Holdings (the "Guarantor"). On the date of
the issuance of the Exchange Notes, the Company will not have any subsidiaries,
however, the Indenture governing the Exchange Notes will permit the Company to
create, acquire or capitalize subsidiaries in the future and will require that
the Exchange Notes be guaranteed by all future Domestic Subsidiaries (as
defined) other than Intellectual Property Subsidiaries (as defined) that are
not wholly owned by the Company. The Indenture permits the Company to incur
additional indebtedness, including Senior Indebtedness, subject to certain
restrictions. See "Description of Notes." As of March 31, 1998, the Company had
$201.25 million of outstanding Senior Indebtedness. Upon a Change of Control
(as defined), each holder of the Notes will have the right to require the
Company to repurchase all or a portion of such holder's Notes then outstanding
at a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase. The Company's ability
to repurchase the Notes may be limited by, among other things, the Company's
financial resources at the time of repurchase. For a complete description of
the terms of the Exchange Notes, including provisions relating to the ability
of the Registrants to create indebtedness that is senior or pari passu to the
Exchange Notes, see "Description of Notes." There will be no cash proceeds to
the Registrants from the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
The Original Notes were originally issued and sold on January 23, 1998 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided pursuant to Rule
144A under the Securities Act and Regulation S under the Securities Act (the
"Initial Offering"). Accordingly, the Original Notes may not be reoffered,
resold or otherwise pledged, hypothecated or transferred in the United States
unless so registered or unless
<PAGE>
(Continued from front cover page)
an applicable exemption from the registration requirements of the Securities
Act is available. Based upon interpretations by the Staff (the "Staff") of the
Securities and Exchange Commission (the "Commission") issued to third parties,
the Registrants believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder
which is (i) an "affiliate" of the Registrants within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Original Notes
directly from the Registrants or (iii) a broker-dealer who acquired Original
Notes as a result of market making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes. Each broker-
dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company and Holdings have
agreed that, for a period not to exceed 180 days after the Expiration Date (as
defined), the Company will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution." Any
holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
The Original Notes and the Exchange Notes constitute new issues of
securities with no established trading market. Any Original Notes not tendered
and accepted in the Exchange Offer will remain outstanding. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Original Notes could
be adversely affected. Following consummation of the Exchange Offer, the
holders of Original Notes will continue to be subject to the existing
restrictions on transfer thereof and the Registrants will have no further
obligation to such holders to provide for the registration under the
Securities Act of the Original Notes except under certain limited
circumstances. (See "Original Notes Registration Rights.") No assurance can be
given as to the liquidity of the trading market for either the Original Notes
or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless extended (the
"Expiration Date"). The date of acceptance for exchange of the Original Notes
(the "Exchange Date") will be the first business day following the Expiration
Date, upon surrender of the Original Notes. Original Notes tendered pursuant
to the Exchange Offer may be withdrawn at any time prior to the Expiration
Date; otherwise such tenders are irrevocable.
----------------
SEE "RISK FACTORS" ON PAGE 14 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1998
<PAGE>
AVAILABLE INFORMATION
The Registrants have filed with the Commission, a Registration Statement on
Form S-4 (the "Registration Statement," which term shall include all
amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration
Statement are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
Neither of the Registrants is currently subject to the periodic reporting
and other informational requirements of the Exchange Act. Pursuant to the
Indenture, the Registrants will file with the Commission and provide to the
holders of the Notes annual reports and the information documents and other
reports which are specified in Section 13 and 15(d) of the Exchange Act.
Periodic reports and other information filed by the Registrants with the
Commission may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
or at its regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center,
Suite 1300, New York, New York 10048. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding companies that file electronically with the Commission. The address
of such site is http://www.sec.gov. Copies of such materials as well as copies
of any documents incorporated by reference herein can also be obtained from
the Registrants upon request. Any such request should be directed to the
Secretary of the Registrants at 220 White Plains Road, Tarrytown, New York
10591, telephone number (914) 631-3100.
The Registrants' obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record
by fewer than 300 holders at the beginning of any fiscal year of the Company,
other than the fiscal year in which the Exchange Offer Registration Statement
(as defined) or any Shelf Registration Statement (as defined) becomes
effective. The Registrants have agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any of
the Notes remain outstanding, it will furnish to the holders of the Notes and
submit to the Commission (unless the Commission will not accept such
materials) (i) all quarterly and annual financial information that would be
required to be contained in filings with the Commission on Forms 10-Q and 10-K
if the Registrants were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Result of Operations" and,
with respect to the annual information only, a report thereon by the
Registrants' certified independent accountants, and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the
Registrants were required to file such reports. In addition, for so long as
any of the Notes remain outstanding, the Registrants have agreed to make
available upon request to any prospective purchaser of, or beneficial owner of
Notes in connection with any offer or sale thereof, the information required
by Rule 144A(d)(4) under the Securities Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR HOLDINGS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATIONS THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE REGISTRANTS SINCE THE DATE HEREOF.
----------------
The Company's registered trademarks include: Eagle(R); Eagle Brand, the
Dessert Maker(R); ReaLemon(R); ReaLime(R); Cremora(R); and None Such(R).
In addition, the Company is licensed to use a number of other registered
trademarks, including Borden(R); Elsie(R); and Elsie Design(R), on certain of
the Company's products. See "The Acquisition" and "Business--Trademarks,
Copyrights and Patents."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 1
RISK FACTORS.............................................................. 14
Consequences of Failure to Exchange..................................... 14
Significant Leverage and Debt Service................................... 14
Subordination of Notes.................................................. 15
Restrictive Financial Covenants......................................... 16
Risks Relating to the Acquisition....................................... 16
Dependence on Key Personnel............................................. 17
Seasonality............................................................. 17
Competition............................................................. 17
Implementation of Business Strategy..................................... 18
Raw Materials........................................................... 18
Control of the Company.................................................. 18
Potential Inability to Fund a Change of Control Offer................... 18
Impact of Governmental Regulation....................................... 18
Compliance with Environmental Regulations............................... 19
General Risks of Food Industry.......................................... 19
Future Holding Company Structure........................................ 19
Guarantees of the Notes................................................. 20
Fraudulent Conveyance Statutes.......................................... 20
Absence of Public Market................................................ 21
THE ACQUISITION........................................................... 22
USE OF PROCEEDS........................................................... 24
CAPITALIZATION............................................................ 24
THE EXCHANGE OFFER........................................................ 25
Purpose of the Exchange Offer........................................... 25
Terms of the Exchange................................................... 25
Expiration Date; Extensions; Termination; Amendments.................... 26
How to Tender........................................................... 26
Terms and Conditions of the Letter of Transmittal....................... 28
Withdrawal Rights....................................................... 29
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes... 29
Conditions to the Exchange Offer........................................ 29
Exchange Agent.......................................................... 30
Solicitation of Tenders; Expenses....................................... 30
Appraisal Rights........................................................ 31
Federal Income Tax Consequences......................................... 31
Other................................................................... 31
SELECTED FINANCIAL DATA................................................... 32
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT................ 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 36
BUSINESS.................................................................. 40
Overview................................................................ 40
Competitive Strengths................................................... 41
Industry Overview....................................................... 42
Business Strategy....................................................... 42
Products and Markets.................................................... 44
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Marketing, Sales and Distribution....................................... 46
Production and Facilities............................................... 46
Raw Materials and Suppliers............................................. 46
Competition............................................................. 47
Trademarks, Copyrights and Patents...................................... 47
Management Information Systems Initiatives.............................. 47
Employees............................................................... 48
Insurance............................................................... 48
Certain Legal and Regulatory Matters.................................... 48
MANAGEMENT................................................................ 50
Directors and Executive Officers........................................ 50
Employment Agreements................................................... 53
1998 Stock Plan......................................................... 53
SECURITY OWNERSHIP........................................................ 55
CERTAIN TRANSACTIONS...................................................... 58
DESCRIPTION OF SENIOR CREDIT FACILITIES................................... 59
DESCRIPTION OF NOTES...................................................... 61
General................................................................. 61
Principal, Maturity and Interest........................................ 61
Guarantees of the Notes................................................. 62
Subordination........................................................... 62
Subordination of Guarantees; Release of Domestic Subsidiary Guarantees.. 63
Optional Redemption..................................................... 64
Mandatory Redemption.................................................... 65
Repurchase at the Option of Holders of Notes............................ 65
Certain Covenants....................................................... 69
Events of Default and Remedies.......................................... 76
No Personal Liability of Directors, Officers, Employees and
Stockholders........................................................... 77
Legal Defeasance and Covenant Defeasance................................ 77
Transfer and Exchange................................................... 79
Amendment, Supplement and Waiver........................................ 79
Payments for Consent.................................................... 79
Concerning the Trustee.................................................. 80
Certain Definitions..................................................... 80
BOOK ENTRY; DELIVERY AND FORM............................................. 97
ORIGINAL NOTES REGISTRATION RIGHTS........................................ 102
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.............................. 105
PLAN OF DISTRIBUTION...................................................... 107
LEGAL MATTERS............................................................. 108
EXPERTS................................................................... 108
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
(ii)
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the notes thereto, appearing elsewhere in this Prospectus. As used in this
Prospectus, unless the context otherwise requires, all references herein to (i)
the "Company" mean (a) the business related to Eagle Brand, ReaLemon, Cremora,
None Such, Borden Egg Nog and Kava brands (the "BBNA Business") acquired by
Eagle Family Foods for periods prior to the purchase of certain assets of
Borden Foods Corporation ("BFC") and BFC Investments, L.P. ("BFC Investments")
(the "Acquisition") and (b) Eagle Family Foods following the completion of the
Acquisition and the Financing Transactions (as defined) (the "Transactions")
and (ii) "Holdings" mean Eagle Family Foods Holdings, Inc. Holdings is a
holding company that will not engage in any business other than holding the
capital stock of the Company. The Transactions were consummated on January 23,
1998. Except as otherwise indicated, (i) all references to market, category and
segment sales, distribution percentages, market share percentages and market
positions reflect the dollar market share for the 52-week period ended
September 14, 1997 for None Such and November 9, 1997 for all other products,
as gathered by Information Resources, Inc. projected from a sample of grocery
stores in the United States based on categories defined by the Company, (ii)
all references to brand awareness reflect female adult brand awareness data
gathered by Opinion Research Corporation International in 1996 for Eagle Brand
and Cremora and in 1995 for ReaLemon and (iii) all references to the Company's
sales refer to net sales.
THE COMPANY
The Company manufactures and markets a portfolio of leading dry-grocery food
products with widely recognized and established brands, including Eagle Brand,
ReaLemon and Cremora. In their defined markets within the United States, three
of the Company's six principal brands maintain the number one position, two
brands are the only products available and one brand holds the number two
position. The Company's leading market positions and well recognized brand
names have enabled the Company to consistently generate strong cash flow. For
the year ended December 31, 1997, the Company's sales were $229.3 million, and
the Company's pro forma EBITDA (as defined) was $50.2 million.
The Company's three largest product lines, Eagle Brand, ReaLemon and Cremora,
accounted for approximately 94% of the Company's 1997 sales. Eagle Brand and
the Company's other sweetened condensed milk products are collectively the
market leader in the U.S. sweetened condensed milk category, and account for a
72% share of this category. Sweetened condensed milk is a commonly used
ingredient in many popular dessert recipes such as cheesecake and pumpkin pie.
Eagle Brand is one of a small number of U.S. branded products with a heritage
that extends over 140 years. In 1997, the Company's sweetened condensed milk
products accounted for 48% of the Company's sales. The Company's ReaLemon
product lines are the market leaders in the lemon and lime juice category,
accounting for a 49% market share, and are the only nationally distributed
branded products in the category. ReaLemon, a convenient and cost effective
alternative to fresh squeezed lemon juice, is a popular ingredient in beverages
and marinades and is used in the preparation of foods such as poultry and fish.
In 1997, the ReaLemon product lines accounted for 25% of the Company's sales.
Cremora is the number two branded powdered non-dairy creamer in the U.S.,
accounting for an 11% market share. Powdered non-dairy creamer is used in
coffee and other hot beverages. In 1997, the Company's powdered non-dairy
creamer product lines accounted for 21% of the Company's sales. The Company's
other three brands accounted for 6% of the Company's 1997 sales and include
None Such, the leading brand of mincemeat pie filling with a 69%
1
<PAGE>
market share, Borden Egg Nog, the only shelf-stable egg nog, and Kava, the only
acid-neutralized coffee.
COMPETITIVE STRENGTHS
The following competitive strengths serve as the foundation for the Company's
business strategy:
. LEADING MARKET POSITIONS. In the United States, five of the Company's six
brands are the category leaders in their defined markets, while Cremora
maintains the number two position in its category. Eagle Brand faces
limited branded competition and ReaLemon, the only national branded
product in its category, faces competition primarily from private label
products. The Company believes that its strong market shares enable it to
achieve superior distribution and shelf space allocation, realize
economies of scale in trade promotion and advertising, and provide a
strong platform for introducing product line extensions and new products.
MARKET POSITION OF THE COMPANY'S PRODUCT LINES
<TABLE>
<CAPTION>
COMPANY NUMBER TWO
MARKET SHARE BRANDED
COMPANY'S ------------------- COMPETITOR'S
PRODUCT LINE PRINCIPAL BRANDS POSITION PERCENTAGE PERCENTAGE
------------ ---------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Sweetened condensed milk Eagle Brand 1 72% 10%
Lemon & lime juice ReaLemon and ReaLime 1 49% 8%
Non-dairy creamer Cremora 2 11% NA
Shelf-stable egg nog Borden Egg Nog 1 100% 0%
Mincemeat pie filling None Such 1 69% 18%
Acid-neutralized coffee Kava 1 100% 0%
</TABLE>
. STRONG BRAND NAME RECOGNITION. The leading market positions of the
Company's largest products are supported by strong brand awareness. Eagle
Brand, ReaLemon and Cremora maintain brand awareness rates of 78%, 85%
and 73%, respectively, primarily due to the heritage of these brands.
Eagle Brand, the Company's oldest brand, was introduced 141 years ago.
ReaLemon has been a staple in American homes for over 60 years, while
Cremora has been marketed for over 35 years. In addition to their long
histories, Eagle Brand and ReaLemon are listed as key ingredients in a
number of widely disseminated classic American recipes. The brand equity
of the Company's products will represent a significant competitive
strength as the Company launches product line extensions and seeks to
build category growth.
. EXTENSIVE SALES AND DISTRIBUTION BASE. The Company maintains an
established national distribution base for its products, which are sold
to retail grocery stores and other channels directly and through a
comprehensive network of over 60 independent food brokers. Eagle Brand
and ReaLemon benefit from 100% national distribution, while Cremora
maintains broad distribution at 79%. Eagle Brand and ReaLemon are
particularly successful in securing shelf-space as consumers typically
purchase these products as part of a larger basket of ingredients,
resulting in greater sales for retailers.
. STRONG OPERATING MARGINS AND ANNUAL CASH FLOW. The Company has strong
operating margins and annual cash flow. For the year ended December 31,
1997, the Company's pro forma gross profit margin was 53.9% while the pro
forma EBITDA margin was 21.9%. The Company believes that its strong
margins result from the established brand equity of its product
portfolio, product quality and the strength of its sales and distribution
network. Management believes that, within the food manufacturing
industry, the Company has relatively low maintenance capital expenditure
requirements which support the Company's strong cash
2
<PAGE>
flow. The Company's strong operating margins and annual cash flow provide
it with financial resources to fund its marketing, sales, distribution and
new product development efforts.
. EXPERIENCED AND FOCUSED MANAGEMENT. The Company's new senior management
team, which assumed control of the Company upon the consummation of the
Acquisition, possesses considerable experience in the food products
industry. The Company's Chief Executive Officer and President, John O'C.
Nugent, has 30 years of consumer products experience. In the past ten
years, he has held general manager positions with Unilever's food
operations, both in the United States and the United Kingdom, and was
most recently President of Johnson & Johnson Consumer Products, Inc.
William A. Lynch, the Company's Chairman and Chief Operating Officer, has
25 years of experience in the consumer packaged goods industry, including
senior marketing positions at Borden, Inc. for all of the Company's six
brands, new products and their related food broker system. During the
past ten years, Mr. Lynch founded and operated a number of successful
entrepreneurial ventures. The new senior management team invested
approximately $1.7 million in the equity of Holdings. In addition to
management's purchase of an equity interest in Holdings, Holdings has
better aligned the Company's new senior management team's incentives with
the success of the Company through the issuance of restricted stock and
the adoption of other incentive initiatives.
RECENT HISTORY
Borden, Inc. was incorporated in 1899 and has engaged in the manufacture and
distribution of a broad range of products including dairy products, industrial
chemicals, decorative products and a wide variety of food products. In December
1994, investors led by affiliates of Kohlberg Kravis Roberts & Co. ("KKR")
agreed to acquire all of the common stock of Borden, Inc. (the "KKR
Acquisition"). Since the closing of the KKR Acquisition in 1995, BFC has
initiated a redesign of the BBNA Business. Between January 1, 1995 and December
31, 1997, BFC (i) invested approximately $14.6 million in market research and
technical research and development, (ii) rationalized product lines, (iii)
improved trade practices, and (iv) developed and tested new products which the
Company will seek to launch in the marketplace.
Management believes that the recent initiatives and investments undertaken by
BFC have positioned the Company favorably for future growth and profitability.
In addition, management believes that, notwithstanding BFC's efforts described
above, former management was principally focused on building Borden, Inc.'s
larger pasta and salty snack businesses, thereby resulting in the
undermarketing of the BBNA Business product lines. As a result, management
believes the products and operations acquired by the Company present
opportunities for sales growth and improved cost management. Management intends
to increase and to redirect marketing expenditures in order to strengthen brand
equity and to grow sales. Furthermore, management intends to launch line
extensions and new products which capitalize on prior investments in market
research, technical research and new product development, thereby realizing the
full potential of the Company's existing product lines as well as penetrating
new categories.
BUSINESS STRATEGY
The Company's goal is to increase its sales and profitability through the
following initiatives:
. GROW BASE BUSINESS.
Increase Consumer Marketing. The Company plans to increase marketing
expenditures on its existing brands to reverse a decline in marketing
expenditures that occurred between 1995 and 1997. The marketing strategies
will be redirected to emphasize consumer "pull" tactics, such
3
<PAGE>
as advertising and consumer promotions, to enhance brand equity and
generate sales across the Company's product lines. Marketing will be
directed primarily toward building category growth and, to a lesser
extent, gaining market share.
Expand into New Distribution Channels. Industry data indicates that in the
last several years non-grocery distribution channels, such as food service
channels, mass merchandise retailers and super centers, have grown faster
than traditional grocery distribution channels. Management intends to
capitalize on this growth opportunity by establishing a dedicated sales
staff and expanding its broker network to focus on these alternative
distribution channels.
Target Ethnic Markets. Management believes that growth opportunities for
Eagle Brand exist in the Hispanic-American and Asian-American communities
and that consumption levels of sweetened condensed milk among these
communities are significantly higher than the national average. Management
plans to implement marketing efforts specifically targeted at increasing
brand awareness and usage in the Hispanic-American and Asian-American
communities.
. LAUNCH LINE EXTENSIONS AND NEW PRODUCTS. The Company intends to launch
line extensions and new products in order to capitalize on the $14.6
million invested by BFC in market research and technical research and
development from 1995 to 1997, as well as on the substantial brand equity
and consumer awareness of the Company's existing products. The Company
continues to consumer test several new products and expects to begin
rolling them out during 1998 and 1999. These initiatives will build on
several recent line extensions. For example, the Company in 1994 and 1995
extended its Eagle Brand line to include a range of fat-free and low-fat
sweetened condensed milk products which generated approximately
$14.0 million in sales in 1997. In 1997 a chocolate flavored sweetened
condensed milk product was launched and the Company will use consumer-
generated information, as well as product research, to optimize the
presentation and positioning of this new product. The Company also
intends to license certain of its widely recognized brand names to third
parties.
. TARGET INTERNATIONAL MARKETS. The Company intends to expand into new
international markets by leveraging the strength of its existing brands.
The Company will specifically target distribution of Eagle Brand in Latin
American markets where management believes that consumption of sweetened
condensed milk is significantly higher than average U.S. per capita
consumption. In 1997, only 1% the Company's sales were generated outside
of the U.S. and Canada.
. PURSUE STRATEGIC ACQUISITIONS. The Company intends to pursue strategic
acquisitions of additional dry-grocery food brands with leading market
positions and significant growth opportunities. Given that four of the
Company's six principal brands are used in the preparation of desserts,
one area of acquisition focus will be on brands in the dessert segment.
By adding new brands through strategic acquisitions, the Company believes
it can achieve synergies in manufacturing, marketing and distribution
across a growing portfolio of leading food brands.
4
<PAGE>
THE ACQUISITION
Pursuant to an Asset Purchase Agreement dated as of November 24, 1997, as
amended as of December 9, 1997 and January 15, 1998 (the "Asset Purchase
Agreement"), Eagle Family Foods acquired certain assets of BFC, BFC Investments
and certain of their affiliates for an aggregate purchase price of $376.5
million, subject to certain post-closing adjustments. The Acquisition was
consummated on January 23, 1998 (the "Acquisition Closing"). The assets
acquired by the Company include, among other things: (i) four manufacturing
facilities located in Wellsboro, Pennsylvania; Starkville, Mississippi;
Waterloo, New York; and Chester, South Carolina; (ii) all machinery and
equipment located at these facilities; (iii) the trademarks Eagle; Eagle Brand,
the Dessert Maker; ReaLemon; ReaLime; Cremora; Kava; None Such and certain
other trademarks in North America and in certain foreign territories; and (iv)
a non-compete and non-solicitation agreement from BFC and certain of its
affiliates. The Asset Purchase Agreement provided that BFC retained
receivables, trade payables and certain accrued liabilities related to the
operation of the BBNA Business. See "The Acquisition."
Financing for the Acquisition and related fees and expenses consisted of (i)
the $82.5 million equity contribution from Holdings (which was financed by
Holdings' issuance of preferred and common stock in that amount to GE
Investment Private Placement Partners II, a Limited Partnership ("GEI") and
Warburg, Pincus Ventures, L.P. ("Warburg" and together with GEI, the "Equity
Sponsors"), and certain members of the Company's management, including William
A. Lynch and John O'C. Nugent (the "Management Investors"), who contributed
approximately $1.7 million of such amount) (the "Equity Contribution"); (ii)
$115.0 million of Original Notes issued pursuant to the Initial Offering; and
(iii) senior secured credit facilities (the "Senior Credit Facilities") in an
aggregate principal amount of $245.0 million, consisting of a $175.0 million
term loan facility (the "Term Loan Facility") and a $70.0 million revolving
credit facility (the "Revolving Credit Facility"), under which $16.5 million
was drawn at the time of the Acquisition Closing. The Senior Credit Facilities,
the Offering and the Equity Contribution are referred to herein as the
"Financing Transactions".
The following table sets forth the sources and uses of funds at the
consummation of the Transactions:
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
SOURCES:
Senior Credit Facilities:
Revolving Credit Facility(/1/)......................... $ 16,500
Term Loan Facility..................................... 175,000
The Notes................................................ 115,000
Equity Contribution...................................... 82,500
--------
Total sources........................................ $389,000
========
USES:
Purchase price........................................... $376,500
Fees and expenses(/2/)................................... 11,767
Cash remaining with the Company.......................... 733
--------
Total uses........................................... $389,000
========
</TABLE>
- - - - --------
(1) Consists of a $70.0 million Revolving Credit Facility, under which the
Company had $16.5 million outstanding upon the Acquisition Closing. See
"Description of Senior Credit Facilities."
(2) Fees and expenses including amounts accrued.
5
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer........ The Company is offering to exchange (the "Exchange
Offer") up to $115,000,000 aggregate principal
amount of 8 3/4% Series B Senior Subordinated Notes
due 2008 (the "Exchange Notes") for up to
$115,000,000 aggregate principal amount of its
outstanding 8 3/4% Senior Subordinated Notes due
2008 (the "Original Notes"). Upon consummation of
the Exchange Offer, the terms of the Exchange Notes
will be substantially identical in all respects
(including principal amount, interest rate,
maturity and ranking) to the terms of the Original
Notes for which they may be exchanged pursuant to
the Exchange Offer, except that (i) the Exchange
Notes will be freely transferable by holders
thereof except as provided herein (see "The
Exchange Offer--Terms of the Exchange" and "--Terms
and Conditions of the Letter of Transmittal") and
(ii) the Exchange Notes will be issued without any
covenant regarding registration under the
Securities Act.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the
Registrants within the meaning of Rule 405 under
the Securities Act, (ii) a broker-dealer who
acquired Original Notes directly from the
Registrants or (iii) broker-dealers who acquired
Original Notes as a result of market making or
other trading activities) without compliance with
the registration and prospectus delivery provisions
of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, and have no
arrangement or understanding with any person to
participate in, a distribution of such Exchange
Notes.
Minimum Condition......... The Exchange Offer is not conditioned upon any min-
imum aggregate principal amount of Original Notes
being tendered for exchange.
Expiration Date...........
The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 unless extended
(the "Expiration Date").
Exchange Date............. The first date of acceptance for exchange for the
Original Notes will be the first business day fol-
lowing the Expiration Date.
Conditions to the
Exchange Offer............ The obligation of the Registrants to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer--Conditions to the Exchange
Offer." The Registrants reserve the right to termi-
nate or amend the Exchange Offer at any time prior
to the Expiration Date upon the occurrence of any
such condition.
6
<PAGE>
Withdrawal Rights......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as prac-
ticable after the expiration or termination of the
Exchange Offer.
Procedures for Tendering
Original Notes............ See "The Exchange Offer--How to Tender."
Federal Income Tax
Consequences.............. The exchange of Original Notes for Exchange Notes
by holders will not be a taxable exchange for fed-
eral income tax purposes, and holders should not
recognize any taxable gain or loss or any interest
income as a result of such exchange.
Effect on Holders of
Original Notes............ As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Original Notes pursuant to the terms of
this Exchange Offer, the Registrants will have ful-
filled a covenant contained in the terms of the
Original Notes and the Exchange and Registration
Rights Agreement (the "Registration Rights Agree-
ment") dated January 23, 1998 between the Regis-
trants and Chase Securities Inc. and Merrill Lynch
Pierce, Fenner & Smith Incorporated, as initial
purchasers, and, accordingly, the holders of the
Original Notes will have no further registration or
other rights under the Registration Rights Agree-
ment, except under certain limited circumstances.
See "Original Notes Registration Rights". Holders
of the Original Notes who do not tender their Orig-
inal Notes in the Exchange Offer will continue to
hold such Original Notes and will be entitled to
all the rights and limitations applicable thereto
under the Indenture, dated as of January 23, 1998,
among the Company, Holdings, as guarantor, and IBJ
Schroder Bank & Trust Company, as Trustee (the
"Trustee"), relating to the Original Notes and the
Exchange Notes (the "Indenture"). All untendered,
and tendered but unaccepted, Original Notes will
continue to be subject to the restrictions on
transfer provided for in the Original Notes and the
Indenture. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes,
could be adversely affected. See "Risk Factors--
Consequences of Failure to Exchange."
TERMS OF THE NOTES
The Exchange Offer applies to $115,000,000 aggregate principal amount of the
Original Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes for which they may be exchanged except
that the Exchange Notes have been registered under the Securities Act and,
therefor, will not bear legends restricting the transfer thereof. The Exchange
Notes will evidence the same debt as the Original Notes and will be entitled to
the benefits of the Indenture. See "Description of Notes."
7
<PAGE>
Maturity.................. January 15, 2008.
Interest Payment Dates.... January 15 and July 15 of each year, commencing on
July 15, 1998.
Sinking Fund.............. None.
Optional Redemption....... Except as described below, the Company may not re-
deem the Notes prior to January 15, 2003. On or af-
ter such date, the Company may redeem the Notes, in
whole or in part, at the redemption prices set
forth herein, together with accrued and unpaid in-
terest, if any, to the date of redemption. In addi-
tion, at any time on or prior to January 15, 2002,
the Company may, subject to certain requirements,
redeem up to 35% of the original aggregate princi-
pal amount of the Notes (calculated giving effect
to any issuance of Additional Notes) with the Net
Cash Proceeds of one or more Public Equity Offer-
ings by the Company or Holdings, at a price equal
to 108.75% of the principal amount to be redeemed,
together with accrued and unpaid interest, if any,
to the date of redemption, provided that at least
65% of the original aggregate principal amount of
the Notes (as so calculated) remains outstanding
immediately after each such redemption. See "De-
scription of Notes--Optional Redemption."
Change of Control......... Upon the occurrence of a Change of Control, each
holder of Notes will have the right to require the
Company to make an offer to repurchase such hold-
er's Notes at a price equal to 101% of principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. See
"Description of Notes--Repurchase at the Option of
Holders of Notes--Change of Control."
Guarantees................ The Notes are unconditionally guaranteed on a se-
nior subordinated and unsecured basis (the "Guaran-
tees") by Holdings and each future Domestic Subsid-
iary other than any Intellectual Property Subsidi-
ary that is not wholly owned by the Company (col-
lectively, the "Guarantors"). Each Guarantee is a
general obligation of the applicable Guarantor and
is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full in
cash of all Senior Indebtedness of such Guarantor.
See "Description of Notes--Guarantees of the Notes"
and "--Certain Covenants--Future Note Guarantors."
Ranking................... The Notes are unsecured and are subordinated in
right of payment to all existing and future Senior
Indebtedness of the Company. The Notes rank pari
passu in right of payment with all existing and fu-
ture Senior Subordinated Indebtedness of the Com-
pany and rank senior in right of payment to all
other subordinated indebtedness of the Company. Af-
ter giving effect to the
8
<PAGE>
Transactions, including the application of the net
proceeds from the Initial Offering, the Company has
outstanding approximately $191.5 million aggregate
principal amount of Senior Indebtedness (exclusive
of unused commitments), all of which is Secured In-
debtedness, and the Company has no Senior Subordi-
nated Indebtedness outstanding other than the Notes
and no indebtedness that is subordinate or junior
in right of payment to the indebtedness represented
by the Notes. See "Description of Notes--Subordina-
tion," "Capitalization" and "The Acquisition."
Restrictive Covenants..... The Indenture restricts (i) the incurrence of addi-
tional Indebtedness (as defined) by the Company and
its subsidiaries, (ii) the payment of dividends or
distributions on, and redemption of, capital stock
of the Company and its subsidiaries and the redemp-
tion of certain subordinated obligations of the
Company and its subsidiaries, (iii) certain other
restricted payments, including, without limitation,
investments, (iv) sales of assets, (v) the creation
of liens, (vi) sale and leaseback transactions,
(vii) the sale or issuance of capital stock of sub-
sidiaries of the Company, (viii) mergers, consoli-
dations and sales of all or substantially all of
the assets of the Company and (ix) certain transac-
tions with affiliates. The Indenture also prohibits
certain restrictions on distributions from subsidi-
aries of the Company. However, all of these limita-
tions and prohibitions are subject to a number of
important qualifications and exceptions. In addi-
tion, a subsidiary of the Company may, under cer-
tain circumstances, be deemed to be an Unrestricted
Subsidiary (as defined) and, as an Unrestricted
Subsidiary, such subsidiary would not be subject to
the restrictions and prohibitions contained in the
Indenture. See "Description of Notes--Certain Cove-
nants" and "--Repurchase at the Option of Holders
of Notes--Asset Sales."
Exchange Offer and
Registration Rights...... The Company and Holdings agreed to file with the
Securities and Exchange Commission (the "Commis-
sion") on or prior to 90 days after the date of
original issuance of the Original Notes (the "Issue
Date"), a registration statement with respect to
the Exchange Offer for a series of Exchange Notes
and use their reasonable best efforts to consummate
such Exchange Offer on or prior to 180 days after
the original issuance of the Notes. Such Exchange
Notes will bear the rate of interest specified on
the cover page hereof for the Original Notes. If
the Company does not comply with certain covenants
set forth in the Exchange and Registration Rights
Agreement, the Company will be obligated to pay
certain liquidated damages to the holders of the
Original Notes. See "Exchange and Registration
Rights Agreement."
9
<PAGE>
Transfer Restrictions;
Absence of a Public
Market for the Original
Notes.................... The Original Notes have not been registered under
the Securities Act of 1933, as amended (the "Secu-
rities Act"), and are subject to restrictions on
transferability and resale. The Original Notes are
new securities and there is currently no estab-
lished market for the Notes. The Exchange Notes
generally will be freely transferable (subject to
the restrictions discussed elsewhere herein) but
will be new securities for which there will not
initially be a market. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Original Notes or the Exchange
Notes. The Original Notes have been designated for
trading in the PORTAL market. The Initial Purchas-
ers have advised the Company that they currently
intend to make a market in the Original Notes and
the Exchange Notes. However, they are not obligated
to do so, and any market making activity with re-
spect to the Original Notes or the Exchange Notes
may be discontinued at any time without notice. The
Company does not intend to apply for listing of the
Original Notes or the Exchange Notes on any na-
tional securities exchange or for their quotation
on an automated dealer quotation system.
Use of Proceeds from
Initial Offering.......... There will be no proceeds to Holdings or the Com-
pany from the exchange pursuant to the Exchange Of-
fer. The proceeds of the Initial Offering, together
with a portion of the borrowings under the Senior
Credit Facilities and the proceeds of the Equity
Contribution, were used to finance the Acquisition
and to pay fees and expenses incurred in connection
with the Transactions. See "The Acquisition."
RISK FACTORS
Holders of Original Notes should carefully consider all of the information
set forth in this Prospectus and, in particular, should evaluate the specific
factors under "Risk Factors" prior to making a decision with respect to the
Exchange Offer. See "Risk Factors."
10
<PAGE>
UNAUDITED SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain unaudited summary pro forma combined
financial data of the Company for the year ended December 31, 1997. The
unaudited summary pro forma combined statement of operations data give effect
to the Transactions as if they had occurred on January 1, 1997. The unaudited
summary pro forma combined financial data do not purport to represent what the
Company's results of operations would have actually been had the Acquisition
and Financing Transactions been consummated as of such date or to project the
Company's results of operations for any future period. The unaudited summary
pro forma combined financial data should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Statement of Operations and the notes
thereto. See "Unaudited Pro Forma Condensed Combined Statement of Operations"
and the separate historical financial statements of the Company and the notes
thereto appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Sales.................................................... $229,370
Gross profit............................................. 123,655
Distribution expense..................................... 12,844
Marketing expense(/4/)................................... 51,705
General & administrative expense(/4/).................... 24,364
Operating income......................................... 34,742
Interest expense......................................... 25,959
Income before income taxes............................... 8,862
OTHER FINANCIAL DATA:
Gross profit margin...................................... 53.9%
EBITDA(/1/).............................................. $ 50,205
EBITDA margin............................................ 21.9%
Depreciation and amortization(/2/)....................... $ 16,354
Capital expenditures..................................... 3,154
Cash interest expense(/3/)............................... 25,068
Ratio of EBITDA to cash interest expense................. 2.0
BALANCE SHEET DATA (ACTUAL AS OF JANUARY 23, 1998):
Total assets............................................. $380,047
Total debt, including current maturities................. 306,500
Stockholder's equity..................................... 67,803(a)
</TABLE>
- - - - --------
(a) Reflects initial equity of $82.5 million less an after tax write-off of in-
process research and development.
See Notes to Unaudited Summary Pro Forma Combined Financial Data.
11
<PAGE>
NOTES TO UNAUDITED SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(1) EBITDA represents income before income taxes, interest expense,
depreciation and amortization. While EBITDA is not intended to represent
cash flow from operations as defined by GAAP and should not be considered
as an indicator of operating performance or an alternative to cash flow (as
measured by GAAP) as a measure of liquidity, it is included herein to
provide additional information with respect to the ability of the Company
to meet its debt service capital expenditures and working capital
requirements.
(2) Includes amortization of debt issuance costs which is included in interest
expense in unaudited summary pro forma combined statement of operations
data.
(3) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.
(4) Reflects elimination of historical allocated marketing and general
administrative expenses and of historical allocated and actual market costs
from marketing and general and administrative expenses.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth summary historical financial data of the BBNA
Business and the Company for the years ended and as of the dates indicated and
is derived from audited and unaudited financial data of the Company. The
summary historical statement of operations data for the years ended December
31, 1995, 1996 and 1997 and the summary historical balance sheet data as of
December 31, 1996 and 1997 and as of January 23, 1998 are derived from the
audited financial statements of the Company included elsewhere in this
Prospectus. The summary historical balance sheet data as of December 31, 1995
are derived from the unaudited financial statements of the Company not included
in this Prospectus and, in the opinion of management, include all adjustments
necessary for a fair presentation. For periods prior to January 1, 1995, the
financial data did not include significant purchase accounting adjustments
related to the KKR Acquisition. As a result, the financial data for the 1993
and 1994 periods are not comparable in certain respects with subsequent periods
and therefore were not included. This information should be read in conjunction
with the historical combined financial statements and related notes thereto
appearing elsewhere in this Prospectus and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.................................. $225,263 $230,384 $229,370
Cost of goods sold..................... 102,712 110,357 107,674
-------- -------- --------
Gross profit........................... 122,551 120,027 121,696
Distribution expense................... 15,691 14,640 13,464
Marketing expense...................... 63,804 62,705 55,074
General & administrative expense....... 13,289 13,483 13,184
-------- -------- --------
Operating income....................... $ 29,767 $ 29,199 $ 39,974
======== ======== ========
OTHER FINANCIAL DATA:
Depreciation and amortization.......... $ 6,010 $ 5,937 $ 6,174
Capital expenditures................... 2,079 3,726 3,154
<CAPTION>
AS OF
JANUARY 23,
1998
-----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD
AND AS OF JANUARY 23, 1998):
Inventories............................ $ 13,317 $ 13,239 $ 15,820 $ 20,100
Net property and equipment............. 16,044 16,649 16,070 23,950
Total assets........................... 160,586 157,857 153,786 380,047
Total debt, including current
maturities............................ 306,500
Stockholder's equity................... 67,803(a)
</TABLE>
- - - - --------
(a) Reflects initial equity of $82.5 million less an after tax write-off of in-
process research and development.
13
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Original Notes for the Exchange Notes offered hereby, holders
of Original Notes should consider carefully the following factors, which may
be generally applicable to the Original Notes as well as the Exchange Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the original Notes may not be offered or sold, unless registered
under the Securities Act and applicable state securities laws, or pursuant to
an exemption therefrom. Except as provided herein, the Registrants do not
intend to register the Original Notes under the Securities Act. In addition,
any holder of Original Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
the original Notes not tendered could be adversely affected. See "The Exchange
Offer" and "Original Notes Registration Rights."
SIGNIFICANT LEVERAGE AND DEBT SERVICE
The Company is highly leveraged. After giving effect to the Transactions,
including the net proceeds from the Offering of the Original Notes in the
manner described in "Use of Proceeds," the Company had total outstanding debt
of approximately $306.5 million (exclusive of unused commitments). In
addition, subject to certain restrictions in the Senior Credit Facilities and
in the Indenture, the Company and its future subsidiaries may incur additional
indebtedness (including additional Senior Indebtedness) from time to time to
finance capital expenditures or acquisitions or for other purposes. At the
Acquisition Closing, the Company had borrowing capacity of up to $53.5 million
under the Revolving Credit Facility, primarily for working capital needs.
The level of the Company's indebtedness and the high degree of leverage
could have important consequences to holders of the Notes, including: (i) a
substantial portion of the Company's cash flow from operations must be
dedicated to debt service and will not be available for other purposes; (ii)
the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures, acquisitions, research and development
or other purposes may be limited; (iii) certain of the Company's borrowings
will be at variable rates of interest, which could result in higher interest
expense in the event of increases in interest rates; (iv) all the indebtedness
outstanding under the Senior Credit Facilities will be secured by
substantially all the assets of the Company and will mature prior to the
maturity of the Notes; and (v) the Company's level of indebtedness could limit
its flexibility in reacting to changes in its industry or economic conditions
generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and by financial, business and
other factors, certain of which are beyond its control, as well as the
availability of borrowings under the Revolving Credit Facility or any
successor facilities. The Company will require substantial amounts of cash to
fund scheduled payments of principal and interest on its outstanding
indebtedness. There can be no assurance, however, that the Company will
14
<PAGE>
be able to generate sufficient cash flow from operations or that borrowings
will be available under the Revolving Credit Facility or any successor
facility in an amount sufficient to enable the Company to service its
outstanding indebtedness. If the Company is not able to generate sufficient
cash from operations or borrow under the Revolving Credit Facility or a
successor facility, then the Company may be required to take certain actions,
including delaying or reducing capital expenditures, seeking to restructure or
refinance its existing indebtedness, selling material assets or operations or
seeking additional equity. There can be no assurance that such actions could
be effected or would be effective in allowing the Company to meet such
obligations. The failure to generate sufficient cash flow, to make such
borrowings or to achieve such alternatives could significantly adversely
affect the market value of the Notes and the Company's ability to pay the
principal of, and interest on, the Notes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
SUBORDINATION OF NOTES
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness of the Company, including borrowings under the Senior
Credit Facilities. Each Guarantee is a general obligation of the applicable
Guarantor and will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash of all Senior Indebtedness of
such Guarantor. In the event of a bankruptcy, liquidation, dissolution,
reorganization or similar proceeding with respect to the Company or a
Guarantor, the assets of the Company or such Guarantor, as the case may be,
will be available to pay obligations on the Notes or the Guarantee, as the
case may be, only after all Senior Indebtedness of the Company or the
Guarantor, as the case may be, has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding or any Guarantee. In addition, under certain circumstances, the
Company and each Guarantor will not be able to make payment of its obligations
under the Notes or the applicable Guarantee in the event of a default under
certain Senior Indebtedness of the Company or such Guarantor. After giving
effect to the Transactions, the aggregate principal amount of Senior
Indebtedness of the Company was $191.5 million (exclusive of unused
commitments), and the aggregate amount of Senior Indebtedness of the
Guarantors, consisting entirely of a guarantee of the Senior Credit Facilities
provided by Holdings, was $191.5 million. Additional Senior Indebtedness may
be incurred by the Company and the Guarantors from time to time, subject to
certain restrictions. See "Description of Notes--Subordination."
In addition to being contractually subordinated to all existing and future
Senior Indebtedness of the Company and the Guarantors, the Notes and the
Guarantees are unsecured and thus effectively rank junior in right of payment
to any Secured Indebtedness of the Company or the Guarantors, as the case may
be, including the indebtedness outstanding under the Senior Credit Facilities,
which is secured by a lien on substantially all the assets of the Company and
the Guarantors. The Notes and the Guarantees do not have the benefit of such
collateral. If an event of default were to occur under the Senior Credit
Facilities (or any other Secured Indebtedness of the Company or the
Guarantors, as the case may be), the lenders thereunder would have the right
to exercise the remedies available to them under the Senior Credit Facilities
and under applicable law. Accordingly, such lenders would have the right to
foreclose upon such collateral to the exclusion of the holders of the Notes,
notwithstanding the existence of an event of default with respect to the
Notes. In such event, such assets would first be used to repay in full all
amounts outstanding under the Senior Credit Facilities (and any other Secured
Indebtedness of the Company or the Guarantors, as the case may be), and it is
possible that there would be insufficient assets remaining after satisfaction
in full of all such indebtedness to satisfy in full all claims of holders of
the Notes.
15
<PAGE>
RESTRICTIVE FINANCIAL COVENANTS
The Indenture restricts, among other things, the ability of the Company and
its subsidiaries, as the case may be, to incur additional indebtedness, to pay
dividends or distributions on, and to redeem, capital stock of the Company and
its subsidiaries as well as to redeem certain subordinated obligations, to
make certain other restricted payments, including, without limitation,
investments, to engage in sales of assets, to incur liens, to engage in sale
and leaseback transactions, to sell or issue capital stock of subsidiaries of
the Company, to engage in mergers, consolidations and sales of all or
substantially all of the assets of the Company and to enter into certain
transactions with affiliates. In addition, the Senior Credit Facilities
contain other and more restrictive covenants that, among other things,
prohibit the Company from prepaying other indebtedness (including the Notes).
The Senior Credit Facilities also require the Company to maintain specified
financial ratios and tests under which the Company is required to achieve
certain financial and operating results. The restrictive covenants contained
in the Indenture and the Senior Credit Facilities may limit the ability of the
Company to respond to changing business and economic conditions, to secure
additional financing, if needed, and to engage in transactions that might be
beneficial to the Company. Moreover, the ability of the Company to meet the
financial ratios and tests contained in the Senior Credit Facilities may be
affected by events beyond its control, and there can be no assurance that the
Company will meet those ratios and tests. A breach of any of these covenants
could result in a default under the Senior Credit Facilities. Upon the
occurrence of an event of default under the Senior Credit Facilities, the
lenders thereunder could elect to declare all amounts outstanding under the
Senior Credit Facilities, together with accrued interest, to be immediately
due and payable. If the Company were unable to repay those amounts, the
lenders could proceed against the collateral granted to them to secure that
indebtedness. See "--Subordination of Notes." If the indebtedness outstanding
under the Senior Credit Facilities were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
that indebtedness and the other indebtedness of the Company, including the
Notes. See "Description of Senior Credit Facilities."
RISKS RELATING TO THE ACQUISITION
The Company was recently formed for the purpose of the Acquisition. The
Company's business was previously operated as the BBNA Business of BFC and BFC
Investments. There can be no assurance that the Company will not encounter
unanticipated problems or expenses in establishing Eagle Family Foods as an
independent company. In addition, there can be no assurance that the Company,
under its new management, will be able to achieve results comparable to those
achieved by the BBNA Business.
BFC and its affiliates historically provided computer, accounting and human
resources support, warehouse space, a network of third party distribution
services and a network of regional food brokers. In connection with the
Acquisition, the Company entered into the Master Customer Services Agreement
(as defined) pursuant to which BFC and its affiliates provide various trade
marketing, distribution, transactions processing, information systems and
accounting services for period of up to 18 months after the Acquisition
Closing. When these services are no longer available, there can be no
assurance that the Company will be able to perform or obtain these services at
costs comparable to those currently anticipated by the Company. The Company
sells its products through a network of over 60 independent food brokers.
Although the Company believes that it will be able to negotiate broker
agreements on substantially the same terms as those included in the agreements
between BFC and the brokers, there can be no assurance that the Company will
be able to do so. The Company entered into the Canadian Agreements (as
defined) in connection with the Acquisition pursuant to which BFC and its
affiliates have agreed to manufacture and distribute sweetened condensed milk
for the Company in Canada at prices based on historical manufacturing costs
for a period of 12 months from the Acquisition Closing. The Company assumed
the Kava Co-Pack Agreement (as defined), pursuant to which CFN (as defined)
will manufacture acid-neutralized coffee
16
<PAGE>
at a price based on a formula of weighted average price of soluble coffee
powder and manufacturing costs. The Company obtains its supply of shelf-stable
egg nog under a seasonal purchase order, which, although not currently in
effect, the Company expects to renew. There can be no assurance that, in
respect of the Canadian Agreements, the Kava Co-Pack Agreement and the
Company's shelf-stable egg nog purchase order, the Company will be able to
enter into new arrangements on substantially the same terms as those in effect
during the operation of the BBNA Business by BFC.
Moreover, pursuant to the Asset Purchase Agreement, the Company is
responsible for certain liabilities attributed to events prior to the
Acquisition Closing, subject to certain limited rights of indemnification.
There can be no assurance that significant liabilities will not materialize or
that, if such liabilities materialize, the Company will receive sufficient
indemnification payments or have sufficient financial resources to satisfy all
obligations relating thereto.
DEPENDENCE ON KEY PERSONNEL
The success of the Company's operations will be dependent, to a significant
extent, on its executives and other key management personnel. Several members
of the Company's senior management are new to the Company. The Company entered
into employment agreements containing non-competition provisions with William
A. Lynch, its Chairman and Chief Operating Officer, and John O'C. Nugent, its
Chief Executive Officer and President, and entered entering into similar
arrangements with its other executive officers. There can be no assurance the
Company will be able to retain its executive officers and other key management
personnel or attract additional qualified management in the future. The
Company has not obtained any key man life insurance with respect to any of its
key members of management. If Mr. Lynch or Mr. Nugent becomes unable to
continue in his present role, or if the Company is unable to attract and
retain other skilled employees, the Company's business could be adversely
affected. See "Management."
SEASONALITY
The Company's sales, net income and cash flows are affected by a seasonal
bias toward the fourth quarter of the year due to increased sales during the
holiday season. Three of the Company's six product lines (Eagle Brand and the
Company's other sweetened condensed milk products, Borden Egg Nog and None
Such) are consumed primarily during the November and December holiday seasons.
In recent years, approximately 45% of the Company's sales have occurred in the
last quarter of the year. As a result of this seasonality, the Company's
working capital requirements have historically increased throughout the year,
peaking in October, which will require the Company to draw upon the Revolving
Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality."
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. Competition is primarily based on price and quality. A number of
these competitors have multiple product lines, have substantially greater
financial and other resources available to them and may be substantially less
leveraged than the Company, and there can be no assurance that the Company can
compete successfully with such other companies. Competitive pressures or other
factors could cause the Company's products to lose market share or could
result in significant price erosion, both of which would have a material
adverse effect on the Company's results of operations. See "Business--
Competition."
17
<PAGE>
IMPLEMENTATION OF BUSINESS STRATEGY
The Company intends to pursue a business strategy of increasing cash flow
and revenue in its core business through a combination of marketing efforts,
expansion of certain markets and product lines, and strategic acquisitions. No
assurance can be given that the Company will be successful in implementing
this strategy. See "Business--Business Strategy."
RAW MATERIALS
The Company purchases agricultural commodities (including milk, sugar, lemon
and lime juice concentrate, vegetable oil and corn syrup), flavors, other raw
materials and packaging from growers, commodity processors, importers, other
food companies and packaging manufacturers. While all such materials are
available from numerous independent suppliers, commodity raw materials are
subject to fluctuations in price attributable to, among other things, change
in crop size and federal and state agricultural programs. For example, milk
prices reached historic highs in 1996 but have subsequently returned to normal
levels. Future price fluctuations in respect of commodity raw materials used
by the Company could have a material adverse effect on the performance of the
Company. See "Business--Raw Materials and Suppliers."
CONTROL OF THE COMPANY
The Company is a wholly owned subsidiary of Holdings, which in turn is owned
by the Equity Sponsors and the Management Investors. Accordingly, the Equity
Sponsors and the Management Investors control Holdings and the Company and
have the power to elect all of their respective directors, appoint new
management and approve any action requiring the approval of the holders of
Holdings' and the Company's common stock, including adopting amendments to
their respective Certificates of Incorporation and approving mergers or sales
of substantially all of their assets. See "Management." The members of the
Company's Board of Directors elected by Holdings will have the authority to
make decisions affecting the capital structure of the Company, including the
issuance of additional stock, the implementation of stock repurchase programs
and declaration of dividends, subject to restrictions imposed by the Indenture
and the Senior Credit Facilities. See "Security Ownership."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, each holder of Notes will have the right to
require the Company to make an offer to repurchase such holder's Notes at 101%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of repurchase. However, the Senior Credit Facilities prohibit
the repurchase of the Notes by the Company in the event of certain events
constituting a Change of Control unless and until such time as the outstanding
indebtedness under the Senior Credit Facilities is repaid in full. In the
event of a Change of Control, there can be no assurance that the Company would
have sufficient financial resources available to satisfy all of its
obligations under the Senior Credit Facilities and the Notes. The Company's
failure to repurchase the Notes would result in an event of default under the
Indenture and the Senior Credit Facilities, each of which could have adverse
consequences for the Company and the holders of the Notes. Moreover, the
Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of outstanding indebtedness of the Company.
IMPACT OF GOVERNMENTAL REGULATION
The Company is subject to numerous federal, state and local laws and
regulations concerning, among other things, health and safety matters, food
manufacture, product labeling and advertising,
18
<PAGE>
including the Federal Food, Drug and Cosmetic Act and regulations promulgated
thereunder by the Food and Drug Administration (the "FDA"). Compliance with
existing federal, state and local laws and regulations is not expected to have
a material adverse effect upon the earnings or competitive position of the
Company. However, the Company cannot predict the effect, if any, of laws and
regulations that may be enacted in the future, or of changes in the
enforcement of existing laws and regulations that are subject to extensive
regulatory discretion. See "Business--Certain Legal and Regulatory Matters--
Public Health."
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The past and present business operations of the Company and the past and
present ownership and operation of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations. As a result, the Company is involved from time to time in
administrative and judicial proceedings, claims and inquiries relating to
environmental matters. In connection with the Acquisition, the Company assumed
all past and future environmental liabilities related to the BBNA Business.
The Company will be indemnified, however, by BFC and BFC Investments with
respect to certain environmental liabilities occurring prior to the
Acquisition Closing. This indemnification is limited in time and amount, and
there can be no assurance that material environmental liabilities will not be
incurred after the indemnification period or will not be in excess of the
indemnified amount or that the Company will be able to pursue successfully any
indemnification claims against BFC. In addition, compliance with more
stringent laws or regulations or stricter interpretation of existing laws, may
require additional expenditures by the Company, some of which may be material.
See "Business-- Certain Legal and Regulatory Matters--Environmental Matters."
GENERAL RISKS OF FOOD INDUSTRY
Food product manufacturing companies are subject to the risks of adverse
changes in general economic conditions, lack of attractiveness of a particular
food product after a "novelty" period, evolving consumer preference and
nutritional and health-related concerns, federal, state and local food
processing controls, consumer product liability claims, risks of product
tampering and the availability and expense of liability insurance. There can
be no assurance that the Company will not be impacted by these risks or that
any such impact will not have a material adverse affect on the performance of
the Company.
FUTURE HOLDING COMPANY STRUCTURE
Pursuant to the Indenture, the Company has the right to transfer the
trademarks, patents, copyrights and other intangible assets relating to the
BBNA Business (an "Inter-Company Intangible Asset Transfer") to one or more
Intellectual Property Subsidiaries, subject to certain conditions. See
"Description of Notes--Certain Definitions (Intellectual Property
Subsidiary)." In addition, the Company may create, acquire or capitalize other
subsidiaries from time to time. In the event an Inter-Company Intangible Asset
Transfer occurs, or if the Company otherwise creates, acquires or capitalizes
subsidiaries, principal and interest payments on the Notes will be dependent
in part on the receipt by the Company of cash dividends, advances and other
payments from such Intellectual Property Subsidiaries or other subsidiaries.
The Notes will be effectively subordinated to all then existing and future
liabilities of such Intellectual Property Subsidiaries (although the
Intellectual Property Subsidiaries will be prohibited from incurring
indebtedness and from engaging in activity other than owning their assets and
licensing such assets to the Company and other activities incidental thereto).
The Notes also will be effectively subordinated to all existing and future
liabilities (including trade payables) of other subsidiaries unless such
subsidiaries are Guarantors of the Notes. Any right of the holders of the
Notes to participate in the distribution of the assets of any Intellectual
Property Subsidiaries or subsidiaries which do not guarantee the Notes will be
subject to the claims of creditors of such Intellectual Property Subsidiaries
or other subsidiaries. The Indenture permits
19
<PAGE>
such subsidiaries (but not Intellectual Property Subsidiaries) to incur
indebtedness in the future provided certain financial and other conditions are
met. See "Description of Notes--Certain Covenants--Limitation on Incurrence of
Indebtedness," "--Guarantees of the Notes" and "--Future Note Guarantors."
GUARANTEES OF THE NOTES
The Notes are unconditionally guaranteed on a senior subordinated and
unsecured basis by Holdings and each future Domestic Subsidiary of the Company
other than any Intellectual Property Subsidiary that is not wholly owned by
the Company. The holders of the Notes have no direct claim against any of the
Guarantors other than a claim created by a Guarantee, which may be subject to
legal challenge in a bankruptcy, liquidation, dissolution, reorganization or
similar proceeding with respect to a Guarantor. If such challenges were to be
upheld, the Guarantees would be invalid and unenforceable. To the extent that
any of the Guarantees are not enforceable, the rights of holders of the Notes
to participate in any distribution of assets of the relevant Guarantor upon
bankruptcy, liquidation, dissolution, reorganization or similar event will, as
is the case with the other unsecured creditors of the Company, be subject to
prior claims of creditors of that Guarantor.
In addition, Holdings is a holding company with no significant assets other
than the capital stock of the Company, and Holdings has no significant
independent operations. Holdings, therefore, will be dependent upon the
receipt of dividends or other distributions from the Company to fund any
obligations that it incurs, including obligations as a Guarantor of the Notes.
The Indenture will not, however, permit dividend payments (other than those
based on the Company's income) or other distributions from the Company to
Holdings other than for certain specified purposes as described under
"Description of Notes--Certain Covenants--Limitation on Restricted Payments."
The Senior Credit Facilities will contain similar or more restrictive
provisions. See "Description of Senior Credit Facilities." Accordingly, if the
Company should at any time be unable to pay interest on or principal of the
Notes, it is highly unlikely that Holdings would be able to meet its
obligations as a Guarantor of the Notes.
FRAUDULENT CONVEYANCE STATUTES
The incurrence of indebtedness (such as the Notes) and the use of proceeds
thereof are subject to review under relevant federal and state fraudulent
conveyance and similar statutes in a bankruptcy or reorganization case or a
lawsuit by or on behalf of creditors of the Company. Under these statutes, if
a court were to find that obligations (such as the Notes) were incurred with
the intent of delaying, hindering or defrauding present or future creditors or
that the obligor received less than a reasonably equivalent value or fair
consideration for those obligations and, at the time of the incurrence of the
obligations, the obligor (i) was insolvent or rendered insolvent by reason
thereof, (ii) was engaged or was about to engage in a business or transaction
for which its remaining unencumbered assets constituted unreasonably small
capital or (iii) intended to or believed that it would incur debts beyond its
ability to pay such debts as they matured or became due, such court could void
or subordinate the obligations in question.
The measure of insolvency for purposes of a fraudulent conveyance claim will
vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent, with respect to a particular
date, if on such date (i) the present fair market value (or present fair
saleable value) of the assets of the company is less than the total amount
required to pay the probable liabilities of the company on its total existing
debts and liabilities (including contingent liabilities) as they become
absolute and matured, (ii) the company is unable to realize upon its assets
and pay its debts and other liabilities, contingent obligations and
commitments as they mature and become due in the normal course of business or
(iii) the company is incurring debts or liabilities beyond its ability to pay
as such debts and liabilities mature.
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<PAGE>
On the basis of the historical financial data, recent operating history as
discussed in "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other factors,
each of the Company and Holdings believes that, after giving effect to the
Transactions, the Company and Holdings will be (i) neither insolvent nor
rendered insolvent by the incurrence of indebtedness in connection with the
Transactions, (ii) in possession of sufficient capital to run its business
effectively and (iii) incurring debts within its ability to pay as the same
mature or become due. There can be no assurance, however, as to the standard a
court would apply in making such determinations or that, regardless of the
standard, a court would not determine that the Company or Holdings was
insolvent at the time of, or rendered insolvent upon consummation of, the
Transactions.
In addition, the Guarantees may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Guarantors. In such a case, the analysis set forth above would generally
apply, except that the Guarantees could also be subject to the claim that,
since the Guarantees were incurred for the benefit of the Company (and only
indirectly for the benefit of the Guarantors), the obligations of the
Guarantors thereunder were incurred for less than reasonably equivalent value
or fair consideration. A court could void any of the Guarantors' obligations
under the Guarantees, subordinate the Guarantees to other indebtedness of a
Guarantor or take other action detrimental to the holders of the Notes.
ABSENCE OF PUBLIC MARKET
The Notes are new securities for which there currently is no market.
Although the Initial Purchasers have informed the Company that they currently
intend to make a market in the Original Notes and the Exchange Notes they are
not obligated to do so and any such market making activity may be discontinued
at any time without notice. In addition, such market making activity may be
limited during the pendency of the Exchange Offer or the effectiveness of a
shelf registration statement in lieu thereof. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Original
Notes and the Exchange Notes.
The Original Notes have been designated for trading in the PORTAL market by
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act). The Company does not intend to apply for listing of the Original Notes
or the Exchange Notes, offered hereby on any securities exchange or for their
quotation on an automated dealer quotation system.
The liquidity of, and trading market for, the Original Notes or the Exchange
Notes also may be adversely affected by general declines in the market for
similar securities. Such declines may adversely affect such liquidity and
trading markets independently of the financial performance of, or prospects
for, the Company.
21
<PAGE>
THE ACQUISITION
GENERAL
Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, Eagle
Family Foods agreed to acquire certain assets of BFC, BFC Investments and
certain of their affiliates for an aggregate purchase price of $387.5 million
subject to certain closing and post-closing adjustments as described below.
The purchase price paid in the Acquisition was to be increased or decreased,
pursuant to a post-closing adjustment, if the Company's inventory was greater
or less than $14.0 million at the Acquisition Closing. The purchase price paid
in the Acquisition was $376.5 million. The assets acquired by the Company
include, among other things: (i) four manufacturing facilities located in
Wellsboro, Pennsylvania; Starkville, Mississippi; Waterloo, New York; and
Chester, South Carolina; (ii) all machinery and equipment located at these
facilities; (iii) certain machinery and equipment located at a Canadian BFC
facility; (iv) the trademarks Eagle; Eagle Brand, the Dessert Maker; ReaLemon;
ReaLime; Cremora; Kava; None Such and certain other trademarks in North
America and in certain foreign territories; (v) copyrights and other
intellectual property used principally in connection with the BBNA Business;
(vi) inventories (raw materials, packaging materials and finished goods)
principally related to the BBNA Business; (vii) business information, files
and records relating principally to the operation of the BBNA Business; (viii)
rights under certain contracts, licenses, purchase orders and other
arrangements and permits relating principally to the operation of the BBNA
Business; and (ix) a non-compete and non-solicitation agreement from BFC and
certain of its affiliates. In connection with the Acquisition, BFC retained
receivables, trade payables and certain accrued liabilities relating to the
BBNA Business. The Company assumed all other accrued liabilities including
workmen's compensation, product liability, automobile liability and general
liability claims, as well as all other liabilities relating to the BBNA
Business that were not specifically retained by BFC, subject to certain
limited rights of indemnification. The Asset Purchase Agreement contains
customary representations, warranties, covenants, conditions and certain
indemnification provisions.
Certain Licensing Arrangements. In connection with the Acquisition, BDH Two,
Inc., Borden, Inc. and certain other affiliates of BFC granted the Company a
perpetual, exclusive and royalty-free license to use certain trademarks,
including the Borden and Elsie trademarks throughout the world (other than
Africa, South America, Central America and the Caribbean (with the exception
of Puerto Rico)), on products on which they are currently used in the BBNA
Business, together with certain product extensions. In addition, BFC assigned
its rights under a license from Southern Foods Group, L.P. to use the Meadow
Gold trademark on sweetened condensed milk in the United States (the "Meadow
Gold License"). The Meadow Gold License is royalty-free and has a five year
term which is renewable automatically for subsequent five year terms, and is
terminable at the option of the licensee upon one year's notice and, under
certain limited circumstances, by the licensor. The Company granted BFC a
perpetual, exclusive and royalty-free license to use the ReaLemon and ReaLime
trademarks in certain foreign markets including Europe, Hong Kong and the
Middle East on products on which they are currently used, together with
product extensions.
Master Customer Services Agreement. At the Acquisition Closing, the Company
and BFC entered into a master customer services agreement (the "Master
Customer Services Agreement"), pursuant to which BFC and its affiliates
provide various trade marketing, distribution, transactions processing,
information systems and accounting services for a period of up to 18 months
after the Acquisition Closing. Certain services provided at specified rates
for such services. However, a significant portion of the services provided at
no charge for either 90 days, and thereafter at the agreed upon rates for such
services, or 135 days, and thereafter at a formula price increasing in 25%
increments each 60 day period thereafter to 100% of the agreed upon rates for
such services 315 days after the Acquisition Closing and thereafter.
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<PAGE>
Canadian Agreements. The Company and BFC's Canadian affiliate entered into a
Contract Packaging Agreement, a Transportation and Warehousing Agreement and a
Sales Representation Agreement (collectively, the "Canadian Agreements"). The
Canadian Agreements provide that BFC's Canadian affiliate manufacture and
package all of the Company's requirements for sweetened condensed milk
products in Canada, and warehouse and sell such products using machinery and
equipment which have been acquired by the Company. The Canadian Agreements
terminate one year from the Acquisition Closing, unless renewed by mutual
agreement. The Contract Packaging Agreement and the Transportation and
Warehousing Agreement are each terminable on 90 days' notice by either party
and the Sales Representation Agreement is terminable on 30 days' notice by
either party.
Puerto Rico Distribution Agreement. At the Acquisition Closing, the Company
entered into an exclusive distribution agreement (the "Puerto Rico
Distribution Agreement") with Borden Foods Puerto Rico, Inc. ("BFPR"),
pursuant to which BFPR distributes products specified from time to time by the
Company in Puerto Rico, upon terms established by the Company. The Puerto Rico
Distribution Agreement will terminate six months from the Acquisition Closing.
Kava Co-Pack Agreement. In connection with the Acquisition Closing, BFC
assigned to the Company its rights under its existing supply contract (the
"Kava Co-Pack Agreement") with Chock Full O' Nuts Corp. ("CFN"). The Kava Co-
Pack Agreement provides that CFN exclusively furnishes the Company with its
requirements, within a specified minimum and maximum range, of acid
neutralized coffee at a price based on a formula of weighted average price of
soluble coffee powder and manufacturing costs. The Kava Co-Pack Agreement is
automatically renewed each April 1 for an annual term unless terminated by
either party by notice not less than 60 days prior to the expiration of the
annual term.
FINANCING OF THE ACQUISITION
Eagle Family Foods was formed to consummate the Acquisition. Financing for
the Acquisition and related fees and expenses consisted of (i) the $82.5
million Equity Contribution by Holdings (which was financed by Holdings'
issuance of preferred and common stock in that amount to GEI and Warburg, as
the Equity Sponsors, together with the Management Investors, who contributed
approximately $1.7 million of such amount); (ii) $115.0 million of Original
Notes issued pursuant to the Initial Offering; and (iii) the Senior Credit
Facilities in an aggregate principal amount of $245.0 million, consisting of
the Term Loan Facility and the Revolving Credit Facility, under which $16.5
million was drawn at the time of the Acquisition Closing.
The following table sets forth the sources and uses of funds at the
consummation of the Transactions:
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
SOURCES:
Senior Credit Facilities
Revolving Credit Facility(/1/)......................... $ 16,500
Term Loan Facility..................................... 175,000
The Notes................................................ 115,000
Equity Contribution...................................... 82,500
--------
Total sources........................................ $389,000
========
USES:
Purchase price........................................... $376,500
Fees and expenses(/2/)................................... 11,767
Cash remaining with the Company.......................... 733
--------
Total uses........................................... $389,000
========
</TABLE>
- - - - --------
(1) Consists of a $70.0 million Revolving Credit Facility, under which the
Company had $16.5 million outstanding upon the Acquisition Closing. See
"Description of Senior Credit Facilities."
(2) Fees and expenses including amounts accrued.
23
<PAGE>
USE OF PROCEEDS
There will be no proceeds to Holdings or the Company from the exchange
pursuant to the Exchange Offer. The proceeds to the Company from the Initial
Offering, together with the proceeds from borrowings under the Senior Credit
Facilities and the Equity Contribution, were used to fund the purchase price
for the Acquisition and to pay related fees and expenses.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 23, 1998 after giving effect to the Transactions. This table should be
read in conjunction with the Financial Statements and notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JANUARY 23, 1998
-------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Debt (including current maturities):
Revolving Credit Facility(/1/)..................... $ 16,500
Term Loan Facility................................. 175,000
The Notes.......................................... 115,000
--------
Total Debt....................................... 306,500
Total Stockholder's Equity, reduced by research and
development write-off(/2/).......................... 67,803
--------
Total Capitalization................................. $374,303
========
</TABLE>
- - - - --------
(1) Consists of a $70.0 million Revolving Credit Facility, under which the
Company had $16.5 million outstanding upon the Acquisition Closing.
Borrowings under the Revolving Credit Facility are available for general
corporate purposes, including the funding of working capital needs. See
"Description of Senior Credit Facilities."
(2) The Company's initial equity of $82.5 million was reduced by a purchase
accounting write-off for research and development in-process of $23.9
million, net of related tax benefit.
24
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the "Letter of Transmittal"), $1,000 in principal amount of
Exchange Notes for each $1,000 in principal amount of the Original Notes. The
terms of the Exchange Notes are identical in all respects to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange
Offer, except that the Exchange Notes will generally be freely transferable by
holders thereof, and the holders of the Exchange Notes (as well as remaining
holders of any Original Notes) will not be entitled to registration rights
under the Registration Rights Agreement. See "Original Notes Registration
Rights." The Exchange Notes will evidence the same debt as the Original Notes
and will be entitled to the benefits of the Indenture. See "Description of
Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Registrants believe that Exchange Notes issued pursuant
to the Exchange Offer in exchange for the Original Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Registrants within the meaning of
Rule 405 under the Securities Act, (ii) a broker-dealer who acquired Original
Notes directly from the Registrants or (iii) broker-dealers who acquired
Original Notes as a result of market making or other trading activities)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business, and such holders are not engaged
in, and do not intend to engage in, and have no arrangement or understanding
with any person to participate in, a distribution of such Exchange Notes. Each
broker- dealer that receives Exchange Notes for its own account in exchange
for Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging, and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Broker-dealers who acquired Original Notes as a result of
market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Registrants have agreed that, for a period not to exceed 180 days after the
Exchange Date, they will make this Prospectus available to any broker-dealer
for use in connection with any such resale. Any holder that cannot rely upon
such interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the first interest
payment on the Exchange Notes, but will not receive any payment in respect of
interest on the Original Notes accrued after the issuance of the Exchange
Notes.
25
<PAGE>
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998, unless the
Registrants in their sole discretion extend the period during which the
Exchange Offer is open, in which event the term "Expiration Date" means the
latest time and date on which the Exchange Offer, as so extended by the
Registrants, expires. The Registrants reserve the right to extend the Exchange
Offer at any time and from time to time on or prior to the Expiration Date by
giving written notice to IBJ Schroder Bank & Trust Company (the "Exchange
Agent") and by timely public announcement communicated, unless otherwise
required by applicable law or regulation, by making a release to the Dow Jones
News Service. During any extension of the Exchange Offer, all Original Notes
previously tendered pursuant to the Exchange Offer will remain subject to the
Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Registrants expressly reserve the right to (i) terminate
the Exchange Offer and not accept for exchange any Original Notes for any
reason, including if any of the events set forth below under "Conditions to
the Exchange Offer" shall have occurred and shall not have been waived by the
Registrants and (ii) amend the terms of the Exchange Offer in any manner,
whether before or after any tender of the Original Notes. If any such
termination or amendment occurs, the Registrants will notify the Exchange
Agent in writing and will either issue a press release or give written notice
to the holders of the Original Notes as promptly as practicable. Unless the
Registrants terminate the Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date, the Registrants will exchange the Exchange Notes
for the Original Notes promptly after the Expiration Date.
If the Registrants waive any material condition to the Exchange Offer, or
amend the Exchange Offer in any other material respect, and if at the time
that notice of such waiver or amendment is first published, sent or given to
holders of Original Notes in the manner specified above, the Exchange Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day from, and including, the date that such notice is
first so published, sent or given, then the Exchange Offer will be extended
until the expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Registrants to record holders of Original
Notes and will be furnished to brokers, banks and similar persons whose names,
or the names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
HOW TO TENDER
The tender to the Registrants of Original Notes by a holder thereof pursuant
to one of the procedures set forth below will constitute an agreement between
such holder and the Registrants in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of an Original Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Original Notes being
tendered and any required signature guarantees (or a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") pursuant to the procedure
described below), to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original
26
<PAGE>
Notes are to be reissued) in the name of the registered holder, the signature
of such signer need not be guaranteed. In any other case, the tendered
Original Notes must be endorsed or accompanied by written instruments of
transfer in form satisfactory to the Registrants and duly executed by the
registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a firm (an "Eligible Institution") that is a
member of a recognized signature guarantee medallion program (an "Eligible
Program") within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Original Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note
register for the Original Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to
register ownership of the Original Notes in such beneficial owner's name or
follow the procedures described in the immediately preceding paragraph. The
transfer of record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Original Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's
systems may make book-entry delivery of Original Notes by causing the Book-
Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures for transfer.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide his taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Registrants and the Exchange Agent.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected
if the Exchange Agent has received at its office listed on the back cover
hereof on or prior to the Expiration Date a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address
of the tendering holder, the names in which the Original Notes are registered
and, if possible, the certificate numbers of the Original Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Original Notes, in proper form for transfer, will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Original Notes being tendered by the above-described
27
<PAGE>
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents),
the Registrants may, at their option, reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are being delivered with this Prospectus
and the related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Registrants, whose determination will be final and binding.
The Registrants reserve the absolute right to reject any or all tenders not in
proper form or the acceptances for exchange of which may, in the opinion of
counsel to the Registrants, be unlawful. The Registrants also reserve the
absolute right to waive any of the conditions of the Exchange Offer or any
defect or irregularities in tenders of any particular holder whether or not
similar defects or irregularities are waived in the case of other holders.
None of the Registrants, the Exchange Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
shall incur any liability for failure to give any such notification. The
Registrants' interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Original Notes to the Registrants and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Original Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Original Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Original
Notes, and that, when the same are accepted for exchange, the Registrants will
acquire good and unencumbered title to the tendered Original Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Registrants to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Registrants and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Registrants of its
obligations under the Registration Rights Agreement and that the Registrants
shall have no further obligations or liabilities thereunder (except in certain
limited circumstances). All authority conferred by the Transferor will survive
the death or incapacity of the Transferor and every obligation of the Transferor
shall be binding upon the heirs, legal representatives, successors, assigns,
executors and administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Registrants within the meaning of Rule 405 under the
Securities Act, that it is not a broker-dealer that owns Original Notes
acquired directly from the Registrants or an affiliate of the Registrants,
that it is
28
<PAGE>
acquiring the Exchange Notes offered hereby in the ordinary course of such
Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such Exchange Notes or (b) that
it is an "affiliate" (as so defined) of the Registrants or of the initial
purchasers in the original offering of the Original Notes, and that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered
Original Notes to be withdrawn, the certificate numbers of Original Notes to
be withdrawn, the principal amount of Original Notes to be withdrawn (which
must be an authorized denomination), a statement that such holder is
withdrawing his election to have such Original Notes exchanged, and the name
of the registered holder of such Original Notes, and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Registrants that the person withdrawing the
tender has succeeded to the beneficial ownership of the Original Notes being
withdrawn. The Exchange Agent will return the properly withdrawn Original
Notes promptly following receipt of notice of withdrawal. All questions as to
the validity of notices of withdrawals, including time of receipt, will be
determined by the Registrants, and such determination will be final and
binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made on the Exchange Date. For
the purposes of the Exchange Offer, the Registrants shall be deemed to have
accepted for exchange validly tendered Original Notes when, as and if the
Registrants have given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Registrants and
causing the Original Notes to be assigned, transferred and exchanged. Upon the
terms and subject to the conditions of the Exchange Offer, delivery of
Exchange Notes to be issued in exchange for accepted Original Notes will be
made by the Exchange Agent promptly after acceptance of the tendered Original
Notes. Original Notes not accepted for exchange by the Registrants will be
returned without expense to the tendering holders (or in the case of Original
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the procedures described above, such
non-exchanged Original Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) promptly following the Expiration Date or,
if the Registrants terminate the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Registrants will not be required to issue Exchange
Notes in respect of any properly tendered Original Notes not previously
accepted and may terminate the Exchange Offer (by oral or written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News
29
<PAGE>
Service) or, at its option, modify or otherwise amend the Exchange Offer, if
(a) there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any
court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, (ii) assessing or seeking any damages as a
result thereof, or (iii) resulting in a material delay in the ability of the
Registrants to accept for exchange or exchange some or all of the Original
Notes pursuant to the Exchange Offer; (b) any statute, rule, regulation, order
or injunction shall be sought, proposed, introduced, enacted, promulgated or
deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any government or governmental
authority, domestic or foreign, or any action shall have been taken, proposed
or threatened, by any government, governmental authority, agency or court,
domestic or foreign, that in the sole judgment of the Registrants might
directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the sole judgment of the Registrants,
might result in the holders of Exchange Notes having obligations with respect
to resales and transfers of Exchange Notes which are greater than those
described in the interpretations of the Commission referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or (c) a material adverse change shall have occurred
in the business, condition (financial or otherwise), operations, or prospects
of the Registrants.
The foregoing conditions are for the sole benefit of the Registrants and may
be asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Registrants) giving rise to such condition or may be waived by the Registrants
in whole or in part at any time or from time to time in their sole discretion.
The failure by the Registrants at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right, and each right will be
deemed an ongoing right which may be asserted at any time or from time to
time. In addition, the Registrants have reserved the right, notwithstanding
the satisfaction of each of the foregoing conditions, to terminate or amend
the Exchange Offer.
Any determination by the Registrants concerning the fulfillment or non-
fulfillment of any conditions will be final and binding upon all parties.
In addition, the Registrants will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such
Original Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or qualification of the Indenture under the Trust Indenture
Act of 1939 (the "Trust Indenture Act").
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover page of this
Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Registrants have not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Registrants will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Registrants will also pay brokerage
houses and other
30
<PAGE>
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and printing, accounting and legal fees, will
be paid by the Company and are estimated at approximately $600,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Registrants. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Registrants since the respective
dates as of which information is given herein. The Exchange Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of
Original Notes in any jurisdiction in which the making of the Exchange Offer
or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Registrants may, at their discretion, take such
action as it may deem necessary to make the Exchange Offer in any such
jurisdiction and extend the Exchange Offer to holders of Original Notes in
such jurisdiction. In any jurisdiction the securities laws or blue sky laws of
which require the Exchange Offer to be made by a licensed broker or dealer,
the Exchange Offer is being made on behalf of the Registrants by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Registrants will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such
rights under the Registration Rights Agreement, which by their terms terminate
or cease to have further effect as a result of the making of this Exchange
Offer. See "Description of Notes." All untendered Original Notes will continue
to be subject to the restriction on transfer set forth in the Indenture. To
the extent that Original Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Original Notes could be adversely
affected. See "Risk Factors--Consequences of Failure to Exchange."
The Registrants may in the future seek to acquire untendered Original Notes
in open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Registrants have no present plan to acquire
any Original Notes which are not tendered in the Exchange Offer.
31
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the BBNA Business
and the Company for the years ended and as of the dates indicated and is
derived from audited and unaudited financial data of the Company. The selected
historical statement of operations data for the years ended December 31, 1995,
1996 and 1997 and the selected historical balance sheet data as of December
31, 1996 and 1997 and January 23, 1998 are derived from the audited financial
statements of the Company included elsewhere in this Prospectus. The selected
historical balance sheet data as of December 31, 1995 are derived from the
unaudited financial statements of the Company not included in this Prospectus
and, in the opinion of management, include all adjustments necessary for a
fair presentation. For periods prior to January 1, 1995, the financial data
did not include significant purchase accounting adjustments related to the KKR
Acquisition. As a result, the financial data for the 1993 and 1994 periods are
not comparable in certain respects with subsequent periods and therefore were
not included. This information should be read in conjunction with the
historical combined financial statements and related notes thereto appearing
elsewhere in this Prospectus and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................. $225,263 $230,384 $229,370
Cost of goods sold.................... 102,712 110,357 107,674
-------- -------- --------
Gross profit.......................... 122,551 120,027 121,696
Distribution expense.................. 15,691 14,640 13,464
Marketing expense..................... 63,804 62,705 55,074
General & administrative expense...... 13,289 13,483 13,184
-------- -------- --------
Operating income...................... $ 29,767 $ 29,199 $ 39,974
======== ======== ========
OTHER FINANCIAL DATA:
Depreciation and amortization......... $ 6,010 $ 5,937 $ 6,174
Capital expenditures.................. 2,079 3,726 3,154
<CAPTION>
AS OF
JANUARY 23,
1998
-----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD AND
AS OF JANUARY 23, 1998):
Inventories........................... $ 13,317 $ 13,239 $ 15,820 $ 20,100
Net property and equipment............ 16,044 16,649 16,070 23,950
Total assets.......................... 160,586 157,857 153,786 380,047
Total debt, including current
maturities........................... 306,500
Stockholder's equity.................. 67,803(a)
</TABLE>
- - - - --------
(a) Reflects initial equity of $82.5 million less an after tax write-off of
in-process research and development.
32
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT
The following unaudited pro forma condensed combined financial statement
(the "Unaudited Pro Forma Condensed Combined Statement of Operations") of the
Company is based on the audited financial statements of the Company which are
included elsewhere in this Prospectus, as adjusted to illustrate the estimated
effects of the Acquisition and Financing Transactions. The unaudited pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The Unaudited Pro Forma Condensed
Combined Statement of Operations and accompanying notes should be read in
conjunction with the historical financial statements of the Company and other
financial information pertaining to the Company including "The Acquisition,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
The Unaudited Pro Forma Condensed Combined Statement of Operations has been
prepared to give effect to the Transactions as if they had occurred on January
1, 1997. The Acquisition was accounted for using the purchase method of
accounting. The total purchase price for the Company will be allocated first
to tangible and identifiable intangible assets and liabilities based upon
independent appraisals and management's estimates of their fair market values,
with the remainder allocated to goodwill. The Unaudited Pro Forma Condensed
Combined Statement of Operations does not purport to be indicative of what the
Company's financial position or results of operation would actually have been
had the Acquisition and Financing Transactions been completed at the beginning
of the period indicated or to project the Company's results of operations for
future periods.
Pursuant to the Master Customer Services Agreement entered into as part of
the Asset Purchase Agreement, BFC and its affiliates provide various
transition services that replace, at the Company's option, substantially all
of the corporate infrastructure services at varying prices depending on the
service. A significant portion of the services will be provided at no charge
for either 90 days, and thereafter at the agreed upon rates for such services,
or 135 days, and thereafter at a formula price increasing in 25% increments
each 60 day period thereafter to 100% of the agreed upon rates for such
services 315 days after the Acquisition Closing and thereafter. The Unaudited
Pro Forma Condensed Combined Financial Statement does not reflect any cost
savings that may be achieved by the Company as a result of the terms of the
Master Customer Services Agreement. See "The Acquisition--Master Customer
Services Agreement."
33
<PAGE>
EAGLE FAMILY FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BBNA
(PREDECESSOR) PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- ---------
<S> <C> <C> <C>
Sales............................. $229,370 $229,370
Cost of goods sold................ 107,674 $ (1,959)(/1/) 105,715
-------- -------- --------
Gross profit...................... 121,696 1,959 123,655
Distribution expense.............. 13,464 (620)(/2/) 12,844
Marketing expense................. 55,074 (3,369)(/3/) 51,705
General & administrative expense.. 13,184 11,180 (/4/) 24,364
-------- -------- --------
Operating income.................. 39,974 (5,232) 34,742
Interest expense.................. -- 25,959 (/5/) 25,959
Other income...................... 79 79
-------- -------- --------
Income before taxes............... 40,053 (31,191) 8,862
Income taxes...................... 16,236 (12,824)(/7/) 3,412(/6/)
-------- -------- --------
Net income........................ $ 23,817 $(18,367) $ 5,450
======== ======== ========
</TABLE>
<TABLE>
<S> <C>
OTHER FINANCIAL DATA:
EBITDA................................................................. $50,205
Depreciation and amortization(/8/)..................................... 16,354
Capital expenditures................................................... 3,154
Cash interest expense.................................................. 25,068
Ratio of earnings to fixed charges(/9/)................................ 1.3
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations.
34
<PAGE>
EAGLE FAMILY FOODS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1997 reflects the Transactions as if they had occurred
on January 1, 1997.
<TABLE>
<CAPTION>
YEAR
ENDED
DEC. 31,
1997
--------
<S> <C>
(1)Reflects the following:
Estimated reduction of depreciation expense due to increase in
remaining useful life of property and equipment net of increase in
value resulting from allocation of acquisition purchase price....... $ (411)
Elimination of allocated costs....................................... (2,048)
Estimated additional employee benefits required on a stand-alone ba-
sis................................................................. 500
-------
$(1,959)
-------
(2)Reflects elimination of allocated distribution expense............ $ (620)
-------
(3)Reflects the following:
Elimination of marketing expense and allocations..................... $(8,447)
Estimated additional marketing expense required on a stand-alone
basis............................................................... 5,078
-------
$(3,369)
(4)Reflects the following:
Elimination of general and administrative expense and allocations.... $(7,240)
Estimated additional general and administrative expense required on
a stand-alone basis................................................. 8,720
Reflects elimination of BBNA amortization............................ (2,925)
Represents amortization expense for the following:
Covenant not to compete and not to solicit to be amortized over
contract period of 5 years.......................................... $ 4,200
Other Intangibles amortized over 40 years............................ 8,425
-------
12,625
-------
$11,180
-------
(5)Reflects interest expense as follows:
Interest resulting from $16,500 Revolving Credit Facility at an
assumed rate of 7.625%.............................................. $ 1,258
Interest resulting from $175,000 Term Loan Facility at an assumed
rate of 7.875%...................................................... 13,748
Interest resulting from $115,000 Senior Subordinated Notes at a rate 10,062
of 8.75%............................................................ -------
Cash Interest Expense.............................................. 25,068
Capitalized debt issuance costs to be amortized over debt period..... 891
-------
Total Interest Expense............................................. $25,959
=======
(6)Reflects income tax effects of above adjustments at an assumed $ 3,412
rate of 38.5%...................................................... =======
(7) Reflects the difference between historical BBNA Business taxes provided
and the assumed pro forma tax provision.
(8) Includes amortization of debt issuance costs which is included in interest
expense in Unaudited Pro Forma Condensed Combined Statement of Operations.
(9) For purposes of this calculation, "earnings" consists of income before
income taxes and fixed charges. "Fixed Charges" consist of interest,
amortization of deferred financing costs and a portion of lease expense.
(10) The following non-recurring pre-tax charges were not reflected in the
Unaudited Pro Forma Condensed Combined Statement of Operations:
Research and development in process with no alternative use to be
written off concurrent with acquisition on January 23, 1998......... $23,900
=======
Master Customer Services Agreement to be amortized over expected
term of use of one year............................................. $17,300
=======
Additional cost of sales due to increase in fair value of inventory.. $ 5,029
=======
</TABLE>
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The Company manufactures and markets a portfolio of leading dry-grocery food
products with widely recognized and established brands, including Eagle Brand,
ReaLemon and Cremora. Prior to the Acquisition, (i) Eagle Family Foods had not
had any significant assets or liabilities, and had not conducted any business,
other than in connection with the Transactions, and (ii) the BBNA Business
operated as a business unit of BFC and was not accounted for as a distinct
legal entity.
Over the past three years, BFC has undertaken several important initiatives
relating to a redesign of the BBNA Business. Between January 1, 1995 and
December 31, 1997, BFC invested approximately $14.6 million in market research
and technical research and development which resulted in the introduction of
several sweetened condensed milk product line extensions and in the
development of new products which the Company intends to launch in the
marketplace. BFC also sought to improve trade practices through policies aimed
at improving controls on discounts and deductions to the retail trade and
reducing inefficient trade promotion spending and trade incentives that
encouraged forward buying by customers. Historically, significant trade
incentives had been periodically offered to BBNA Business customers across its
product lines. In 1995, management began to reduce these trade incentives.
Historical expenses consist in part of corporate allocations from BFC and
Borden, Inc. that were charged to the BBNA Business. Allocations include
certain marketing, general and administrative costs incurred at the corporate
level such as executive management, group and general insurance, retirement
benefits, accounting, legal, tax, credit and information services, as well as
costs for resources such as sales and administration that were shared with
other operating entities of BFC and its affiliates. For a discussion of the
allocation methodology used, see Note 2 to the Company's Combined Financial
Statements for the years ended December 31, 1997, 1996 and 1995 included
elsewhere in this Prospectus. Management believes that the level of the
historical operating expenses for the BBNA Business may not be indicative of
the actual expenses required to operate the Company on a stand-alone basis.
Management is establishing a new corporate infrastructure to operate the
Company on a stand-alone basis. See "Unaudited Pro Forma Condensed Combined
Statement of Operations."
Set forth below is a discussion of the financial condition and results of
operations of the BBNA Business for the fiscal years ended December 31, 1995,
1996 and 1997. The following discussion should be read in conjunction with the
Combined Financial Statements of the Company and the notes thereto, and the
Unaudited Pro Forma Condensed Combined Financial Statement, included elsewhere
in this Prospectus. References herein to 1995, 1996 and 1997 refer to the
Company's fiscal years ended December 31, 1995, 1996 and 1997, respectively,
unless the context otherwise requires.
36
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the results of operations of the Company as a
percentage of sales for the years ended 1995, 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Sales................................................ 100.0% 100.0% 100.0%
Cost of goods sold................................... 45.6 47.9 46.9
------- ------- -------
Gross profit......................................... 54.4 52.1 53.1
Distribution expense................................. 7.0 6.4 5.9
Marketing expense.................................... 28.3 27.2 24.0
General & administrative expense..................... 5.9 5.9 5.7
------- ------- -------
Operating Income..................................... 13.2% 12.6% 17.4%
======= ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Sales. The Company's sales were $229.3 million for the year ended December
31, 1997, as compared to $230.4 million in 1996, a decrease of $1.1 million,
or 0.5%. The decrease reflected an increase of $4.1 million in sales of
sweetened condensed milk, offset by decreases of $0.4 million in ReaLemon
product line sales, $3.9 million in non-dairy creamer sales and $1.0 million
in Borden Egg Nog sales.
Cost of Goods Sold. Cost of goods sold was $107.7 million for the year ended
December 31, 1997, as compared to $110.4 million in 1996, a decrease of $2.7
million, or 2.4%. Expressed as a percentage of sales, cost of goods sold in
1997 decreased 1% from the prior year, to 46.9%, primarily as a result of milk
prices returning to normal levels.
Distribution Expense. Distribution expense was $13.5 million for the year
ended December 31, 1997, as compared to $14.6 million in 1996, a decrease of
$1.1 million, or 7.5%. Expressed as a percentage of sales, distribution
expense decreased to 5.9% in 1997 from 6.4% in the prior year. The decrease in
distribution expense was primarily the result of the realization of
efficiencies within the distribution system, thereby lowering overall
distribution expense.
Marketing Expense. Marketing expense was $55.1 million for the year ended
December 31, 1997, as compared to $62.7 million in 1996, a decrease of $7.6
million, or 12.1%. Expressed as a percentage of sales, marketing expense
decreased to 24.0% in 1997 from 27.2% in 1996. Trade promotion expenses in the
1997 period decreased 9.6%, or $2.1 million, primarily as the result of the
elimination of off-season trade promotions and a lower level of new product
introduction activity. Advertising and consumer promotion expenses in the 1997
period decreased 12.3%, or $2.5 million, primarily as the result of a
reduction in higher advertising and consumer promotion expenses incurred in
1996 to support line extensions introduced in that year. Other marketing
expenses (advertising and promotion management, variable sales, field
sales/sales support and market research) declined $3.0 million primarily as
the result of sales force reductions and a decrease in market research
expense.
General & Administrative ("G&A") Expense. Total G&A expense was $13.2
million for the year ended December 31, 1997, as compared to $13.5 million for
the prior year, a decrease of $0.3 million, or 2.2%. Expressed as a percentage
of sales, G&A expense decreased to 5.7% in 1997 from 5.9% in the prior year.
Operating Income. As a result of the factors discussed above, the Company's
operating income was $40.0 million for the year ended December 31, 1997, as
compared to $29.2 million in the prior period, an increase of $10.8 million,
or 37.0%.
37
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Sales. The Company's sales were $230.4 million for the year ended December
31, 1996, as compared to $225.3 million in 1995, an increase of $5.1 million,
or 2.3%. The increase was primarily due to a $2.5 million increase in sales of
non-dairy creamer products and a $2.3 million increase in ReaLemon product
lines sales. Non-dairy creamer sales increased primarily due to higher prices
for private label, increased industrial sales and increased sales of branded
Cremora as the Company abandoned its previous "every day low price" strategy
and replaced it with a strategy focused on couponing and advertising Cremora's
premium taste. ReaLemon sales increased primarily due to the introduction of
the 15 oz. squeeze bottle.
Cost of Goods Sold. Cost of goods sold was $110.4 million for the year ended
December 31, 1996, as compared to $102.7 million in 1995, an increase of $7.7
million, or 7.5%. Expressed as a percentage of sales, cost of goods sold
increased to 47.9% in 1996 from 45.6% in 1995. The increase in cost of goods
sold as a percentage of sales was primarily the result of increased milk and
lemon concentrate prices in the period. Milk prices reached historic highs in
1996 and lemon and lime concentrate prices rose in 1996 relative to 1995.
Distribution Expense. Distribution expense was $14.6 million for the year
ended December 31, 1996, as compared to $15.7 million in 1995, a decrease of
$1.1 million, or 7.0%. Expressed as a percentage of sales, distribution
expense decreased to 6.4% in 1996 from 7.0% in 1995. The decrease in
distribution expense was primarily the result of the rationalization of the
distribution system through the closure of two warehouses.
Marketing Expense. Marketing expense was $62.7 million for the year ended
December 31, 1996, as compared to $63.8 million in 1995, a decrease of $1.1
million, or 1.7%. Expressed as a percentage of sales, marketing expense
decreased to 27.2% in 1996 from 28.3% in 1995. Trade promotion expenses in
1996 decreased 17.8%, or $4.7 million, compared to 1995, primarily as the
result of BFC management's de-emphasis of "push" marketing tactics. As a
result of the Company's new strategy, advertising and consumer promotion
expenses increased 11.6%, or $2.1 million, in 1996, as compared to 1995.
Market research expense increased $1.2 million, or 39.0%, in 1996 to support
the Company's line extensions and new product development efforts. Other
selling expenses increased 2.5%, or $0.4 million.
General & Administrative Expense. Total G&A expense was $13.5 million for
the year ended December 31, 1996, as compared to $13.3 million in 1995, an
increase of $0.2 million, or 1.5%. Expressed as a percentage of sales, G&A
expense was 5.9% in 1996 and 1995.
Operating Income. As a result of the factors discussed above, the Company's
operating income was $29.2 million for the year ended December 31, 1996, as
compared to $29.8 million in 1995, a decrease of $0.6 million, or 2.0%.
LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Transactions, interest payments on the Notes and
interest and principal payments under the Senior Credit Facilities represent
significant cash requirements for the Company. Borrowings under the Senior
Credit Facilities bear interest at floating rates and require interest
payments on varying dates. Borrowings under the Senior Credit Facilities
consist principally of the $175.0 million Term Loan Facility maturing in 2005.
In addition, the Senior Credit Facilities include the $70.0 million Revolving
Credit Facility maturing in 2004, of which $16.5 million was outstanding at
the Acquisition Closing. The Term Loan Facility amortizes $1.0 million in each
of the years 1998 through 2002, and $10.0 million, $40.0 million and $120.0
million in the years 2003, 2004 and 2005, respectively. See "Description of
Senior Credit Facilities."
38
<PAGE>
The Company's remaining liquidity needs are for capital expenditures and
increases in working capital. The Company expects to spend no more than $12.0
million on capital projects in 1998, of which $5.0 million is expected to fund
management information systems initiatives, $2.5 million is expected to fund
maintenance expenditures in existing facilities and the balance is expected to
fund discretionary capital projects associated with new products. See
"Business--Management Information Systems Initiatives." The Senior Credit
Facilities impose annual limits on the Company's capital expenditures and
investments.
The Company's primary sources of liquidity will be cash flows from
operations and borrowings under the Revolving Credit Facility. Immediately
after consummation of the Transactions, approximately $53.5 million was
available to the Company for borrowings under the Revolving Credit Facility.
See "Description of Senior Credit Facilities."
SEASONALITY
The Company's sales, net income and cash flows are affected by a seasonal
bias toward the fourth quarter of the year due to increased sales during the
holiday season. Three of the Company's six major product lines (Eagle Brand
and the Company's other sweetened condensed milk products, Borden Egg Nog and
None Such) are consumed primarily during the November and December holiday
seasons. In recent years, approximately 45% of the Company's sales have
occurred in the last quarter of the year. As a result of this seasonality, the
Company's working capital needs have historically increased throughout the
year, peaking in October, which will require the Company to draw additional
amounts on its Revolving Credit Facility.
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
audited financial statements of the Company included elsewhere in this
Prospectus.
RECENTLY ISSUED ACCOUNTING STATEMENTS
The Financial Accounting Standards Board has recently issued two new
accounting standards, Statement No. 130, "Reporting Comprehensive Income" and
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements will affect the disclosure requirements for the
1998 reporting period. The Company is currently evaluating the effect of these
new statements.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on the Company's intention to create a fully stand-alone dedicated
management information system early in 1999 that incorporates software that
recognizes four digits, the Company does not believe the Year 2000 issue will
have a material adverse impact on the operations of the Company.
The Company is in the process of initiating formal communications with all
of its significant suppliers and large customers to determine the extent to
which the Company is vulnerable to those third parties' failure to remediate
their own Year 2000 issues, and the Company's current assessments are based on
presently available information. However, there can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion
that is incompatible with the Company's systems, would not have material
adverse effect on the Company.
39
<PAGE>
BUSINESS
OVERVIEW
The Company manufactures and markets a portfolio of leading dry-grocery food
products with widely recognized and established brands, including Eagle Brand,
ReaLemon and Cremora. In their defined markets within the United States, three
of the Company's six principal brands maintain the number one position, two
brands are the only products available and one brand holds the number two
position. The Company's leading market positions and well recognized brand
names have enabled the Company to consistently generate strong cash flow. For
the year ended December 31, 1997, the Company's sales were $229.3 million, and
the Company's pro forma EBITDA was $50.2 million.
The Company's three largest product lines, Eagle Brand, ReaLemon and
Cremora, accounted for approximately 94% of the Company's 1997 sales. Eagle
Brand and the Company's other sweetened condensed milk products are
collectively the market leader in the U.S. sweetened condensed milk category,
and account for a 72% share of this category. Sweetened condensed milk is a
commonly used ingredient in many popular dessert recipes such as cheesecake
and pumpkin pie. Eagle Brand is one of a small number of U.S. branded products
with a heritage that extends over 140 years. In 1997, the Company's sweetened
condensed milk products accounted for 48% of the Company's sales. The
Company's ReaLemon product lines are the market leaders in the lemon and lime
juice category, accounting for a 49% market share, and are the only nationally
distributed branded products in the category. ReaLemon, a convenient and cost
effective alternative to fresh squeezed lemon juice, is a popular ingredient
in beverages and marinades and is used in the preparation of foods such as
poultry and fish. In 1997, the ReaLemon product lines accounted for 25% of the
Company's sales. Cremora is the number two branded powdered non-dairy creamer
in the U.S., accounting for an 11% market share. Powdered non-dairy creamer is
used in coffee and other hot beverages. In 1997, the Company's powdered non-
dairy creamer product lines accounted for 21% of the Company's sales. The
Company's other three brands accounted for 6% of the Company's 1996 sales and
include None Such, the leading brand of mincemeat pie filling with a 69%
market share, Borden Egg Nog, the only shelf-stable egg nog, and Kava, the
only acid-neutralized coffee.
The Company's principal executive office is located at 220 White Plains
Road, Tarrytown, New York 10591, and the telephone number is (914) 631-3100.
The Company was incorporated in the State of Delaware in November 1997.
40
<PAGE>
COMPETITIVE STRENGTHS
The following competitive strengths serve as the foundation for the
Company's business strategy:
. LEADING MARKET POSITIONS. In the United States, five of the Company's six
brands are the category leaders in their defined markets, while Cremora
maintains the number two position in its category. Eagle Brand faces
limited branded competition and ReaLemon, the only national branded
product in its category, faces competition primarily from private label
products. The Company believes that its strong market shares enable it to
achieve superior distribution and shelf space allocation, realize
economies of scale in trade promotion and advertising, and provide a
strong platform for introducing product line extensions and new products.
MARKET POSITION OF THE COMPANY'S PRODUCT LINES
<TABLE>
<CAPTION>
COMPANY NUMBER TWO
MARKET SHARE BRANDED
COMPANY'S ------------------- COMPETITOR'S
PRODUCT LINE PRINCIPAL BRAND POSITION PERCENTAGE PERCENTAGE
------------ --------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Sweetened condensed milk Eagle Brand 1 72% 10%
Lemon & lime juice ReaLemon and ReaLime 1 49% 8%
Non-dairy creamer Cremora 2 11% NA
Shelf-stable egg nog Borden Egg Nog 1 100% 0%
Mincemeat pie filling None Such 1 69% 18%
Acid-neutralized coffee Kava 1 100% 0%
</TABLE>
. STRONG BRAND NAME RECOGNITION. The leading market positions of the
Company's largest products are supported by strong brand awareness. Eagle
Brand, ReaLemon and Cremora maintain brand awareness rates of 78%, 85%
and 73%, respectively, primarily due to the heritage of these brands.
Eagle Brand, the Company's oldest brand, was introduced 141 years ago.
ReaLemon has been a staple in American homes for over 60 years, while
Cremora has been marketed for over 35 years. In addition to their long
histories, Eagle Brand and ReaLemon are listed as key ingredients in a
number of widely disseminated classic American recipes. The brand equity
of the Company's products will represent a significant competitive
strength as the Company launches product line extensions and seeks to
build category growth.
. EXTENSIVE SALES AND DISTRIBUTION BASE. The Company maintains an
established national distribution base for its products, which are sold
to retail grocery stores and other channels directly and through a
comprehensive network of over 60 independent food brokers. Eagle Brand
and ReaLemon benefit from 100% national distribution, while Cremora
maintains broad distribution at 79%. Eagle Brand and ReaLemon are
particularly successful in securing shelf-space as consumers typically
purchase these products as part of a larger basket of ingredients,
resulting in greater sales for retailers.
. STRONG OPERATING MARGINS AND ANNUAL CASH FLOW. The Company has strong
operating margins and annual cash flow. For the year ended December 31,
1997, the Company's pro forma gross profit margin was 53.9% while the pro
forma EBITDA margin was 21.9%. The Company believes that its strong
margins result from the established brand equity of its product
portfolio, product quality and the strength of its sales and distribution
network. Management believes that, within the food manufacturing
industry, the Company has relatively low maintenance capital expenditure
requirements which support the Company's strong cash flow. The Company's
strong operating margins and annual cash flow provide it with financial
resources to fund its marketing, sales, distribution and new product
development efforts.
. EXPERIENCED AND FOCUSED MANAGEMENT. The Company's new senior management
team, which assumed control of the Company upon the consummation of the
Acquisition, possesses considerable experience in the food products
industry. The Company's Chief Executive Officer and President, John O'C.
Nugent, has 30 years of consumer products experience. In the past
41
<PAGE>
ten years, he has held general manager positions with Unilever's food
operations, both in the United States and the United Kingdom, and was most
recently President of Johnson & Johnson Consumer Products, Inc. William A.
Lynch, the Company's Chairman and Chief Operating Officer, has 25 years of
experience in the consumer packaged goods industry, including senior
marketing positions at Borden, Inc. for all of the Company's six brands,
new products and their related food broker system. During the past ten
years, Mr. Lynch founded and operated a number of successful
entrepreneurial ventures. The new senior management team invested
approximately $1.7 million in the equity of Holdings. In addition to
management's purchase of an equity interest in Holdings, Holdings has
better aligned the Company's new senior management team's incentives with
the success of the Company through the issuance of restricted stock and
the adoption of other incentive initiatives.
INDUSTRY OVERVIEW
The U.S. food industry is characterized by relatively stable annual growth
based on modest price and population increases. Over the last ten years, the
industry has experienced consolidation as competitors have shed non-core
business lines and made strategic acquisitions to strengthen category
positions, generate economies of scale in distribution, production and raw
material sourcing and create leverage relative to the retail grocery trade
through better service and broader market presence.
Grocery retailers have also utilized mergers and acquisitions to consolidate
within their industry. Growth in the mass merchandiser channel has outpaced
growth in the retail grocery channel, and mass merchandisers have consequently
increased their share of food sales relative to the retail grocery and drug
store channels. Furthermore, the convenience store channel has maintained a
constant presence within the total grocery industry. To expand their potential
markets, food companies are broadening their distribution channels to include
greater focus on mass merchandisers and other alternative distribution
channels. Another growth opportunity in the U.S. for branded food companies is
the food service distribution channel, which supplies restaurants, hospitals,
schools and other institutions. In addition to the U.S. market, certain
international markets with above average population growth and expanding
economies offer significant growth opportunities for U.S. companies. These
international markets include Latin America, Central Europe, Russia and the
Pacific Rim.
BUSINESS STRATEGY
The Company's goal is to increase its sales and profitability through the
following initiatives:
. GROW BASE BUSINESS.
Increase Consumer Marketing. The Company plans to increase marketing
expenditures on its existing brands to reverse a decline in marketing
expenditures that occurred between 1995 and 1997. The marketing
strategies will be redirected to emphasize consumer "pull" tactics, such
as advertising and consumer promotions, to enhance brand equity and
generate sales across the Company's product lines. Marketing will be
directed primarily toward building category growth and, to a lesser
extent, gaining market share.
Expand into New Distribution Channels. Industry data indicates that in
the last several years non-grocery distribution channels, such as food
service channels, mass merchandise retailers and super centers, have
grown faster than traditional grocery distribution channels. Management
intends to capitalize on this growth opportunity by establishing a
dedicated sales staff and expanding its broker network to focus on these
alternative distribution channels.
42
<PAGE>
Target Ethnic Markets. Management believes that growth opportunities for
Eagle Brand exist in the Hispanic-American and Asian-American communities
and that consumption levels of sweetened condensed milk among these
communities are significantly higher than the national average.
Management plans to implement marketing efforts specifically targeted at
increasing brand awareness and usage in the Hispanic-American and Asian-
American communities.
. LAUNCH LINE EXTENSIONS AND NEW PRODUCTS. The Company intends to launch
line extensions and new products in order to capitalize on the $14.6
million invested by BFC in market research and technical research and
development from 1995 to 1997, as well as on the substantial brand equity
and consumer awareness of the Company's existing products. The Company
continues to consumer test several new products and expects to begin
rolling them out during 1998 and 1999. These initiatives will build on
several recent line extensions. For example, the Company in 1994 and 1995
extended its Eagle Brand line to include a range of fat-free and low-fat
sweetened condensed milk products which generated approximately
$14.0 million in sales in 1997. In 1997, a chocolate flavored sweetened
condensed milk product was launched and the Company will use consumer-
generated information, as well as product research, to optimize the
presentation and positioning of this new product. The Company also
intends to license certain of its widely recognized brand names to third
parties.
. TARGET INTERNATIONAL MARKETS. The Company intends to expand into new
international markets by leveraging the strength of its existing brands.
The Company will specifically target distribution of Eagle Brand in Latin
American markets where management believes that consumption of sweetened
condensed milk is significantly higher than average U.S. per capita
consumption. In 1997, only 1% of the Company's sales were generated
outside of the U.S. and Canada.
. PURSUE STRATEGIC ACQUISITIONS. The Company intends to pursue strategic
acquisitions of additional dry-grocery food brands with leading market
positions and significant growth opportunities. Given that four of the
Company's six principal brands are used in the preparation of desserts,
one area of acquisition focus will be on brands in the dessert segment.
By adding new brands through strategic acquisitions, the Company believes
it can achieve synergies in manufacturing, marketing and distribution
across a growing portfolio of leading food brands.
43
<PAGE>
PRODUCTS AND MARKETS
The Company manufactures and markets a portfolio of widely recognized, dry-
grocery food products that are leaders within their respective markets. The
portfolio is comprised of the Company's three largest product lines, Eagle
Brand, ReaLemon and Cremora, and three other brands, Borden Egg Nog, None Such
and Kava. The retail grocery channel is the Company's primary distribution
channel, with additional sales to mass merchandisers, food service customers,
the U.S. military and industrial and private label businesses. The Company's
U.S. food business is complemented by a strong presence in Canada and Puerto
Rico.
The following table sets forth sales data for each of the Company's product
lines:
<TABLE>
<CAPTION>
PERCENTAGE
PRODUCT LINE COMPANY'S PRINCIPAL BRANDS 1997 SALES OF SALES
------------ -------------------------- ----------- ----------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Sweetened condensed milk Eagle Brand $109.5 47.8%
Lemon & lime juice ReaLemon and ReaLime 58.4 25.5
Non-dairy creamer Cremora 47.8 20.8
Shelf-stable egg nog Borden Egg Nog 4.3 1.9
Mincemeat pie filling None Such 5.0 2.1
Acid-neutralized coffee Kava 4.3 1.9
------ -----
Total $229.3 100.0%
====== =====
</TABLE>
EAGLE BRAND. The Company manufactures and markets Eagle Brand and additional
sweetened condensed milk products. Sweetened condensed milk is used by
consumers as a topping and an ingredient in dessert recipes and a number of
other food recipes. With a heritage that extends over 140 years, Eagle Brand
sweetened condensed milk is the leading product in the Company's sweetened
condensed milk business and one of the oldest and most trusted brand names in
the U.S. Eagle Brand enjoys strong consumer awareness, with a brand awareness
rate of 78%. In addition to classic Eagle Brand sweetened condensed milk, the
Company's other branded sweetened condensed milk products include Magnolia and
Meadow Gold, Eagle Brand low fat and fat free products, Eagle Brand Amaretto
flavored sweetened condensed milk, and Eagle Brand Creamy Chocolate flavor,
which the Company began shipping in September 1997. The Company's Eagle Brand
products carry the Borden and Elsie trademarks, thereby enhancing the brand
awareness of this line. Management believes significant new product
opportunities exist for expanding into new categories, capitalizing on the
strength of the Eagle Brand equity.
Eagle Brand is the leader of the sweetened condensed milk category, with a
62% dollar market share. Total dollar market share for the Company's sweetened
condensed milk line, including Magnolia and Meadow Gold, is 72%. Eagle Brand
has a U.S. distribution base of 100%. In addition to U.S. sales, Eagle Brand
products are sold in Canada.
The retail grocery channel is the primary outlet for the Company's sweetened
condensed milk products and accounted for approximately 75% of the Company's
sweetened condensed milk sales for the year ended December 31, 1997. The
balance of the Company's sweetened condensed milk sales are made through other
channels, including mass merchandisers, food service customers, export
markets, the U.S. military and a co-pack relationship with a third-party
distributor.
REALEMON. The Company manufactures and markets ReaLemon lemon juice and
ReaLime lime juice from concentrate. Consumers use ReaLemon and ReaLime
primarily as a flavoring or recipe ingredient, such as for accenting
beverages, marinating poultry, meat and fish, enhancing salad dressings and
complementing other food and beverage products. ReaLemon's success is
supported
44
<PAGE>
by consumer trust in the brand's "fresh lemon taste" and over 60 year
heritage. In recent surveys commissioned by the Company, ReaLemon is
consistently ranked significantly higher than the competition on the top four
imagery attributes contributing to purchase interest ("high quality," "fresh
lemon taste," "brand you can trust" and "doesn't taste watered down").
Management believes that the brand's considerable strength provides a solid
platform for new products and licensing opportunities. The Company currently
has a licensing arrangement with Brach & Brock Confections, Inc. to
manufacture "ReaLemon" candies. Management believes the Company can increase
revenues of ReaLemon through new product introductions and licensing
opportunities, including licensing its use in frozen concentrate, sauces and
marinades, candy and cough drops. The Company intends to increase usage
through in-store promotion campaigns and tie-ins with complementary products.
ReaLemon and ReaLime are the only nationally branded shelf-stable products
within the U.S. retail lemon and lime juice market. The ReaLemon product lines
account for 49% dollar market share of the total lemon and lime juice
category. The product lines' strength are further demonstrated by their 100%
national distribution. The retail grocery channel is the primary outlet for
the Company's ReaLemon product lines and accounted for approximately 82% of
ReaLemon sales in the year ended December 31, 1997. The Company also markets
the ReaLemon product lines to mass merchandisers, food service customers,
export markets and the U.S. military.
CREMORA. The Company manufactures and markets powdered non-dairy creamer
under the Cremora brand name and also manufactures powdered non-dairy creamer
for private label and industrial customers. Non-dairy creamer is used as a
lightener in hot beverages, such as coffee and tea. Branded Cremora is sold
primarily through the retail grocery channel and accounted for 50% of the
Company's 1997 powdered non-dairy creamer sales. Private label sales accounted
for 31% of sales, with the balance primarily attributable to bulk sales to
industrial customers (who use non-dairy creamer in producing other food
products).
Cremora, with an 11% dollar market share, holds the number two position in
the powdered non-dairy creamer market. Introduced in 1962, Cremora has 73%
brand awareness and a 79% national distribution base. Management believes that
it can use Cremora's strong brand equity to boost sales through new marketing
campaigns and by introducing a superior, reformulated product, line extensions
and new products.
BORDEN EGG NOG. Borden Egg Nog is marketed by the Company and supplied by a
third party through a seasonal purchase order arrangement. Borden Egg Nog is
the only shelf-stable egg nog available in the market and competes with
refrigerated egg nog. Egg nog is generally consumed during the holidays as a
beverage or mixed with liquors as a cocktail. As such, sales of Borden Egg Nog
are highly seasonal, with approximately 90% of sales occurring in the last
three months of the year. Borden Egg Nog is distributed through the retail
grocery channel.
NONE SUCH. The Company manufactures and markets two flavors of None Such:
Regular and Brandy & Rum. None Such mincemeat is used in pies, cookies and
pastries, and is consumed primarily during the holiday season. None Such has a
heritage dating back to 1885, and holds a 69% dollar share of the mincemeat
category. None Such is distributed through the retail grocery channel.
Management believes that the product's strong brand equity could be used in
line extensions to increase sales.
KAVA. Kava is marketed by the Company and co-packed by a third party
pursuant to the Kava Co-Pack Agreement. Kava is a unique instant coffee,
differentiated as the only brand that is "90% acid-neutralized." Management
believes that Kava's customer loyalty is significantly higher than that of
most other instant coffee brands, and is well positioned to remain high given
the brand's unique
45
<PAGE>
position as an acid-neutralized product. Management believes that Kava's
strong brand equity and unique product attributes provide an excellent
platform for targeted marketing efforts and line extensions.
MARKETING, SALES AND DISTRIBUTION
The Company's marketing programs consist of media advertising, consumer
promotions, trade promotion and co-promotion of certain products as
ingredients in recipes. Media advertising, including television, print and
radio advertising, is employed for Eagle Brand, ReaLemon and Cremora in an
effort to continuously build brand equity and awareness. Since many of the
Company's brands are purchased primarily as ingredients for recipes, the
Company frequently promotes recipes incorporating its brands and has co-
promoted these brands with other food companies, such as Tyson Foods, Inc. and
Keebler Corporation, whose products are also incorporated into these recipes.
The Company also promotes its seasonal brands, None Such and Borden Egg Nog,
with recipe promotions during the holiday season. In recent years, total
marketing expenditures have declined due primarily to reductions in trade
promotion expenses in order to de-emphasize "push" marketing tactics.
Management intends to reverse the decline in marketing expenditures by
increasing marketing spending and redirecting such spending to advertising and
consumer promotions, emphasizing consumer "pull" tactics in an effort to grow
brand equity and increase sales.
The Company sells its retail products in the U.S. through over 60
independent food brokers who represent the Company to the retail grocery
trade. The Company also sells its products to non-grocery channels directly
and through brokers, depending on the size and needs of the customer.
PRODUCTION AND FACILITIES
The Company believes that its production systems are among the lowest cost,
highest-quality manufacturing systems in the markets in which the Company
competes. Except for Kava and sweetened condensed milk in Canada, which are
produced under co-pack arrangements pursuant to the Kava Co-Pack Agreement and
the Canadian Agreements, and Borden Egg Nog, which the Company obtains under a
seasonal purchase order, the Company produces all of its products in four
Company-owned manufacturing facilities, as described in the following table.
Management believes that the Company's manufacturing plants have sufficient
capacity to accommodate the Company's needs for the foreseeable future.
The following table sets forth the location, approximate size and products
manufactured at each of the Company's manufacturing facilities:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET PRODUCTS MANUFACTURED
-------- ----------- ---------------------
<S> <C> <C>
Wellsboro, Pennsylvania 119,000 Sweetened condensed milk, mincemeat pie
filling
Starkville, Mississippi 49,000 Sweetened condensed milk
Waterloo, New York 102,100 Lemon juice and lime juice
Chester, South Carolina 77,300 Powdered non-dairy creamer
</TABLE>
In addition to the manufacturing facilities described above, the Company
leases 9,792 square feet of office space in Tarrytown, New York, leases 14,366
square feet of office and laboratory space in Columbus, Ohio, leases 34,000
square feet of warehouse space in Chester, South Carolina and uses public
warehouse space in numerous locations in variable amounts as needed.
RAW MATERIALS AND SUPPLIERS
The primary raw materials used in the Company's operations include milk,
sugar, lemon and lime juice concentrate, vegetable oil, corn syrup and
packaging materials. The Company purchases its raw
46
<PAGE>
materials, all of which are widely available, from numerous independent
suppliers. Acid-neutralized coffee and egg nog are obtained in final product
from co-packers.
COMPETITION
The food industry is highly competitive. Numerous brands and products
compete for shelf-space and sales, with competition based primarily on price
and quality. The Company competes with a significant number of competitors of
varying sizes, including divisions or subsidiaries of larger companies. The
most significant branded competition encountered by the Company is Nestle's
Coffee-mate, which competes with Cremora. However, most of the competition
encountered by the Company is from private label brands. A number of these
branded and private label competitors have broader product lines as well as
substantially greater financial and other resources available to them.
TRADEMARKS, COPYRIGHTS AND PATENTS
The Company owns a number of trademarks, licenses and patents. The Company's
principal trademarks include Eagle; Eagle Brand, the Dessert Maker; ReaLemon;
ReaLime; Cremora; and None Such which the Company has registered in the United
States and various foreign countries. The Company holds a perpetual, exclusive
and royalty-free license to use the Borden and Elsie trademarks on products on
which they are currently used in the BBNA Business, together with certain
product extensions. The Borden and Elsie trademarks are currently used on (i)
the entire line of Eagle Brand products including condensed or evaporated
milk, and (ii) shelf-stable egg nog. The Borden trademark is also currently
used on Cremora non-dairy creamer. The Company also holds a perpetual,
exclusive and royalty-free license to use the Borden trademark on None Such
mincemeat, Magnolia condensed or evaporated milk, and Kava acid-neutralized
coffee. In addition, as assignee from BFC, the Company holds an exclusive and
royalty-free license from Southern Foods Group, L.P. to use the Meadow Gold
trademark on sweetened condensed milk in the United States for a five year
term, which is renewable automatically for subsequent five year terms and
terminable at the option of the Company upon one year's notice and, under
certain limited circumstances, by the licensor. Such brand names are
considered to be of fundamental importance to the business of the Company due
to their brand identification and ability to maintain brand loyalty. The
Company has granted BFC an exclusive, perpetual, royalty-free license to use
the ReaLemon and ReaLime trademarks in certain foreign markets including
Europe, the Middle East and Hong Kong. A third party owns the Cremora
trademark in Africa and the Middle East. The Company also owns various patents
and copyrights associated with the business. The Company is able to transfer
its trademarks, licenses and patents to its Intellectual Property
Subsidiaries, subject to the consent of the Banks (as defined). See "The
Acquisition" and "Description of the Notes --Certain Covenants--Merger,
Consolidation or Sale of Assets."
MANAGEMENT INFORMATION SYSTEMS INITIATIVES
Historically, the Company has relied upon affiliates of Borden, Inc. for its
management information systems requirements. The Company, in conjunction with
outside consultants, intends to create a fully stand-alone dedicated
management information system capable of supporting the Company's growth over
a period of years. Management expects the development and installation of this
system to be substantially completed and the system to be operational during
the first half of 1999. Based on consultants' estimates and preliminary bids
by experienced systems integrators, the Company has budgeted capital
expenditures in 1998 and 1999 consisting of $3.2 million to fund the
acquisition of hardware and software for this project and $6.7 million for
nonrecurring, development expenses to fund anticipated information technology
consulting and other related costs. The actual costs related to this
initiative, as well as future costs of operation of the system, may differ
materially from management's estimates.
47
<PAGE>
EMPLOYEES
As of March 31, 1998, the Company employed a total of 335 people, including
195 hourly and 140 salaried employees. The Wellsboro, Pennsylvania and
Starkville, Mississippi plants are the only unionized Company plants. Union
employees represent approximately 28% of the Company's total work force. At
Wellsboro, the United Food and Commercial Workers Union-Local 174 has a
contract expiring in February 2000 and at Starkville, the Teamsters Local 984
has a contract expiring on January 31, 2001. Management believes that
relations with the Company's employees and unions are generally good.
INSURANCE
Historically, the BBNA Business generally relied on self insurance for
losses and liabilities relating to workers' compensation, health and welfare
claims, physical damage to property, business interruption and comprehensive
general, product and vehicle claims. Since the Acquisition Closing, the
Company has entered into insurance policies on customary terms for comparable
companies to cover risks associated with such exposures.
CERTAIN LEGAL AND REGULATORY MATTERS
Public Health. The Company is subject to the Federal Food, Drug and Cosmetic
Act and regulations promulgated thereunder by the FDA. This comprehensive
regulatory program governs, among other things, the manufacturing, composition
and ingredients, labeling, packaging and safety of food. In addition, the
Nutrition Labeling and Education Act of 1990, as amended, prescribes the
format and content of certain information required to appear on the labels of
food products. The Company is also subject to regulation by certain other
governmental agencies.
The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of facilities.
Enforcement actions for violations of federal, state and local regulations may
include seizure and condemnation of violative products, cease and desist
orders, injunctions and/or monetary penalties. Management believes that the
Company's facilities and practices are in compliance with applicable
government regulations in all material respects.
The Company is subject to certain health and safety regulations, including
regulations issued pursuant to the Occupational Safety and Health Act. These
regulations require the Company to comply with certain manufacturing, health
and safety standards to protect its employees from accidents.
Environmental Matters. The Company believes that it is substantially in
compliance with all applicable laws and regulations for the protection of the
environment and the health and safety of its employees. The Company's
operations and properties are subject to a wide variety of increasingly
complex and stringent federal, state and local environmental regulations
governing the storage, handling, generation, treatment, emission, and disposal
of certain substances and wastes, the remediation of contaminated soil and
groundwater, and the health and safety of employees. As such, the nature of
the Company's operations exposes it to the risk of claims with respect to
environmental matters. Based upon its experience to date, the Company believes
that the future cost of compliance with existing environmental laws and
regulations and liability for known environmental claims will not have a
material adverse effect on the Company's business or financial position. In
connection with the Acquisition, the Company assumed all past and future
environmental liabilities related to the BBNA Business. The Company will be
indemnified, however, by BFC and BFC Investments with respect to certain
environmental liabilities occurring prior to the Acquisition Closing. This
48
<PAGE>
indemnification is limited in time and amount, and there can be no assurance
that material environmental liabilities will not be incurred after the
indemnification period or in excess of the indemnified amount or that the
Company will be able to pursue successfully any indemnification claims against
BFC. In addition, future events, such as changes in existing laws and
regulations or their interpretation, and more vigorous enforcement policies of
regulatory agencies, may give rise to additional expenditures or liabilities
that could be material.
Legal Proceedings. The Company is subject to litigation in the ordinary
course of its business. The Company is not a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company.
49
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors of Holdings and the Company and executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - - ---- --- --------
<S> <C> <C>
William A. Lynch................ 50 Chairman of the Board of Directors and
Chief Operating Officer
Chief Executive Officer, President and
John O'C. Nugent................ 56 Director
Craig A. Steinke................ 41 Chief Financial Officer, Vice President and
Treasurer
Jonathan F. Rich................ 51 Vice President, General Counsel and
Secretary
Tamar K. Bernbaum............... 47 Vice President, Marketing
James A. Byrne.................. 53 Vice President, Human Resources
Virginia Cappello............... 46 Vice President, Market Research
Frederick M. Dale, Jr........... 42 Vice President, Manufacturing
Paul F. Keida................... 47 Vice President, Technology
Richard A. Lumpp................ 51 Vice President, Sales
A.L. Stanley.................... 53 Vice President, Food Service &
International
Andreas T. Hildebrand........... 30 Director
Edward A. Johnson............... 35 Director
Kewsong Lee..................... 32 Director
Howard H. Newman................ 50 Director
Donald W. Torey................. 41 Director
Paul W. Van Orden............... 70 Director
</TABLE>
WILLIAM A. LYNCH has served as Chairman of the Board of Directors of
Holdings and the Company and Chief Operating Officer of the Company since
their respective dates of formation. In the past ten years, Mr. Lynch founded,
owned, and acted as Chief Executive Officer of a number of entrepreneurial
ventures including Group 1 Capital, Ltd. (founded in 1990), Audio One, Inc.
(founded in 1989), and Consumer Products, Inc. (founded in 1986). Mr. Lynch
possesses extensive experience in the consumer products industry, having
served, prior to 1985, in a variety of management positions for Bristol-Myers
Squibb Co., Borden, Inc., Calgon Consumer Products Company and The Procter &
Gamble Company.
JOHN O'C. NUGENT has served as a Director of Holdings and the Company and
Chief Executive Officer and President of the Company since their respective
dates of formation. From 1993 through 1996, he served as the President of
Johnson & Johnson Consumer Products, Inc., where he was responsible for the
consumer business and pharmaceutical products division. Prior to that, Mr.
Nugent spent eight years with Unilever occupying a series of marketing and
general management positions. Most recently, he served as Senior Vice
President (General Manager) of the Van den Bergh Consumer Products Division in
the U.S. prior to an assignment in the United Kingdom where he was Director
(COO position) of Van den Bergh, Ltd. Mr. Nugent's background in consumer
products extends over thirty years, with experience at Borden, Inc., Calgon
Consumer Products Company and The Procter & Gamble Company, where he held a
variety of marketing and management positions. His present service as a
director includes membership on the board of Small Planet Foods. His past
service as a director includes membership on the boards of the Association of
National Advertisers, Cosmetics Toiletries and Fragrance Association and the
National Association of Margarine Manufacturers.
CRAIG A. STEINKE has served as Chief Financial Officer, Vice President and
Treasurer of Holdings and the Company since January 1998. From 1996 through
1998, Mr. Steinke has served as Senior Vice President and Group General
Manager of BHP Copper, a business group of Broken Hill Proprietary Co., Ltd
("BHP"). From 1992 through 1996, Mr. Steinke held President, Vice President
50
<PAGE>
and Controller positions at the Metals Division of Magma Copper Co. Prior to
1992, Mr. Steinke held a variety of positions at Arthur Andersen LLP and the
Chief Financial Officer position at Hayward Lumber Co.
JONATHAN F. RICH has served as Vice President, General Counsel and
Sectretary of Holdings and the Company since their respective dates of
formation. From 1990 through 1996, Mr. Rich served as Vice President and
General Counsel of Nabisco International, a $1.6 billion operating unit of
Nabisco, Inc. Prior to that, he served two years as the Associate General
Counsel for Del Monte Foods Company. Mr. Rich is a member of the New York Bar.
His past service as a director includes membership on the board of Grupo
Gamesa, S.A. de C.V., one of Mexico's largest food manufacturers.
TAMAR K. BERNBAUM has served as Vice President, Marketing of the Company
since January 1998. From 1991 through 1997, Ms. Bernbaum held Director of
Trade Marketing and Category Manager for Trade Marketing positions at
Unilever's Van Den Bergh Foods division. From 1983 through 1991, Ms. Bernbaum
served as Senior Product Manager and Product Manager at Unilever's Ragu Foods
Company division. Prior to 1983, Ms. Bernbaum held a variety of management
positions at Colgate-Palmolive Company and Nestle Inc.
JAMES A. BYRNE has served as Vice President, Human Resources of the Company
since its formation in November 1997. From 1990 through 1995, Mr. Byrne served
as the Director of Human Resources for Wyeth-Lederle Vaccines and Pediatrics &
Lederle Consumer Health Products. Prior to that, Mr. Byrne spent 22 years at
American Cyanamid Co. in a variety of human resources management positions.
VIRGINIA CAPPELLO has served as Vice President, Market Research of the
Company since January 1998. From 1997 through January 1998, Ms. Cappello
served as Director of International Research for MasterCard International Inc.
From 1987 through 1997, she served as Group Market Research Manager of
Unilever's Van Den Bergh Foods division. From 1980 through 1987, Ms. Cappello
held Group Market Research Manager and Senior Market Research Manager
positions serving both the domestic and international operations of
International Playtex, Inc. Prior to 1980, Ms. Cappello held management
positions at Evaluative Criteria, Inc., Lebhar Friedman Research, Erdos &
Morgan, Inc. and O'Brian Sherwood Associated, Inc.
FREDERICK M. DALE, JR. has served as Vice President, Manufacturing of the
Company since December 1997. From 1996 through 1997, Mr. Dale served as
Director of Operations for BFC. From 1993 until 1996, Mr. Dale was Plant
Manager of Borden, Inc.'s Wellsboro, Pennsylvania sweetened condensed milk
manufacturing plant. Prior to 1993, Mr. Dale held management positions with
Borden, Inc., PepsiCo, Inc. and Cadbury Schweppes plc.
PAUL F. KEIDA has served as Vice President, Technology of the Company since
December 1997. From 1995 through 1997, Mr. Keida served as Vice President of
Research and Development of Borden, Inc. For 19 years prior to 1995, Mr. Keida
held a variety of management positions at Borden, Inc. in the technology
research and development areas.
RICHARD A. LUMPP has served as Vice President, Sales of the Company since
December 1997. From 1996 through 1997, Mr. Lumpp served as Senior Vice
President of Neo, Inc., an Information Resources, Inc. affiliate. Between 1995
and 1996, Mr. Lumpp served as a Principal at CSC Weston Group. Between 1993
and 1995, Mr. Lumpp held Senior Vice President of Client Service and Vice
President of Sales positions with Information Resources, Inc. Prior to 1993,
Mr. Lumpp held a variety of management positions at Unilever's Van den Bergh
Foods and Ragu Foods Company divisions, The Gillette Company and Johnson &
Johnson.
A.L. STANLEY has served as Vice President, Food Service & International of
the Company since December 1997. From 1994 through 1997, Mr. Stanley served as
Vice President, Sales of BFC where
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<PAGE>
he was responsible for the marketing of BBNA Business products as well as
several other products. From 1981 through 1994, Mr. Stanley held several Vice
President and management positions at James River Corporation. Prior to 1981,
Mr. Stanley held a variety of management positions at American Can Company.
ANDREAS T. HILDEBRAND has served as a Director of Holdings and the Company
since their respective dates of formation. Mr. Hildebrand has served as a Vice
President in the Private Equity Group of General Electric Investment
Corporation ("GEIC") since May 1997, and as an Investment Manager and Senior
Financial Analyst since 1993. Prior to joining GEIC, Mr. Hildebrand was an
Economic Analyst in the office of Massachusetts Governor William Weld. Mr.
Hildebrand presently serves as a director of several privately held companies.
EDWARD A. JOHNSON has served as a Director of Holdings and the Company since
April 1998. Mr. Johnson has served as a Vice President of Warburg, Pincus
Ventures, Inc. ("WPV") since January 1997. From 1994 to 1996, Mr. Johnson was
an associate at E.M. Warburg, Pincus & Co., LLC ("EMW LLC"). Prior to joining
EMW LLC, he was a consultant at The Boston Consulting Group from 1992 to 1994.
Mr. Johnson currently serves as director of a privately held company.
KEWSONG LEE has served as a Director of Holdings and the Company since their
respective dates of formation. Mr. Lee has served as a Member and Managing
Director of EMW LLC and a general partner of Warburg, Pincus & Co. ("WP")
since January 1, 1997. Mr. Lee served as a Vice President of WPV from January
1995 to December 1996, and as an associate at E.M. Warburg, Pincus & Co., Inc.
("EMW") from 1992 until December 1994. Prior to joining EMW, Mr. Lee was a
consultant at McKinsey & Company, Inc., a management consulting company from
1990 to 1992. His present service as a director includes membership on the
boards of Knoll, Inc., RenaissanceRe Holdings Ltd. and several privately held
companies.
HOWARD H. NEWMAN has served as a Director of Holdings and the Company since
their respective dates of formation. Mr. Newman has served as a Member and
Managing Director of EMW LLC (and its predecessor) and a general partner of WP
since 1987. Prior to joining EMW LLC's predecessor in 1984 he was a Principal
with Morgan Stanley & Co., Incorporated. His present service as a director
includes membership on the boards of ADVO, Inc., Newfield Exploration Company,
Cox Insurance Holdings Plc, Comcast UK Cable Partners Limited, RenaissanceRe
Holdings Ltd. and several privately held companies.
DONALD W. TOREY has served as a Director of Holdings and the Company since
their respective dates of formation. Mr. Torey has served as Executive Vice
President of GEIC and GE Investment Management Incorporated ("GEIM" and,
together with GEIC, "GE Investments") with responsibility for GE Investments'
Private Equity and Real Estate groups since January 1997. From 1993 through
1996, Mr. Torey served as Chief Financial Officer of GE Investments. Prior to
that, Mr. Torey served as Manager of Mergers and Acquisition Finance for
General Electric Company ("GE"). Mr. Torey currently serves as a Trustee for
the General Electric Pension Trust ("GEPT") and as a director of a privately
held company.
PAUL W. VAN ORDEN has served as a Director of Holdings and the Company since
April 1998. Mr. Van Orden has been a Special Student at the Yale Divinity
School since 1997. From 1991 through 1996, he was the Executive-In-Residence,
the Executive Director of the Chazen Institute for International Business and
a Visiting Professor at the Columbia University Graduate School of Business.
Prior to that, Mr. Van Orden was an Executive Vice President at GE. He
currently serves as a director of a privately held company.
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Mr. William
A. Lynch and Mr. John O'C. Nugent, pursuant to which Mr. Lynch serves as
Chairman of the Company and Chief Operating Officer and Mr. Nugent serves as
Chief Executive Officer and President of the Company. The initial annual base
salaries under such agreements for each of Mr. Lynch and Mr. Nugent are
$300,000. Increases in the base salary are determined by the Board of
Directors. In addition, Mr. Lynch and Mr. Nugent are each entitled to receive
a bonus during the Company's first full year of up to 100% of their base
salaries if certain performance targets are met. Bonuses for future periods
are to be based on targets to be established by the Board of Directors. Each
agreement has a term of two years, with automatic annual renewals. In the
event either employment agreement is terminated by the Company without "cause"
(as defined in such employment agreement), Mr. Lynch or Mr. Nugent, as the
case may be, are entitled to receive severance payments equal to the base
salary then in effect for the greater of the next 12 months or the remainder
of the employment term. The agreements provide for customary non-competition
and non-solicitation provisions. The Company entered into similar arrangements
with its other executive officers.
As of March 31, 1998, Messrs. Lynch, Nugent, Steinke, Lumpp and Ms. Bernbaum
are the five most highly compensated executives of Holdings and the Company.
Pursuant to each of their employment agreements, Messrs. Lynch, Nugent,
Steinke, Lumpp and Ms. Bernbaum are entitled to an initial annual base salary
of $300,000, $300,000, $210,000, $170,000 and $155,000, respectively. Each
executive is also entitled to receive a bonus during the Company's first full
year of up to 100% of his or her base salary if certain performance targets
are met. In addition, Messrs. Lynch and Nugent each received 58,230 Restricted
Shares (as defined) and Messrs. Steinke and Lumpp and Ms. Bernbaum each
received 4,835 Restricted Shares in January 1998.
1998 STOCK PLAN
The Board of Directors of Holdings adopted the 1998 Stock Incentive Plan
(the "1998 Stock Plan"), which provides for the grant to officers, key
employees, directors and consultants of the Company of restricted stock,
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), and stock
options that are non-qualified for United States Federal income tax purposes.
The total number of shares of common stock of Holdings that may be issued as
restricted stock or for which options may be granted pursuant to the 1998
Stock Plan is 153,650, subject to certain adjustments reflecting changes in
Holdings' capitalization. The 1998 Stock Plan is administered by the Board of
Directors of Holdings (or a committee of such Board of Directors). The Board
of Directors of Holdings will determine, among other things, which officers,
employees, directors and consultants of the Company will receive restricted
stock or options under the 1998 Stock Plan, the time when restricted stock or
options will be issued or granted, the type of option (incentive stock options
or non-qualified stock options, or both) to be granted, the number of shares
subject to each award or grant, the time or times when the shares will vest or
the options will become exercisable, and, subject to certain conditions
discussed below, the option price and duration of the options.
The exercise price of incentive stock options will be determined by the
Board of Directors of Holdings, but may not be less than the fair market value
on the date of grant and the term of any such option may not exceed ten years
from the date of grant. With respect to any participant in the 1998 Stock Plan
who owns stock representing more than 10% of the voting power of the
outstanding capital stock of Holdings, the exercise price of any incentive
stock option may not be less than 110% of the fair market value of such shares
on the date of grant and the term of such option may not exceed five years
from the date of grant.
The exercise price of non-qualified stock options will be determined by the
Board of Directors of Holdings on the date of grant, but may not be less than
the par value of the common stock on the date of grant, and the term of such
option may not exceed ten years from the date of the grant.
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<PAGE>
Payment of the option price may be made by check or by tender of shares of
common stock of Holdings then owned by the optionee for a period of six months
or by any other means acceptable to Holdings. Shares issued or options granted
pursuant to the 1998 Stock Plan will not be transferable, except by will or
the laws of descent and distribution in the event of death or, in the case of
non-incentive options, at the discretion of the Board of Directors of
Holdings. During an optionee's lifetime, the option will be exercisable only
by the optionee.
The Board of Directors of Holdings has the right at any time and from time
to time to amend or modify the 1998 Stock Plan, without the consent of
Holdings' stockholders or optionees; provided that no such action may
adversely affect options or restricted stock awards previously granted without
the holder's consent, and provided further that no such action, without the
approval of the stockholders of Holdings, may increase the total number of
shares of common stock of Holdings which may be issued pursuant to the plan.
The expiration date of the 1998 Stock Plan after which no options or
restricted stock awards may be granted thereunder is ten years from the
effective date of the 1998 Stock Plan.
Holdings issued an aggregate of 143,805 shares of its common stock to
executive officers of the Company, including the Management Investors (the
"Restricted Shares"). The Restricted Shares will vest in equal installments
over five years (the "Vesting Period"), beginning on the first anniversary of
the date of issuance provided that such grantee is employed by the Company on
such date. Upon the consummation of an initial public offering of common stock
of Holdings registered under the Securities Act meeting certain thresholds
prior to the end of the Vesting Periods, 20% of the Restricted Shares will
vest. Any remaining unvested Restricted Shares would then vest in equal
installments over the time remaining in the Vesting Period. The Board of
Directors of Holdings may also establish certain performance criteria that
could result in accelerated vesting of the Restricted Shares.
In the event an employee leaves the employ of the Company under certain
circumstances, Holdings will have the right to purchase shares then owned by
the employee at various prices, depending on the reason for the termination
and whether the shares or options had vested.
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SECURITY OWNERSHIP
All of the issued and outstanding shares of common stock of the Company are
beneficially owned by Holdings. There are two classes of capital stock of
Holdings authorized and outstanding: the Common Stock ("Common Stock"), which
has full voting rights, and Series A Non-Voting Preferred Stock ("Series A
Preferred Stock"), which has limited voting rights. The following table sets
forth, as of the consummation of the Initial Offering, certain information
regarding the beneficial ownership of Common Stock and the Series A Preferred
Stock, as determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to (i)
each person known by the Company to be the beneficial owner of more than five
percent of any class of Holdings' voting securities, (ii) each of the
directors and certain executive officers of Holdings and (iii) all directors
and executive officers of Holdings, as a group:
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK
NAME AND ADDRESS OF --------------------------- ---------------------------
BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENTAGE NUMBER OF SHARES PERCENTAGE
-------------------- ---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
GE Investment Private
Placement Partners II,
a Limited Partnership
3003 Summer Street
Stamford, CT
06905(/2/)............ 404,075 41.3 400,034 49.0
Warburg, Pincus
Ventures, L.P.
466 Lexington Avenue
New York, NY
10017(/3/)............ 404,075 41.3 400,034 49.0
William A. Lynch(/4/)... 66,480 6.8 8,168 1.0
John O'C. Nugent(/4/)... 63,230 6.5 4,950 *
Craig A. Steinke(/5/)... 5,835 * 990 *
Tamar K. Bernbaum(/5/).. 4,835 * -- --
Richard A. Lumpp(/5/)... 5,835 * 990 *
Andreas T. Hildebrand
(/2/)(/6/)............. -- -- -- --
Edward A. Johnson....... -- -- -- --
Kewsong Lee(/3/)........ 404,075 41.3 400,034 49.0
Howard H. Newman(/3/)... 404,075 41.3 400,034 49.0
Donald W. Torey(/2/)
(/6/).................. -- -- -- --
Paul W. Van Orden(/6/).. -- -- -- --
All directors and
executive officers as a
group (17 persons)(/7/) 564,730 57.7 416,716 51.0
</TABLE>
- - - - --------
* Less than 1%
(1) Pursuant to the rules of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has
or shares (i) the power to vote or dispose of such shares, whether or not
such person has any pecuniary interest in such shares, or (ii) the right
to acquire the power to vote or dispose of such shares within 60 days,
including any right to acquire through the exercise of any option, warrant
or right.
(2) Does not include any shares indirectly held by Trustees of GEPT by virtue
of GEPT's limited partnership interest in Warburg. GEPT is also a limited
partner in GEI. GEIM is the general partner of GEI and a wholly owned
subsidiary of GE. As a result, each of GEIM and GE may be deemed to be the
beneficial owner of the shares owned by GEI.
(3) The sole general partner of Warburg is WP, a New York general partnership.
EMW LLC, a New York limited liability company, manages Warburg. The
members of EMW LLC are substantially the same as the partners of WP.
Lionel I. Pincus is the managing partner of WP and the managing member of
EMW LLC. WP, as the sole general partner of Warburg, has a 15% interest in
the profits of Warburg. Messrs. Kewsong Lee and Howard H. Newman,
directors of Holdings, are Managing Directors and members of EMW LLC and
general partners of WP. As such, Messrs. Lee and Newman may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1
under the Exchange Act) in an indeterminate portion of the shares
beneficially owned by Warburg and WP.
(4) Includes 58,230 shares of restricted stock, subject to certain vesting and
forfeiture requirements, issued to each of Messrs. Lynch and Nugent upon
consummation of the Initial Offering. See "Management--1998 Stock Plan."
(5) Includes 4,835 shares of restricted stock, subject to certain vesting and
for future requirements, issued to each of Messrs. Steinke and Lumpp and
Ms. Bernbaum. See "Management--1998 Stock Plan."
(6) Excludes 404,075 shares of Common Stock and 400,034 shares of Series A
Preferred Stock beneficially owned by GEI and GEIM. As an executive
officer and director of GEIM, Mr. Torey has shared voting and investment
power with respect to the shares held by GEI, and therefore, may be deemed
to be the beneficial owner of such shares. Messrs. Torey, Hildebrand and
Paul W. Van Orden disclaim beneficial ownership of all such shares owned
by GEI and GEIM.
(7) Includes 404,075 shares of Common Stock and 400,034 shares of Series A
Preferred Stock beneficially owned by Warburg. Excludes 404,075 shares of
Common Stock and 400,034 shares of Series A Preferred Stock beneficially
owned by GEI. Includes 1,600 shares of Common Stock and 1,584 shares of
Series A Preferred Stock held by executive officers not identified in the
table and 143,805 shares of restricted stock, subject to certain vesting
and forfeiture requirements, issued to executive officers upon
consummation of the Initial Offering. See "Management--1998 Stock Plan."
55
<PAGE>
THE HOLDINGS STOCKHOLDERS AGREEMENT
The relations among the Equity Sponsors and the Management Investors
(collectively, the "Investors"), and Holdings are governed by a Stockholders
Agreement, dated as of the Acquisition Closing (the "Holdings Stockholders
Agreement"). The following summary of certain provisions of the Holdings
Stockholders Agreement does not purport to be complete and is qualified in its
entirety by reference to all the provisions of the Holdings Stockholders
Agreement.
Board of Directors. Holdings is managed by the Board of Directors which is
comprised of nine members, three of whom are designated by GEI and three of
whom are designated by Warburg. For so long as GEI beneficially owns at least
20% of the Common Stock outstanding on a fully diluted basis, GEI has the
right to designate three directors to the Board of Directors. For so long as
GEI beneficially owns at least 15% of the Common Stock outstanding on a fully
diluted basis, GEI has the right to designate two directors to the Board of
Directors. For so long as GEI beneficially owns at least 10% of the Common
Stock outstanding on a fully diluted basis, GEI has the right to designate one
director to the Board of Directors. For so long as Warburg beneficially owns
at least 20% of the Common Stock outstanding on a fully diluted basis, Warburg
has the right to designate three directors to the Board of Directors. For so
long as Warburg beneficially owns at least 15% of the Common Stock outstanding
on a fully diluted basis, Warburg has the right to designate two directors to
the Board of Directors. For so long as Warburg beneficially owns at least 10%
of the Common Stock outstanding on a fully diluted basis, Warburg has the
right to designate one director to the Board of Directors. Mr. Lynch and Mr.
Nugent will be entitled to serve as directors for so long as they remain
executive officers of the Company. In addition, as long as the Equity Sponsors
in the aggregate beneficially own more than 50% of the Common Stock
outstanding on a fully diluted basis, the Equity Sponsors have the right to
designate a majority of the directors to the Board of Directors. The Board of
Directors will have at least one director who is not an officer or employee of
Holdings, the Company, or the Equity Sponsors, appointed by unanimous approval
of the Board of Directors. The Holdings Stockholders Agreement provides that
the Board of Directors of the Company is identical to that of Holdings.
The consent of a majority of the Board of Directors which includes at least
one of the directors designated by GEI and one of the directors designated by
Warburg is required for the approval of (i) the Company's or Holdings' annual
operating budget; (ii) capital expenditures or investments not approved in the
annual budget in amounts greater than $500,000; (iii) any merger or
consolidation involving the Company or Holdings; (iv) any acquisition by the
Company or Holdings of any assets or stock, other than acquisitions of assets
in the ordinary course of business; (v) any divestiture of assets in excess of
$500,000 by the Company or Holdings, other than sales of inventory in the
ordinary course of business; (vi) any liquidation, dissolution or winding up,
or any consent to a bankruptcy or insolvency or related proceeding involving,
the Company or Holdings; (vii) the issuance or sale of any debt or equity
securities for cash; (viii) any expansion into new lines of business; (ix) any
joint venture or strategic alliance; (x) the repurchase or redemption of any
outstanding shares of capital stock or the declaration or payment of any
dividends on any shares of capital stock of the Company or Holdings; (xi) the
amendment or modification of the certificate of incorporation or bylaws of the
Company or Holdings; (xii) the amendment, modification or termination of any
employment agreement with any executive officer of the Company or Holdings;
(xiii) the grant of any stock options or other equity-based compensation;
(xiv) the hiring or firing of any executive officer; (xv) any related party
transactions; (xvi) any loans or guarantees by the Company or Holdings outside
of the ordinary course of business; (xvii) any agreement having a duration in
excess of one year or cumulative obligations in excess of $1 million; (xviii)
the amendment, modification or termination of any agreement with any union;
(xix) the approval or adoption, amendment, modification or termination of
certain employee benefit plans; and (xx) any agreement to do any of the
foregoing.
56
<PAGE>
Restrictions on Transfer of Stock. Securities held by the Management
Investors, including any shares of Common Stock or Series A Preferred Stock
and any options to acquire shares of Common Stock, may only be sold or
otherwise transferred with the consent of the Board of Directors of Holdings.
Tag-Along Rights. The Holdings Stockholders Agreement provides that in the
event any Investor chooses to sell or otherwise transfer more than 20% of its
shares of Common Stock or Series A Preferred Stock to a proposed transferee,
the selling Investor must offer to each of the other Investors the right to
participate in such sale on a pro rata basis based on ownership of the shares
being sold.
Subscription Rights. With certain exceptions, the Holdings Stockholders
Agreement provides each Investor with subscription rights in connection with
any issuance of equity securities by Holdings for cash whereby each Investor
shall have the right to purchase a pro rata portion of such equity securities.
Certain Covenants. The Holdings Stockholders Agreement requires Holdings to
(i) provide certain financial and other information to the Investors
concerning Holdings and its subsidiaries, (ii) comply with applicable law and
(iii) maintain insurance.
Termination. The tag-along rights and subscription rights described above
will terminate upon the completion of an initial public offering of Common
Stock.
THE REGISTRATION RIGHTS AGREEMENT
Holdings and the Investors have entered into a Registration Rights
Agreement, dated as of the Acquisition Closing (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, each of the Equity
Sponsors has two demand registration rights for each of its Preferred Stock
and Common Stock. In addition, the Equity Sponsors have unlimited Form S-3
registration rights and unlimited piggyback rights. The Management Investors
also have piggyback registration rights. All expenses related to these
registrations (other than underwriting discounts and commissions) will be
borne by Holdings. Holdings is required to use its best efforts to effect such
registrations, subject to certain conditions and limitations. Holdings has
agreed to indemnify the Investors for certain liabilities arising out of such
registrations, including liabilities under the Securities Act.
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<PAGE>
CERTAIN TRANSACTIONS
Holdings and the Investors have entered into Subscription Agreements, dated
as of the Acquisition Closing (collectively, the "Subscription Agreements"),
pursuant to which, among other things, Holdings agreed to issue shares of
Common Stock and Series A Preferred Stock. See "Security Ownership."
In connection with the portion of the equity contribution to Holdings made
by Mr. Lynch and Mr. Nugent, the Company lent an aggregate of $575,000 to Mr.
Lynch and $250,000 to Mr. Nugent in exchange for full recourse notes bearing
interest at a floating rate, set semi-annually, at The Chase Manhattan Bank's
then applicable prime rate, in effect for six month periods, plus 0.5%. Each
note matures on the fifth anniversary of the Acquisition Closing and is
secured by a pledge in favor of the Company of all of the shares of Common
Stock and Series A Preferred Stock owned by such Management Investor.
All future transactions between the Company and its officers, directors,
principal stockholders or their respective affiliates, will be on terms no
less favorable to the Company than can be obtained from unaffiliated third
parties.
58
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITIES
Set forth below is a summary description of the Senior Credit Facilities the
Company entered into in connection with the Acquisition. The summary does not
purport to be complete and is qualified in its entirety by reference to the
definitive documentation for the Senior Credit Facilities.
GENERAL
The Company entered into an agreement with The Chase Manhattan Bank
("Chase," in its capacity as collateral agent, the "Collateral Agent," and, in
its capacity as administrative agent, the "Administrative Agent"), Merrill
Lynch Capital Corporation ("MLCC" and, in its capacity as documentation agent,
the "Documentation Agent") and other lending institutions (collectively, the
"Banks") to borrow an aggregate principal amount of up to $245.0 million,
consisting of (i) the $70.0 million Revolving Credit Facility and (ii) the
$175.0 million Term Loan Facility. The Senior Credit Facilities are guaranteed
by Holdings and all future domestic subsidiaries of the Company (in this
context, the "Guarantors"). The Company has drawn down the Revolving Credit
Facility in the amount of $16.5 million in connection with the Acquisition.
The Senior Credit Facilities and the Initial Offering were conditioned upon
each other. Borrowings under the Senior Credit Facilities constitute Senior
Indebtedness under the Indenture.
Security. Indebtedness of the Company under the Senior Credit Facilities is
secured by (i) 100% of the capital stock of the Company and each of its
subsidiaries (which pledge, in the case of foreign subsidiaries, is limited to
65% of the voting stock of each directly owned foreign subsidiary unless (x)
reasonably requested by the Collateral Agent and (y) to the extent and for so
long as such pledge may be accomplished without causing adverse tax
consequences to the Company) and (ii) a first priority security interest in
substantially all assets and properties of the Company and its future domestic
subsidiaries.
Interest. Indebtedness under the Senior Credit Facilities bears interest at
a floating rate. Indebtedness under the Revolving Credit Facility bears
interest at a rate based, at the Company's option, upon (i) Chase's adjusted
London Interbank Offered Rate ("Adjusted LIBOR") for one, two, three or six
months plus 2.0% or (ii) Chase's Alternate Base Rate plus 1.0%. Indebtedness
under the Term Loan Facility bears interest at a rate based, at the Company's
option, upon (i) Adjusted LIBOR for one, two, three or six months plus 2.25%
or (ii) Chase's Alternate Base Rate plus 1.25%. These rates are subject to
performance pricing step-downs based on the Company's leverage ratio.
Maturity. Loans made pursuant to the Revolving Credit Facility may be
borrowed, repaid and reborrowed from time to time until the seventh
anniversary of the Acquisition Closing, subject to satisfaction of certain
conditions on the date of any such borrowing. No letter of credit shall have
an expiration date that is more than one year after the issuance date thereof
or that is after the fifth business day prior to the termination date of the
Revolving Credit Facility. The loans made under the Term Loan Facility were
available in a single drawing at the Acquisition Closing, are subject to
quarterly amortization of principal and mature on the eighth anniversary of
the Acquisition Closing. The Term Loan Facility will be permanently reduced in
an amount equal to the net cash proceeds of permitted asset sales and
permitted issuances of additional debt or equity by the Company or its
subsidiaries and a portion of the Company's excess cash flows.
Certain Fees. The Company is required to pay to the Banks a commitment fee
equal to 1/2 of 1% per annum on the committed undrawn amount of the Revolving
Credit Facility, subject to performance pricing step-downs based upon the
Company's leverage ratio, and letters of credit fees equal to the margin over
the Adjusted LIBOR rate charged for Adjusted LIBOR loans under the
59
<PAGE>
Revolving Credit Facility on a per annum basis, plus a fronting fee of 1/4 of
1% per annum to be paid to the issuer of the letter of credit.
Conditions to Extensions of Credit. The obligation of the Banks to make
subsequent loans or extend letters of credit under the Revolving Credit
Facility is subject to the satisfaction of certain customary closing
conditions.
Covenants. The Senior Credit Facilities require the Company to meet certain
financial tests, including debt coverage and interest expense coverage
requirements. The Senior Credit Facilities also contain covenants which, among
other things, limit the Company's ability to incur additional indebtedness, to
make capital expenditures, to enter into sale/leaseback transactions, to make
dividends, loans and investments, to modify material agreements, to enter into
transactions with affiliates, to engage in asset sales, acquisitions, mergers
and consolidations, to prepay subordinated indebtedness (including the Notes)
and to incur liens and encumbrances. The covenants contained in the Senior
Credit Facilities also require the Company to pledge assets acquired after the
Acquisition Closing, including stock of after-acquired or formed subsidiaries
(which pledge, in the case of foreign subsidiaries, is limited to 65% of the
voting stock of each directly owned foreign subsidiary unless (x) reasonably
requested by the Collateral Agent and (y) to the extent and for so long as
such pledge may be accomplished without causing adverse tax consequences to
the Company), to deliver guarantees by wholly owned domestic subsidiaries and
to maintain insurance.
Events of Default. Defaults under the Senior Credit Facilities include
failure to pay interest or fees due under the Senior Credit Facilities within
a specified number of days from the date on which such payments are due,
failure to repay principal due under the Senior Credit Facilities when due,
breaches of certain affirmative covenants, conditions or agreements contained
in the documents relating to Senior Credit Facilities that are unremedied for
a specified period and breaches of certain other affirmative covenants or any
negative covenant, the default by the Company or any of its subsidiaries in
respect of certain other indebtedness, including indebtedness under the Notes,
the occurrence of certain events of bankruptcy, the entering of certain
judgments against the Company or any of its subsidiaries, the failure of the
security interests created under the Senior Credit Facilities to remain valid
and perfected, the failure of the documents relating to the Senior Credit
Facilities to be and remain in full force and effect and the change in control
of the Company.
60
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Exchange Notes will be issued, and the Original Notes were issued, under
an Indenture, dated as of January 23, 1998 (the "Indenture"), among the
Company, Holdings, as guarantor, and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"), a copy of which is available upon request to the
Company. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the TIA. The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the TIA. Capitalized terms used herein and not
otherwise defined have the meanings set forth in the section "Certain
Definitions."
The Notes are unsecured senior subordinated obligations of the Company. The
Notes are unconditionally Guaranteed on a senior subordinated and unsecured
basis by Holdings (the "Parent Guarantee") and by each future Domestic
Subsidiary of the Company (each, a "Domestic Subsidiary Guarantee" and,
collectively, the "Domestic Subsidiary Guarantees") (Holdings and such future
Domestic Subsidiaries of the Company are referred to collectively as the
"Guarantors"), and the Company will cause each such future Domestic Subsidiary
of the Company to enter into a supplemental indenture providing for such
Domestic Subsidiary to Guarantee payment of the Notes as required in the
Indenture. See "Certain Covenants--Future Note Guarantors" below.
PRINCIPAL, MATURITY AND INTEREST
The initial Original Notes were issued in an aggregate principal amount of
$115.0 million and will mature on January 15, 2008. Interest on the Notes
accrues at a rate per annum shown on the front cover of this Prospectus from
January 23, 1998, or from the most recent date to which interest has been paid
or provided for, payable semiannually to Holders of record at the close of
business on the January 1 or July 1 (whether or not such day is a business
day) immediately preceding the interest payment date on January 15 and July 15
of each year, commencing July 15, 1998. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months. The Indenture provides for the
issuance thereunder of up to $150.0 million aggregate principal amount of
additional Notes having substantially identical terms and conditions to the
Notes offered hereby (the "Additional Notes"), subject to compliance with the
covenants contained in the Indenture. Any Additional Notes will be part of the
same issue as the Notes offered hereby (and accordingly will participate in
purchase offers and partial redemptions) and will vote on all matters with the
Notes offered hereby. For purposes of this "Description of the Notes,"
reference to the Notes includes Additional Notes.
Principal of, premium, if any, and interest, including Special Interest, on
the Notes is payable, and the Notes may be exchanged or transferred, at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan, The City of New York (which initially shall be the corporate trust
office of the Trustee, at One State Street, New York, New York 10004), except
that, at the option of the Company, payment of interest and Special Interest
may be made by check mailed to the registered holders of the Notes at their
registered addresses; provided that all payments with respect to global Notes
and certificated Notes the Holders of which have given written wire transfer
instructions to the Trustee by no later than five business days prior to the
relevant payment date will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
The Original Notes were issued and the Exchange Notes will be issued only in
fully registered form, without coupons, in denominations of $1,000 and any
integral multiple of $1,000.
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GUARANTEES OF THE NOTES
The Parent Guarantee and the Domestic Subsidiary Guarantees irrevocably and
unconditionally, jointly and severally, guarantee the performance and punctual
payment when due, whether at Stated Maturity, by acceleration or otherwise, of
all Obligations of the Company under the Indenture and the Notes. Each of the
Guarantors irrevocably and unconditionally, jointly and severally, agrees to
pay, in addition to any amount stated above, any and all expenses (including
reasonable counsel fees and expenses) incurred by the Trustee or the Holders
in enforcing any rights under the Parent Guarantee or the Domestic Subsidiary
Guarantees. Each of the Parent Guarantee and the Domestic Subsidiary
Guarantees is limited in amount to an amount not to exceed the maximum amount
that can be Guaranteed by the relevant Guarantor without rendering the Parent
Guarantee as it relates to Holdings, or each Domestic Subsidiary Guarantee as
it relates to such Domestic Subsidiary, voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
Each of the Parent Guarantee and the Domestic Subsidiary Guarantees is a
continuing Guarantee and shall (a) remain in full force and effect until
payment in full of all of the Company's Obligations under the Indenture and
the Notes or, in the case of a Domestic Subsidiary Guarantee, upon such
Domestic Subsidiary no longer being a Subsidiary, and (b) inure to the benefit
of and be enforceable by the Trustee, the Holders and their successors,
transferees and assigns. Each of the Parent Guarantee and the Domestic
Subsidiary Guarantees is a Guarantee of payment and not of collection.
SUBORDINATION
The payment of principal of, premium, if any, and interest, including
Special Interest, if any, on the Notes is subordinated in right of payment, as
set forth in the Indenture, to the prior payment in full in cash of Senior
Indebtedness, which will include borrowings under the Senior Credit
Facilities, whether outstanding on the date of the Indenture or thereafter
Incurred.
Upon any distribution to creditors of the Company in a total or partial
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full in cash of all Obligations due in respect
of such Senior Indebtedness (including interest after the commencement of any
such proceeding at the rate specified in the documentation governing the
applicable Senior Indebtedness whether or not the claim for such interest is
allowed as a claim after such filing) before Holders of Notes will be entitled
to receive any payment or distribution with respect to the Notes, and until
all Obligations with respect to Senior Indebtedness are paid in full in cash,
any payment or distribution to which Holders of Notes would be entitled shall
be made to the holders of Senior Indebtedness (except that Holders of Notes
may receive securities that are subordinated at least to the same extent as
the Notes to Senior Indebtedness and to any securities issued in exchange for
Senior Indebtedness ("Subordinated Reorganization Securities") and Holders of
Notes may recover payments made from the trust described under the caption
"Legal Defeasance and Covenant Defeasance"). If a payment or distribution is
made to Holders of Notes that, due to the subordination provisions of the
Indenture, should not have been made to them, such Holders are required to
hold such payment or distribution in trust for the benefit of the holders of
Senior Indebtedness and pay it over to them.
The Company may not make any payment upon or in respect of the Notes and may
not otherwise purchase, redeem or otherwise retire any Notes (except in
Subordinated Reorganization Securities or from the trust described under the
caption "Legal Defeasance and Covenant Defeasance") or make any deposit
described under the caption "Legal Defeasance and Covenant Defeasance" if (i)
a default
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in the payment of the principal of, premium, if any, or interest on Designated
Senior Indebtedness of the Company (or any other Senior Indebtedness having a
principal amount at the time of determination in excess of $25.0 million)
occurs and is continuing or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness of the Company which permits
holders of the Designated Senior Indebtedness of the Company as to which such
default relates to accelerate its maturity and the Trustee receives a notice
of such default (a "Payment Blockage Notice") from the holders or the
representative of the holders of the Designated Senior Indebtedness of the
Company. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and
(b) in the case of a nonpayment default, upon the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of the
Designated Senior Indebtedness of the Company has been accelerated. No new
period of payment blockage may be commenced by a Payment Blockage Notice
unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions described above, such failure would constitute an Event of Default
under the Indenture and would enable Holders of Notes to accelerate the
maturity of the Notes. See "--Events of Default." The Indenture will further
require that the Company promptly notify holders of Designated Senior
Indebtedness of the Company if payment of the Notes is accelerated because of
any Event of Default. Upon any acceleration of the Notes, if any Designated
Senior Indebtedness of the Company is outstanding, the Company may not pay the
Notes until five business days after such holders or the representative of
such holders receives notice of such acceleration and, thereafter, may pay the
Notes only if the subordination provisions of the Indenture permit payment at
that time.
By reason of such subordination provisions contained in the Indenture, in
the event of an insolvency, bankruptcy, reorganization or liquidation of the
Company, or upon the occurrence of a Change of Control or an Asset Sale
requiring repurchase by the Company of any Notes, there may not be sufficient
assets remaining to satisfy the claims of Holders of Notes after satisfying
the claims of creditors who are holders of Senior Indebtedness. See "Risk
Factors--Subordination of Notes." Assuming the Notes were to be issued and the
related transactions were to be consummated in January 1998, on a pro forma
basis after giving effect to such issuance and transactions, the outstanding
Senior Indebtedness would have been $191.5 million (exclusive of unused
commitments), all of which would have been Secured Indebtedness. The Indenture
will limit, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Indebtedness, that the Company can Incur. See
"--Certain Covenants--Limitation on Incurrence of Indebtedness."
SUBORDINATION OF GUARANTEES; RELEASE OF DOMESTIC SUBSIDIARY GUARANTEES
The Parent Guarantee and the Domestic Subsidiary Guarantees will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash of all Senior Indebtedness of the applicable
Guarantor.
Upon any distribution to creditors of a Guarantor in a total or partial
liquidation or dissolution of such Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
such Guarantor or its property, an assignment for the benefit of creditors or
any marshaling of such Guarantor's assets and liabilities, the holders of
Senior Indebtedness of such Guarantor will be entitled to receive payment in
full in cash of all Obligations due in respect of such Senior Indebtedness
(including interest after the commencement of any such proceeding at the rate
specified in the documentation governing the applicable Senior Indebtedness
whether or not the claim for such interest is allowed as a claim after such
filing) before Holders of Notes will be entitled to receive any payment or
distribution with respect to the Parent Guarantee or any Domestic
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Subsidiary Guarantee, and until all Obligations with respect to Senior
Indebtedness of such Guarantor are paid in full in cash, any payment or
distribution that would have been made under the Parent Guarantee or any
Domestic Subsidiary Guarantee shall be made to the holders of such Senior
Indebtedness (except that Holders of Notes may receive Subordinated
Reorganization Securities of such Guarantor). If a payment or distribution is
made to Holders of Notes that, due to the subordination provisions of the
Indenture, should not have been made to them, such Holders are required to
hold such payment or distribution in trust for the benefit of the holders of
Senior Indebtedness of such Guarantor and pay it over to them.
A Guarantor may not make any payment upon or in respect of the Parent
Guarantee or any Domestic Subsidiary Guarantee, as applicable (except in
Subordinated Reorganization Securities of such Guarantor), if (i) a default in
the payment of the principal of, premium, if any, or interest on Designated
Senior Indebtedness of such Guarantor (or any other Senior Indebtedness having
a principal amount at the time of determination in excess of $25 million)
occurs and is continuing or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness of such Guarantor which permits
holders of the Designated Senior Indebtedness of such Guarantor as to which
such default relates to accelerate its maturity and the Trustee receives a
Payment Blockage Notice from the holders or the representative of the holders
of the Designated Senior Indebtedness of such Guarantor. Payments under the
Parent Guarantee and the Domestic Subsidiary Guarantees may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in the case of a nonpayment default, upon
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of the Designated Senior Indebtedness of such
Guarantor has been accelerated. No new period of payment blockage may be
commenced by a Payment Blockage Notice unless and until 360 days have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice.
By reason of such subordination provisions contained in the Indenture, in
the event of an insolvency, bankruptcy, reorganization or liquidation of a
Guarantor, there may not be sufficient assets remaining to satisfy the claims
of Holders of Notes with respect to the Parent Guarantee or any Domestic
Subsidiary Guarantee after satisfying the claims of creditors who are holders
of Senior Indebtedness of such Guarantor.
In the event of a sale or other disposition of all or substantially all of
the assets of any Domestic Subsidiary Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Domestic Subsidiary Guarantor, by way of merger,
consolidation or otherwise, such Domestic Subsidiary Guarantor (in the event
of a sale or other disposition of all of the Capital Stock of such Domestic
Subsidiary Guarantor) will be released and relieved of its Obligations under
its Domestic Subsidiary Guarantee or the Person acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of such Domestic Subsidiary Guarantor) (other than a Domestic Subsidiary
Guarantor) will not be required to enter into a Domestic Subsidiary Guarantee;
provided, in each case, that such transaction is carried out pursuant to and
in accordance with the covenants described under the captions "Repurchase at
the Option of Holders of Notes--Asset Sales" and "Certain Covenants--Merger,
Consolidation or Sale of Assets."
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after January 15, 2003, and prior to maturity, at the
following redemption prices (expressed as a percentage of principal amount),
plus accrued and unpaid interest, including any Special Interest, thereon to
the redemption date (subject to the right of Holders of record on the relevant
record date
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to receive interest due on the relevant payment date), if redeemed during the
twelve-month period commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 104.375%
2004........................................................... 102.917%
2005........................................................... 101.458%
2006 and thereafter............................................ 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to January 15,
2002, the Company may (but shall not have the obligation to) redeem up to 35%
of the original aggregate principal amount of the Notes (calculated giving
effect to any issuance of Additional Notes) at a redemption price of 108.75%
of the original principal amount thereof, plus accrued interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date)
with the proceeds of one or more Public Equity Offerings made by the Company
or of a capital contribution made by Holdings to the common equity capital of
the Company with the net proceeds of a Public Equity Offering made by
Holdings; provided that at least 65% of the aggregate principal amount of
Notes (as so calculated) remain outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
within 75 days of the date of the closing of such Public Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances and in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed;
provided that no Note of $1,000 in original principal amount or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancelation of the original
Note. On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS OF NOTES
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer") at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, including any Special Interest,
thereon (subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date) (the "Change of
Control Payment"), to the date of repurchase (the "Change of Control Payment
Date").
Within 30 days following any Change of Control, the Company will mail a
notice to each Holder of Notes describing the transaction or transactions that
constitute the Change of Control and offering
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to repurchase Notes pursuant to the procedures required by the Indenture and
described in such notice. The Change of Control Payment Date shall be a
business day not less than 30 days nor more than 60 days after such notice is
mailed. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the paying agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The paying agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture will provide
that, prior to complying with the provisions of this covenant, but in any
event within 30 days following a Change of Control, the Company will either
repay in full all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this covenant. The
Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit Holders of Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
The Senior Credit Facilities provide that certain change of control events
with respect to the Company (including a Change of Control) would constitute a
default thereunder. Any future credit agreements or other agreements relating
to Senior Indebtedness to which the Company becomes a party may contain
similar restrictions and provisions. In the event a Change of Control occurs
at a time when the Company is prohibited from purchasing Notes, the Company
could seek the consent of its lenders to the purchase of Notes or could
attempt to repay the borrowings that contain such prohibition. If the Company
does not obtain such a consent or repay such borrowings, the Company will
remain prohibited from purchasing Notes. In such case, the Company's failure
to purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Senior Credit
Facilities. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
The meaning of the phrase "all or substantially all" as used in the
definition of "Change of Control" with respect to a sale of assets varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve
a disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether a Change of Control has occurred and
whether the Notes are subject to a Change of Control Offer.
Restrictions in the Indenture described herein on the ability of the Company
and its Subsidiaries to Incur additional Indebtedness, to grant Liens on its
or their property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company,
whether favored or opposed by the management of the Company. Consummation of
any such transaction in certain circumstances may require redemption or
repurchase of the Notes, and there
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can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout
of the Company or any of its Subsidiaries by the management of the Company or
other Persons. While such restrictions cover a variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
Indenture may not afford the Holders of Notes protection in all circumstances
from the adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, engage in an Asset Sale (except
an Asset Sale (an "Exempt Asset Sale") the Net Proceeds of which plus the Net
Proceeds of all other Asset Sales concurrently or previously made in the same
fiscal year do not exceed $3.0 million) unless (i) the Company (or the
Subsidiary) receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value (as determined by the Board, whose
determination shall be conclusive if made in good faith and evidenced by a
Board Resolution), and in the case of a lease of assets, a lease providing for
rent and other conditions which are no less favorable to the Company (or the
Subsidiary) in any material respect than the then prevailing market conditions
(as determined by the Board, whose determination shall be conclusive if made
in good faith and evidenced by a Board Resolution) of the assets or Capital
Stock sold or otherwise disposed of, and (ii) at least 80% (100% in the case
of lease payments) of the consideration therefor received by the Company (or
the Subsidiary) is in the form of cash or Cash Equivalents; provided that for
purposes of this clause (ii), "cash" shall include the amount of any
Indebtedness for money borrowed and any Capital Lease Obligation that (x) is
assumed by the transferee of any such assets or other property in such Asset
Sale or (y) with respect to the sale or other disposition of all of the
Capital Stock of any Subsidiary of the Company, remains the liability of such
Subsidiary subsequent to such sale or other disposition, but only to the
extent that such assumption, sale or other disposition, as the case may be, is
effected on a basis under which there is no further recourse to the Company or
any of its Subsidiaries with respect to such liability.
The Company may apply Net Proceeds of an Asset Sale, at its option, within
360 days from the receipt of such Net Proceeds (a) to permanently reduce
Senior Indebtedness other than Indebtedness under the Revolving Credit
Facility, (b) to permanently reduce Indebtedness under the Revolving Credit
Facility (and to correspondingly reduce commitments with respect thereto), (c)
to acquire another business (including through purchase of stock or merger) or
other assets, in each case in, or used or useful in, the same or a similar
line of business as the Company or any of its Subsidiaries was engaged in on
the date of the Indenture or any reasonable extensions or expansions thereof
or (d) to reimburse the Company or its Subsidiaries for expenditures made, and
costs incurred, to repair, rebuild, replace or restore property subject to
loss, damage or taking to the extent that the Net Proceeds consist of
insurance proceeds received on account of such loss, damage or taking. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce Indebtedness under the Revolving Credit Facility (without any
obligation to reduce the commitments thereunder) or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales (other than Exempt Asset Sales) that are not applied
or invested as provided and in the relevant time period described in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company will be required to make an offer to all Holders of Notes (and, at its
option, holders of other pari passu Indebtedness) (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes (and such other Indebtedness)
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, including Special Interest, thereon (subject
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to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date) to the date of purchase,
in accordance with the procedures set forth below. If the aggregate principal
amount of Notes (and such other Indebtedness) surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Company shall select the Notes (and
such other Indebtedness) to be purchased on a pro rata basis; provided that
only Notes in denominations of $1,000 or integral multiples thereof shall be
purchased. Holders whose Notes are purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
In the event the Company is required to make an Asset Sale Offer, it shall
promptly, and in any event within 30 days after the Company becomes obligated
to make such Asset Sale Offer, deliver to the Trustee and send, by first-class
mail to each Holder of Notes, a written notice stating that such Holder may
elect to have such Holder's Notes purchased by the Company, either in whole or
in part, subject to proration, in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days or more than 60 days after the date of such notice
(the "Asset Sale Purchase Date") and shall contain information concerning the
Asset Sale Offer (including, to the extent available, appropriate pro forma
financial information) and all instructions and materials necessary to tender
Notes pursuant to the Asset Sale Offer, together with the information
contained in the next following paragraph.
Not later than the date upon which written notice of an Asset Sale Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Asset Sale Offer
(the "Asset Sale Offer Amount"), (ii) the allocation of the Net Proceeds from
the Asset Sale pursuant to which such Asset Sale Offer is being made and (iii)
the compliance of such allocation with the provisions of the second preceding
paragraph. On such date, the Company shall also deposit irrevocably with the
Trustee or with the paying agent in cash an amount equal to the Asset Sale
Offer Amount to be held for payment in accordance with the provisions of this
covenant. On the Asset Sale Purchase Date, the Company shall deliver, or cause
to be delivered, to the Trustee the Notes or portions thereof that have been
tendered properly to, and are to be accepted by, the Company. The paying agent
shall promptly mail or deliver payment to each tendering Holder in the amount
of the applicable purchase price. In the event that the aggregate purchase
price of the Notes delivered to the Trustee is less than the Asset Sale Offer
Amount, the excess shall be delivered to the Company immediately after
completion of the Asset Sale Offer.
A Holder electing to have a Note purchased will be required to surrender the
Note, with an appropriate form duly completed, to the paying agent at the
address specified in the notice at least five business days prior to the Asset
Sale Purchase Date. A Holder will be entitled to withdraw its election if the
paying agent receives, not later than three business days prior to the Asset
Sale Purchase Date, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note that was delivered for
purchase by the Holder and a statement that such Holder is withdrawing its
election to have such Note purchased.
At the time the Company delivers, or causes to be delivered, Notes to the
Trustee that are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Notes are to be accepted by the
Company pursuant to and in accordance with the terms of this covenant. A Note
shall be deemed to have been accepted for purchase at the time the paying
agent mails or delivers payment therefor to the surrendering Holder.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
this covenant, the Company will comply with the applicable securities laws and
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regulations and will not be deemed to have breached its obligations under this
covenant by virtue thereof.
Notwithstanding the foregoing, the Indenture provides that the Company will
be permitted to consummate an Asset Swap if (i) at the time of entering into
the related Asset Swap Agreement or immediately after giving effect to such
Asset Swap, no Default or Event of Default shall have occurred or be
continuing or would occur as a consequence thereof, (ii) in the event that the
EBITDA associated with the Productive Assets that are the subject of such
Asset Swap for the period of the most recent four consecutive fiscal quarters
ending at least 45 days prior to the date on which the related Asset Swap
Agreement is executed by the parties thereto exceeds $3.0 million, the Company
provides to the Trustee a written opinion of an Independent Financial Advisor
that such Asset Swap is fair to the Company from a financial point of view and
(iii) the EBITDA associated with the Productive Assets that are the subject of
such Asset Swap for the period of the most recent four consecutive fiscal
quarters ending at least 45 days prior to the date on which the related Asset
Swap Agreement is executed by the parties thereto, when aggregated with the
EBITDA associated with all other Productive Assets that were the subject of
any previously completed Asset Swap for the period of the most recent four
consecutive fiscal quarters ending at least 45 days prior to the date on which
each related Asset Purchase Agreement was executed by the parties thereto,
does not exceed $10 million. For purposes of computing the EBITDA associated
with the Productive Assets that are the subject of an Asset Swap, the Company
shall allocate selling, general and administrative expenses to such Productive
Assets such that the ratio of the selling, general and administrative expenses
allocated to such Productive Assets for the relevant period to the total
selling, general and administrative expenses of the Company and its
consolidated Subsidiaries for such period is equal to the ratio of the
revenues attributable to such Productive Assets for such period to the total
revenues of the Company and its consolidated Subsidiaries for such period.
The Indenture also provides that the Company will not permit any
Intellectual Property Subsidiary to sell, lease, convey, dispose of or
otherwise transfer any of its properties or assets in one or a series of
related transactions (other than the granting of licenses to the Company as
permitted under the Indenture) unless, at the time of such sale, lease,
conveyance, disposition or other transfer, such Intellectual Property
Subsidiary is a Wholly Owned Subsidiary of the Company.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Incurrence of Indebtedness
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness; provided, however,
that the Company and its Subsidiaries may Incur Indebtedness (including
Acquired Indebtedness) if: (i) the Consolidated Interest Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is Incurred would have been at least 1.75 to 1.00
with respect to any Incurrence on or before January 15, 2001, or at least 2.00
to 1.00 thereafter, determined on a pro forma basis (including a pro forma
application of the Net Proceeds therefrom), as if the additional Indebtedness
had been Incurred at the beginning of such four-quarter period; and (ii) no
Default or Event of Default (except any as may be cured through the
application of proceeds of such Indebtedness) shall have occurred and be
continuing or would occur as a consequence thereof.
For purposes of determining any particular amount of Indebtedness under this
"--Limitation on Incurrence of Indebtedness" covenant, Guarantees, Liens or
Obligations with respect to letters of
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credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of determining
compliance with such covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness described in the
definition of Permitted Indebtedness, the Company, in its sole discretion,
shall classify such item of Indebtedness and shall only be required to include
the amount and type of such Indebtedness in one of such clauses.
Limitation on Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries, directly or indirectly, to: (i) declare or pay any dividend
or make any distribution on or in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving the Company),
except dividends or distributions payable solely in its Capital Stock (other
than Redeemable Stock) and except dividends or distributions payable solely to
the Company or any Wholly Owned Subsidiary of the Company; (ii) purchase
(except as a Permitted Investment), redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any direct or indirect parent of the
Company or any Subsidiary of the Company (including any Intellectual Property
Subsidiary) or any Unrestricted Subsidiary or other Affiliate of the Company
(other than any such Capital Stock owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
a scheduled mandatory sinking fund payment date or Stated Maturity any (a)
Subordinated Indebtedness of the Company or (b) Subordinated Indebtedness of
any Domestic Subsidiary; or (iv) make any Restricted Investment (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being herein referred to as a
"Restricted Payment"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(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 (other than Permitted
Indebtedness) pursuant to the Consolidated Interest Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"--Limitation on Incurrence of Indebtedness"; and
(c) the aggregate amount of such Restricted Payment and all other Restricted
Payments declared or made by the Company and its Subsidiaries after the date
of the Indenture, is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (treated as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture 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 a
deficit, minus 100% of such deficit), plus (ii) 100% of the aggregate Net Cash
Proceeds received by the Company from the issue or sale after the date of the
Indenture of Capital Stock of the Company or of debt securities of the Company
that have been converted into such Capital Stock (other than (x) Capital Stock
(or convertible debt securities) sold to a Subsidiary of the Company or an
Unrestricted Subsidiary of the Company, (y) Redeemable Stock or debt
securities that have been converted into Redeemable Stock and (z) except as
provided for in clause (iv), an employee participation plan or other trust
established by the Company or any of its Subsidiaries), plus (iii) 100% of the
net reduction in Investments in any Unrestricted Subsidiary of the Company
resulting from payments of interest on Indebtedness, dividends, repayments of
principal of loans or advances, or other transfers of assets, in each case to
the Company or any Subsidiary of the Company from such
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Unrestricted Subsidiary (except to the extent that any such payment is
included in the calculation of Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Subsidiaries of the Company;
provided that the amount included in this clause (iii) shall not exceed the
amount of Investments previously made by the Company and its Subsidiaries in
such Unrestricted Subsidiary, plus (iv) 100% of the aggregate Net Cash
Proceeds received by the Company from the issue or sale after the date of the
Indenture of Capital Stock (other than Redeemable Stock) of the Company to any
employee participation plan or similar trust; provided, however, that if such
plan or trust Incurs any Indebtedness to, or Guaranteed by, the Company or any
of its Subsidiaries to finance the acquisition of such Capital Stock, such
aggregate amount shall be limited to such Net Cash Proceeds less such
Indebtedness Incurred to or Guaranteed by the Company or any of its
Subsidiaries and any increase in the Consolidated Net Worth of the Company
resulting from principal repayments made by such plan or trust with respect to
Indebtedness Incurred by it to finance the purchase of such Capital Stock,
plus (v) the amount by which Indebtedness of the Company or its Subsidiaries
is reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the date of the
Indenture of any Indebtedness of the Company or its Subsidiaries convertible
or exchangeable into Capital Stock of the Company (less the amount of any
cash, or other property other than such Capital Stock, distributed by the
Company or any Subsidiary of the Company upon such conversion or exchange).
The foregoing provisions, however, will not prohibit (i) the payment of any
dividend or distribution by any Subsidiary of the Company that is not a Wholly
Owned Subsidiary of the Company so long as any such dividend or distribution
is paid to all shareholders of such Subsidiary on a pro rata basis; (ii) the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of the Indenture; (iii) the making of any Restricted Payment in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company or any Unrestricted Subsidiary of
the Company) of Capital Stock of the Company (other than Redeemable Stock);
provided, that any net cash proceeds that are utilized for any such Restricted
Payment, and any Net Income resulting therefrom, shall be excluded from clause
(c) of the preceding paragraph; (iv) the redemption, repurchase, retirement or
other acquisition of any Capital Stock or Subordinated Indebtedness of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary or any Unrestricted Subsidiary of
the Company) of other Capital Stock of the Company (other than any Redeemable
Stock); provided, that any net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, shall be excluded from clause (c) of the preceding
paragraph; (v) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of any Intellectual Property Subsidiary owned by
any Person other than the Company or any Wholly Owned Subsidiary of the
Company so long as the consideration paid in connection with any such
purchase, redemption, acquisition or retirement is solely in the form of
Qualified Subordinated Indebtedness; (vi) the redemption, repurchase,
defeasance or other acquisition or retirement for value of Subordinated
Indebtedness, including premium, if any, and accrued and unpaid interest, with
the proceeds of Qualified Subordinated Indebtedness; (vii) Investments at any
one time outstanding in an aggregate amount not to exceed $25.0 million in any
Person or Persons the primary business of which is related, ancillary or
complementary to the businesses of the Company and its Subsidiaries on the
date of such Investments (provided that Investments in any such Person or
Persons with respect to which the Company or any of its Wholly Owned
Subsidiaries owns less than 50% of the outstanding voting Capital Stock of any
such Person may not exceed $15.0 million at any one time outstanding); (viii)
any payment by the Company or any of its Subsidiaries directly or through any
direct or indirect parent company (a) in connection with the repurchase of
outstanding shares of Capital Stock of the Company or Holdings following the
death, disability or termination of employment of Management Shareholders and
(b) of amounts required to be paid to participants or former participants in
employee benefit plans upon any termination of employment by such participants
as provided in the
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documents related thereto, in an aggregate amount (for both clauses (a) and
(b)) not to exceed $5.0 million in any fiscal year (provided that any unused
amount may be carried over to any subsequent fiscal year subject to a maximum
amount of $10.0 million in any fiscal year); (ix) Investments in Currency
Agreements; (x) any repurchase of equity interests deemed to occur upon
exercise of stock options if such equity interests represent a portion of the
exercise price of such option; (xi) payments to Holdings pursuant to any tax
sharing agreement under which the Company is allocated its proportionate share
of the actual tax liability of the affiliated group of corporations that file
consolidated federal income tax returns (or that file state or local income
tax returns on a consolidated basis); (xii) loans, advances, dividends or
distributions by the Company or any of its Subsidiaries to Holdings to pay for
corporate, administrative and operating expenses in the ordinary course of
business, including payment of directors' and officers' insurance premiums,
key man life insurance premiums, directors' fees, and fees, expenses and
indemnities incurred in connection with the issuance of the Notes and the
other transactions consummated in connection therewith on the date of the
Indenture (including the registration under applicable laws and regulations of
its debt securities as required by the Exchange and Registration Rights
Agreement); and (xiii) (A) loans, advances, dividends or distributions by the
Company or any of its Subsidiaries to Holdings not to exceed an amount
necessary to permit Holdings to pay (1) its costs (including all professional
fees and expenses) incurred to comply with its reporting obligations under
federal or state laws or under the Indenture, including as described under "--
Reports," or in connection with reporting or other obligations under the
Senior Credit Facilities or any related collateral documents or guarantees,
(2) its expenses incurred in connection with any public offering of equity
securities which has been terminated by the board of directors of Holdings,
the net proceeds of which were specifically intended to be received by or
contributed or loaned to the Company, and (B) loans or advances by the Company
or any of its Subsidiaries to Holdings not to exceed an amount necessary to
permit Holdings to pay its interim expenses incurred in connection with any
public offering of equity securities the net proceeds of which are
specifically intended to be received by or contributed or loaned to the
Company, which, unless such offering shall have been terminated by the board
of directors of Holdings, shall be repaid to the Company promptly out of the
proceeds of such offering. In computing the amount of Restricted Payments for
purposes of clause (c) of the preceding paragraph, Restricted Payments under
clauses (ii) and (viii) shall be included, and Restricted Payments under
clauses (i), (iii), (iv), (v), (vi), (vii), (ix), (x), (xi), (xii) and (xiii)
shall not be included.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (as determined by the Board, whose determination shall be
conclusive if made in good faith and evidenced in a Board Resolution) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by
the Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. 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 the covenant described under the caption "--
Limitation on Restricted Payments" were computed, which calculations may be
based upon the Company's latest available financial statements.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary of the Company to (i)(a) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries on its Capital Stock or 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 Subsidiaries, (ii) make loans or advances to the
Company or any of its Subsidiaries, or (iii) transfer any of its properties or
assets to the Company or any of its Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of
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(A) Existing Indebtedness as in effect on the date of the Indenture, (B) the
Senior Credit Facilities as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, in any material respect (as determined by the Board, whose
determination shall be conclusive if made in good faith and evidenced by a
Board Resolution) with respect to such dividend and other payment restrictions
than those contained in the Senior Credit Facilities as in effect on the date
of the Indenture, (C) the Indenture and the Notes, (D) applicable law, (E)
Refinancing Indebtedness; provided that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive,
taken as a whole, in any material respect (as determined by the Board, whose
determination shall be conclusive if made in good faith and evidenced by a
Board Resolution) than those contained in the agreements governing the
Indebtedness being refinanced, (F) Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the Company (provided that (1) such
Indebtedness is not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company, (2) such encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person so acquired and its Subsidiaries and (3)
such Indebtedness is otherwise permitted to be incurred pursuant to the
provisions of the covenant described under "--Limitation on Incurrence of
Indebtedness" above), (G) Secured Indebtedness otherwise permitted to be
incurred pursuant to the provisions of the covenants described under "--
Limitation on Incurrence of Indebtedness" above and "--Limitation on
Subordinated Liens" below to the extent that such Indebtedness limits the
right of the debtor to dispose of the assets securing such Indebtedness, (H)
customary non-assignment provisions restricting subletting or assignment of
any lease or other agreement entered into by the Company or any of its
Subsidiaries, (I) customary net worth provisions contained in leases and other
agreements entered into by the Company or any of its Subsidiaries in the
ordinary course of business and (J) customary restrictions with respect to a
Subsidiary of the Company pursuant to an agreement that has been entered into
for the sale or other disposition of all or substantially all of the Capital
Stock or assets of such Subsidiary.
Limitation on Subordinated Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or suffer to exist any
Lien (other than Permitted Liens) on any of its property or assets, whether
owned on the date of the Indenture or thereafter acquired, securing any
Indebtedness other than Senior Indebtedness, in the case of the Company, or
senior indebtedness of a Subsidiary of the Company, in the case of a
Subsidiary, unless the Notes or, in the case of a Subsidiary of the Company,
its Guarantee of the Notes, are secured equally and ratably with such other
Indebtedness; provided that if such Indebtedness is by its terms expressly
subordinate to the Notes in the case of the Company or to the Guarantee in the
case of a Subsidiary of the Company, the Lien securing such Indebtedness shall
be subordinate or junior to the Lien securing the Notes or the Guarantee, as
the case may be, with the same relative priority as such Indebtedness shall
have with respect to the Notes or the Guarantee, as the case may be.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, enter into any Sale and Leaseback Transaction.
Notwithstanding the foregoing, the Company or any Subsidiary of the Company
may enter into a Sale and Leaseback Transaction if: (i) after giving pro forma
effect to any such Sale and Leaseback Transaction, the Company shall be in
compliance with the covenants described under the captions "--Limitation on
Incurrence of Indebtedness" and "--Limitation on Subordinated Liens" above;
(ii) the gross cash proceeds of such Sale and Leaseback Transaction are at
least equal to the Fair Market Value of such property (as determined by
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the Board, whose determination shall be conclusive if made in good faith and
evidenced by a Board Resolution); and (iii) the Company shall apply the net
cash proceeds of the sale as provided under "Repurchase at the Option of
Holders--Asset Sales" above, to the extent required therein.
Limitation on Sale or Issuance of Capital Stock of Subsidiaries
The Indenture provides that the Company will not sell any shares of Capital
Stock of any of its Subsidiaries to any Person (other than to the Company or a
Wholly Owned Subsidiary of the Company), and will not permit any of its
Subsidiaries, directly or indirectly, to issue or sell any shares of its
Capital Stock to any Person (other than to the Company or a Wholly Owned
Subsidiary of the Company), unless, immediately after giving effect to such
sale or issuance, such Subsidiary would no longer be a Subsidiary of the
Company; provided, however, that this covenant shall not prohibit (i) the
Company or any of its Subsidiaries from selling or disposing of all of the
Capital Stock of any of its Subsidiaries, (ii) the creation of any Subsidiary
of the Company that, at the time of the initial issuance of any shares of
Capital Stock of such Subsidiary, is not a Wholly Owned Subsidiary of the
Company or (iii) the designation of a Subsidiary as an Unrestricted Subsidiary
in compliance with the Indenture. The proceeds of any sale of such Capital
Stock permitted under this provision will be treated as Net Proceeds of an
Asset Sale and must be applied in accordance with the terms of the covenant
described under "Repurchase at the Option of Holders--Asset Sales."
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not, in a single transaction or
series of related transactions, consolidate with or merge with or into
(whether or not the Company is the surviving corporation), or directly and/or
indirectly through its Subsidiaries sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
(determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole) in one or more related transactions, to another Person, or allow
any Person to merge into the Company (other than the consolidation or merger
of a Wholly Owned Subsidiary with or into the Company) (provided that the
creation of a Lien by a Person on or in any of its assets shall not in and of
itself constitute the sale, assignment, transfer, lease, conveyance or other
disposition of the asset or assets subject to the Lien) unless (i) either (a)
the Company is the surviving corporation or (b) 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 and expressly assumes all the obligations of the Company under the
Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (ii) immediately after giving effect
to such transaction no Default or Event of Default exists; and (iii) the
Company or, if other than the Company, the entity or Person formed by or
surviving any such consolidation or merger, 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 (other
than Permitted Indebtedness) pursuant to the Consolidated Interest Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "-- Limitation on Incurrence of Indebtedness."
Notwithstanding the foregoing, the Indenture will provide that the Company may
transfer patents, trademarks, copyrights and other intellectual property to
one or more Intellectual Property Subsidiaries.
In the event of any transaction (other than a lease) described in, and
complying with, the immediately preceding paragraph in which the Company is
not the surviving Person and the surviving Person assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture, such surviving Person shall succeed to, and be substituted for, and
may
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exercise every right and power of, the Company, and the Company will be
discharged from its obligations under the Indenture and the Notes; provided
that solely for the purpose of calculating amounts described in clause (c)
under "--Limitation on Restricted Payments", any such surviving Person shall
only be deemed to have succeeded to, and be substituted for, the Company with
respect to the period subsequent to the effective time of such transaction,
and the Company (before giving effect to such transaction) shall be deemed to
be the "Company" for such purposes for all prior periods.
For purposes of the first paragraph of this covenant, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one
or more Subsidiaries of the Company, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, after the date of the Indenture,
in any one or a series of related transactions, sell, lease, transfer or
otherwise dispose of any of its properties, assets or services to, or make any
payment to, or purchase any property, assets or services from, or enter into
or make any agreement, loan, advance or Guarantee with, or for the benefit of,
any Affiliate (each of the foregoing, an "Affiliate Transaction"), other than
Exempt Affiliate Transactions, unless (i) such Affiliate Transaction is on
terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Subsidiary with an unrelated Person, as evidenced by an
Officers' Certificate delivered by the Company to the Trustee, and (ii) the
Company delivers to the Trustee (a) with respect to any Affiliate Transaction
entered into after the date of the Indenture involving aggregate consideration
in excess of $5.0 million, a resolution of a committee of Independent
Directors of the Company set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above and has been
approved by such committee or, in the event there are no Independent
Directors, an opinion as to the fairness to the Company or such Subsidiary of
such Affiliate Transaction from a financial point of view issued by an
Independent Financial Advisor and (b) with respect to an Affiliate Transaction
entered into after the date of the Indenture involving aggregate consideration
in excess of $25.0 million, or in connection with the sale or other transfer
in one or a series of related transactions of any patents, trademarks,
copyrights or other intellectual property to any Intellectual Property
Subsidiary and the related sale or other transfer in one or a series of
related transactions of any interest in such Intellectual Property Subsidiary
(other than any such sale or transfer to the Company or any Wholly Owned
Subsidiary of the Company), an opinion as to the fairness to the Company or
such Subsidiary of such Affiliate Transaction from a financial point of view
issued by an Independent Financial Advisor. Notwithstanding the foregoing, the
Indenture will provide that the Company may not enter into any license
agreement or other agreement or arrangement relating to licensing fees,
royalty payments or similar fees or payments with any Intellectual Property
Subsidiary that provides for the payment of any fees or the making of any
payments by the Company to the Intellectual Property Subsidiary in any year in
excess of 10% of the gross revenues for such year attributable to the sales of
products using the patents, trademarks, copyrights or other intellectual
property that is the subject of such agreement or arrangement.
Limitation on Layering Debt
The Indenture provides that the Company will not Incur any Indebtedness that
is subordinate or junior in right of payment to any Senior Indebtedness and
senior in any respect in right of payment to the Notes.
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Restrictions on Holdings
The Indenture contains covenants limiting the activities of Holdings to
acting as a holding company for the Company and activities reasonably
incidental thereto.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Trustee and to the Holders of Notes within 15 days
after it is or would have been required to file them with the Commission (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 section entitled
"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 and (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, at any time after the
Company files a registration statement with respect to the Exchange Offer or a
shelf registration statement relating to the offer and sale of the Transfer
Restricted Notes by the Holders thereof from time to time, the Company will
(i) 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
(ii) if the Commission will not accept such filing, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to securities analysts and prospective investors. In
addition, the Company has agreed that, for so long as any Notes remain
outstanding, it will furnish to the Trustee, to the Holders of Notes 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.
Future Note Guarantors
The Company will cause each of its future Domestic Subsidiaries to enter
into a supplemental indenture providing for such Domestic Subsidiary to
Guarantee payment of the Notes on a senior subordinated and unsecured basis.
Each Domestic Subsidiary Guarantee will be subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full in cash of all
Senior Indebtedness of such Guarantor. In addition, the Domestic Subsidiary
Guarantee provided by each Domestic Subsidiary will be limited to an amount
not to exceed the maximum amount that can be Guaranteed by the relevant
Subsidiary without rendering such Guarantee, as it relates to such Subsidiary,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest,
including Special Interest, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due,
upon redemption or otherwise of the principal of or premium, if any, on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (iii) failure by the Company or Holdings to comply with the
provisions described under the captions "Repurchase at Option of Holders of
Notes--Change of Control" and "Repurchase at Option of Holders of Notes--Asset
Sales"; (iv) failure by the Company to comply for 30 days after written notice
by the Trustee or Holders of at least 25% of the aggregate principal amount of
the Notes outstanding with any of its other agreements, covenants or
warranties in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness
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for money borrowed by the Company or any of its Subsidiaries (or the payment
of which is Guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or Guarantee exists on the date of the Indenture, or is created
after the date of the Indenture, which default (a) is caused by a failure to
pay principal of or interest on such Indebtedness when due after giving effect
to applicable grace periods (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, totals $10.0
million or more; (vi) failure by the Company or any of its Significant
Subsidiaries to pay final judgments or orders (not fully covered by insurance)
totaling in excess of $10.0 million, which judgments or orders either (a) are
the subject of any enforcement proceeding commenced by any creditor or (b)
remain unstayed for 45 days; and (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the then outstanding Notes
may declare by written notice to the Company all the Notes to be due and
payable immediately in an amount equal to the principal amount of the Notes,
together with accrued interest to the date the Notes become due and payable.
Notwithstanding the foregoing, in the case of an Event of Default specified in
clause (vii) above with respect to the Company, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Indenture provides that, if a Default occurs and is
continuing, generally the Trustee must, within 90 days after the occurrence of
such Default, give to the Holders of Notes notice of such Default. The Trustee
may withhold from Holders of Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal, premium or interest or Special Interest on the Notes) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all of
the Notes, waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or Holdings, as such, shall have any liability for any obligations of the
Company or Holdings under the Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
Notes. Such waiver may not be effective to waive liabilities under the federal
securities laws, and it is the view of the Commission that such waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes (and the
obligations of the Guarantors under the Domestic Subsidiary Guarantees)
("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes
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to receive payments in respect of the principal of, premium, if any, and
interest, including Special Interest, on such Notes when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants described under "Certain Covenants" ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including nonpayment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, noncallable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest, including
Special Interest, on the outstanding Notes on the Stated Maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 95th day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under, any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, although neither a
Legal Defeasance nor a Covenant Defeasance shall occur while the Senior Credit
Facilities are outstanding unless such defeasance is permitted thereunder or
the holders of the Indebtedness represented by the Senior Credit Facilities
(or a representative thereof) consent to such Legal Defeasance or Covenant
Defeasance; (vi) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and (vii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A Holder of Notes may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes, fees
and expenses required by law or permitted by the Indenture. The Company is not
required to transfer or exchange any Note selected for redemption. Also, the
Company is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of such Note
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment, supplement or
waiver may not (with respect to any Notes held by a nonconsenting Holder): (i)
reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money other
than that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of or premium, if any, or interest on
the Notes, (vii) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under the
caption "Repurchase at the Option of Holders"), (viii) amend or modify any
Guarantees on the Notes or (ix) make any change in the foregoing amendment,
supplement and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the rights under the Indenture of any such Holder, to comply with requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the TIA or to make certain changes to the Indenture to provide
for the issuance of Additional Notes.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for
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or as an inducement to any consent, waiver or amendment of any terms or
provisions of the Notes, unless such consideration is offered to be paid or
agreed to be paid to all Holders of Notes which so consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires an conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i) any
Indebtedness of any other Person existing at the time such other Person is
merged with or into, or becomes 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 (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director
or executive officer of (a) such specified Person or (b) any Person described
in the preceding clause (i). For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of any class, or any series
of any class, of equity securities of a Person, whether or not voting, shall
be deemed to be control.
"Asset Sale" means, with respect to any Person, the sale, lease, conveyance,
disposition or other transfer, that does not constitute a Restricted Payment
or an Investment, by such Person of any of its property or assets (including
without limitation, by way of a Sale and Leaseback Transaction and including
the issuance, sale or other transfer of any Capital Stock in any Subsidiary
(including any Intellectual Property Subsidiary) of such Person or the sale or
other transfer of Capital Stock in any Unrestricted Subsidiary of such Person
(including the receipt of proceeds of insurance paid on account of the loss of
or damage to any asset and awards of compensation for any asset taken by
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condemnation, eminent domain or similar proceeding, and including the receipt
of proceeds of business interruption insurance), in each case in one or a
series of related transactions; provided that, notwithstanding the foregoing,
the term "Asset Sale" shall not include: (a) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted pursuant to the covenant entitled "Merger, Consolidation
or Sale of Assets," (b) the sale or lease of inventory and obsolete equipment
or personal property no longer useful in the business of such Person, in each
case in the ordinary course of business, (c) a transfer of assets by any
Person to the Company, an Intellectual Property Subsidiary or a Wholly Owned
Subsidiary of the Company, (d) an issuance of Capital Stock by any Person to
the Company or to a Wholly Owned Subsidiary of the Company, (e) the sale or
other disposition of cash or Cash Equivalents, (f) the issuance by the Company
of shares of its Capital Stock, (g) the licensing of intellectual property in
the ordinary course of business or (h) Asset Swaps permitted pursuant to the
covenant entitled "Repurchase at Option of Holders--Asset Sales."
"Asset Swap" means the substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company and another Person or group
of affiliated Persons (which Person or group of affiliated Persons is not
affiliated with the Company) pursuant to an Asset Swap Agreement.
"Asset Swap Agreement" means a definitive agreement, subject only to
customary closing conditions that the Company in good faith believes will be
satisfied, providing for an Asset Swap; provided, however, that any amendment
to, or waiver of, any closing condition that individually or in the aggregate
is material to such Asset Swap shall be deemed to be a new Asset Swap
Agreement.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or
foreign law for the relief of debtors.
"Board" means the board of directors of the Company.
"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" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible or exchangeable
into such equity.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any commercial bank of
recognized standing having capital and surplus in excess of $500.0 million or
(ii) any bank whose short-term commercial paper rating from Standard and
Poor's Rating Group is at least A-1 or the equivalent thereof or from Moody's
Investors Service, Inc. is at least P-1 or the equivalent thereof (any such
bank being an "Approved Lender"), in each case with maturities of not more
than twelve months from the date of acquisition, (c) commercial paper issued
by any Approved
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Lender (or by the parent company thereof), (d) repurchase obligations of any
lender under the Senior Credit Facilities (as in effect on the date of the
Indenture) or any Approved Lender and (e) any shares of money market mutual or
similar funds having assets in excess of $500.0 million or which invest
exclusively in the assets satisfying the requirements of clauses (a) through
(d) of this definition.
"Change of Control" means such time as:
(i) prior to the initial Public Equity Offering by the Company or
Holdings of its common stock, (a) Holdings ceases to be, directly or
indirectly, the beneficial owner of 100% of the voting power of the Voting
Stock of the Company (unless the Company has merged with or into Holdings
in compliance with the covenant set forth under the caption "Merger,
Consolidation or Sale of Assets" or (b) the Initial Shareholders cease to
be, directly or indirectly, the beneficial owners, in the aggregate, of
more than 50% of the voting power of the Voting Stock of the Company and of
Holdings, in each case on a fully-diluted basis, after giving effect to the
conversion and exercise of all outstanding warrants, options any other
securities of the Company or Holdings, as the case may be, convertible into
or exercisable for Voting Stock of the Company or Holdings, as the case may
be (whether or not such securities are then currently convertible or
exercisable); or
(ii) after the initial Public Equity Offering by the Company or Holdings
of its common stock, (a) any "person" or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) (other than one or more of the
Initial Shareholders) becomes, directly or indirectly, the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all shares
that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), by way of
merger, consolidation or otherwise, of 35% or more of the voting power of
the Voting Stock of the Company or Holdings on a fully-diluted basis, after
giving effect to the conversion and exercise of all outstanding warrants,
options and other securities of the Company or Holdings, as the case may
be, convertible into or exercisable for Voting Stock of the Company or
Holdings, as the case may be, (whether or not such securities are then
currently convertible or exercisable) and (b) such person or group is or
becomes, directly or indirectly, the beneficial owner of a greater
percentage of the voting power of the Voting Stock of the Company or
Holdings, as the case may be, calculated on such fully diluted basis, than
the percentage beneficially owned by the Initial Shareholders; or
(iii) the Company or Holdings merges with or into another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges with or
into the Company or Holdings, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company or Holdings, as the
case may be, is converted into or exchanged for cash, securities or other
property, other than any such transaction where (x) the outstanding Voting
Stock of the Company or Holdings, as the case may be, is converted into or
exchanged for (1) Voting Stock (other than Redeemable Stock) of the
surviving or transferee corporation and/or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under the Indenture and (y) immediately after such transaction no
"person" or "group" (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act) (other than one or more of the Initial Shareholders) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of (1) 35% or more of the voting power of the Voting Stock of
the surviving or transferee corporation on a fully diluted basis, after
giving effect to the conversion and exercise of all outstanding warrants,
options and other securities of such surviving or transferee corporation
convertible into or exercisable for Voting Stock of such surviving or
transferee
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corporation (whether or not such securities are then currently convertible
or exercisable) and (2) a greater percentage of the voting power of the
Voting Stock of such surviving or transferee corporation calculated on such
fully diluted basis, than the percentage beneficially owned by the Initial
Shareholders; or
(iv) during any period of two consecutive calendar years, individuals who
at the beginning of such period constituted the Board or the board of
directors of Holdings, together with any new members of such Board or board
of directors (a) whose election by such Board or board of directors or
whose nomination for election by the stockholders of the Company or
Holdings, as the case may be, was approved by a vote of a majority of the
members of such Board or board of directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved or (b) elected by the
Initial Shareholders, cease for any reason to constitute a majority of the
directors of the Company or Holdings, as the case may be, then in office.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) the sum of (a) Consolidated Interest
Expense for such four fiscal quarters plus (b) all cash preferred dividends
(tax effected) for such period; provided, however, that:
(a) if the Company or any Subsidiary of the Company (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio is an Incurrence of
Indebtedness, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness and the application of the proceeds thereof as if such
Indebtedness had been Incurred and the proceeds thereof applied on the
first day of such period or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period
that is no longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect to such discharge of such Indebtedness, including application
of the proceeds of such new Indebtedness, as if such defeasance, repayment,
repurchase or discharge had occurred on the first day of such period
(except that, in making such computation, the amount of Indebtedness under
the Revolving Credit Facility or other revolving credit facility shall be
computed based upon the average daily balance of such Indebtedness during
such four-quarter period);
(b) if since the beginning of such period the Company or any of its
Subsidiaries shall have disposed of any company or any business or any
group of assets constituting an operating unit (a "Disposal"), the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets that are the subject of such
Disposal for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period, and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any of its Subsidiaries repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Subsidiaries in connection with such Disposal for such period (or, if the
Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such
Subsidiary to the extent the Company and its continuing Subsidiaries are no
longer liable for such Indebtedness after such sale);
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(c) if since the beginning of such period the Company or any Subsidiary
of the Company (by merger or otherwise) shall have acquired any company or
any business or any group of assets constituting an operating unit (an
"Acquisition"), EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Acquisition occurred on the
first day of such period; and
(d) if since the beginning of such period any Person (that subsequently
became a Subsidiary of the Company or was merged with or into the Company
or any Subsidiary of the Company since the beginning of such period) shall
have made any Disposal or Acquisition that would have required an
adjustment pursuant to clause (b) or (c) above if made by the Company or a
Subsidiary of the Company during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Disposal or Acquisition occurred on the first day
of such period.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Hedging Obligations
applicable to such Indebtedness if such Hedging Obligations have a remaining
term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Subsidiary of the
Company, a fixed or floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be computed by
applying, at the option of the Company, either a fixed or floating rate. If
any Indebtedness that is being given pro forma effect was Incurred under the
Revolving Credit Facility or any other revolving credit facility, the interest
expense on such Indebtedness shall be computed based upon the average daily
balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Subsidiaries as determined in
accordance with GAAP, plus, to the extent not included in such interest, (i)
the interest component of Capital Lease Obligations and Attributable Debt,
whether paid or accrued, (ii) amortization of debt discount, (iii) non-cash
interest expense, (iv) accrued interest, (v) interest actually paid by the
Company or any such Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (vi) net costs associated with Hedging
Obligations, (vii) the interest portion of any deferred obligation, (viii)
Preferred Stock dividends in respect of all Preferred Stock (including
Redeemable Stock) of Subsidiaries of the Company and Redeemable Stock of the
Company held by Persons other than the Company or a Wholly Owned Subsidiary of
the Company and (ix) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan
or trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust; provided,
however, that there shall be excluded therefrom (y) any such interest expense
in respect of Qualified Subordinated Indebtedness and (z) any such interest
expense of any Unrestricted Subsidiary of the Company to the extent the
related Indebtedness is not Guaranteed or paid by the Company or any
Subsidiary of the Company.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its 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 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 Subsidiary thereof, (ii) the Net Income
(but not loss) of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which 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
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governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income (if positive) 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, or any dividends or
other distributions from, any Unrestricted Subsidiary of the Company, to the
extent otherwise included, shall be excluded, until distributed in cash to the
Company or one of its Subsidiaries and provided further that, for the purposes
of clause (i), Net Income of any such entity shall be calculated in the same
manner that Net Income of the Company is calculated. Notwithstanding the
foregoing, for the purposes of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" only, there shall be excluded
from Consolidated Net Income any payments of interest on Indebtedness,
dividends, repayments of principal of loans or advances, or other transfers of
assets, from Unrestricted Subsidiaries to the Company or any of its
Subsidiaries to the extent such payments, dividends, repayments, advances or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (c)(iii) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP, as of the end of the most recent fiscal quarter of
the Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated
value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B)
any amounts attributable to Redeemable Stock of the Company.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP (excluding any non-cash charge that
requires or represents an accrual or reserve for cash charges for any future
period, other than accruals for future retiree medical obligations made
pursuant to SFAS No. 87, No. 112 and No. 116, as amended or modified).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to
or under which the Company or any of its Subsidiaries is a party or a
beneficiary.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means, with respect to any Person, (i) so
long as the Senior Credit Facilities are outstanding, Indebtedness of such
Person under the Senior Credit Facilities and (ii) thereafter, any other
Senior Indebtedness of such Person permitted under the Indenture the principal
amount of which is $25.0 million or more and that has been designated by such
Person as "Designated Senior Indebtedness."
"Domestic Subsidiary" means any direct or indirect Subsidiary of the Company
that is organized and existing under the laws of the United States, any state
thereof or the District of Columbia, but shall not include any Intellectual
Property Subsidiary unless such Intellectual Property Subsidiary is a Wholly
Owned Subsidiary of the Company.
"Domestic Subsidiary Guarantee" means any unconditional Guarantee, on a
senior subordinated and unsecured basis, of the Notes provided by any Domestic
Subsidiary of the Company.
"EBITDA" for any period means the sum of Consolidated Net Income, income tax
expense, Consolidated Interest Expense and Consolidated Non-Cash Charges
deducted in computing
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Consolidated Net Income, without duplication, in each case for such period, of
such Person and its consolidated Subsidiaries on a consolidated basis, all
determined in accordance with GAAP.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of the date of the Indenture, between
the Company and the Initial Purchasers.
"Exchange Notes" means, collectively, debt securities of the Company that
are identical in all material respects to the Notes, except for the transfer
restrictions relating to the Notes, issued in a like aggregate principal
amount of the Notes pursuant to the Exchange and Registration Rights
Agreement.
"Exchange Offer" means a registered exchange offer for the Notes undertaken
by the Company pursuant to the Exchange and Registration Rights Agreement.
"Exempt Affiliate Transactions" means (a) transactions between or among the
Company and/or its Wholly Owned Subsidiaries, (b) loans or advances to
employees and officers of the Company or any Subsidiary of the Company in the
ordinary course of business to provide for the payment of reasonable expenses
incurred by such persons in the performance of their responsibilities to the
Company or such Subsidiary or in connection with any relocation, (c) fees,
compensation or employee benefit arrangements paid to and indemnity provided
on behalf of directors, officers or employees of the Company or any Subsidiary
of the Company in the ordinary course of business, (d) any employment
agreement (including customary benefits thereunder) that is in effect on the
date of the Indenture in the ordinary course of business and any such
agreement entered into by the Company or a Subsidiary of the Company after the
date of the Indenture in the ordinary course of business of the Company or
such Subsidiary, (e) any Restricted Payment that is not prohibited by the
covenant set forth under the caption "--Certain Covenants--Limitation on
Restricted Payments" above and (f) transactions pursuant to agreements in
effect on the date of original issuance of the Notes, including amendments
thereto entered into after such date; provided that the terms of any such
amendment are not, in the aggregate, less favorable to the Company than the
terms of such agreement prior to such amendment and; provided further that
such agreements are set forth in a schedule to the Indenture.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the date of the Indenture, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arms'-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"Foreign Subsidiary" means any Subsidiary of the Company that is not a
Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person,
including any such obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising
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by agreement to purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb shall have a correlative
meaning.
"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.
"Holder" means the Person in whose name a Note is registered or the
registrar's books.
"Holdings" means Eagle Family Foods Holdings, Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness. The terms "Incurred," "Incurrence"
and "Incurring" shall each have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal (accreted value in the case of Indebtedness Incurred
with original issue discount) of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(ii) the principal (accreted value in the case of Indebtedness Incurred
with original issue discount) of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(iii) all Capital Lease Obligations and Attributable Debt of such Person;
(iv) all obligations of such person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables);
(v) all reimbursement obligations of such Person in respect of letters of
credit, bankers' acceptances or other similar instruments or credit
transactions, other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iv) of this definition) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn
upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock of such
Person or any Redeemable Stock of such Person's Subsidiaries (but
excluding, in each case, any accrued dividends);
(vii) the amount of Preferred Stock of such Person's Subsidiaries (but
excluding any unaccrued dividends);
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(viii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that if such Indebtedness is not assumed by such Person,
the amount of such Indebtedness shall be the lesser of (a) the Fair Market
Value (as determined by the board of directors of such Person, whose
determination shall be conclusive if made in good faith and evidenced by a
resolution of such board of directors) of such asset at such date of
determination and (b) the amount of such Indebtedness of such other Person;
(ix) all Indebtedness of other Persons to the extent Guaranteed by such
Person; and
(x) to the extent not otherwise included in this definition, net
obligations in respect of Hedging Obligations.
For purposes of this definition, the maximum fixed redemption, repayment or
repurchase price of any Redeemable Stock that does not have a fixed
redemption, repayment or repurchase price shall be calculated in accordance
with the terms of such Redeemable Stock as if such Redeemable Stock were
redeemed, repaid or repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that
if such Redeemable Stock is not then permitted to be redeemed, repaid or
repurchased, the redemption, repayment or repurchase price shall be the book
value of such Redeemable Stock as reflected in the most recent financial
statements of such Person. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any contingent
obligations at such date.
"Independent Director" means a director of the Company other than a director
who is a party, or who is a director, officer, employee or Affiliate (or is
related by blood or marriage to any such person) of the other party, to the
transaction in question, and who is, in fact, independent in respect of such
transaction.
"Independent Financial Advisor" means a reputable accounting, appraisal or
nationally recognized investment banking or consulting firm that is, in the
reasonable judgment of the Board, qualified to perform the task for which such
firm has been engaged and disinterested and independent with respect to the
Company.
"Initial Purchasers" means, collectively, Chase Securities Inc. and Merrill
Lynch & Co.
"Initial Shareholders" means the Sponsors and Management Shareholders.
"Intellectual Property Subsidiary" means any Subsidiary of the Company (i)
substantially all the assets of which are comprised of patents, trademarks,
copyrights and other intellectual property, (ii) that is engaged solely in the
business of owning such assets (prior to any sale, lease, conveyance,
disposition of or other transfer of any of such assets to any Person in
accordance with the terms of the Indenture) and licensing such assets to the
Company pursuant to a license agreement or other agreement or arrangement
relating to licensing fees, royalty payments or similar fees or payments that
does not require the payment of any fees or the making of any payments by the
Company to such Intellectual Property Subsidiary in any year in excess of 10%
of the gross revenues for such year attributable to the sales of products
using the patents, trademarks, copyrights or other intellectual property that
is the subject of such agreement or arrangement and other activities
incidental thereto, (iii) contains in its charter, partnership agreement,
operating agreement or other constituent or governing document (A) a provision
granting the Company or any Wholly Owned Subsidiary of the Company control
over the management (including the sale, lease, conveyance disposition of or
other transfer of any of the properties or assets) of such Subsidiary, (B) a
prohibition against the making of
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any distribution by such Subsidiary to any Person other than the Company or
any Wholly Owned Subsidiary of the Company with respect to any year (other
than in connection with the sale, lease, conveyance, disposition of or other
transfer of any assets of such Subsidiary to any Person in accordance with the
terms of the Indenture) in an amount in excess of 10% of the difference (if
positive) between the revenue of such Subsidiary for such year and the
operating expenses of such Subsidiary for such year and (C) a provision
requiring that all proceeds derived from the issuance, sale or other transfer
of any shares of Capital Stock by such Subsidiary be distributed to the
Company promptly upon receipt thereof and (iv) that does not Incur
Indebtedness and that does not incur any other obligation other than as
permitted under clause (ii) above.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including an Affiliate) in the form of a direct or
indirect loan (including a Guarantee of Indebtedness or other Obligation),
advance or other extension of credit or capital contribution (by means of any
transfer of cash or other property) (excluding an advance to any officer or
employee of the type specified in clause (b) of the definition of Exempt
Affiliate Transactions and accounts receivable and other extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices), purchase or other acquisition for consideration or ownership of
Indebtedness, Capital Stock or other security issued or owned by any other
Person and any other item that is or would be classified as an investment on a
balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Capital Stock or other securities by the Company for consideration
consisting of common equity securities of the Company shall not be deemed to
be an Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Shareholder" means an officer, director or employee of the
Company or any Subsidiary of the Company who is the beneficial owner of any
Capital Stock of the Company or of Holdings.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, 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, any dispositions pursuant
to a Sale and Leaseback Transaction) or (b) the disposition of any securities
by such Person or any of its Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Subsidiaries, (ii) any extraordinary
gain or loss, together with any related provision for taxes on such
extraordinary gain or loss, (iii) any gains (but not losses) from currency
exchange transactions not in the ordinary course of business consistent with
past practice and (iv) with respect to the Company, (a) cash restructuring
charges or writeoffs recorded within the one-year period following the date of
the Indenture in an aggregate amount not to exceed $5.0 million and (b) other
such non-cash restructuring charges or writeoffs recorded within such one-year
period (excluding any non-cash charge that requires or represents an accrual
or reserve for cash charges for any future period).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any
noncash consideration received in any Asset Sale but only as and when
received) net of (i) the amount of cash applied to repay or defease
Indebtedness secured by
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the asset involved in such Asset Sale, (ii) the direct costs and expenses
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), (iii) any relocation
expenses incurred as a result thereof, (iv) taxes (including income taxes and
taxes payable upon payment or other distribution of funds from a Foreign
Subsidiary to the Company or another Subsidiary of the Company) paid or
payable as a result thereof, (v) any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP, (vi) a
reasonable reserve for the after-tax cost of any indemnification payments
(fixed or contingent) attributable to the seller's indemnities to purchaser in
respect of such Asset Sale undertaken by the Company or any of its
Subsidiaries in connection with such Asset Sale and (vii) if such Person is a
Subsidiary of the Company, any dividends or distributions payable to holders
of minority interests in such Subsidiary from the proceeds of such Asset Sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its 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; and (ii) no default with respect to which (including
any rights that the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary of the Company) would permit (upon notice,
lapse of time or both) any holder of any other Indebtedness of the Company or
any of its Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
"Obligations" means any principal, interest, special interest, penalties,
premiums, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or
the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"pari passu," as applied to the ranking of any Indebtedness of a Person in
relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not subordinate in right of payment to any
Indebtedness or (ii) is subordinate in right of payment to the same
Indebtedness as is the other, and is so subordinate to the same extent, and is
not subordinate in right of payment to each other or to any Indebtedness as to
which the other is not so subordinate.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company under the Senior Credit Facilities (and
of any future Domestic Subsidiaries under the Domestic Subsidiary
Guarantees), or any refinancing thereof, in an aggregate principal amount
at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) not to exceed $265.0 million, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount or the commitments with respect to such
Indebtedness pursuant to the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales";
(ii) the Existing Indebtedness of the Company;
(iii) the Indebtedness of the Company under the Notes and of any future
Domestic Subsidiaries under the Domestic Subsidiary Guarantees;
(iv) Indebtedness (including Acquired Indebtedness) of the Company or any
of its Subsidiaries represented by Capital Lease Obligations, mortgage
financings or Purchase Money
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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 used in the business of the Company or such Subsidiary or any
Refinancing Indebtedness thereof (provided that the requirements of clause
(ii) of the definition of Refinancing Indebtedness need not be met for the
purposes of this clause (iv)), in an aggregate principal amount not to
exceed $20.0 million at any time outstanding;
(v) Refinancing Indebtedness of the Company or any of its Subsidiaries;
(vi) Indebtedness of the Company owing to and held by any of its Wholly
Owned Subsidiaries or Indebtedness of a Subsidiary of the Company owing to
and held by the Company and any of its Wholly Owned Subsidiaries; provided,
however, that (i) any subsequent issuance or transfer of Capital Stock that
results in any such Indebtedness being held by a Person other than a Wholly
Owned Subsidiary of the Company and (ii) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly
Owned Subsidiary of the Company shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
(vii) (a) Hedging Obligations that are Incurred by the Company or any of
its Subsidiaries for the purpose of fixing or hedging interest rate risk
with respect to any floating rate Indebtedness that is permitted by the
Indenture to be Incurred, (b) Indebtedness for letters of credit relating
to workers' compensation claims and self-insurance or similar requirements
in the ordinary course of business, (c) Indebtedness in respect of
performance, surety or appeal bonds in the ordinary course of business and
(d) Indebtedness in respect of any Currency Agreement;
(viii) Indebtedness of the Company to the extent the proceeds thereof are
immediately used after the Incurrence thereof to purchase Notes tendered in
an offer to purchase made as a result of a Change of Control;
(ix) Indebtedness arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations (or from Guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any Subsidiary of the Company pursuant to
such agreements), in any case Incurred in connection with the disposition
of any business, assets or Subsidiary of the Company (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Subsidiary of the Company in
connection with such disposition;
(x) Qualified Subordinated Indebtedness of the Company or a Domestic
Subsidiary;
(xi) Indebtedness of Foreign Subsidiaries in an amount not at any time
exceeding $10.0 million; and
(xii) Indebtedness of the Company and its Subsidiaries (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount at any time outstanding not to exceed $20.0
million.
"Permitted Investments" means (a) any Investments in the Company; (b) any
Investments in Cash Equivalents; (c) Investments made as a result of the
receipt of noncash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales"; (d) Investments outstanding
as of the date of the Indenture; (e) Investments in property or assets to be
used in (or in Subsidiaries and any entity that, as a result of such
Investment, is a Subsidiary engaged in) the same or a similar line of business
as the Company or any of its Subsidiaries was engaged in on the date of the
Indenture or
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any reasonable extensions or expansions thereof and Investments in the form of
any purchase or other acquisition for consideration or ownership of additional
Capital Stock of any of the Subsidiaries of the Company permitted under the
Indenture; (f) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses in
accordance with GAAP; (g) loans or advances to employees made in the ordinary
course of business that do not in the aggregate exceed $10.0 million at any
time outstanding; (h) accounts receivables and other extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices; (i) Investments in any broker or customer; provided that the
aggregate amount of such Investments in all brokers and customers shall not at
any time exceed $5.0 million; (j) Investments in dealers or customers received
as distributions on debt claims under a plan or plans of reorganization in any
bankruptcy proceeding filed by or against any dealer or customer under Chapter
11 of Title 11 of the U.S. Code; provided that the Company liquidates such
Investments as soon as practicable; and (k) Investments in Indebtedness
incurred by the Company or any Subsidiary of the Company in compliance with
the covenant described under "--Certain Covenants--Limitation on Incurrence of
Indebtedness." The term "Permitted Investments" shall not include the
purchase, redemption or other acquisition or retirement for value of any
shares of Capital Stock of any Intellectual Property Subsidiary that are not
owned by the Company.
"Permitted Liens" means Liens securing Indebtedness of a Person existing at
the time that such Person is merged into or consolidated with the Company or a
Subsidiary of the Company or its assets are acquired by such Person; provided
that such Liens were not created in contemplation of such merger or
consolidation or purchase and do not extend to any assets of the Company or
any Subsidiary of the Company, other than the surviving person and its
Subsidiaries or such assets.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) that is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Private Exchange Notes" means, collectively, debt securities of the Company
that are identical in all material respects to the Exchange Notes, except for
the transfer restrictions relating to such Private Exchange Notes, issued by
the Company (under the same indenture as the Exchange Notes) simultaneously
with the delivery of the Exchange Notes in the Exchange Offer, to any Holder
that holds any Notes acquired by it that have, or that are reasonably likely
to be determined to have, the status of an unsold allotment in an initial
distribution, or to any Holder that is not entitled to participate in the
Exchange Offer, upon the request of any such Holder, in exchange for a like
aggregate principal amount of Notes held by such Holder.
"Productive Assets" means assets of a kind used or usable by the Company and
its Subsidiaries in the Company's business or any Related Business.
"Public Equity Offering" means an underwritten primary public offering of
the common stock of the Company or of the common stock of Holdings pursuant to
an effective registration statement filed with the Commission in accordance
with the Securities Act (whether alone or in conjunction with a secondary
public offering).
"Purchase Money Obligations" of any Person means any obligations of such
Person to any seller or any other Person Incurred or assumed to finance the
construction and/or acquisition of real or personal property to be used in the
business of such Person or any of its Subsidiaries in an amount
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that is not more than 100% of the cost of such property, and Incurred in
contemplation of, or within 180 days after, the date of such acquisition
(excluding accounts payable to trade creditors Incurred in the ordinary course
of business).
"Qualified Subordinated Indebtedness" means Subordinated Indebtedness owing
to an Initial Shareholder or any Affiliate of any Initial Shareholder (or, in
the case of Qualified Subordinated Indebtedness issued by the Company to
purchase, redeem or otherwise acquire or retire for value any shares of
Capital Stock of any Intellectual Property Subsidiary, to any other Person)
that (i) does not require or permit any payment for any reason upon or in
respect thereof, whether principal, interest or otherwise, prior to the Stated
Maturity thereof, except in additional Qualified Subordinated Indebtedness,
(ii) does not permit any acceleration thereof at any time prior to the date
that is 365 days after the payment in full in cash of the Notes, (iii) has a
Stated Maturity that is not earlier than the fifth anniversary of the Stated
Maturity of the Notes, (iv) does not contain any affirmative, negative,
financial or operating covenants and (v) is expressly subordinated in right of
payment to all other Indebtedness of the Company on substantially the same
terms that it is subordinated in right of payment to the Notes.
"Redeemable Stock" means with respect to any Person, Capital Stock of such
Person 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 (unless any redemption or repurchase of such Capital Stock thereupon is
required by any such terms, but only to the extent that a payment in respect
thereof would be permitted under the covenant set forth under the caption "--
Certain Covenants--Limitation on Restricted Payments"), 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 which is one year after the date on which the Notes mature.
"Refinancing Indebtedness" means any Indebtedness of the Company or any of
its 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 Subsidiaries; provided that: (i) the principal
amount of such Refinancing Indebtedness does not exceed the principal amount
of the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses and penalties and premiums
incurred in connection therewith); (ii) such Refinancing Indebtedness 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) such Refinancing Indebtedness
ranks in right of payment to the Notes at least to the same extent as the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is Incurred either by the Company or by
the Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Registration Default" means (i) the failure of the Company to file with the
Commission the applicable registration statement as required by the Exchange
and Registration Rights Agreement, (ii) the failure of the registration
statement prepared in connection with the Exchange Offer or any shelf
registration statement relating to the offer and sale of the Transfer
Restricted Notes by the Holders thereof from time to time to be declared
effective as required by the Exchange and Registration Rights Agreement, (iii)
the failure to consummate the Exchange Offer as required by the Exchange and
Registration Rights Agreement or (iv) the failure of any shelf registration
statement relating to the offer and sale of the Transfer Restricted Notes by
the Holders thereof from time to time to remain effective as provided in the
Exchange and Registration Rights Agreement.
"Related Business" means any business which is the same as or related,
ancillary or complimentary to the business of the Company on the date of the
Indenture, as reasonably determined by the Board.
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"Resolution" means a copy of a resolution certified by the secretary or an
assistant secretary of the Company to have been duly adopted by the Board and
to be in full force and effect on the date on which such certification
delivered to the Trustee.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means that certain senior secured revolving
credit facility provided to the Company by The Chase Manhattan Bank, Merrill
Lynch Capital Corporation and certain other lenders on the date of the
Indenture in an amount equal to $70.0 million and/or any successor facility or
facilities.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to the Company or a Subsidiary of the Company of any property, whether
owned by the Company or any Subsidiary of the Company as of the date of the
Indenture or later acquired, which has been or is to be sold or transferred by
the Company or such Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
property.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Credit Facilities" means the Revolving Credit Facility and the Term
Credit Facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced, restated or
refinanced from time to time.
"Senior Indebtedness" means with respect to Indebtedness of the Company, (i)
Indebtedness Incurred under the Senior Credit Facilities and (ii) any other
Indebtedness permitted to be Incurred under the terms of the Indenture, unless
the instrument under which such Indebtedness is Incurred expressly provides
that it is on parity with or subordinated in right of payment to any
Indebtedness for money borrowed. Notwithstanding anything to the contrary in
the foregoing, Senior Indebtedness will not include (w) any liability for
federal, state, local or other taxes, (x) any Indebtedness of the Company to
any of its Subsidiaries, Unrestricted Subsidiaries or other Affiliates, (y)
any Trade Payables or (z) any Indebtedness that is Incurred in violation of
the Indenture. Senior Indebtedness shall include (a) the principal of,
premium, if any, and interest (including interest accruing after the filing of
a petition initiating any proceeding pursuant to any Bankruptcy Law) in
accordance with and at the rate (including any rate applicable upon any
default, to the extent lawful) specified in any document evidencing the Senior
Indebtedness (whether or not the claim for such interest is allowed as a claim
after such filing in any proceeding under such Bankruptcy Law) and (b) all
other obligations with respect to any Senior Indebtedness (including all
reimbursement obligations in respect of letters of credit issued under the
Senior Credit Facilities and all obligations for fees, expenses, indemnities
and other amounts payable thereunder or in connection therewith). "Senior
Indebtedness" of any Guarantor has a correlative meaning.
"Significant Subsidiary" means, at any date of determination, any Subsidiary
or Unrestricted Subsidiary of the Company that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted
for more than 5% of the consolidated revenues of the Company and its
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 5% of the consolidated assets of the Company and its Subsidiaries, all as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year.
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"Special Interest" means an amount equal to $0.192 per week per $1,000
principal amount of Notes constituting Transfer Restricted Notes held by each
Holder until all Registration Defaults have been cured.
"Sponsors" means, collectively, GE Investment Private Placement Partners II,
a Limited Partnership, and Warburg, Pincus Ventures, L.P. and any successor
funds.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of an
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Indebtedness" means Indebtedness of the Company or any
Domestic Subsidiary if the instrument creating or evidencing such Indebtedness
or pursuant to which such Indebtedness is outstanding provides that such
Indebtedness is subordinated in right of payment to the Notes or any Domestic
Subsidiary Guarantees of any such Domestic Subsidiary, as the case may be, and
may be subordinated to Senior Indebtedness.
"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 such
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 one or more Subsidiaries of such Person (or any combination
thereof). Notwithstanding the foregoing, an Unrestricted Subsidiary and all of
its Subsidiaries shall not be a Subsidiary of the Company for any purposes of
the Indenture.
"Term Credit Facility" means that certain senior secured term loan provided
to the Company by The Chase Manhattan Bank, Merrill Lynch Capital Corporation
and certain other lenders on the date of the Indenture, in an aggregate
principal amount of $175.0 million.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)77aaa-77bbbb)
as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any Indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business of such
Person in connection with the acquisition of goods or services.
"Transfer Restricted Notes" means (i) each Note until the date on which such
Note has been exchanged for a freely transferable Exchange Note in the
Exchange Offer, (ii) each Note or Private Exchange Note until the date on
which it has been effectively registered under the Securities Act and disposed
of in accordance with a shelf registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Notes by the Holders thereof from time to time in accordance with
the methods of distribution set forth in such registration statement or (iii)
each Note or Private Exchange Note until the date on which it is distributed
to the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act.
"Unrestricted Subsidiary" means (i) any Person that (a) at the time of
determination shall be designated an Unrestricted Subsidiary by the Board in
the manner provided below and (b) would, but
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for such designation, be a Subsidiary of the Company and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board may designate any Subsidiary of the
Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless at the time of designation
such Subsidiary or any Subsidiary of such Subsidiary owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided, however, that either (a) the Subsidiary to be
so designated has total assets of $1,000 or less or (b) if such Subsidiary has
assets greater than $1,000, then such designation would be permitted under "--
Certain Covenants--Limitation on Restricted Payments" as a "Restricted
Payment" after giving effect to the designation. The Board may designate any
Unrestricted Subsidiary to be a Subsidiary; provided, however, that
immediately after giving pro forma effect to such designation (1) the Company
could Incur $1.00 of additional Indebtedness pursuant to the Consolidated
Interest Coverage Ratio test in "--Certain Covenants--Limitation on
Indebtedness" and (2) no Default or Event of Default shall have occurred and
be continuing. Any such designation by the Board shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complies with the foregoing provisions.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"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
product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments 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.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of the Indenture.
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BOOK-ENTRY; DELIVERY AND FORM
The Original Notes were offered and sold in connection with the initial
offering thereof solely to "qualified institutional buyers," as defined in
Rule 144A ("Rule 144A") under the Securities Act ("QIBs"), pursuant to Rule
144A and in offshore transactions to persons other than "U.S. persons," as
defined in Regulation S ("Regulation S") under the Securities Act ("Non-U.S.
Persons"), in reliance on Regulation S. Following the initial offering of the
Original Notes, the Original Notes may be sold to QIBs pursuant to Rule 144A,
Non-U.S. Persons in reliance on Regulation S and pursuant to other exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act, as described under "Transfer Restrictions", including sales to
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3)
and (7) under the Securities Act ("Institutional Accredited Investors"), that
are not QIBs.
THE GLOBAL NOTES
Rule 144A Global Note. Notes offered and sold to QIBs pursuant to Rule 144A
were issued in the form of one or more registered notes in global form,
without interest coupons (collectively, the "Rule 144A Global Note"). The Rule
144A Global Note was deposited on the date of the closing of the sale of the
Original Notes to the Initial Purchasers (the "Closing Date"), which will be
the same day as the Issue Date, with, or on behalf of, The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee of DTC,
or will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between DTC and the Trustee. Interests in the Rule 144A
Global Note will be available for purchase only by QIBs.
Regulation S Global Notes. Original Notes offered and sold in offshore
transactions to Non-U.S. Persons in reliance on Regulation S will initially be
issued in the form of one or more registered notes in temporary global form,
without interest coupons (collectively, "the Regulation S Temporary Global
Note"). Beneficial interests in the Regulation S Temporary Global Note will be
exchanged for beneficial interests in a corresponding note in permanent global
form (the "Regulation S Permanent Global Note" and, together with the
Regulation S Temporary Global Note, the "Regulation S Global Notes") within a
reasonable period after the expiration of the Restricted Period (as defined
below) upon certification that the beneficial interests in the Regulation S
Temporary Global Notes are owned by either Non-U.S. Persons or U.S. persons
who purchased such interests pursuant to an exemption from, or in transaction
not subject to, the registration requirements of the Securities Act. Each
Regulation S Global Note will be deposited upon issuance with, or on behalf
of, a custodian for DTC in the manner described in the preceding paragraph for
credit to the respective accounts of the purchasers (or to such other accounts
as they may direct) at Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System ("Euroclear"), or Cedel Bank,
societe anonyme ("Cedel"). Prior to the 40th day after the later of the
commencement of the offering of the Notes and the Closing Date (such period
through and including such 40th day, the "Restricted Period"), interests in
the Regulation S Temporary Global Note may only be held through Euroclear or
Cedel (as indirect participants in DTC) unless exchanged for interests in the
Rule 144A Global Note or the Institutional Accredited Investor Global Note (as
defined below) in accordance with the transfer and certification requirements
described herein.
Investors may hold their interests in the applicable Regulation S Global
Note directly through Euroclear or Cedel, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold such interests through organizations other than
Euroclear or Cedel that are participants in the DTC system. Euroclear and
Cedel will hold such interests in the applicable Regulation S Global Note on
behalf of their participants through customers' securities accounts in their
respective names on the books of their respective depositories. Such
depositories, in turn, will
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hold such interests in the Regulation S Global Note in customers' securities
accounts in the depositories' names on the books of DTC.
Institutional Accredited Investor Global Note. In connection with the sale
of Original Notes to an Institutional Accredited Investor, beneficial
interests in any of the Global Notes (as defined below) may be exchanged for
interests in a separate note in registered form, without interest coupons (the
"Institutional Accredited Investor Global Note"), which will be deposited on
the Closing Date with, or on behalf of, a custodian for DTC in the manner
described in the preceding paragraphs.
Except as set forth below, the Rule 144A Global Note, the Regulation S
Global Notes and the Institutional Accredited Investor Global Note
(collectively, the "Global Notes") may be transferred, in whole and not in
part, solely to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Original Notes in physical, certificated form ("Certificated Notes") except in
the limited circumstances described below.
The Original Notes are subject to certain restrictions on transfer and will
bear a restrictive legend as set forth under "Transfer Restrictions. "
All interests in the Global Notes, including those held through Euroclear or
Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such systems.
EXCHANGES AMONG THE GLOBAL NOTES
Prior to the expiration of the Restricted Period, transfers by an owner of a
beneficial interest in the Regulation S Temporary Global Note to a transferee
who takes delivery of such interest through the Rule 144A Global Note or the
Institutional Accredited Investor Global Note will be made only in accordance
with applicable procedures and upon receipt by the Trustee of a written
certification from the transferor of the beneficial interest in the form
provided in the Indenture to the effect that such transfer is being made to
(i) a person whom the transferor reasonably believes is a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(ii) an Institutional Accredited Investor purchasing for its own account, or
for the account of such an Institutional Accredited Investor, in a minimum
principal amount of the Original Notes of $250,000. In addition, in the case
of a transfer pursuant to clause (ii) above, the transferor may be required to
deliver to the Company and the Trustee (as defined in the Indenture) a letter
from the transferee substantially in the form of Annex A hereto, which shall
provide, among other things, that the transferee is an Institutional
Accredited Investor that is acquiring such Notes not for distribution in
violation of the Securities Act.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note
or the Institutional Accredited Investor Global Note to a transferee who takes
delivery of such interest through the Regulation S Global Note, whether before
or after the expiration of the Restricted Period, will be made only upon
receipt by the Trustee of a certification from the transferor to the effect
that such transfer is being made in accordance with Regulation S or (if
available) Rule 144 and that, if such transfer is being made prior to the
expiration of the Restricted Period, the interest transferred will be held
immediately thereafter through Euroclear or Cedel.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.
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CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. None
the Company or any of the Initial Purchasers takes any responsibility for
these operations or procedures, and investors are urged to contact the
relevant system or its participants directly to discuss these matters.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (v) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. DTC's Participants include securities
brokers and dealers (including the Initial Purchasers), banks and trust
companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Investors who are not Participants
may beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Company expects that, pursuant to procedures established by DTC, (i)
upon deposit of each Global Note, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and
(ii) ownership of the Original Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC
(with respect to the interests of Participants) and the records of
Participants and the Indirect Participants (with respect to the interests of
persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Original Notes
represented by a Global Note to such persons may be limited. In addition,
because DTC can act only on behalf of its Participants, who in turn act on
behalf of persons who hold interests through Participants, the ability of a
person having an interest in Original Notes represented by a Global Note to
pledge or transfer such interest to persons or entities that do not
participate in DTC's system, or to otherwise take actions in respect of such
interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Original Notes represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Notes, and will not be considered
the owners or holders thereof under the Indenture for any purpose, including
with respect to the giving of any direction, instruction or approval to the
Trustee thereunder. Accordingly, each holder owning a beneficial interest in a
Global Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a
holder of Notes under the Indenture or such Global Note. The Company
understands that under existing industry practice, in the event that the
Company requests any action of holders of Original Notes, or a holder that is
an owner of a beneficial interest in a Global Note desires to take any action
that DTC, as the
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holder of such Global Note, is entitled to take, DTC would authorize the
Participants to take such action and the Participants would authorize holders
owning through such Participants to take such action or would otherwise act
upon the instruction of such holders. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of Original Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such Original Notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date
will be payable by the Trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the Global Note representing such
Notes under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names the Original Notes, including
the Global Notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to owners of
beneficial interests in a Global Note (including principal, premium, if any,
liquidated damages, if any, and interest). Payments by the Participants and
the Indirect Participants to the owners of beneficial interests in a Global
Note will be governed by standing instructions and customary industry practice
and will be the responsibility of the Participants or the Indirect
Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one
hand, and Euroclear or Cedel participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as
the case may be, by its respective depository; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear
or Cedel as a result of sales of interest in a Global Note by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued
at any time. Neither the Company nor the Trustee will have any responsibility
for the performance by DTC, Euroclear or Cedel or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
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CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depository is not
appointed within 90 days of such notice or cessation, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Original Notes in definitive form under the Indenture or (iii) upon the
occurrence of certain other events as provided in the Indenture, then, upon
surrender by DTC of the Global Notes, Certificated Notes will be issued to
each person that DTC identifies as the beneficial owner of the Original Notes
represented by the Global Notes. Upon any such issuance, the Trustee is
required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof) and cause the same to be delivered
thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners
of the related Original Notes and each such person may conclusively rely on,
and shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Original Notes to be issued).
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ORIGINAL NOTES REGISTRATION RIGHTS
The Company, Holdings and the Initial Purchasers entered into the Exchange
and Registration Rights Agreement in connection with the issuance of the
Notes. Pursuant to the Exchange and Registration Rights Agreement, the Company
and Holdings agreed to (i) file with the Commission on or prior to 90 days
after the Issue Date a registration statement on Form S-1 or Form S-4, if the
use of such form is then available (the "Exchange Offer Registration
Statement"), relating to the registered Exchange Offer for the Notes under the
Securities Act and (ii) use their reasonable best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date. As soon as practicable
after the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the holders of Transfer Restricted Securities (as
defined below) who are not prohibited by any law or policy of the Commission
from participating in the Exchange Offer the opportunity to exchange their
Transfer Restricted Securities for Exchange Notes, which will be an issue of a
second series of notes that are identical in all material respects to the
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions) that will be registered under the Securities Act. The
Company will keep the Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Exchange Offer is mailed to the holders of the Original Notes.
If (i) because of any change in law or applicable interpretations thereof by
the staff of the Commission, the Company is not permitted to effect the
Exchange Offer as contemplated by the Exchange and Registration Rights
Agreement, (ii) any Original Notes validly tendered pursuant to the Exchange
Offer are not exchanged for Exchange Notes within 180 days after the Issue
Date, (iii) any Initial Purchaser so requests with respect to Original Notes
not eligible to be exchanged for Exchange Notes in the Exchange Offer, (iv)
any applicable law or interpretations do not permit any holder of Original
Notes to participate in the Exchange Offer, (v) any holder of Original Notes
that participates in the Exchange Offer does not receive freely transferable
Exchange Notes in exchange for tendered Original Notes or (vi) the Company so
elects, then the Company will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of Transfer
Restricted Securities by such holders who satisfy certain conditions relating
to the provision of information in connection with the Shelf Registration
Statement. For purposes of the foregoing, "Transfer Restricted Securities"
means each Original Note until (i) the date on which such Original Note has
been exchanged for a freely transferable Exchange Note in the Exchange Offer,
(ii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) the date on which such Original Note is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act.
The Company and Holdings will use their reasonable best efforts to have the
Exchange Offer Registration Statement or, if applicable, the Shelf
Registration Statement (each, a "Registration Statement") declared effective
by the Commission as promptly as practicable after the filing thereof. Unless
the Exchange Offer would not be permitted by a policy of the Commission, the
Company will commence the Exchange Offer and will use its reasonable best
efforts to consummate the Exchange Offer as promptly as practicable, but in
any event prior to 180 days after the Issue Date. If applicable, the Company
will use its reasonable best efforts to keep the Shelf Registration Statement
effective for a period of two years after the Issue Date.
If (i) the applicable Registration Statement is not filed with the
Commission on or prior to 90 days after the Issue Date; (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 150 days after the Issue Date; (iii)
the Exchange Offer is not consummated on or prior to 180 days after the Issue
Date or (iv) the Shelf Registration Statement is filed and declared effective
within 180 days after the Issue Date but shall
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thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by
an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default"), the
Company will be obligated to pay liquidated damages to each holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to $0.192 per week per $1,000 principal amount of
the Original Notes constituting Transfer Restricted Securities held by such
holder until the applicable Registration Statement is filed, the Exchange
Offer Registration Statement is declared effective and the Exchange Offer is
consummated or the Shelf Registration Statement is declared effective or again
becomes effective, as the case may be. All accrued liquidated damages shall be
paid to holders in the same manner as interest payments on the Original Notes
on semi-annual payment dates that correspond to interest payment dates for the
Original Notes. Following the cure of all Registration Defaults, the accrual
of liquidated damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company and Holdings (i) shall make available for a period of 180 days after
the consummation of the Exchange Offer a prospectus meeting the requirements
of the Securities Act to any broker-dealer for use in connection with any
resale of any such Exchange Notes and (ii) shall pay all expenses incident to
the Exchange Offer (including the expense of one counsel to the holders of the
Original Notes) and will indemnify certain holders of the Original Notes
(including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Exchange and Registration Rights Agreement
(including certain indemnification rights and obligations).
Each holder of Original Notes who wishes to exchange such Original Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business; (ii)
it has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes and (iii) it is not an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Company or of Holdings,
or if it is an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Original Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
Holders of the Original Notes will be required to make certain
representations to the Company (as described above) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their
Original Notes included in the Shelf Registration Statement and benefit from
the provisions regarding liquidated damages set forth in the preceding
paragraphs. A holder who sells Original Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Exchange and Registration Rights Agreement that are
applicable to such a holder (including certain indemnification obligations).
For so long as the Original Notes are outstanding, the Company and Holdings
will continue to provide to holders of the Notes and to prospective purchasers
of the Notes the information required by Rule 144A(d)(4) under the Securities
Act.
103
<PAGE>
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration
Rights Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
104
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material U.S. Federal income
tax considerations applicable to holders of the Notes. This summary is based
upon current provisions of the Code, regulations of the Treasury Department,
administrative rulings and pronouncements of the Internal Revenue Service
("IRS") and judicial decisions currently in effect, all of which are subject
to change, possibly with retroactive effect. The discussion does not deal with
all aspects of U.S. Federal income taxation that may be relevant to particular
investors in light of their personal investment circumstances, including
persons holding Notes as part of a conversion transaction or as part of a
hedge or hedging transaction, or as a position in a straddle for tax purposes,
nor does it discuss U.S. Federal income tax considerations applicable to
certain types of investors subject to special treatment under the U.S. Federal
income tax laws, including insurance companies, tax-exempt organizations and
financial institutions or broker-dealers. In addition, the discussion does not
consider the effect of any foreign, state, local, gift, estate or other tax
laws that may be applicable to a particular investor. Except as specifically
provided below with respect to Non-U.S. Holders (as defined below), the
discussion is limited to holders of Notes that are U.S. persons. For purposes
of the discussion, a "U.S. person" means (i) a citizen or resident (as defined
in Section 7701(b)(1) of the Code) of the United States, (ii) a corporation or
other entity taxable as a corporation created or organized under the laws of
the United States or any State thereof (including the District of Columbia),
(iii) an estate or trust described in Section 7701(a)(30) of the Code, or (iv)
a person whose worldwide income or gain is otherwise subject to U.S. Federal
income taxation on a net income basis, and a "Non-U.S. Holder" means any
beneficial owner of a Note that is not a U.S. person. EACH POTENTIAL INVESTOR
SHOULD CONSULT ITS TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
TAXATION OF THE NOTES
Interest on the Notes. A holder of a Note will be required to report
interest earned on the Note as ordinary interest income for U.S. Federal
income tax purposes in accordance with such holder's method of tax accounting.
Disposition of the Notes. A holder's tax basis for a Note generally will be
such holder's purchase price for the Note. Upon the sale, exchange,
redemption, retirement or other disposition of a Note, a holder generally will
recognize capital gain or loss equal to the difference (if any) between the
amount realized (other than amounts attributable to accrued but unpaid stated
interest which will be taxable as ordinary income) and such holder's tax basis
in the Note. Such gain or loss shall be treated as long-term capital gain or
loss if the Note was held for more than one year. In the case of individuals,
such gain or loss will be subject to a maximum rate of 28% if the Note has
been held for more than one year but less than eighteen months and will be
subject to a maximum tax rate of 20% if the Note has been held for more than
eighteen months.
Exchange Offer. The exchange of a Note for an Exchange Note pursuant to the
Exchange Offer should not constitute a taxable exchange.
NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, a Non-U.S. Holder
generally will not be subject to U.S. Federal income or withholding tax on
payments of interest on a Note, provided that (i) the holder is not (A) a
direct or indirect owner of 10% or more of the total voting power of all
voting stock of the Company or (B) a controlled foreign corporation related to
the Company through stock
105
<PAGE>
ownership, (ii) such interest payments are not effectively connected with the
conduct by the Non-U.S. Holder of a trade or business within the United States
and (iii) the Company or its paying agent receives certain information from
the holder (or a financial institution that holds the Notes in the ordinary
course of its trade or business) certifying that such holder is a Non-U.S.
Holder. See "--Information Reporting and Backup Withholding" for recent
changes to the requirements described in (iii) above. Subject to the
discussion of backup withholding below, a Non-U.S. Holder generally will not
be subject to U.S. Federal income or withholding tax on gains from the sale or
other disposition of a Note, provided that (i) such gains are not effectively
connected with the conduct by the Non-U.S. Holder of a trade or business
within the United States and (ii) such Non-U.S. Holder is not an individual
who is present in the United States for 183 days or more in the taxable year
of disposition and meets certain other requirements.
INFORMATION REPORTING AND BACKUP WITHHOLDING
On October 6, 1997, the Treasury Department issued final regulations
relating to withholding, information reporting and backup withholding that
unify current certification procedures and forms and clarify reliance
standards (the "Final Regulations"). The Final Regulations generally will be
effective with respect to payments made after December 31, 1998. Except as
provided below, this section describes rules applicable to payments made on or
before December 31, 1998.
A holder of a Note may be subject to backup withholding at a rate of 31%
with respect to interest paid on the Note and proceeds from the sale,
exchange, redemption or retirement of the Note, unless such holder (i) is a
corporation or comes within with certain other exempt categories and, when
required, demonstrates that fact or (ii) provides a correct taxpayer
identification number (social security number or employer identification
number), certifies as to its exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. Certain
penalties may be imposed by the IRS on a holder that is required to supply
information but does not do so in the proper manner.
A Non-U.S. Holder generally will be exempt from backup withholding and
information reporting requirements, but may be required to comply with
certification and identification procedures in order to obtain an exemption
from backup withholding and information reporting.
Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against such holder's U.S. Federal income tax
(which might entitle such holder to a refund), provided that such holder
furnishes the required information to the IRS.
The Final Regulations impose certain certification and documentation
requirements on Non-U.S. Holders claiming an exemption from withholding,
information reporting and backup withholding on interest paid on the Notes and
proceeds of a sale of the Notes.
PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE EFFECT, IF ANY, OF THE FINAL REGULATIONS ON THEIR PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES.
106
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Original
Notes where such Original Notes were acquired as a result of market-making
activities or other trading activities. The Company and Holdings have agreed
that, for a period of 180 days after the Expiration Date, the Company will
make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale. In addition, until ,
1998, all dealers effecting transactions in the Exchange Notes may be required
to deliver a prospectus.
Neither the Company nor Holdings will receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period not to exceed 180 days after the Expiration Date, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company and Holdings have agreed
to pay all expenses incident to the Exchange Offer (including the expenses of
one counsel for the holders of the Notes) other than commissions or
concessions of any broker-dealers and will indemnify holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
107
<PAGE>
LEGAL MATTERS
The legality of the Exchange Notes will be passed upon for the Company by
Willkie Farr & Gallagher, New York, New York.
EXPERTS
The combined financial statements of Borden Brands North America of BFC
included in this Prospectus as of December 31, 1996 and 1997 and the related
combined statements of operations, owner's investment and cash flows for each
of the three years in the period ended December 31, 1997, have been audited by
Deloitte & Touche llp, independent auditors given on the authority of said
firm as experts in auditing and accounting, as stated in their report
appearing herein. The balance sheet of Eagle Family Foods, Inc. and the
consolidated balance sheet of Eagle Family Foods Holdings, Inc. as of
January 23, 1998 included in this Exchange Offer has been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants of
Eagle Family Foods, Inc. and Eagle Family Foods Holdings, Inc., given on the
authority of that firm as experts in accounting and auditing.
108
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Eagle Family Foods, Inc.
Eagle Family Foods Holdings, Inc.
Report of Independent Accountants....................................... F-2
Eagle Family Foods, Inc. Balance Sheet, as of January 23, 1998.......... F-3
Eagle Family Foods Holdings, Inc. Consolidated Balance Sheet, as of
January 23, 1998....................................................... F-4
Notes to Balance Sheets................................................. F-5
Borden Brands North America
Independent Auditors' Report............................................ F-12
Combined Statements of Operations of the Predecessor Company, for the
years ended December 31, 1997, 1996 and 1995........................... F-13
Combined Balance Sheets of the Predecessor Company, as of December 31,
1997 and 1996.......................................................... F-14
Combined Statements of Cash Flows of the Predecessor Company, for the
years ended December 31, 1997, 1996 and 1995........................... F-15
Combined Statements of Owner's Investment of the Predecessor Company,
for the years ended December 31, 1997, 1996 and 1995................... F-16
Notes to Combined Financial Statements of the Predecessor Company....... F-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Eagle
Family Foods Holdings, Inc.
We have audited the accompanying balance sheet of Eagle Family Foods, Inc.
and the consolidated balance sheet of Eagle Family Foods Holdings, Inc. as of
January 23, 1998 (date of commencement of operations). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these balance sheets. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of these balance sheets provides a
reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of Eagle Family Foods, Inc. and
Eagle Family Foods Holdings, Inc., respectively, as of January 23, 1998, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
April 15, 1998
F-2
<PAGE>
EAGLE FAMILY FOODS, INC.
BALANCE SHEET
JANUARY 23, 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash................................................................ $ 3,798
Inventories......................................................... 20,100
Other current assets................................................ 51
--------
Total Current Assets.............................................. 23,949
PROPERTY AND EQUIPMENT................................................ 23,950
NOTES RECEIVABLE FROM RELATED PARTIES (NOTE 10)....................... 825
INTANGIBLES........................................................... 312,758
DEFERRED INCOME TAXES................................................. 9,202
OTHER NON-CURRENT ASSETS.............................................. 9,363
--------
TOTAL ASSETS.......................................................... $380,047
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Short-term debt..................................................... $ 1,000
Other current liabilities........................................... 5,744
--------
Total Current Liabilities......................................... 6,744
LONG-TERM DEBT........................................................ 305,500
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDER'S EQUITY
Common stock, $.01 per value, 250,000 shares authorized,
10,000 shares issued and outstanding............................... 1
Additional paid-in capital.......................................... 82,500
Accumulated deficit (Note 5)........................................ (14,698)
--------
Total Stockholder's Equity........................................ 67,803
--------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................ $380,047
========
</TABLE>
The accompanying Notes are an integral part of the Balance Sheet.
F-3
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
JANUARY 23, 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash.................................................................. $ 3,798
Inventories........................................................... 20,100
Other current assets.................................................. 50
--------
Total Current Assets................................................ 23,948
PROPERTY AND EQUIPMENT.................................................. 23,950
INTANGIBLES............................................................. 312,758
DEFERRED INCOME TAXES................................................... 9,202
OTHER NON-CURRENT ASSETS................................................ 9,363
--------
TOTAL ASSETS............................................................ $379,221
========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Short-term debt....................................................... $ 1,000
Other current liabilities............................................. 5,744
--------
Total Current Liabilities........................................... 6,744
LONG-TERM DEBT.......................................................... 305,500
COMMITMENTS AND CONTINGENCIES (NOTE 11)
REDEEMABLE PREFERRED STOCK
Series A preferred stock, $100 stated value,
1,000,000 shares authorized,
816,750 shares issued and outstanding................................ 81,675
Subscription receivable (Note 10)..................................... (817)
--------
80,858
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock $0.01 par value, 1,200,000 shares authorized,
971,839 shares issued and outstanding................................ 10
Additional paid-in capital............................................ 962
Unearned compensation (Note 12)....................................... (147)
Accumulated deficit (Note 5).......................................... (14,698)
Subscription receivable (Note 10)..................................... (8)
--------
Total Stockholders' Equity (Deficit)................................ (13,881)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).................... $379,221
========
</TABLE>
The accompanying Notes are an integral part of the Consolidated Balance Sheet.
F-4
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS
1. BASIS OF PRESENTATION:
The accompanying balance sheets present the financial position of Eagle
Family Foods, Inc. ("EFFI" or the "Company") and the consolidated financial
position of Eagle Family Foods Holdings, Inc. ("Holdings") and its wholly
owned subsidiary, EFFI. All significant intercompany balances and transactions
have been eliminated in consolidation.
EFFI was incorporated on November 14, 1997 and Holdings was incorporated on
December 22, 1997. On December 30, 1997, EFFI issued 10,000 shares of common
stock, par value $.01 per share, for $1,000 to Holdings. Holdings and EFFI did
not incur any income or expenses until commencement of operations on January
23, 1998. On January 23, 1998, Holdings received $82.5 million from GE
Investment Private Placement Partners II ("GEI"), Warburg, Pincus Ventures,
L.P. ("Warburg") and certain members of management in exchange for 825,000
shares of common stock and 876,750 shares of Series A preferred stock. On
January 23, 1998, EFFI acquired certain assets of Borden Foods Corporation
("BFC") and certain of their affiliates for $376.5 million subject to certain
post closing adjustments. Financing for the acquisition and related fees
consisted of (i) $82.5 million equity contribution from Holdings, (ii) $115.0
million of 8 3/4% senior subordinated notes and (iii) senior secured credit
facilities in the aggregate principal amount of $245.0 million, consisting of
$175.0 million term loan facility and a $70.0 million revolving credit
facility, under which $16.5 million was drawn at the time of the acquisition
closing. (See Note 6.)
The acquisition has been reflected in the balance sheets using the purchase
method of accounting. The purchase price has been allocated to the assets of
EFFI on the basis of their fair values. The fair values of assets have been
determined based on independent appraisals and management's estimates.
EFFI manufactures and markets a portfolio of leading dry-grocery food
products with widely recognized and established brands, primarily in the
United States with limited sales and manufacturing in Canada. The Company's
portfolio of products includes "Eagle Brand" sweetened condensed milk
"ReaLemon" reconstituted lemon and lime juice, "Nonesuch" mincemeat, "Cremora"
non-dairy creamer, "Kava" acid-neutralized coffee and "Borden" egg nog.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Inventories
Inventories are stated at fair value.
Property and Equipment
Property and equipment is stated at fair value. Depreciation and
amortization of property and equipment will be calculated for financial
reporting purposes on a straight-line method using estimated service lives
ranging principally from 10-20 years for buildings and improvements and 3-10
years for other property and equipment. When assets are sold, retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the accounts and any related gain or loss is recorded in the
statement of operations. Normal maintenance and repairs are expensed as
incurred, while major renewals and betterments which extend service lives are
capitalized.
Intangibles
Intangibles are stated at fair value and amortized on a straight-line basis
over periods ranging from one to forty years. Goodwill represents the excess
of purchase price over fair value of identifiable assets and liabilities
acquired.
Impairment
Long-lived assets including goodwill are reviewed for impairment whenever
events or changes indicate that full recoverability is questionable. Factors
used in the valuation include, but are not limited to, management's plans for
future operations, recent operating results and projected cash flows.
F-5
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS--CONTINUED
Other Non-current Assets
Other non-current assets consist primarily of deferred financing costs
amounting to approximately $8,530,000. Such costs are amortized over the term
of the related debt using the interest method.
Other Current Liabilities
Other current liabilities at January 23, 1998 consisted primarily of
acquisition related expenses.
Income Taxes
Income taxes are accounted for in accordance with Statements of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires the use of the liability method. Under this method, deferred tax
assets and liabilities are measured using enacted tax rates in effect in the
years in which those temporary differences are expected to reverse.
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. Actual
results may differ from those estimates.
Foreign Currency Translation
All assets and liabilities of Canadian operations are translated into U.S.
dollars using the rate as of January 23, 1998.
Fair Value of Financial Instruments
The carrying values of cash, notes receivable and accrued expenses as stated
on the balance sheet approximates their fair market value because of their
short maturity. The fair value of the Company's long-term debt equals the
carrying value because the debt was issued on the date of the balance sheet.
Environmental Matters
The Company, like others in similar businesses, is subject to extensive
Federal, state and local environmental laws and regulations. Although the
Company's environmental policies and practices are designed to ensure
compliance with these laws and regulations, future developments and
increasingly stringent regulations could require the Company to incur
additional unforeseen environmental expenditures. Environmental remediation
costs are accrued when environmental assessments and/or remedial efforts are
probable and the cost or a reasonable range can be estimated. Environmental
expenditures which improve the condition of the property are capitalized and
amortized over their estimated useful life.
3. INVENTORIES:
Inventories are stated at fair value determined at the time of the
acquisition. Inventories at January 23, 1998 consisted of the following (in
thousands):
<TABLE>
<S> <C>
Finished goods.................................................. $18,000
Raw material.................................................... 2,100
-------
$20,100
=======
</TABLE>
The fair value of inventories exceeds the predecessor's manufacturing cost
by approximately $5.0 million.
F-6
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEET--CONTINUED
4. PROPERTY AND EQUIPMENT:
Property and equipment is recorded at fair value and consisted of the
following as of January 23, 1998 (in thousands):
<TABLE>
<S> <C>
Land........................................................... $ 470
Buildings and improvements..................................... 6,161
Machinery and equipment........................................ 17,319
-------
$23,950
=======
</TABLE>
5. INTANGIBLE ASSETS:
Intangible assets are amortized on a straight-line basis over their
estimated useful lives. Intangible assets as of January 23, 1998 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED USEFUL
COST LIVES
-------- ----------------
<S> <C> <C>
Tradenames......................................... $141,000 40 years
Goodwill........................................... 133,458 40 years
Covenant not to compete............................ 21,000 5 years
Master customer service agreement.................. 17,300 1 year
--------
$312,758
========
</TABLE>
The Company allocated $23.9 million of purchase price to acquired in-process
research and development reflecting the fair market value of certain products
currently in development. These products have not reached technological
feasibility and have no alternative future use. Concurrent with the
acquisition on January 23, 1998, the Company recorded a non-recurring charge
of $23.9 million to write-off the aforementioned acquired in-process research
and development. At January 23, 1998, the charge has been reflected in
accumulated deficit, net of related taxes, as the Company views the purchase
price allocation and subsequent write-off as a contemporaneous transaction.
6. DEBT OBLIGATIONS:
Debt obligations as of January 23, 1998 consisted of the following (in
thousands):
<TABLE>
<S> <C>
7 7/8% term loan facility due December 31, 2005.............. $175,000
8 3/4% senior subordinated notes due January 15, 2009........ 115,000
7 5/8% revolving credit facility due December 31, 2004....... 16,500
--------
Total debt obligations................................... 306,500
Less:
Current portion of term loan facility........................ (1,000)
--------
Short-term debt obligations.................................. (1,000)
--------
Long-term debt obligations................................... $305,500
========
</TABLE>
F-7
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS--CONTINUED
Senior Credit Facilities
EFFI received senior bank financing from a group of lenders in an aggregate
principal amount of up to $245.0 million (the "Senior Credit Facilities"). The
Senior Credit Facilities consist of (i) a $70.0 million seven-year revolving
credit facility (the "Revolving Credit Facility") and (ii) a $175.0 million
eight-year term loan (the "Term Loan Facility"). The Senior Credit Facilities
are guaranteed by Holdings and all future domestic subsidiaries of the
Company. As of January 23, 1998, the Company has drawn from the Revolving
Credit Facility in the amount of $16.5 million and the proceeds of the Term
Loan were fully drawn to fund a portion of the acquisition.
Indebtedness under the Revolving Credit Facility bears interest at the
Company's option at LIBOR plus a 2% premium or at a base rate plus a 1%
premium. Interest payment terms are determined at the time each draw is made
under the Revolving Credit Facility. Indebtedness under the Term Loan Facility
bears interest at the Company's option at LIBOR plus a 2.25% premium or at a
base rate plus a 1.25% premium. These rates are subject to performance pricing
step-downs based on the Company's leverage ratio. The Revolving Credit
Facility matures on December 31, 2004.
The Term Loan requires principal payments in quarterly installments
commencing in the quarter ending March 31, 1998 with a $250,000 principal
payment. Scheduled principal payments will equal $1 million in fiscal 1998,
1999, 2000, 2001, and 2002, $10 million in fiscal 2003, $40 million in fiscal
2004, with the balance of the Term Loan of $120 million due in fiscal 2005.
Interest is payable currently.
The Senior Credit Facilities contain certain financial covenants which
require the Company to meet certain financial tests including debt coverage
and interest expense coverage requirements. In addition, The Senior Credit
Facilities contain covenants including limitations on additional indebtedness,
liens, asset sales, capital expenditures, sale and leaseback transactions,
dividends, loans and investments, modification of material agreements,
transactions with affiliates, acquisitions, mergers and consolidations and
prepayment of subordinated indebtedness. The Senior Credit Facilities
agreement also requires the Company to pledge assets acquired after the
acquisition closing, including stock of after-acquired or formed subsidiaries,
to deliver guarantees by wholly owned domestic subsidiaries and to maintain
insurance. The Senior Credit Facilities contain customary events of default,
including certain changes of control of the Company.
The obligations of EFFI under the Senior Credit Facilities are
collateralized by (i) 100% of the capital stock of the Company and each of its
subsidiaries and (ii) a first priority collateral interest in substantially
all assets and properties of the Company and its future domestic subsidiaries.
Senior Subordinated Notes
EFFI issued $115 million of senior subordinated notes (the "Notes") and
received cash proceeds of $111.55 million net of underwriting discount. The
Notes are due January 15, 2008 and bear interest of 8 3/4% per annum payable
on January 15 and July 15, commencing July 15, 1998.
The Notes are unconditionally guaranteed by Holdings (the "Parent
Guarantee") and the Company will cause each future Domestic Subsidiary (each,
a "Domestic Subsidiary Guarantee") of the Company to enter into a supplemental
indenture providing for such Domestic Subsidiary to guarantee payment of the
Notes as required in the Indenture. The Notes are unsecured and subordinated
in right of payment to all existing and future senior indebtedness of the
Company. The
F-8
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS--CONTINUED
Notes include certain covenants including limitations on indebtedness,
dividends and other payment restrictions affecting subsidiaries, subordinated
liens, sale and leaseback transactions, sale or issuance of capital stock of
subsidiaries, merge, consolidation, or sale of assets, transactions with
affiliates and layering debt.
7. INCOME TAXES
The temporary difference which gave rise to a deferred tax asset at January
23, 1998 resulted from purchased in-process research and development written
off concurrent with the acquisition and totaled approximately $9.5 million.
8. REDEEMABLE PREFERRED STOCK
On January 23, 1998, 816,750 shares of Series A Non-Voting Preferred Stock
("Preferred Stock") were issued at a stated value of $100 per share (the
"Stated Value"). The Preferred Stock provides for preferential cumulative
dividends at the rate of 10% per share per annum of the Stated Value.
Dividends are payable as declared by the Holdings Board of Directors and shall
be paid before any dividends shall be set apart for or paid upon the Common
Stock. In the event of liquidation, dissolution or winding up, the holders of
shares of Preferred Stock are entitled to be paid out of the assets of
Holdings available for distribution to its stockholders before any payment is
made to the holders of stock junior to the Preferred Stock. Holders of
Preferred Stock are not entitled to vote on any matters presented to the
stockholders of Holdings. However, the affirmative vote or written consent of
the holders of at least two-thirds of the then outstanding shares of Preferred
Stock is required to amend, alter or repeal the preferences, special rights or
other powers of the Preferred Stock. The Preferred Stock is subject to
mandatory redemption at a price per share equal to the Stated Value plus all
dividends accrued and unpaid thereon upon (1) the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, (2) the sale of all or substantially all of the assets of Holdings or
the merger or consolidation of Holdings with or into any other corporation or
other entity in which the holders of Holdings' outstanding shares before the
merger or consolidation do not retain a majority of the voting power of the
surviving corporation or other entity or (3) the acquisition by any person of
shares of Common Stock representing a majority of the issued and outstanding
shares of Common Stock then outstanding.
F-9
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS--CONTINUED
9. EAGLE FAMILY FOODS HOLDINGS, INC.
A balance sheet at January 23, 1998 for Holdings, with the investment in
EFFI shown on the equity basis, follows:
<TABLE>
<S> <C>
Assets
Investment in subsidiary..................................... $ 67,803
========
Total Assets............................................... $ 67,803
========
Liabilities
Payable to EFFI.............................................. $ 1
Redeemable Preferred Stock
Series A preferred stock, $100 stated value
1,000,000 shares authorized, 816,750 issued and outstanding.. 81,675
Shareholders' Equity
Common stock, $.01 par value; 1,200,000 shares authorized,
971,839 shares issued and outstanding....................... 10
Additional paid in capital................................... 962
Unearned compensation...................................... (147)
Accumulated deficit........................................ (14,698)
--------
Total Stockholders' Equity (Deficit)..................... (13,873)
--------
Total Liabilities and Stockholders' Equity (Deficit)....... $ 67,803
========
</TABLE>
10. STOCK SUBSCRIPTION AGREEMENT
On January 23, 1998, GEI, Warburg, and several officers of Holdings
subscribed to purchase a combined 816,750 shares of preferred stock at $100
per share and 825,000 shares of common stock at $1 per share. Full payment for
the stock was received from all but two of the officers, who subscribed to
purchase an aggregate of 13,117.5 shares of preferred stock and 13,250 shares
of common stock. Notes aggregating $825,000 were received from the two
officers as partial consideration for the subscription. These notes are
collateralized by the shares issued. They have a stated interest rate of prime
(as defined) plus .5%, with a maturity date of January 23, 2003.
11. COMMITMENTS AND CONTINGENCIES
Commitments--The Company has entered into long-term contracts for the
purchase of certain raw materials. Minimum purchase commitments, at current
prices, are approximately $13.0 million as of January 23, 1998.
Employment Agreements--The Company has entered into two-year employment
agreements with certain key executives. Such agreements provide for annual
salaries and bonuses and include non-compete and non-solicitation provisions.
F-10
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
NOTES TO THE BALANCE SHEETS--CONTINUED
12. STOCK OPTIONS AND RESTRICTED STOCK
On January 14, 1998, Holdings' Board of Directors adopted the 1998 Stock
Incentive Plan (the "Plan"). The Plan provides for the grant to officers, key
employees, directors and consultants of the Company of incentive stock
options, non-qualified stock options, and restricted stock. A total of 153,650
shares of common stock may be awarded under the Plan, subject to certain
adjustments reflecting changes in Holdings' capitalization.
Grants of options and the periods during which such options can be exercised
are at the discretion of a committee of the Board of Directors. As of January
23, 1998, the committee has not granted any stock options.
Under the Plan, grants of restricted stock and the periods during which such
grants become unrestricted and vest are at the discretion of the committee.
On January 16, 1998, the committee granted and issued 146,839 shares of
restricted stock to Holdings' officers and other key employees. The restricted
stock vests in installments of 20% per year on each of the first five
anniversaries of the issue date, provided that the recipient is employed by
Holdings as of each such date. The fair market value of the shares at the date
of grant totaled $146,839. Unearned compensation was charged for the fair
value of the restricted shares granted and issued in accordance with the Plan.
The unearned compensation is shown as a reduction of stockholders' equity
(deficit) in the accompanying Consolidated Balance Sheet. Unearned
compensation will be amortized ratably over the restricted period.
Holders of the restricted stock are not entitled to receive dividends until
such shares vest or to vote their respective shares during the restricted
period. Additionally, the sale, transfer, pledge, exchange or disposal of
restricted shares during the restricted period is not permitted except as
otherwise allowed by the stockholders agreement.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders of
Borden Foods Corporation
We have audited the accompanying combined balance sheets of Borden Brands
North America ("BBNA"), which comprises certain operating businesses of Borden
Foods Corporation and affiliates, as of December 31, 1997 and 1996, and the
related combined statements of operations, owner's investment and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of Borden Food's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of BBNA at December 31, 1997 and
1996, and the combined results of their operations and their combined cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Columbus, Ohio
April 6, 1998
F-12
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales........................................... $229,370 $230,384 $225,263
Cost of goods sold.................................. 107,674 110,357 102,712
-------- -------- --------
Gross margin........................................ 121,696 120,027 122,551
Distribution expense................................ 13,464 14,640 15,691
Marketing expense................................... 55,074 62,705 63,804
General & administrative expense.................... 13,184 13,483 13,289
-------- -------- --------
Operating income.................................... 39,974 29,199 29,767
Other income........................................ 79 38 --
-------- -------- --------
Income before income taxes.......................... 40,053 29,237 29,767
Income tax expense.................................. 16,236 12,034 12,235
-------- -------- --------
Net income.......................................... $ 23,817 $ 17,203 $ 17,532
======== ======== ========
</TABLE>
See Notes to Combined Financial Statements
F-13
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................ $ 6 $ 33
Accounts receivable (less allowance for doubtful
accounts of $268 and $238, respectively)........... 12,862 15,953
Inventories:
Finished and in-process goods .................... 13,292 11,277
Raw materials and supplies........................ 2,528 1,962
Other current assets................................ 879 903
-------- --------
Total Current Assets.............................. 29,567 30,128
PROPERTY AND EQUIPMENT
Land................................................ 325 374
Buildings........................................... 3,669 3,712
Machinery and equipment............................. 20,462 18,403
-------- --------
24,456 22,489
Less accumulated depreciation....................... (8,386) (5,840)
-------- --------
Net Property and Equipment........................ 16,070 16,649
INTANGIBLES........................................... 108,122 111,047
OTHER NON-CURRENT ASSETS.............................. 27 33
-------- --------
TOTAL ASSETS.......................................... $153,786 $157,857
======== ========
LIABILITIES AND OWNER'S INVESTMENT
CURRENT LIABILITIES
Accounts payable.................................... $ 7,774 $ 8,230
Other current liabilities........................... 25,347 25,045
-------- --------
Total current liabilities......................... 33,121 33,275
Other non-current liabilities......................... 2,527 2,492
Commitments and Contingencies (Notes 3 and 9)......... -- --
OWNER'S INVESTMENT.................................... 118,138 122,090
-------- --------
TOTAL LIABILITIES AND OWNER'S INVESTMENT.............. $153,786 $157,857
======== ========
</TABLE>
See Notes to Combined Financial Statements
F-14
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION> YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net income........................................ $23,817 $17,203 $17,532
Adjustments to reconcile net income to net cash
from (used in) operating activities
Depreciation and amortization................... 6,174 5,937 6,010
Loss on sale of fixed assets.................... 312
Net change in assets and liabilities
Accounts receivable............................. 3,091 (286) 2,145
Inventories..................................... (2,581) 78 (1,615)
Accounts payable................................ (456) (2,231) 1,396
Other assets.................................... 30 755 1,225
Other liabilities............................... 509 3,022 (3,586)
------- ------- -------
Cash flows from operating activities.............. 30,896 24,478 23,107
CASH FLOWS (USED IN) INVESTING ACTIVITIES
Capital expenditures.............................. (3,154) (3,726) (2,079)
CASH FLOWS USED IN FINANCING ACTIVITIES
Net decrease in intercompany investment........... (27,769) (20,723) (21,028)
------- ------- -------
(Decrease) increase in cash......................... (27) 29 --
Cash at beginning of year........................... 33 4 4
------- ------- -------
Cash at end of year................................. $ 6 $ 33 $ 4
======= ======= =======
</TABLE>
See Notes to Combined Financial Statements
F-15
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
COMBINED STATEMENTS OF OWNER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
RETAINED INTERCOMPANY
EARNINGS INVESTMENT TOTAL
-------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1, 1995........................ $ -- $129,106 $129,106
Net income...................................... 17,532 17,532
Cash collected on behalf of BBNA................ (227,985) (227,985)
Cash disbursed on behalf of BBNA................ 207,571 207,571
Translation adjustments and other............... (614) (614)
------- -------- --------
Balance, December 31, 1995...................... 17,532 108,078 125,610
Net income...................................... 17,203 17,203
Cash collected on behalf of BBNA................ (233,610) (233,610)
Cash disbursed on behalf of BBNA................ 212,464 212,464
Translation adjustments and other............... 423 423
------- -------- --------
Balance, December 31, 1996...................... 34,734 87,355 122,090
Net income...................................... 23,817 23,817
Cash collected on behalf of BBNA................ (232,052) (232,052)
Cash disbursed on behalf of BBNA................ 204,585 204,585
Translation adjustments and other............... (302) (302)
------- -------- --------
Balance, December 31, 1997...................... $58,552 $ 59,586 $118,138
======= ======== ========
</TABLE>
See Notes to Combined Financial Statements
F-16
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations and Basis of Presentation--The accompanying combined
financial statements present the financial position, results of operations,
cash flows and owner's investment of Borden Brands North America of Borden
Foods Corporation ("BBNA" or the "Company"). These financial statements have
been prepared on a purchase accounting basis which reflects an allocation of a
portion of the acquisition cost relating to the 1994 acquisition by an
affiliate of Kohlberg Kravis Roberts ("KKR") of Borden, Inc. ("Borden") to
BBNA. The purchase price has been allocated to tangible and intangible assets
and liabilities of BBNA based on independent appraisals and management
estimates.
BBNA is engaged in the business of developing, manufacturing, marketing,
distributing and selling certain food products primarily in the United States
with limited sales and manufacturing activity in Canada. The BBNA products
include "Eagle Brand" sweetened condensed milk, "ReaLemon" reconstituted lemon
and lime juice, "Nonesuch" mincemeat, "Cremora" non-dairy creamer, "Kava"
acid-neutralized coffee and "Borden" egg nog.
In 1996, an affiliate of KKR, Borden Foods Holdings, LLC ("Foods Holdings")
formed Borden Foods Corporation ("BFC") for the purposes of acquiring and
operating certain of Borden's food businesses, including BBNA. In addition,
Foods Holdings together with BFC, invested in Borden Foods Investment LP for
the purposes of acquiring and holding certain trademarks associated with BBNA
and the other Borden food businesses. The acquisition from Borden was a
taxable transaction effective October 1, 1996. There was no change in the book
basis of BBNA's assets and liabilities at the time of the sale because the
sale was between related parties and Borden's principal stockholder continues
to control the food businesses.
In March 1997, BFC announced its intention to sell certain businesses from
its current portfolio which were considered not to be aligned with their
ongoing strategy. Among these businesses were the BBNA business, FunCheese and
the Puerto Rican distribution business. Subsequent to December 31, 1997, BBNA
was purchased by Eagle Family Foods, Inc., a newly formed entity sponsored by
GE Investment Private Placement Partners II, a Limited Partnership and
Warburg, Pincus Ventures, L.P.
BBNA operates as a business unit of BFC which is an affiliate of Borden.
Under this structure, BFC incurs various administrative costs in connection
with the operation of the BBNA business, such as accounting, legal, tax,
credit and information services departments and executive management. In
addition, BBNA utilizes shared sales and administrative resources with other
BFC business units. These costs were allocated to BBNA through intercompany
expense charges and the intercompany liability is accumulated in the owner's
investment account.
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. The most significant estimates in BBNA financial statements
are the allowance for doubtful accounts, reserve for inventory obsolescence,
accruals for trade promotions and deductions, general and group insurance and
Borden and BFC corporate allocations. Actual results could differ from those
estimates.
Summary of Significant Accounting Policies--Significant accounting policies
followed by BBNA, as summarized below, are in conformity with generally
accepted accounting principles.
F-17
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
Principles of Combination--The combined financial statements include the
accounts of BBNA after elimination of material inter and intracompany accounts
and transactions.
Revenue Recognition--Revenues are recognized when products are shipped.
Liabilities are established for estimated returns, allowances and consumer and
certain trade promotions and discounts when revenues are recognized.
Research and Development--Research and development costs are charged to
general and administrative expense when incurred. Research and development
costs amounted to $1,781, $2,809 and $1,593 for the years ended December 31,
1997, 1996 and 1995, respectively.
Advertising and Promotion Expense--Production costs of future media
advertising are deferred until the advertising first occurs. All other
advertising costs are expensed when incurred. Promotional expenses are
generally expensed ratably over the year in relation to revenues or other
performance measures. Advertising and promotional expenses were $28,245,
$37,071 and $44,065 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Cash--BBNA considers all highly liquid investments purchased with a term to
maturity of three months or less when purchased to be cash equivalents.
Inventories--Inventories are stated at the lower of cost or market with cost
principally being determined using the first-in, first-out method.
Property and Equipment--Property and equipment are stated at cost, less a
reserve for accumulated depreciation. Depreciation is recorded on the
straight-line basis over useful lives of 30 years for buildings and 3 to 10
years for equipment.
Major renewals and betterments are capitalized. Maintenance, repairs and
minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, related cost and accumulated depreciation are removed
from the accounts and any related gain or loss is recorded in the statement of
operations.
Intangibles--Trademarks are amortized on a straight-line basis over the
shorter of forty years or their useful lives; goodwill represents the excess
of purchase price over fair value of identifiable assets of businesses
acquired and is amortized on a straight-line basis over forty years. The
accumulated amortization of intangibles was $8,775, $5,850 and $2,925 at
December 31, 1997, 1996 and 1995, respectively.
Impairment--The carrying value of property, equipment and intangibles is
evaluated periodically for recoverability when considered in relation to the
expected future undiscounted cash flows of the business over the estimated
remaining useful life of the asset.
Slotting Allowances--The costs of obtaining shelf space (slotting) are
accrued when committed and amortized over the period of benefit, which is
generally twelve months.
Income Taxes--The results of the domestic and Canadian operations of BBNA
are included in BFC's or Borden Canada Limited's consolidated tax returns. BFC
uses the liability method of accounting for deferred income taxes.
Deferred income taxes are recorded to recognize the future effects of
temporary differences which arise between financial statement assets and
liabilities and their basis for income tax reporting
F-18
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
purposes. For purposes of these stand-alone financial statements, income taxes
are determined as though BBNA filed separate U.S. federal, Canadian and state
corporate income tax returns. Because all income tax liabilities (current and
deferred) are paid to BBNA's owner such amounts are included as a component of
owner's investment in the accompanying financial statements.
Foreign Currency Translation--All assets and liabilities of Canadian
operations are translated into U.S. dollars using the rate at the end of the
fiscal period. Income and expense items are translated at average exchange
rates prevailing during the fiscal period. The resulting translation
adjustments are considered insignificant and are recorded in owner's
investment.
Concentrations of Credit Risk--Financial instruments which potentially
subject BBNA to concentrations of credit risk consist principally of temporary
cash investments and accounts receivable. The majority of BBNA cash activity
is managed by BFC. BFC and BBNA places its temporary cash investments ($6 at
December 31, 1997 and $33 at December 31, 1996), with high quality
institutions and, by policy, limits the amount of credit exposure to any one
institution. Concentrations of credit risk with respect to accounts receivable
are limited, due to the large number of customers comprising BBNA's customer
base and their dispersion across many different geographies primarily within
North America. BBNA generally does not require collateral or other security to
support customer receivables.
Pension and Retirement Savings Plans--Most of BBNA's employees are covered
under the Borden Employee Retirement Income Plan pension plan. BFC's
cumulative liability associated with the plan is recorded on BFC's balance
sheets. A portion of BFC's total liability has been allocated to BBNA based on
allocations provided by Borden's actuary, which were based on actual employee
census data. BBNA's share of the allocated cost to fund and administer these
plans is recorded in the statements of operations in the year the cost is
incurred.
Substantially all domestic employees of BBNA participate in Borden's
retirement savings plans. BBNA's cost of providing the retirement savings plan
is the amount by which it matches eligible contributions made by participating
employees and is recognized as a charge to income in the year the cost is
incurred.
Non-pension Postemployment and Postretirement Benefits--BFC provides certain
health and life insurance benefits for eligible retirees and their dependents.
The cost of postretirement benefits is accrued during the employees' working
careers. BBNA's cumulative liability associated with these plans is recorded
on BBNA's balance sheet based on allocations provided by Borden's actuary.
BBNA's share of the allocated cost to fund and administer these plans is
recorded in the statements of operations in the year the cost is incurred.
Borden provides certain other postemployment benefits to qualified former or
inactive employees. BBNA's cumulative liability associated with these plans is
recorded on BBNA's balance sheets based on allocations provided by Borden's
actuary. BBNA's share of the cost to fund and administer these plans is
recorded in the statements of operations in the year the cost is incurred.
Fair Value of Financial Instruments--The carrying values of cash, accounts
receivable and payable, other receivables, and accrued and other current
liabilities as stated on the balance sheets approximate their fair market
value.
F-19
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
Group and General Insurance Reserve--BFC is generally self-insured for
losses and liabilities relating to workers' compensation, health and welfare
claims, physical damage to property, business interruption and comprehensive
general, product and vehicle liability. BFC or Borden maintains insurance
policies for certain items exceeding deductible limits. Losses are accrued for
the estimated aggregate liability for claims using certain actuarial
assumptions followed in the insurance industry and BFC's experience. An
allocation of the liability associated with BBNA has been included in these
financial statements.
2. RELATED PARTIES AND INTERCOMPANY ALLOCATIONS
BBNA is engaged in various transactions with BFC, Borden and its affiliates
in the ordinary course of business. Prior to January 1, 1996, certain general
and administrative costs, such as group and general insurance, retirement
benefits, and corporate administrative departments, were allocated to BBNA. A
description of the allocation methods of these costs follows.
Pension and postemployment and postretirement group insurance benefits were
charged to BBNA based on allocations provided by Borden's actuary, which were
based on actual employee census data. General and group insurance expenses,
which include liability and property damage insurance, were allocated based on
actual claims costs and a pro-rata share of Borden's catastrophic insurance
coverage premiums. Corporate information services and corporate staff
department services were allocated based on usage of resources such as
personnel and data processing equipment. For purposes of these financial
statements, certain other administrative expenses incurred by Borden in 1995
have been allocated to BBNA generally based on a pro-rata share of Borden's
total sales. Management believes the allocations of these costs are reasonable
based upon the circumstances, however, the allocated amounts are not
necessarily indicative of costs that would have been incurred if BBNA operated
independently. Amounts due to Borden resulting from these allocations, as well
as sales and purchases of products and materials to or from other operations,
are reflected in owner's investment.
Subsequent to January 1, 1996, a subsidiary of Borden provides certain
administrative services to BBNA at negotiated fees. These services include:
processing of payroll, active and retiree group insurance claims
administration, administration of workers compensation claims, and securing
insurance coverage for catastrophic claims. BBNA reimburses the Borden
subsidiary for payments made on BBNA's behalf and for services provided. These
amounts due to a subsidiary of Borden are also included in owner's investment.
BBNA is generally self-insured for general insurance claims and
postemployment benefits other than pensions. The liabilities for these
obligations are included in BBNA's financial statements.
BBNA utilizes the BFC shared sales force for its retail grocery and private
label sales activity. Costs are allocated to BBNA based on the proportion of
the BBNA sales dollars to the total domestic BFC sales.
Customer accounts receivable balances, allowance for doubtful accounts and
accruals for customer allowances and credits are managed by customer in total
for BBNA and certain other BFC food businesses. An allocation of accounts
receivable and the allowance for doubtful accounts has been made to BBNA based
on a proportion of the BBNA sales dollars to the total sales of the group. An
allocation of the accrual for customer allowances and credits has been
allocated to BBNA based on a proportion of actual customer deductions taken by
BBNA customers to the total deductions taken by customers of all businesses in
the group.
F-20
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
Employee pension benefits are provided under the Borden Employee Retirement
Income Plan to which BBNA contributes. The employees may also participate in
the Borden retirement savings plan. Borden also provides certain health and
life insurance benefits for eligible employees. BBNA has recognized expenses
associated with these benefits, certain of which are determined and allocated
by Borden's actuary. BBNA has assumed an actuarially determined portion of
BFC's U.S. net pension liability.
The following table summarizes the allocation of costs to BBNA in 1995 and
the charges for these costs in 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pension and other employee benefits..................... $ 524 $ 368 $ 432
Group and general insurance............................. 2,314 1,416 2,071
Corporate information services ......................... 3,201 3,336 3,043
Shared sales force...................................... 5,011 6,005 6,318
Executive compensation, corporate staff, research
department services and division overhead.............. 8,385 9,526 9,002
</TABLE>
Of the total amounts in 1997, 1996 and 1995, $2,761, $2,948 and $4,223
respectively, was included in cost of goods sold and $7,890, $8,644 and $9,468
respectively, was included in marketing expense, while the majority of the
remaining amount was included in general and administrative expense.
The benefit related liabilities allocated by Borden to BBNA include the
following (see Note 4 for income tax amounts) as of the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Net domestic pension liability........................ $ 372 $ 180
Postretirement benefit obligation..................... 1,726 1,794
Postemployment benefit obligation..................... 265 343
Non-qualified plan obligation......................... 164 175
Group and general insurance........................... 1,106 910
</TABLE>
Prior to January 1, 1996, Borden managed disbursements and the net cash
position of BBNA. Subsequent to January 1, 1996, BFC manages disbursements and
the net cash position. Accordingly, both cash generated and required by BBNA's
operations are recorded in owner's investment for such periods. An allocation
of interest was not practical because Borden and BFC had not historically
identified a capital structure comprised of separate elements of debt and
equity applicable to BBNA as a separate entity.
BBNA had sales to affiliates of KKR of $6,678, $7,374 and $6,643 for the
years ended December 31, 1997, 1996 and 1995, respectively.
3. LEASES
BBNA currently leases warehouse space, production facilities and vehicles
under long-term or month-to-month arrangements. Rental expense amounted to
$110, $44 and $34 for the years ended
F-21
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
December 31, 1997, 1996 and 1995, respectively. Future minimum annual rentals
under operating leases at December 31, 1997 are as follows for calendar years:
<TABLE>
<CAPTION>
MINIMUM RENTALS ON
OPERATING LEASES
------------------
<S> <C>
1998........................... $ 68
1999........................... 44
2000........................... 27
2001........................... 24
2002........................... 6
----
Total.......................... $169
====
</TABLE>
4. INCOME TAXES
Income tax expense for domestic and foreign operations that file a
consolidated tax return with other entities was calculated utilizing statutory
rates multiplied by pretax income as adjusted for known book to tax
differences. As discussed in Note 1, BBNA tax accounts have been prepared as
though BBNA filed separate income tax returns and may not necessarily
represent the tax position as prepared on a consolidated basis with BFC or
Borden.
Income tax expense is comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $13,891 $11,671 $ 9,682
State and local..................................... 2,551 2,068 1,838
Foreign............................................. 523 416 641
------- ------- -------
16,965 14,155 12,161
Deferred:
Federal............................................. (656) (1,902) 66
State and local..................................... (73) (219) 8
------- ------- -------
(729) (2,121) 74
------- ------- -------
$16,236 $12,034 $12,235
======= ======= =======
</TABLE>
The following table reconciles the maximum statutory U.S. Federal income tax
rate multiplied by BBNA's income before taxes to the recorded income tax
expense (benefit):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Federal income tax
at 35%................. $14,019 $10,233 $10,418
State income tax, net of
Federal benefit........ 1,610 1,190 1,188
Foreign rate
differentials.......... 41 45 63
Goodwill amortization
and other nondeductible
expenses............... 566 566 566
------- ------- -------
Provision for income
taxes.................. $16,236 $12,034 $12,235
======= ======= =======
</TABLE>
F-22
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
Domestic and foreign components of income before taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Domestic................................................ $38,676 $28,142 $28,079
Foreign................................................. 1,377 1,095 1,688
------- ------- -------
$40,053 $29,237 $29,767
======= ======= =======
</TABLE>
Deferred income tax assets and liabilities for domestic and Canadian
operations have been included in owner's investment. As stated in Note 1, the
accompanying financial statements reflect the assets of BBNA on a purchase
accounting basis. The tax basis of BBNA's net assets was not affected by the
KKR acquisition. Deferred tax assets and liabilities up to September 30, 1996
reflect the differences between the purchase accounting book basis and the
historical tax basis of BBNA's net assets. As a result of the 1996 purchase of
Borden's food operations by BFC, the tax basis of BBNA's net assets was
increased to reflect an allocated portion of the purchase price less the
assets transferred plus liabilities assumed. The book basis of BBNA's net
assets did not change as a result of the October 1, 1996 transaction, as the
sale was between related parties and Borden's principal stockholder continued
to control BFC. Deferred tax assets and liabilities were adjusted as of
October 1, 1996 to reflect the change in the tax basis.
Deferred income tax assets and liabilities included in owner's investment at
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Assets:
Trademarks and other intangibles.............................. $17,600 $16,662
Customer allowances and credits............................... 5,250 5,630
Coupon accrual................................................ 1,222 1,208
Non-pension postemployment.................................... 674 700
General insurance............................................. 322 351
Incentive compensation........................................ 700 450
Property and equipment........................................ 377 468
------- -------
Gross deferred tax assets................................... 26,145 25,469
Liabilities:
Prepaid slotting allowance.................................... 278 331
------- -------
Net assets...................................................... $25,867 $25,138
======= =======
</TABLE>
5. PENSION AND RETIREMENT SAVINGS PLANS
Most employees of BBNA participate in the Borden Employee Retirement Income
Plan. For most salaried employees, benefits under the plan generally are based
on compensation and credited service. For most hourly employees, benefits
under the plan are based on specified amounts per year of credited service. A
portion of Borden's expense for the domestic retirement plan was allocated to
BBNA (see Note 2).
A net pension asset or liability, which approximates the portion of the
total pension assets or liabilities of Borden which relates to the employees
of BBNA, has been reflected in BBNA's stand-alone balance sheets (see Note 2).
For the domestic plan in which the employees of BBNA as well as
F-23
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
employees of other Borden affiliated businesses participate, the gross pension
obligation was allocated to BBNA upon the actuarially determined obligation
relating to BBNA's employees.
The rates used to determine pension expense for the plan shared with other
Borden affiliates were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Discount rate........................... 7.5% 6.8% 8.8%
Rate of increase in future compensation
levels................................. 4.5% 4.3% 5.3%
Expected long-term rate of return on
plan assets............................ 8.5% 7.8% 9.8%
</TABLE>
Borden's funding of its pension plans equals or exceeds the minimum funding
requirements imposed by federal laws and regulations. Plan assets consist
primarily of equity securities and corporate obligations. The funded status of
Borden's domestic pension plan on a purchase accounting basis was as follows
(in millions):
<TABLE>
<CAPTION>
ACCUMULATED
BENEFITS EXCEED
PLAN ASSETS
----------------
1997 1996
------- -------
<S> <C> <C>
Plan assets at fair value.................................... $ 385.2 $ 393.6
Actuarial present value of:
Vested benefit obligation.................................. (333.9) (383.1)
Accumulated benefit obligation............................. (342.5) (400.4)
Projected benefit obligation............................... (345.0) (400.4)
------- -------
Plan assets greater (less) than projected benefit obligation. 40.2 (6.8)
Unrecognized prior service cost.............................. 2.6 2.9
Unrecognized loss (benefit).................................. (35.7) 2.2
Minimum liability adjustment................................. (5.1)
------- -------
Net pension asset (liability)................................ $ 7.1 $ (6.8)
======= =======
</TABLE>
The weighted average discount rates and rates of increase in future
compensation levels used in determining the projected benefit obligation for
the Borden domestic pension plan were 7.3% and 4.4% respectively, as of
December 31, 1997 and 7.5% and 4.5% respectively as of December 31, 1996.
Eligible salaried and hourly non-bargaining employees may contribute up to
5% of their pay to Borden sponsored retirement savings plans (7% for certain
longer service salaried employees), which was matched 50% by Borden in 1997,
1996 and 1995.
6. NON-PENSION POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
BBNA participates in Borden-sponsored non-pension postemployment and
postretirement benefit plans. The postretirement plans provide certain health
and life insurance benefits for eligible domestic retirees and their
dependents.
F-24
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
Participants who are not eligible for Medicare are provided with the same
medical benefits as active employees, while those who are eligible for
Medicare are provided with supplemental benefits. The postretirement medical
benefits are contributory for retirements after 1983; the postretirement life
insurance benefit is noncontributory.
Prior to January 1, 1996, amounts attributable to postretirement benefits
were commingled in one Borden sponsored plan. Allocation of liabilities for
such benefits was made to BFC based upon the actuarially determined obligation
relating to the Foods domestic employees. Effective January 1, 1996, the
components of postretirement benefit expense and unfunded postretirement
obligation were accounted for separately for BFC. The information provided as
of December 1, 1997 and 1996, represents the status of BFC's segregated plan
(in millions):
<TABLE>
<CAPTION>
BFC BFC
1997 1996
----- ------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees..................................................... $(7.9) $(10.4)
Fully eligible active plan participants...................... (0.2)
Other active plan participants............................... (0.1) (0.7)
----- ------
(8.0) (11.3)
Unrecognized prior service cost................................
Unrecognized net (benefit) loss................................ (0.7) 0.1
----- ------
Accrued postretirement liability............................... $(8.7) $(11.2)
===== ======
</TABLE>
A liability which approximates the portion of Borden's total postemployment
and postretirement obligation which relates to the domestic employees of BBNA
has been reflected in BBNA's balance sheets (see Note 2). Such allocation was
based upon the actuarially-determined obligation for these benefits relating
to BBNA's domestic employees.
A portion of Borden's expense for postemployment and postretirement benefits
was allocated annually to BBNA (see Note 2). The discount rate used in
determining the accumulated postretirement benefit obligation at December 31,
1997 and 1996 was 7.3% and 7.5%, respectively.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation at December 31, 1997 was 8.8% for 1998,
gradually declining to 5.3% by the year 2004. The comparable assumptions for
the prior year were 9.5% and 5.5%, respectively.
Borden also provides certain postemployment benefits, primarily medical and
life insurance benefits for long-term disabled employees, to qualified former
or inactive employees. The costs of benefits provided to former or inactive
employees after employment, but before retirement, are accrued when it is
probable that a benefit will be provided. The amounts of such charges are not
considered significant.
Management does not believe that these allocations are materially different
from amounts that would be calculated historically for BBNA on a stand-alone
basis.
F-25
<PAGE>
BORDEN BRANDS NORTH AMERICA
(PREDECESSOR COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS)
7. UNITS AND UNIT APPRECIATION RIGHTS
During 1996, a Unit Incentive Plan was formed which provides for the
granting of options, unit appreciation rights, ("UARs") units and other unit-
based grants to key employees of BFC.
During 1996 Foods Holdings sold units to certain management employees of
BFC's business units, including BBNA, and granted UARs to unit holders under
this plan. The UARs entitle the holder to receive an amount in cash equal to
the excess of the market price (as defined in the UAR agreement) of the units
over the exercise price of the UAR. The UARs vest ratably over five years and
expire upon certain events, including termination of the unitholder's
employment, but in no case to exceed ten years. There was no compensation
expense recorded by BFC or BBNA in 1996 or 1997 in relation to the issuance of
the UARs because the exercise price exceeds the underlying value of the UARs.
8. SUPPLEMENTAL INFORMATION
Intangibles and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Intangibles:
Trademarks.......................................... $ 48,365 $ 49,671
Goodwill............................................ 59,757 61,376
-------- --------
$108,122 $111,047
======== ========
Other current liabilities:
Customer allowances, credits and other.............. $ 17,982 $ 19,501
Coupon accrual...................................... 3,132 3,097
Employee benefits and compensation.................. 2,068 1,225
Broker commissions.................................. 991 307
Other............................................... 1,174 915
-------- --------
$ 25,347 $ 25,045
======== ========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Commitments--BBNA has entered into long-term contracts for the purchase of
certain raw materials. Minimum purchase commitments, at current prices, are
approximately $11.9 million at December 31, 1997.
F-26
<PAGE>
EAGLE FAMILY FOODS, INC.
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Confirm by telephone:
(212) 858-2103
By Registered or Certified Mail:
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Department
By Hand:
One State Street
New York, NY 10004
Attention: Securities Processing Window, Subcellar One, (SC-1)
By Overnight Courier:
One State Street
New York, NY 10004
Attention: Securities Processing Window, Subcellar One, (SC-1)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation of enterprise. A
corporation may, in advance of the final action of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or
agent in defending such action, provided that the director or officer
undertakes to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the corporation. A corporation may
indemnify such person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses (including attorneys' fees) which he
or she actually and reasonably incurred in connection therewith. The
indemnification provided is not deemed to be exclusive of any other rights to
which an officer or director may be entitled under any corporation's by-law,
agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Section 9 of the Company's
Restated Certificate of Incorporation (the "Company's Restated Certificate"),
Article 8 of Holdings' Restated Certificate of Incorporation (the "Holdings'
Restated Certificate" and, together with the Company's Restated Certificate,
the "Restated Certificates"), Holdings' By-Laws and the Company's By-Laws
(together with Holdings' By-Laws, the "By-Laws") provide that the Registrants
shall indemnify to the fullest extent permitted under and in accordance with
the laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
by reason of the fact that he is or was a director, officer, employee or agent
of the Registrants, or is or was serving at the request of the Registrants as
director, officer, trustee, employee or agent of or in any other capacity with
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrants, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The indemnification
provided by the Restated Certificates and the By-Laws shall not be deemed
exclusive of any other rights to which any of those seeking indemnification or
advancement of expenses may be entitled under any other contract or agreement
between each of the Registrants and any officer, director, employee or agent
of the Registrants. Expenses incurred in defending a civil or criminal action,
suit or proceeding shall (in the case of any action, suit or proceeding
against a
II-1
<PAGE>
director of the Registrants) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Registrants in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors of each of the Registrants
upon receipt of an undertaking by or on behalf of the indemnified person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Registrants. Subparagraph (d) of Section 9 of the
Company's Restated Certificate and subparagraph (d) of Article 8 of Holdings'
Restated Certificate provide that neither the amendment or repeal of, nor the
adoption of any provision inconsistent with, the above-referenced provisions
of the Restated Certificates shall eliminate or reduce the effect of such
provisions in respect of any matter occurring before such amendment, repeal or
adoption of an inconsistent provision or in respect of any cause of action,
suit or claim relating to any such matter which would have given rise to a
right of indemnification or right to receive expenses pursuant to such
provisions if any such provision had not been so amended or repealed or if a
provision inconsistent therewith had not been so adopted. Subparagraph (c) of
Section 9 of the Company's Restated Certificate and subparagraph (e) of
Article 8 of Holdings' Restated Certificate provide that a director of the
Registrants shall not be personally liable to the Registrants or their
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 Registrants or their 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 DGCL or any amendment thereto or successor
provision thereto, or (iv) for any transaction from which the director derived
an improper personal benefit. If the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Registrants shall be eliminated or
limited to the fullest extent permitted by the DGCL as so amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 --Asset Purchase Agreement, dated as of November 24, 1997, as amended
as of December 9, 1997 and January 15, 1998, by and among Borden
Foods Corporation, BFC Investments, L.P., and the Company.
3.1 --Restated Certificate of Incorporation of Holdings, dated January 15,
1998.
3.2 --Bylaws of Holdings.
3.3 --Restated Certificate of Incorporation of the Company, dated November
19, 1997.
3.4 --Bylaws of the Company.
4.1 --Purchase Agreement, dated January 16, 1998, by and among Holdings,
the Company, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated.
4.2 --Indenture, dated January 23, 1998, among Holdings, the Company and
IBJ Schroder Bank & Trust Company (including Specimen Certificates of
8 3/4% Series Senior Subordinated Notes due 2008 and 8 3/4% Series B
Senior Subordinated Notes due 2008).
4.3 --Registration Rights Agreement, dated January 23, 1998, by and among
Holdings, the Company, Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
4.4 --Credit Agreement, dated January 23, 1998, by and among the Company,
Holdings, The Chase Manhattan Bank, Merrill Lynch Capital
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated.
4.5 --Stockholders Agreement, dated as of January 23, 1998, by and among
Holdings and certain stockholders of Holdings named therein.
4.6 --Exchange and Registration Rights Agreement, dated of January 23,
1998, by and among Holdings and certain stockholders of Holdings
named therein.
4.7 --Subscription Rights Agreement, dated as of January 23, 1998, by and
among Holdings, GE Investment Private Placement Partners II, a
Limited Partnership, and Warburg, Pincus Ventures, L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
5.1 --Opinion of Willkie Farr & Gallagher.*
8.1 --Opinion of Willkie Farr & Gallagher.*
10.1 --Master Customer Services Agreement, dated as of January 23, 1998, by
and between the Company and Borden Foods Corporation.
10.2 --License Agreement dated January 23, 1998 by and among BDH Two, Inc.,
Borden, Inc. and the Company.
10.3 -- Assignment of Trademark License Agreement dated January 23, 1998,
by and between BFC and the Company of BFC's License Agreement, dated
as of September 4, 1997, by and between BFC and Southern Foods Group,
L.P.*
10.4 --License Agreement, dated January 23, 1998, by and between BFC and
the Company.
10.5 --The 1998 Stock Incentive Plan of Holdings.
10.6 --Employment Agreement, dated January 23, 1998, by and between John
O'C. Nugent and the Company.
10.7 --Employment Agreement, dated January 23, 1998, by and between William
A. Lynch and the Company.
10.8 --Employment Agreement, dated January 23, 1998, by and between Craig
A. Steinke and the Company.
10.9 --Employment Agreement, dated January 23, 1998, by and between Tamar
K. Bernbaum and the Company.
10.10 --Employment Agreement, dated January 23, 1998, by and between Richard
A. Lumpp and the Company.
10.11 --Pledge Agreement, dated January 23, 1998, by and between William A.
Lynch and the Company.
10.12 --Pledge Agreement, dated January 23, 1998, by and between John O'C.
Nugent and the Company.
10.13 --Secured Recourse Promissory Note, dated January 23, 1998, from
William A. Lynch to the Company.
10.14 --Secured Recourse Promissory Note, dated January 23, 1998, from John
O'C. Nugent to the Company.
23.1 --Consent of Coopers & Lybrand LLP.
23.2 --Consent of Deloitte & Touche LLP.
23.3 --Consent of Willkie Farr & Gallagher* (contained in the Opinions of
Willkie Farr & Gallagher filed as Exhibits 5.1 and 8.1).
24.0 --Power of Attorney (included on page II-6).
</TABLE>
- - - - --------
*To be filed by amendment.
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
25.0 --Statement on Form T-1 of Eligibility of Trustee.
27.1 --Financial Data Schedule of Eagle Family Foods Holdings, Inc.
27.2 --Financial Data Schedule of Eagle Family Foods, Inc.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Clients.
99.4 --Form of Letter to Nominees.
</TABLE>
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements
or notes thereto.
ITEM 22. UNDERTAKINGS.
Each of the undersigned registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of registrants
pursuant to the provisions described under Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Each of the undersigned registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by each of the registrants pursuant to Rule 424(b)(1) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Each of the undersigned registrants hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
Each of the undersigned registrants hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved herein, that was not the subject of and
included in this Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, EACH OF THE
REGISTRANTS HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK,
STATE OF NEW YORK, ON THE 16TH DAY OF APRIL 1998.
Eagle Family Foods Holdings, Inc.
/s/ John O'C. Nugent
By: _________________________________
JOHN O'C. NUGENT, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Eagle Family Foods, Inc.
/s/ John O'C. Nugent
By: _________________________________
JOHN O'C. NUGENT, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
II-5
<PAGE>
POWER OF ATTORNEY
The undersigned officers and directors of Eagle Family Foods Holdings, Inc.
and Eagle Family Foods, Inc., hereby severally constitute and appoint John
O'C. Nugent and Jonathan F. Rich and each of them, attorneys-in-fact for the
undersigned, in any and all capacities, with the power of substitution, to
sign any amendments to this Registration Statement (including post-effective
amendments) and any subsequent registration statement for the same offering
which may be filed under Rule 462(b) under the Securities Act of 1933, as
amended, and to file the same with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all interests and purposes as he might
or could do in person, hereby ratifying and confirming all that each said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS, IN
THEIR CAPACITIES AT BOTH EAGLE FAMILY HOLDINGS, INC. AND EAGLE FAMILY FOODS,
INC. AND ON THE DATES INDICATED.
NAME TITLE DATE
/s/ John O'C. Nugent President, Chief April 16, 1998
- - - - ------------------------------------- Executive Officer
JOHN O'C. NUGENT and Director
(principal
executive officer)
/s/ William A. Lynch Chairman of the April 16, 1998
- - - - ------------------------------------- Board, Chief
WILLIAM A. LYNCH Operating Officer
and Director
/s/ Craig A. Steinke Chief Financial April 16, 1998
- - - - ------------------------------------- Officer (principal
CRAIG A. STEINKE financial and
accounting officer)
/s/ Andreas T. Hildebrand Director April 16, 1998
- - - - -------------------------------------
ANDREAS T. HILDEBRAND
/s/ Edward A. Johnson Director April 16, 1998
- - - - -------------------------------------
EDWARD A. JOHNSON
/s/ Kewsong Lee Director April 16, 1998
- - - - -------------------------------------
KEWSONG LEE
/s/ Howard H. Newman Director April 16, 1998
- - - - -------------------------------------
HOWARD H. NEWMAN
/s/ Donald W. Torey Director April 16, 1998
- - - - -------------------------------------
DONALD W. TOREY
/s/ Paul W. Van Orden Director April 16, 1998
- - - - -------------------------------------
PAUL W. VAN ORDEN
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
2.1 --Asset Purchase Agreement, dated as of November 24, 1997, as
amended as of December 9, 1997 and January 15, 1998, by and
among Borden Foods Corporation, BFC Investments, L.P., and the
Company.
3.1 --Restated Certificate of Incorporation of Holdings, dated
January 15, 1998.
3.2 --Bylaws of Holdings.
3.3 --Restated Certificate of Incorporation of the Company, dated
November 19, 1997.
3.4 --Bylaws of the Company.
4.1 --Purchase Agreement, dated January 16, 1998, by and among
Holdings, the Company, Chase Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
4.2 --Indenture, dated January 23, 1998, among Holdings, the
Company and IBJ Schroder Bank & Trust Company (including
Specimen Certificates of 8 3/4% Series Senior Subordinated
Notes due 2008 and 8 3/4% Series B Senior Subordinated Notes
due 2008).
4.3 --Registration Rights Agreement, dated January 23, 1998, by and
among Holdings, the Company, Chase Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
4.4 --Credit Agreement, dated January 23, 1998, by and among the
Company, Holdings, The Chase Manhattan Bank, Merrill Lynch
Capital Corporation, Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
4.5 --Stockholders Agreement, dated as of January 23, 1998, by and
among Holdings and certain stockholders of Holdings named
therein.
4.6 --Exchange and Registration Rights Agreement, dated of January
23, 1998, by and among Holdings and certain stockholders of
Holdings named therein.
4.7 --Subscription Rights Agreement, dated as of January 23, 1998,
by and among Holdings, GE Investment Private Placement
Partners II, a Limited Partnership, and Warburg, Pincus
Ventures, L.P.
5.1 --Opinion of Willkie Farr & Gallagher.*
8.1 --Opinion of Willkie Farr & Gallagher.*
10.1 --Master Customer Services Agreement, dated as of January 23,
1998, by and between the Company and Borden Foods Corporation.
10.2 --License Agreement dated January 23, 1998 by and among BDH
Two, Inc., Borden, Inc. and the Company.
10.3 -- Assignment of Trademark License Agreement dated January 23,
1998, by and between BFC and the Company of BFC's License
Agreement, dated as of September 4, 1997, by and between BFC
and Southern Foods Group, L.P.*
10.4 --License Agreement, dated January 23, 1998, by and between BFC
and the Company.
10.5 --The 1998 Stock Incentive Plan of Holdings.
10.6 --Employment Agreement, dated January 23, 1998, by and between
John O'C. Nugent and the Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.7 --Employment Agreement, dated January 23, 1998, by and between
William A. Lynch and the Company.
10.8 --Employment Agreement, dated January 23, 1998, by and between
Craig A. Steinke and the Company.
10.9 --Employment Agreement, dated January 23, 1998, by and between
Tamar K. Bernbaum and the Company.
10.10 --Employment Agreement, dated January 23, 1998, by and between
Richard A. Lumpp and the Company.
10.11 --Pledge Agreement, dated January 23, 1998, by and between
William A. Lynch and the Company.
10.12 --Pledge Agreement, dated January 23, 1998, by and between John
O'C. Nugent and the Company.
10.13 --Secured Recourse Promissory Note, dated January 23, 1998,
from William A. Lynch to the Company.
10.14 --Secured Recourse Promissory Note, dated January 23, 1998,
from John O'C. Nugent to the Company.
23.1 --Consent of Coopers & Lybrand LLP.
23.2 --Consent of Deloitte & Touche LLP.
23.3 --Consent of Willkie Farr & Gallagher* (contained in the
Opinions of Willkie Farr & Gallagher filed as Exhibits 5.1 and
8.1).
24.0 --Power of Attorney (included on page II-6).
25.0 --Statement on Form T-1 of Eligibility of Trustee.
27.1 --Financial Data Schedule of Eagle Family Foods Holdings, Inc.
27.2 --Financial Data Schedule of Eagle Family Foods, Inc.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Clients.
99.4 --Form of Letter to Nominees.
</TABLE>
- - - - --------
*To be filed by amendment.
<PAGE>
Exhibit 2.1
- - - - --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
BORDEN FOODS CORPORATION,
BFC INVESTMENTS, L.P.
and
EAGLE FAMILY FOODS, INC.
Dated as of November 24, 1997
- - - - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1 SALE OF ASSETS AND ASSUMPTION OF LIABILITIES......................... 2
1.1 Sale of Assets.................................................. 2
1.2 Assets.......................................................... 3
1.3 Excluded Assets................................................. 8
1.4 Assumed Liabilities............................................. 11
1.5 Excluded Liabilities............................................ 12
2 PURCHASE PRICE AND ADJUSTMENTS....................................... 15
2.1 Purchase Price.................................................. 15
2.2 Inventory Adjustments........................................... 17
2.3 Proration of Payroll and Real and Personal Property Taxes....... 19
3 REPRESENTATIONS AND WARRANTIES OF BFC................................ 20
3.1 Corporate Existence............................................. 20
3.2 Corporate Authority............................................. 21
3.3 Governmental Approvals; Consents................................ 22
3.4 Financial Statements............................................ 22
3.5 Absence of Changes.............................................. 23
3.6 Real and Personal Properties.................................... 25
3.7 Contracts....................................................... 29
3.8 Litigation, Agencies............................................ 30
3.9 Intangible Property Rights...................................... 31
3.10 Insurance....................................................... 35
3.11 Tax Matters..................................................... 35
3.12 Employment and Benefits......................................... 36
3.13 Compliance with Laws............................................ 38
3.14 Finders; Brokers................................................ 39
3.15 Environmental Matters........................................... 39
3.16 Product Guaranty................................................ 42
3.17 Machinery....................................................... 43
3.18 Product Recalls................................................. 43
3.19 Customers and Suppliers......................................... 43
3.20 [Intentionally Omitted]......................................... 44
3.21 No Undisclosed Liabilities...................................... 44
3.22 Entire Business................................................. 44
3.23 No Other Representations or Warranties.......................... 45
3.24 Expiration of Representations and Warranties.................... 45
4 REPRESENTATIONS OF BUYER............................................. 45
4.1 Corporate Existence............................................. 45
4.2 Corporate Authority............................................. 46
4.3 Governmental Approvals; Consents................................ 47
4.4 Finders; Brokers................................................ 47
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.5 Financial Capacity.............................................. 47
4.6 No Other Representations or Warranties.......................... 48
4.7 Expiration of Representations and Warranties.................... 48
5 AGREEMENTS OF BUYER.................................................. 48
5.1 Operation of the Business....................................... 48
5.2 Investigation of Business....................................... 51
5.3 Mutual Cooperation; No Inconsistent Action...................... 52
5.4 Public Disclosures.............................................. 53
5.5 Access to Records and Personnel................................. 54
5.6 License Agreements and Transactions............................. 55
5.7 Employee Relations and Benefits................................. 56
5.8 Product Shipment and Inventory Reconciliation................... 63
5.9 "As Is" Condition............................................... 64
5.10 Non-Solicitation................................................ 64
5.11 [Intentionally Omitted]......................................... 65
5.12 Financing....................................................... 65
5.13 Consumer Claims and Complaints.................................. 66
5.14 Promotion/Pricing Allowance..................................... 66
5.15 Administration of Accounts; Customer Inquiries.................. 67
5.16 Services Agreement.............................................. 68
5.17 Puerto Rico Distributor Agreement............................... 68
5.18 Canadian Copack and Distribution Agreements..................... 69
5.19 Covenant Not to Compete......................................... 69
5.20 Confidentiality................................................. 73
5.21 Acquisition of Rights to Confidentiality........................ 74
5.22 Certain Restrictions............................................ 74
6 CONDITIONS........................................................... 75
6.1 Conditions Precedent to Obligations of Buyer, BFC and BFC
Investments..................................................... 75
6.2 Conditions Precedent to Obligation of BFC and BFC Investments... 75
6.3 Conditions Precedent to Obligation of Buyer..................... 77
7 CLOSING.............................................................. 79
7.1 Closing Date.................................................... 79
7.2 Buyer Deliveries................................................ 79
7.3 BFC Deliveries.................................................. 79
8 INDEMNIFICATION...................................................... 80
8.1 Indemnification by BFC.......................................... 80
8.2 Indemnification by Buyer........................................ 84
8.3 Indemnification Calculations.................................... 86
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9 TERMINATION.......................................................... 88
9.1 Termination Events.............................................. 88
9.2 Effect of Termination........................................... 89
10 ALTERNATIVE DISPUTE RESOLUTION....................................... 89
11 MISCELLANEOUS AGREEMENTS OF THE PARTIES.............................. 90
11.1 Notices........................................................ 90
11.2 Bulk Transfers................................................. 91
11.3 Transaction Taxes.............................................. 91
11.4 Further Assurances; Asset Returns.............................. 92
11.5 Other Covenants................................................ 92
11.6 Expenses....................................................... 93
11.7 Non-Assignability.............................................. 93
11.8 Amendment; Waiver.............................................. 93
11.9 Schedules and Exhibits......................................... 94
11.10 Third Parties.................................................. 95
11.11 Governing Law.................................................. 95
11.12 Consent to Jurisdiction........................................ 95
11.13 Certain Definitions............................................ 96
11.14 Entire Agreement............................................... 97
11.15 Specific Performance........................................... 97
11.16 Section Headings; Table of Contents............................ 97
11.17 Severability................................................... 98
11.18 Counterparts................................................... 98
</TABLE>
-iii-
<PAGE>
Exhibits
EXHIBIT A - Financing Letters and Equity Letter
EXHIBIT B-1 - Form of BFC Investments Assignment
EXHIBIT B-2 - Form of BFC Assignment
EXHIBIT C - Form of Borden License Agreement
EXHIBIT D - Form of Buyer's License Agreement
EXHIBIT E - Form of Services Agreement
EXHIBIT F - Form of Puerto Rico Distributor Agreement
EXHIBIT G - Term Sheets for Canadian Agreements
EXHIBIT H - Form of Assumption Agreement
EXHIBIT I - Form of Opinion of Willkie Farr & Gallagher
EXHIBIT J - Form of Bill of Sale
EXHIBIT K - Form of Opinion of General Counsel of BFC
EXHIBIT L - Form of Opinion of Simpson Thacher & Bartlett
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of November 24, 1997 (hereinafter
"Agreement"), among BORDEN FOODS CORPORATION, a Delaware corporation ("BFC"),
- - - - ---------- ---
EAGLE FAMILY FOODS, INC., a Delaware corporation ("Buyer"), and, solely for
-----
purposes of Sections 1.1(b), 1.2(b), 1.3(b), 1.4, 1.5, 2.1, 5.4, 5.6, 6.2, 7.3
and 11.4 hereof, BFC INVESTMENTS, L.P., a Delaware limited partnership ("BFC
---
Investments").
- - - - -----------
W I T N E S S E T H:
WHEREAS, BFC and BFC Investments, directly or through their affiliates, are
collectively engaged, in part, in the business of developing, manufacturing,
marketing, distributing and selling in the United States (excluding Puerto Rico)
and Canada sweetened condensed milk sold under the Eagle Brand name, powdered
non-dairy creamer sold under the Cremora brand name, canned egg nog sold under
the Borden brand name, shelf-stable juice sold under the ReaLemon/ReaLime brand
names, mincemeat sold under the None Such brand name, and acid-neutralized
instant coffee sold under the Kava brand name and, in the case of certain of the
foregoing brands, under other related names (which business is hereinafter
referred to as the "Business") (provided that, subject to the terms and
--------
conditions of this Agreement and the license agreements referred to herein, the
foregoing definition of the Business shall not be deemed to be a limitation on
Buyer's ability to expand the Business outside of the United States and Canada);
and
WHEREAS, Buyer desires to purchase from BFC and BFC Investments, and BFC
and BFC Investments desire to sell or to cause their affiliates to sell to
Buyer, the BFC Assets
<PAGE>
2
and the BFC Investments Assets (each as defined below), and in connection
therewith Buyer is willing to assume the Assumed Liabilities (as defined below)
(collectively, the "Purchase"), upon the terms and subject to the conditions of
--------
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereby agree as follows:
1 SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
--------------------------------------------
1.1 Sale of Assets.
--------------
(a) Sale of BFC Assets. Subject to the satisfaction or waiver of the
------------------
conditions set forth in this Agreement, at the Closing and as of the Closing
Date, as these terms are defined in Section 7.1 hereof, BFC shall, and shall
cause its affiliates to, sell, assign, transfer, convey and deliver to Buyer
free and clear of any lien or other encumbrance other than Permitted Liens (as
hereinafter defined), and Buyer shall purchase, all of the assets, rights,
properties, claims, contracts and business of BFC and its affiliates which are
principally utilized in the Business as of the Closing Date, of every kind,
nature, character and description, tangible and intangible, real, personal or
mixed, wherever located, other than the Excluded BFC Assets (as defined in
Section 1.3(a) hereof) (the "BFC Assets"), provided, however, that the BFC
---------- -------- -------
Assets shall not include any BFC Investments Assets (as defined in Section
1.1(b)). As of the Closing, risk of loss as to the BFC Assets shall pass from
BFC and its affiliates to Buyer.
(b) Sale of BFC Investments Assets. Subject to the satisfaction or waiver
------------------------------
of the conditions set forth in this Agreement, at the Closing and as of the
Closing Date, BFC Investments shall sell, assign, transfer, convey and deliver
to Buyer free and clear of any lien or other encumbrance other than Permitted
Liens, and Buyer shall purchase, all of the assets, rights, properties, claims,
contracts and business of BFC Investments which are principally
<PAGE>
3
utilized in the Business as of the Closing Date, of every kind, nature,
character and description, tangible and intangible, real, personal or mixed,
wherever located, other than the Excluded BFC Investment Assets (as defined in
Section 1.3(b) hereof) (the "BFC Investments Assets"; and together with the BFC
----------------------
Assets, the "Assets"). As of the Closing, risk of loss as to the BFC
------
Investments Assets shall pass from BFC Investments to Buyer.
1.2 Assets.
------
(a) BFC Assets. The BFC Assets to be purchased by Buyer at the Closing
----------
include, without limitation, the following:
(i) BFC Real Property. All BFC Real Property (as defined in Section
-----------------
3.6(b)) described on Part 1 of Schedule 3.6(a)(i) hereto, including all
------------------
buildings, structures and other improvements situated thereon (individually
referred to as a "Facility" and collectively, the "Facilities"), and all of
-------- ----------
BFC's right, title and interest in all easements, privileges, rights-of-way,
riparian and other water rights, lands underlying any adjacent streets or roads
and appurtenances pertaining to or accruing to the benefit of such property, in
each case subject to the exceptions described on Schedule 3.6(a)(ii) hereto.
-------------------
(ii) Machinery and Equipment. All machinery (including Tetrapak
-----------------------
machinery and laboratory equipment), vehicles, computers, equipment, furniture,
fixtures, supplies and other items of personal property reflected in the balance
sheet included within the 1997 Audited Financial Statements (as defined in
Section 3.4(b)), with additions thereto in the ordinary course of business (net
of dispositions, (x) prior to the date hereof, which do not cause Section 3.5 to
be untrue and (y) on or after the date hereof, which do not violate Section
5.1(b)), and all replacements for any of the foregoing, which are located at the
Facilities on the Closing Date or otherwise principally used in or related to
the Business as of
<PAGE>
4
the Closing Date, whether or not such assets have a book value (the
"Machinery"), and all warranties and guarantees, if any, express or implied,
---------
existing for the benefit of BFC in connection with the Machinery, to the extent
transferable.
(iii) Intangible Property.
-------------------
(A) Patent Rights. All right, title and interest of BFC and
-------------
its affiliates in all patentable inventions, discoveries, improvements, ideas
and know-how and all unexpired domestic and foreign patents and patent
applications, as well as all reissues, divisionals, continuations and
continuation-in-part applications and any patents issuing thereon and all
renewals and extensions thereof, and all license agreements and other agreements
which relate to inventions and discoveries and any patent applications and
patents thereon, as well as improvements therein, used principally in connection
with the Business and described on Schedule 3.9(a)(i) hereto in all territories
------------------
worldwide other than, in the case of any such right, title or interest relating
to powdered non-dairy creamer sold under the Cremora brand name and related
names, in those territories set forth on Schedule 1.3(a)(i), and claims or
------------------
causes of action arising out of or related to infringement or misappropriation
of any Patent Rights (as defined in Section 3.9(a));
(B) Trademark Rights. All right, title and interest of BFC and
----------------
its affiliates in (i) all trademarks, service marks and all registrations and
applications pertaining thereto (including all documents or files pertaining
thereto), trade names and any logos associated therewith; (ii) any and all
licenses or other rights to use trademarks owned by others and (iii) any trade
dress associated with the Business, and any translations, adaptations,
derivations or combinations of any of the items indicated in clauses (i) and
(ii) above, in each case described in clauses (i) through (iii) as used
principally in connection with the Business
<PAGE>
5
and described on Schedule 1.2(a)(iii)(B) or Schedule 3.9(b)(i) hereto in all
----------------------- ------------------
territories worldwide other than, in the case of any such right, title or
interest relating to powdered non-dairy creamer sold under the Cremora brand
name and related names, in those territories set forth on Schedule 1.3(a)(i),
------------------
together with the goodwill associated therewith and claims or causes of action
arising out of or related to infringement or misappropriation of any Trademark
Rights (as defined in Section 3.9(b));
(C) Copyrights. All right, title and interest of BFC and its
----------
affiliates in all copyrights, copyright registrations, copyright applications
(pertaining thereto) and all licenses or other rights to use the copyrights of
others, in each case used principally in connection with the Business and
described on Schedule 3.9(c)(i) hereto in all territories worldwide other than,
------------------
in the case of any such right, title or interest relating to powdered non-dairy
creamer sold under the Cremora brand name and related names, in those
territories set forth on Schedule 1.3(a)(i), and claims or causes of action
------------------
arising out of or related to infringement or misappropriation of any Copyright
Rights (as defined in Section 3.9(c));
(D) Technology. All right, title and interest of BFC and its
----------
affiliates in the Technology (as defined in Section 3.9(a)) as of the Closing
Date other than, in the case of any such right, title or interest relating to
powdered non-dairy creamer sold under the Cremora brand name and related names,
in those territories set forth on Schedule 1.3(a)(i);
------------------
(E) Other. All right, title and interest of BFC and its
-----
affiliates in all material domain names and registrations or applications for
registration thereof used principally in connection with the Business and
described on Schedule 3.9(d) hereto in all territories worldwide and claims or
---------------
causes of action arising out of or related to infringement or misappropriation
of any Internet Rights (as defined in Section 3.9(d)); and
<PAGE>
6
(F) New Products. All right, title and interest of BFC and
------------
its affiliates in all products in development as of the Closing Date, including
all right, title and interest of BFC and its affiliates in all intangible rights
associated therewith, relating principally to or arising principally out of the
Business.
(iv) Contracts. All Contracts (as defined in Section 3.7(a)) to
---------
which BFC is a party or by which BFC is bound, as of the Closing Date,
including, without limitation, the BFC Leases (as defined in Section 3.6(b)).
(v) Licenses and Permits. To the extent transferable, all Licenses
--------------------
and Permits (as defined in Section 3.13) owned or used by BFC as of the Closing
Date and which relate principally to the operation of the Business.
(vi) Inventories. The finished products (other than finished
-----------
products that have been billed and are being held for customers' accounts)
principally related to the Business and owned or shipped (to the extent owned)
by BFC on the Closing Date and all work-in-process, raw materials and packaging
materials used in connection therewith, principally related to the Business and
owned by BFC on the Closing Date, including returns of inventory following the
Closing Date, provided, however, that BFC shall remain liable for any and all
-------- -------
credits or refunds due to customers that return any inventory to the extent
specified in Section 1.5(f).
(vii) Business Information; Files and Records. All business
---------------------------------------
information, management systems (to the extent transferable), books, archival
materials, files and records, whether in hard copy or magnetic format, but only
to the extent still in existence, relating principally to the operation of the
Business, including, without limitation, advertising, print and radio/television
commercials, sales promotion materials, point of sale and shelf
<PAGE>
7
merchandising materials, marketing and sales programs, market research,
technical research, business and strategic plans, customer, supplier/alternative
supplier and co-packer files and lists, consumer communications, equipment
maintenance records and warranty information, plant plans, specifications and
drawings, product and raw material specifications, manufacturing procedures and
processes, recipes (both for manufacturing and home or end-user use of
products), trade secrets and customer specifications and all files relating to
Transferred Employees, correspondence with federal, state and local governmental
agencies relating to the operation of the Business and related files and records
of BFC, other than tax returns and correspondence relating to Taxes.
(viii) Phone Numbers, etc. To the extent transferable, all telephone
------------------
numbers (e.g., toll free numbers), fax numbers and similar numbers or addresses
relating principally to the Business.
(ix) Other BFC Assets. All other assets (other than Excluded BFC
----------------
Assets) principally utilized in the Business and owned by BFC included in (A)
the Financial Statements (as defined in Section 3.4), to the extent still in
existence on the Closing Date, and (B) the Closing Statement (as defined in
Section 2.2(c)) including, in each case, all goodwill associated with any of the
items listed in (i) through (viii) above and clauses (A) and (B) of this clause
(ix).
(b) BFC Investments Assets. The BFC Investments Assets to be
----------------------
purchased by Buyer at the Closing consist of all of BFC Investments' right,
title and interest in (i) all trademarks, service marks and all registrations
and applications pertaining thereto (including all documents or files pertaining
thereto), trade names and any logos associated therewith; (ii) any and all
licenses or other rights to use trademarks owned by others and (iii) any trade
<PAGE>
8
dress associated with the Business and any translations, adaptations,
derivations or combinations of any of the items indicated in clauses (i) or (ii)
above, in each case described in clauses (i) through (iii) as used principally
in connection with the Business and described on Schedule 3.9(b)(i) hereto in
------------------
all territories worldwide other than, in the case of any such right, title or
interest relating to powdered non-dairy creamer sold under the Cremora brand
name and related names, those set forth on Schedule 1.3(a)(i), together with the
------------------
goodwill associated therewith and claims or causes of action arising out of or
related to infringement or misappropriation thereof.
1.3 Excluded Assets.
---------------
(a) Excluded BFC Assets. It is expressly agreed that BFC will
-------------------
retain and Buyer will not acquire the following assets (the "Excluded BFC
------------
Assets"):
- - - - ------
(i) Non-Acquired Assets. The assets utilized by BFC principally in
-------------------
connection with businesses other than the Business or used principally by BFC at
plants or distribution facilities which are not owned or used by BFC principally
in the operation of the Business.
(ii) Cash and Cash Equivalents. Cash and cash equivalents,
-------------------------
including, without limitation, bank deposits, investments in so-called "money
market" funds, commercial paper funds, certificates of deposit, Treasury Bills
and accrued interest thereon, other than any of the foregoing to the extent
arising out of the operation of the Business on or after the Closing Date.
(iii) Tax Refunds. Any refunds or credits (including interest
-----------
thereon or claims therefor) with respect to any Taxes (as defined in Section
3.11) that are Excluded Liabilities.
<PAGE>
9
(iv) Insurance Contracts. Any contracts of insurance in respect of
-------------------
the Business; and any reimbursement for, or other benefit associated with
prepaid insurance, and any rights associated with any prepaid expense for which
Buyer will not receive the benefit after the Closing Date, including without
limitation any insurance proceeds with respect to events occurring prior to the
Closing Date, to the extent BFC assumes or retains the cost of any such event or
indemnifies Buyer with respect to such event.
(v) Excluded Information Systems. Any information systems of the
----------------------------
Business identified in Schedule 1.3 (a)(v).
-------------------
(vi) Employee Benefit Assets. Any assets relating to the Benefit
-----------------------
Plans (as defined in Section 3.12(b)).
(vii) Transferred or Disposed Assets. Any assets transferred or
------------------------------
otherwise disposed of by BFC in the ordinary course of the Business prior to the
Closing and not in violation of this Agreement, or with Buyer's prior written
consent.
(viii) BFC Trademarks. (i) All trademarks, service marks and trade
--------------
names of BFC and its affiliates incorporating the word "Borden", "Meadow Gold"
or "Elsie" and any logos related thereto or used in connection therewith
including; (ii) any translations, adaptations, derivations or combinations of
any of the items indicated in (i); and (iii) all goodwill associated with any of
the items indicated in (i) and (ii).
(ix) Certain Cremora Assets. All of BFC's right, title and interest
----------------------
in the intangible property described in Section 1.2(a)(iii) relating to powdered
non-dairy creamer sold under the Cremora brand name and related names in those
territories set forth on Schedule 1.3(a)(i).
------------------
<PAGE>
10
(x) Excluded Receivables. The accounts receivables and other
--------------------
receivables of the Business including without limitation, the receivables set
forth on Schedule 1.3(a)(x), but excluding the accounts receivables and other
------------------
receivables of the Business arising on or after the Closing Date.
(xi) Affiliate Contracts. All Contracts between BFC and any
-------------------
affiliate of BFC (other than any portfolio company of an investment fund
organized by Kohlberg Kravis Roberts & Co., except Borden, Inc. ("Borden")),
------
except for Contracts contemplated by this Agreement, Contracts listed on
Schedule 1.3(a)(xi) or Contracts for the purchase of inventory or raw materials.
- - - - -------------------
(xii) UPC Number. Any manufacturer's identification number included
----------
in a Universal Product Code number, provided, however, that Buyer shall be able
-------- -------
to sell finished goods inventory existing as of the Closing Date, use any
packaging existing as of the Closing Date or resell any returned inventory
containing the manufacturer's identification number used by BFC.
(xiii) Other Excluded BFC Assets. Such other specific assets used
-------------------------
in the Business as are listed on Schedule 1.3(a)(xiii).
---------------------
(b) Excluded BFC Investments Assets. It is expressly agreed that BFC
-------------------------------
Investments will retain and Buyer will not acquire (except pursuant to the
License Agreement referred to in Section 5.6(a)) any interest in (i) all
trademarks, service marks and trade names of BFC Investments and its affiliates
incorporating the word "Borden", "Meadow Gold" or "Elsie" and any logos related
thereto or used in connection therewith including; (ii) any translations,
adaptations, derivations or combinations of any of the items indicated in (i);
and
<PAGE>
11
(iii) all goodwill associated with any of the items indicated in (i) and (ii)
(the "Excluded BFC Investments Assets"; and together with the Excluded BFC
-------------------------------
Assets, the "Excluded Assets").
---------------
1.4 Assumed Liabilities. On the Closing Date, Buyer assumes and agrees to
-------------------
pay, perform and discharge when due, all debts, liabilities and obligations
whatsoever, other than Excluded Liabilities (as defined below) of BFC and BFC
Investments, arising out of or pertaining principally to the Business or the
Assets whether arising before or after the Closing, and whether known or
unknown, fixed or contingent, to the extent the same are unpaid, undelivered or
unperformed on the Closing Date, including, but not limited to, the following:
(a) all liabilities of the Business (other than Excluded Liabilities)
included in the Financial Statements, to the extent they are still in
existence on the Closing Date including the notes thereto, and all
liabilities incurred in the ordinary course of the Business subsequent to
the date of the most recent Financial Statements;
(b) all debts, obligations and liabilities in respect of the Business
or the Assets arising or incurred by Buyer on and after the Closing Date;
(c) all debts, obligations and liabilities which arise on account of
Buyer's operation of the Business, the use of the Assets, and/or sale of
any products manufactured and/or sold by Buyer on and after the Closing
Date;
(d) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations arising out of or related principally to
the Business or that otherwise arise out of or are related to the Assets;
(e) all obligations and liabilities of BFC and BFC Investments under
the Contracts including the BFC Leases and Licenses and Permits, but only
to the extent
<PAGE>
12
the foregoing are validly assigned to Buyer, provided, that Contracts set
--------
forth on Schedule 3.7(b) shall not be assigned to Buyer without Buyer's
---------------
consent (which may be withheld in Buyer's sole discretion);
(f) all workers' compensation, product liability, automobile
liability and general liability claims of BFC relating principally to the
Business which occurred prior to the Closing Date, or any incident arising
prior to the Closing Date which results in any such claims after the
Closing Date;
(g) all obligations and liabilities of BFC arising as a result of at
anytime being the owner, occupant of, or the operator of the activities
conducted at any of the BFC Real Properties, including all obligations and
liabilities relating to personal injury, property damage and Environmental
Liability (as defined in Section 3.15);
(h) all obligations and liabilities assumed by Buyer pursuant to
Section 5.7 hereof;
(i) all obligations and liabilities of BFC and BFC Investments for
Taxes owed in respect of the Business assumed by Buyer pursuant to Sections
2.3 or 11.3 hereof; and
(j) all other liabilities and obligations of BFC and BFC Investments
arising principally out of or related principally to the Business or the
Assets (the debts, liabilities and obligations described in this Section
1.4, collectively, the "Assumed Liabilities").
-------------------
<PAGE>
13
1.5 Excluded Liabilities.
--------------------
It is expressly agreed that BFC and BFC Investments will retain and Buyer
shall not assume, or in any way be liable or responsible for, any of the
following liabilities of BFC or the Business (the "Excluded Liabilities"):
--------------------
(a) all obligations and liabilities principally arising out of or
relating to the Excluded Assets;
(b) all debts, liabilities or obligations of BFC and BFC Investments
that do not arise out of or are not principally related to the Business;
(c) all obligations and liabilities of BFC retained pursuant to
Section 5.7 hereof;
(d) all trade payables, trade promotion or pricing allowances (other
than liabilities relating to returns and coupons and sales incentives payable to
brokers and Sun Hing, but including slotting allowances) and all liabilities for
broker commissions earned based on sales prior to the Closing Date, in each case
which would be reflected as a liability on a balance sheet of BFC prepared in
accordance with generally accepted accounting principles as of the Closing Date,
provided, however, that with respect to any particular trade promotion or
- - - - -------- -------
pricing allowance, such liability shall be an Excluded Liability only if BFC
shall have shipped inventory to the applicable customer in connection with such
trade promotion or pricing allowance prior to the Closing Date;
(e) all liabilities relating to coupons "dropped" by BFC prior to the
earlier of the Closing Date and January 1, 1998, but only to the extent such
coupons are received by Buyer for redemption prior to June 30, 1998;
<PAGE>
14
(f) any liability for credits or refunds due to customers resulting
from any bona fide return of inventory prior to the 60th day following the
Closing Date (or, in the case of returns of mincemeat or egg nog, June 30,
1998), provided, however, that the amount of the liability which is an Excluded
-------- -------
Liability shall be limited to the amount in excess of inventory standard cost
with respect to any such saleable inventory (x) with an expiration date that is
more than 90 days following the date such inventory is returned (or, in the case
of returns of mincemeat or egg nog, with an expiration date that is after
December 31, 1998) and (y) which, when combined with Buyer's then existing
inventory, does not constitute an amount of inventory in excess of the amount
reasonably expected to be sold during the 12 month period following such return
date;
(g) all obligations and liabilities relating to sales incentives
payable to brokers to the extent based on sales prior to January 1, 1998 and all
obligation and liabilities relating to sales volume incentives under BFC's
arrangements with Sun Hing to the extent based on sales prior to January 1,
1998;
(h) any liability or obligation of BFC owing to any stockholder,
subsidiary or affiliate thereof (other than any portfolio company of an
investment fund organized by Kohlberg Kravis Roberts & Co., except Borden),
other than liabilities or obligations for the purchase of inventory or raw
materials;
(i) any liabilities related to (i) income Taxes of any of BFC or BFC
Investments (ii) except to the extent provided under Sections 2.3 or 11.3, Taxes
attributable to the transfer of the Assets pursuant to this Agreement, (iii) all
other Taxes relating to the Business and attributable to periods ending prior to
the Closing Date, (iv) all other Taxes not
<PAGE>
15
attributable to the Business and (v) Taxes of any other Person pursuant to an
agreement or otherwise; and
(j) any other obligations and liabilities for which BFC and BFC
Investments have expressly assumed responsibility pursuant to this Agreement.
2 PURCHASE PRICE AND ADJUSTMENTS
------------------------------
2.1 Purchase Price.
--------------
(a) The total consideration to be paid by Buyer for the Business
pursuant to this Agreement shall be:
(i) Forty Million Dollars ($40,000,000), subject to the
adjustments as provided in Section 2.2, payable to BFC in respect of the
BFC Assets (other than goodwill, going concern value and other intangibles)
(the "BFC Purchase Price");
------------------
(ii) Three Hundred Forty-Seven Million Five Hundred Thousand
Dollars ($347,500,000) payable to BFC (for itself and as agent for BFC
Investments, Borden, BDH Two, Inc. ("BDH") and/or Borden Foods Investments
---
Corporation), in respect of (A) the BFC Investments Assets, (B) the
Assignments (as defined in Section 5.6(a)) by BFC Investments and BFC,
respectively, of their rights under the Trademark License Agreement dated
October 1, 1996, between Borden and BFC Investments and the Trademark
License Agreement dated October 1, 1996, between BFC Investments and BFC
(collectively, the "Existing License Agreements") relating to the
---------------------------
trademarks listed in the appendices to the Borden License Agreement (as
defined in Section 5.6(a)), (C) subsequent to the termination of the
Existing License Agreements (as to the portions thereof which shall have
been assigned pursuant to the Assignments), the execution and delivery of
the Borden License Agreement, (D) the covenants contained in
<PAGE>
16
Sections 5.19(a) and 5.19(b) below and (E) goodwill, going concern value
and other intangibles (the "IP Purchase Price" and, together with the BFC
-----------------
Purchase Price, the "Purchase Price"); and
--------------
(iii) the assumption by Buyer of the Assumed Liabilities.
Buyer, BFC and BFC Investments agree to allocate the Purchase Price in
accordance with the rules under Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the Treasury Regulations promulgated
----
thereunder and to cooperate in good faith with each other to allocate the
Purchase Price among the Assets to the extent necessary to comply with all
other applicable laws, including, without limitation, the transfer tax laws
applicable to the transfer of any of the BFC Real Properties. BFC and
Buyer agree to act in accordance with such allocations (including any
modifications thereto reflecting any post-closing adjustments) in any
relevant Tax returns or filings, including any forms or reports required to
be filed pursuant to Section 1060 of the Code, the Treasury Regulations
promulgated thereunder or any provisions of local, state and foreign law
("1060 Forms"), and to cooperate in the preparation of any 1060 Forms and
------------
to file such 1060 Forms in the manner required by applicable law. Buyer
and BFC Investments recognize that the Purchase Price does not include
Buyer's acquisition expenses and that Buyer will allocate such expenses
appropriately.
(b) Payment of Purchase Price. The BFC Purchase Price shall be
-------------------------
payable in immediately available federal funds to such bank accounts, in the
United States, as shall be designated by BFC not less than two business days
prior to Closing, and the IP Purchase
<PAGE>
17
Price shall be payable in immediately available federal funds to such bank
accounts, in the United States, as shall be designated by BFC not less than two
business days prior to Closing.
2.2 Inventory Adjustments.
---------------------
(a) Calculation of the Inventory Adjustments. The BFC Purchase Price
----------------------------------------
shall be increased or decreased, on a dollar-for-dollar basis, by the amount by
which the Closing inventory as defined in Schedule 2.2(a) (the "Closing
--------------- -------
Inventory") of the Business is finally determined, accepted, deemed accepted or
- - - - ---------
agreed pursuant to Section 2.2(d) below to be greater or less than $25,000,000
(the "Target Inventory").
----------------
(b) Closing Estimate. At least three business days prior to Closing,
----------------
BFC shall deliver to Buyer its good faith estimate of the Closing Inventory (the
"Closing Estimate"). Such estimate shall be based on the books and records of
----------------
the Business and the valuation principles set forth in Section 2.2(c) to be used
to prepare the Closing Statement (as defined in Section 2.2(c)). If the Closing
Estimate is greater than the Target Inventory, then Buyer shall pay to BFC the
amount of such excess at the Closing in the manner described in Section 2.1(b).
If the Closing Estimate is less than the Target Inventory, then the BFC Purchase
Price payable by Buyer at the Closing shall be reduced by the amount of such
deficiency.
(c) Closing Inventory. Within sixty (60) days after the Closing,
-----------------
Buyer will prepare and deliver to BFC a calculation of the Closing Inventory of
the Business dated as of the Closing Date (the "Closing Statement"). The
-----------------
Closing Statement shall be prepared by Buyer in accordance with Schedule 2.2(a)
---------------
and otherwise in accordance with generally accepted accounting principles
applied on a basis consistent with the 1997 Audited Financial Statements (as
defined in Section 3.4(b)). Notwithstanding anything to the contrary contained
<PAGE>
18
herein, the Closing Inventory shall not include (i) any finished goods inventory
with an expiration date during the 90 day period commencing on the Closing Date
(or, in the case of mincemeat or egg nog, with an expiration date prior to
January 1, 1999) or (ii) any finished goods inventory, work in process, raw
materials, packaging, packaging materials or shipping containers in excess of
amounts reasonably expected to be sold or used in production during the 12 month
period commencing on the Closing Date.
(d) Closing Calculation. BFC shall be entitled to full access to the
-------------------
relevant records and working papers prepared by or for Buyer to aid in its
review of the calculation of Closing Inventory set forth on the Closing
Statement. If BFC believes that the Closing Inventory calculation (hereinafter
the "Closing Calculation") has not been properly calculated in accordance with
-------------------
the calculation methodologies set forth in this Section 2.2, it shall, within
thirty (30) days after receipt of the Closing Calculation, give written notice
(the "Objection") to Buyer, setting forth the basis of its belief in reasonable
---------
detail and to the extent practicable the adjustments to the Closing Calculation
which BFC believes should be made. Failure to so notify Buyer shall constitute
acceptance and approval of the Closing Calculation. If Buyer agrees that any
change proposed by BFC is appropriate, the change shall be made to the Closing
Calculation. If any proposed change is disputed by Buyer, then BFC and Buyer
shall negotiate in good faith to resolve such dispute as expeditiously as
possible. If, after a period of thirty (30) days following the date on which BFC
delivers the Objection, there remains any dispute as to the Closing Calculation,
then, the New York City office of Ernst & Young or another major accounting firm
jointly selected by BFC and Buyer and with no ties to either Buyer or BFC (the
"Neutral Accounting Firm"), shall be engaged to resolve any remaining disputes.
-----------------------
The Neutral Accounting Firm shall act as an arbitrator to determine only those
<PAGE>
19
issues still in dispute. The Neutral Accounting Firm's determination, based upon
the calculation methodologies set forth in this Section 2.2, shall be made
within thirty (30) days following the date on which the dispute is submitted,
shall be set forth in a written statement delivered to BFC and Buyer, and shall
be final, binding and conclusive. The fees and any expenses of the Neutral
Accounting Firm shall be shared equally by BFC and Buyer.
(e) Payment of BFC Purchase Price Adjustment. If the Closing
----------------------------------------
Inventory is greater than the Closing Estimate, then Buyer shall pay to BFC the
amount of such excess. If the Closing Inventory is less than the Closing
Estimate, then BFC shall pay to Buyer the amount of such deficiency. Any such
payment shall be made by wire transfer to an account designated by BFC or Buyer,
as the case may be, in United States Dollars, in immediately available federal
funds within three (3) business days after (i) the Closing Calculation has been
accepted or deemed accepted by BFC pursuant to Section 2.2(d) or (ii) any
proposed changes have been agreed upon by BFC and Buyer pursuant to Section
2.2(d) or (iii) following delivery to BFC and Buyer of the determination by the
Neutral Accounting Firm as described in Section 2.2(d) together with interest
from the Closing Date to the date of payment at the "base rate" of Citibank,
N.A. or any successor thereto in New York, New York on the Closing Date, based
on a 360-day year.
2.3 Proration of Payroll and Real and Personal Property Taxes. Payroll
---------------------------------------------------------
related taxes (including unemployment and FICA taxes) and real and personal
property Taxes and assessments on the Assets for any taxable period commencing
prior to the Closing Date and ending after the Closing Date shall be prorated on
a per diem basis between Buyer, on the one hand, and BFC and BFC Investments, on
the other hand, as of the Closing Date. All such prorations shall be allocated
so that items relating to time periods ending prior to the
<PAGE>
20
Closing Date shall be allocated to BFC and BFC Investments, and items relating
to time periods beginning on or after the Closing Date shall be allocated to
Buyer, provided, however, that the parties shall allocate any real property Tax
in accordance with Section 164(d) of the Code. The amount of all such
prorations shall be settled and paid on the Closing Date, provided that final
payments with respect to prorations that are not able to be calculated as of the
Closing Date shall be calculated and paid as soon as practicable thereafter. If
any of the tax rates for payroll-related taxes or real or personal property
taxes for the current taxable period are not established by the Closing Date,
the prorations shall be made on the basis of the rate in effect for the
preceding taxable period, and such proration shall be adjusted upon presentation
of written evidence by BFC or Buyer, as the case may be, that the actual taxes
paid differ from the amount assumed on the Closing Date.
3 REPRESENTATIONS AND WARRANTIES OF BFC
-------------------------------------
BFC represents and warrants to Buyer that:
3.1 Corporate Existence.
-------------------
BFC is a corporation duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and BFC
Investments is a limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and each of
BFC and BFC Investments has the requisite power and authority to own, lease and
operate the properties and assets used in the Business being sold hereunder and
to carry on the Business as the same is now being conducted. BFC and BFC
Investments are each duly authorized, qualified or licensed to do business as a
foreign corporation or a limited partnership and are each in good standing in
every jurisdiction wherein, by reason of the nature of the Business or the
character of the Assets, the failure to be so qualified would
<PAGE>
21
have an effect on or result in a change in the Business, that individually or in
the aggregate, is materially adverse to the assets (other than Excluded Assets),
results of operations, condition (financial or otherwise) or business of the
Business taken as a whole or on the ability of BFC and BFC Investments to
consummate the transactions contemplated hereby (a "Material Adverse Effect").
-----------------------
BFC is the sole general partner of BFC Investments. BFC Investments, T.M.I.
Associates, L.P., Borden, BDH and The Borden Company, Limited are each
affiliates of BFC.
3.2 Corporate Authority.
-------------------
This Agreement and the other agreements delivered by BFC and BFC
Investments hereunder (collectively, the "Transaction Documents"), and the
---------------------
consummation of all of the transactions provided for herein and therein have
been duly authorized by the Board of Directors of BFC and, where appropriate, by
BFC Investments, and by all requisite corporate, shareholder, partnership or
other action, and each of BFC and, where applicable, BFC Investments has full
power and authority to execute and deliver the Transaction Documents and to
perform its obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by BFC and, where applicable, BFC Investments and
constitutes a valid and legally binding obligation of BFC and, where applicable,
BFC Investments enforceable in accordance with its terms except as
enforceability may be (i) limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditor's rights, or (ii) subject to general
principles of equity. The execution and delivery of the Transaction Documents
by BFC and, where applicable, BFC Investments and the consummation by BFC and,
where applicable, BFC Investments of the transactions contemplated hereby and
thereby will not (x) violate or conflict with any provision of the Certificate
of Incorporation or
<PAGE>
22
By-Laws of BFC nor the partnership agreement or certificate of limited
partnership of BFC Investments or (y) result in any breach or constitute any
default under any contract, indenture, mortgage, lease, note or other agreement
or instrument to which BFC or BFC Investments is subject or is a party, except,
in the case of clause (y), for any such breach or default which would not have a
Material Adverse Effect.
3.3 Governmental Approvals; Consents.
--------------------------------
BFC and BFC Investments are not subject to any order, judgment or decree
which would prevent the consummation of the transactions contemplated hereby.
No claim, legal action, suit, arbitration, governmental investigation, action,
or other legal or administrative proceeding is pending or, to the knowledge of
BFC, threatened against BFC or BFC Investments which would be reasonably likely
to enjoin or delay the transactions contemplated hereby. Except as set forth in
Schedule 3.3 hereto, no consent, approval, order or authorization of, license or
- - - - ------------
permit from, notice to or registration, declaration or filing with, any
governmental authority or entity, domestic or foreign, or of any third party, is
or has been required on the part of BFC or BFC Investments in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby except for such consents, approvals, orders or
authorizations of, licenses or permits, filings or notices the failure of which
to obtain or make would not have a Material Adverse Effect.
3.4 Financial Statements. (a) Schedule 3.4 contains a copy of (i) the
-------------------- ------------
audited combined balance sheet of the Business as of December 31, 1996 and the
audited combined statements of operations and cash flows relating to the
Business for the twelve months ended December 31, 1996 and December 31, 1995,
including any related notes, together with the report thereon of Deloitte &
Touche L.L.P., the independent public accountants of the
<PAGE>
23
Business (collectively, "Annual Audited Financial Statements"), and (ii) the
-----------------------------------
audited combined balance sheet of the Business as of September 27, 1997 and the
related audited combined statements of income and cash flows relating to the
Business, including any related notes, for the nine months ended September 27,
1997, together with the report thereon of such independent public accountants
(the "1997 Audited Financial Statements" and, together with the Annual Audited
---------------------------------
Financial Statements, the "Financial Statements"). The Financial Statements
--------------------
have been prepared from the books and records relating to the Business. Each of
the balance sheets included in the Financial Statements, in all material
respects, fairly presents the combined financial position of the Business as of
its date, and the other related statements included in the Financial Statements,
in all material respects, fairly present the combined financial position of the
Business for the periods presented therein, subject to normal year-end
adjustments in the case of the 1997 Audited Financial Statement which will not
be material in amount, and in each case in accordance with generally accepted
accounting principles, applied on a consistent basis during the periods
involved, except as otherwise noted therein.
(b) All of the Financial Statements are qualified by the fact that the
Business has not operated as a separate "stand-alone" entity within BFC. As a
result, the Business received certain allocated charges and credits as discussed
more fully in the notes accompanying the Financial Statements. Such charges and
credits, while believed by BFC to be reasonable, do not necessarily reflect the
amounts which would have resulted from arms-length transactions.
3.5 Absence of Changes.
------------------
Except as otherwise disclosed in the Schedules hereto or as contemplated by
this Agreement, since September 30, 1997, (i) the Business has been conducted in
all material respects in the ordinary course consistent with past practice and
(ii) there has not been any
<PAGE>
24
change in the Business or its financial condition, other than seasonal changes,
changes relating to the economy in general or changes relating to the industry
in which the Business operates in general, which has had a Material Adverse
Effect. Since September 30, 1997, except as otherwise disclosed in the Schedule
--------
3.5 or the other Schedules hereto or as contemplated by this Agreement, BFC has
- - - - ---
not:
(a) failed to pay any creditor any amount owed to such creditor when
due (after the expiration of applicable grace periods) arising from the
operation of the Business, other than in the ordinary course of business
consistent with past practice or amounts being contested in good faith and
for which adequate reserves have been provided;
(b) failed to discharge or satisfy any lien on any of the Assets
other than Permitted Liens;
(c) mortgaged, pledged or subjected to any lien, any of the Assets,
except for Permitted Liens;
(d) sold or otherwise transferred any of the assets of the Business
material to the Business or cancelled any debts or claims material to the
Business or waived any rights material to the Business, except, in each
case described in this clause (d), in the ordinary course of business
consistent with past practice;
(e) disposed of any patents, trademarks or copyrights or any patent,
trademark, or copyright applications used principally in the operations of
the Business;
(f) defaulted on any material obligation relating to the operations
of the Business;
<PAGE>
25
(g) written down the value of any inventory specifically relating to
the Business except in the ordinary course of business consistent with past
practice;
(h) granted any allowances or sold inventory significantly in excess
of reasonably anticipated consumption for the near term (commonly referred
to as "trade loading") other than in the ordinary course of business;
(i) granted any increase in the compensation or benefits of Eligible
Employees (as defined in Section 5.7(a)), other than increases in
accordance with past practice and not exceeding 5% of annual compensation,
as a result of collective bargaining or as required by any Benefit Plan, or
entered into any employment or severance agreement or arrangement with any
of them; or
(j) entered into any agreement or made any commitment to do any of
the foregoing.
3.6 Real and Personal Properties.
----------------------------
(a) Schedule 3.6(a)(i)(1) lists the real property owned in fee by BFC
---------------------
related to the Business (each, a "BFC Owned Real Property", and collectively,
-----------------------
the "BFC Owned Real Properties"). BFC owns good and marketable, fee simple
-------------------------
title to the BFC Owned Real Properties and owns all of the improvements located
thereon free and clear of all liens, charges and other encumbrances, except (i)
as set forth on Schedule 3.6(a)(ii); (ii) as disclosed in the Financial
-------------------
Statements; (iii) liens for taxes, assessments and other governmental charges
not yet due and payable or, if due, (A) not delinquent or (B) being contested in
good faith by appropriate proceedings during which collection or enforcement
against the property is stayed and for which adequate reserves have been
provided for in the Financial Statements; (iv) with respect to real property,
(A) easements, licenses, covenants, rights-of-way and other
<PAGE>
26
similar restrictions, including, without limitation, any other agreements or
restrictions which would be shown by a current title report, (B) any conditions
that may be shown by a current survey, title report or physical inspection and
(C) zoning, building and other similar restrictions, provided that same are not
materially violated by the existing improvements, so long as none of (A), (B) or
(C) restrict the use of such real property substantially as currently used; and
(v) other liens, charges or other encumbrances that do not, individually or in
the aggregate, interfere materially with the use, operation or enjoyment of any
of the Assets as presently being used (such liens, charges and encumbrances
described in clauses (i)-(v) hereof are referred to herein as "Permitted
---------
Liens"), provided, however, that none of the foregoing materially interfere with
- - - - ----- -------- -------
access to or use of such real property as the same is presently being used or
occupied. The BFC Owned Real Properties constitute all of the real property
owned by BFC and primarily used in the Business. Except as set forth on
Schedule 3.6(a)(ii), none of the BFC Owned Real Properties is subject to any
- - - - -------------------
right or option of any other person to purchase or lease or otherwise obtain
title to, or an interest in, such BFC Owned Real Properties. No person other
than BFC has any right to use, occupy or lease any of the BFC Owned Real
Properties.
(b) Schedule 3.6(a)(i)(2) lists all of the leases, subleases, and
---------------------
occupancy agreements, as well as the consent required, if any, in order to
assign the lease or sublet the subject premises, of real properties leased,
subleased or occupied by BFC relating principally to the Business (whether
entered into as lessor, lessee, sublessor or sublessee) together with any
modifications, amendments, extensions and renewals of the same (collectively,
the "BFC Leases"; the real property leased by BFC pursuant to a BFC Lease, the
----------
"BFC Leased Real Properties"; the BFC Owned Real Properties and the BFC Leased
--------------------------
Real Properties,
<PAGE>
27
collectively, the "BFC Real Properties"). True and complete copies of the BFC
-------------------
Leases have been made available by BFC to Buyer. BFC has a valid leasehold
interest in the BFC Leased Properties and each of the BFC Leases is valid and
binding and in full force and effect and has not been modified or amended except
as indicated in the lease documents made available to Buyer. Except as set
forth on Schedule 3.6(a)(ii), neither BFC nor, to BFC's best knowledge, any
-------------------
other party, is in default under any of the BFC Leases and no event exists
which, with the giving of notice or lapse of time or both, would become a
default on the part of any party under any BFC Lease. No person other than BFC
has any right to use, occupy or lease any of the BFC Leased Real Properties.
(c) Except as disclosed on Schedule 3.6(a)(ii), the leasehold interests
-------------------
relating to the BFC Leases are free and clear of all mortgages, deeds of trust,
liens, pledges, leases, subleases, licenses, occupancy agreements and any
charges or security interests in or on the BFC Real Properties and any interest
of a vendor or a lessor under any conditional sale agreement, capital lease or
title retention agreement relating to the BFC Real Properties, other than the
Permitted Liens.
(d) No eminent domain, condemnation, incorporation, annexation or
moratorium or similar proceeding has been commenced or, to BFC's knowledge,
threatened by an authority having the power of eminent domain to condemn any
part of the BFC Real Properties or any improvements thereon.
(e) There is no violation of a condition or agreement contained in any
easement, restrictive covenant or any similar instrument or agreement affecting
any of the BFC Owned Real Properties. None of the BFC Owned Real Properties is
located in any conservation or historic district, or is historically certified,
subject to historic preservation rules, regulations,
<PAGE>
28
requirements or designated as a landmark. No application or proceeding for any
such certification or designation is pending or, to BFC's knowledge, is
threatened. Except as set forth on Schedule 3.6(e), none of the building
---------------
improvements on the BFC Owned Real Properties are located in an area that has
been identified as having special flood hazards. Each of the BFC Real
Properties, is designated as a separate tax lot.
(f) To BFC's knowledge, there are no proposed reassessments of any of the
BFC Real Properties by any taxing authority and there are no threatened or
pending special assessments or other actions or proceedings that could give rise
to an increase in real property taxes or assessments against any of the BFC Real
Properties, provided, however, that this representation shall not be applicable
to any reassessment resulting from the Purchase.
(g) Each of the BFC Real Properties is an independent unit which does not
now rely on any facilities located on any property which is not part of the BFC
Real Properties.
(h) The improvements at the BFC Real Properties are in materially good
condition and repair, ordinary wear and tear excepted, and have not suffered any
casualty or other material damage which has not been repaired in all material
respects. To the knowledge of BFC, there is no material structural, mechanical
or other significant defect or deficiency in the improvements located on any of
the BFC Owned Real Properties.
(i) Immediately following consummation of the Purchase, BFC will not own
or lease any real property contiguous or adjacent to any of the BFC Real
Properties.
(j) BFC has not received any notice of any material violation of any
applicable building, zoning, land use or other similar statutes, laws,
ordinances, regulations, permits or other requirements, including, without
limitation, the Americans With Disabilities Act, with respect to the BFC Real
Properties, and no such violations exist. Except as set forth on
<PAGE>
29
Schedule 3.6(j), BFC has no knowledge and has not received any notice of any
- - - - ---------------
pending or contemplated rezoning proceeding affecting any of the BFC Owned Real
Properties.
(k) BFC has not received any notice from the utility company or
municipality of any fact or condition which could result in the discontinuation
of presently available or otherwise necessary sewer, water, electric, gas,
telephone or other utilities or services for any of the Owned BFC Real
Properties.
(l) BFC has paid or will pay prior to Closing all brokerage and finders
fees and commissions due from BFC with respect to any of the BFC Real
Properties.
(m) BFC is not a "foreign person" within the meaning of Section 1445(f) of
the Code.
3.7 Contracts.
---------
(a) Except as otherwise disclosed in Schedule 3.7, as of the date of
------------
this Agreement there are no outstanding commitments, contracts, indentures and
agreements, written or oral, to which BFC or BFC Investments is a party to or by
which BFC or BFC Investments is bound that relate principally to the Business
including, without limitation, personal property leases, purchase orders for
inventory, service or maintenance agreements, broker agreements, sales
representative agreements and license agreements (hereinafter "Contracts") that
---------
(i) involve commitments by BFC or BFC Investments for terms of twelve (12)
months or longer and involve payment of more than $50,000; (ii) involve payment
of more than $100,000; (iii) have been entered into with salesmen, commissioned
agents, or other sales representatives, or with distributors, dealers or
customers and involve payment of more than $50,000 (other than purchase orders
in the ordinary course); (iv) involve employment or consulting agreements; (v)
involve contracts relating to any indebtedness (as defined under generally
accepted accounting principles) or the mortgaging, pledging or
<PAGE>
30
otherwise placing a lien on any Asset (other than Permitted Liens or liens on
equipment in connection with equipment leases); (vi) involve contracts with any
affiliate of BFC or BFC Investments involving payments of more than $50,000; or
(vii) involve contracts that would prohibit the Buyer from freely engaging in
the Business anywhere in the United States and Canada, or, to the knowledge of
BFC, any other country, and in each case described in clauses (i) through (vii),
are not terminable by their terms, without penalty, on thirty (30) days or less
notice. Contracts disclosed in Schedule 3.7 are hereafter referred to as the
------------
"Disclosed Contracts".
-------------------
(b) BFC has furnished or made available to Buyer a true and correct
copy of each Disclosed Contract, other than the Disclosed Contracts set forth on
Schedule 3.7(b). Each Contract which is to be assigned to Buyer pursuant to
- - - - ---------------
this Agreement is valid and in full force and effect according to its terms, and
BFC is not, and to BFC's knowledge, no other party thereto is in material
default or breach under any such Contract and there are no claims affecting the
same of any kind pending as of which BFC has notice except where such failure to
be valid or in full force or effect or such breach or claim would not have a
Material Adverse Effect; and
(c) Except as listed in Schedule 3.7, all Disclosed Contracts to be
------------
assigned to Buyer in accordance with this Agreement are assignable without the
requirement of consent from any other party thereto except for those Disclosed
Contracts the failure to be assignable would not have a Material Adverse Effect.
3.8 Litigation, Agencies.
--------------------
Except as set forth in Schedule 3.8, there are no claims, actions, suits,
------------
proceedings (whether adjudicatory, rulemaking, licensing, or otherwise) or
investigations pending or, to the
<PAGE>
31
knowledge of BFC, threatened in law or in equity, or before any governmental
agency which, if determined or resolved adversely or in accordance with the
plaintiff's demands would reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.8, BFC and BFC Investments are not in
------------
default under any judgment, order, injunction or decree of any court or
government agency relating to the Business or the Assets.
3.9 Intangible Property Rights.
--------------------------
(a) Schedule 3.9(a)(i) lists all material unexpired domestic and
------------------
foreign patents and patent applications, as well as all material reissues,
divisionals, continuations and continuation-in-part applications and any patents
issuing thereon and all renewals and extensions thereof, and all material
license agreements and other agreements which relate to inventions and
discoveries and any patent applications and patents thereon, as well as
improvements therein used principally in connection with the Business (the
"Patent Rights"). Except as set forth in Schedule 3.9(a)(ii) and except as
------------- -------------------
would not have a Material Adverse Effect, (i) BFC and its affiliates own, are
licensed or have the right to use the Patent Rights and the Technology (as
defined below) (x) in the United States and Canada and (y) to the knowledge of
BFC, outside the United States and Canada, in each case (but only to the
knowledge of BFC in cases described in clause (y)) free and clear of all liens,
encumbrances, equities and other restrictions; (ii) there are no pending claims
challenging the validity or ownership of the Patent Rights or Technology owned
by BFC and its affiliates or the right of BFC and its affiliates to use or
transfer the Patent Rights or Technology in the United States or Canada or, to
the knowledge of BFC, outside the United States and Canada; (iii) the issued
U.S. and Canadian patents under the Patent Rights owned by BFC and its
affiliates are valid and subsisting and, to BFC's knowledge, any patents issued
outside the United States and
<PAGE>
32
Canada under the Patent Rights owned by BFC and its affiliates are valid and
subsisting, and to BFC's knowledge, none of the claims of the foregoing patents
is now being infringed by others; (iv) there are no licenses or sublicense
agreements now in effect regarding the use by BFC and its affiliates of the
Patent Rights or Technology in the United States and Canada, or to the knowledge
of BFC, outside of the United States and Canada; and (v) to BFC's knowledge, (x)
BFC and its affiliates are not infringing any U.S. or foreign patent owned by
third parties in the current operation of the Business and (y) no claim is now
pending or is threatened to such effect. No ingredient, including, without
limitation, any ingredient used in the recipes relating to the Business, is
owned or procurable solely through BFC or any of its controlled affiliates. As
used in this Agreement, the term "Technology" shall mean the patterns, plans,
----------
designs, research data, trade secrets and other proprietary know-how, formulae
and manufacturing procedures and processes, new material and product
specifications, recipes (both for manufacturing as well as for home or end-user
use of products), flavors, ingredients, operating manuals, drawings, technology,
manuals, data, business information and files and records, procedures, research
and development records, computer programs, software and databases (including
source code, object code, development documentation, programming tools,
drawings, specifications and data) and all licenses or other rights to use any
such technical information and know-how of others developed, relating to or used
principally in connection with the Business.
(b) Schedule 3.9(b)(i) lists (i) all material trademarks and service
------------------
marks and all registrations and applications pertaining thereto (including all
documents or files pertaining thereto) and trade names; (ii) any and all
material licenses or other rights to use trademarks or service marks owned by
others and (iii) any material trade dress associated therewith, in each
<PAGE>
33
case used principally in connection with the Business (the "Trademark Rights").
----------------
Except as set forth in Schedule 3.9(b)(ii) and except as would not have a
-------------------
Material Adverse Effect, (i) BFC and its affiliates own, are licensed or have
the full right to use and transfer the United States federal and Canadian
Trademark Rights and trade dress, and, to the knowledge of BFC, the state
Trademark Rights and the Trademark Rights in countries other than the United
States and Canada; (ii) (x) except with respect to those items noted with two
asterisks on Schedule 3.9(b)(i), all registered United States federal and
------------------
Canadian Trademark Rights and trade dress owned by BFC and its affiliates are
valid and subsisting, (y) to the knowledge of BFC, registered state Trademark
Rights and trade dress owned by BFC and its affiliates are valid and subsisting
and (z) to the knowledge of BFC, any registered Trademark Rights and trade dress
owned by BFC and its affiliates outside the United States and Canada are valid
and subsisting, in each case (but only to the knowledge of BFC in cases
described in clauses (y) and (z)), free and clear of any encumbrances or rights
of third parties which would restrict Buyer's exclusive right to use or transfer
the registered Trademark Rights and trade dress; (iii) to BFC's knowledge, none
of the Trademark Rights infringe the trademark rights of third parties; and (iv)
no claim by third parties with regard to the use in the United States or Canada
(or to BFC's knowledge, in any other country) of any of the Trademark Rights and
trade dress owned by BFC and its affiliates is pending or, to BFC's knowledge,
has been made or is threatened, and, to BFC's knowledge, none of the Trademark
Rights is being infringed by others. BFC represents that, as soon as is
practicable after the date hereof, but in no event later than 90 days after the
date hereof, it will refrain from using and will seek to cancel all trademark
registrations in its name or in the name of its affiliates that combine, in
<PAGE>
34
whole or in any material portion, trademarks described on Schedule
--------
1.2(a)(iii)(B) or Schedule 3.9(b)(i) with the Licensed Trademarks (as defined in
- - - - -------------- ------------------
the Borden License Agreement).
(c) Schedule 3.9(c)(i) lists all material copyrights and copyright
------------------
registrations and copyright applications (pertaining thereto) and all material
licenses or other rights to use the copyrights of others, in each case used
principally in connection with the Business (the "Copyright Rights"). Except as
----------------
disclosed in Schedule 3.9(c)(ii) and except for those claims that would not have
-------------------
a Material Adverse Effect, (i) BFC and its affiliates own, are licensed or have
the full right to use and transfer the United States and Canadian Copyright
Rights and, to the knowledge of BFC, the Copyright Rights in countries outside
the United States and Canada; (ii) (x) all registered United States and Canadian
Copyright Rights owned by BFC and its affiliates are valid and subsisting and
(y) to the knowledge of BFC, any registered Copyright Rights owned by BFC and
its affiliates outside the United States and Canada are valid and subsisting, in
each case (but only to the knowledge of BFC in cases described in clause (y)),
free and clear of any encumbrances or rights of third parties which would
restrict Buyer's exclusive right to use or transfer the registered Copyright
Rights; (iii) to BFC's knowledge, none of the Copyright Rights infringe the
copyright rights of third parties; and (iv) no claim by third parties with
regard to the use in the United States or Canada (or to BFC's knowledge, in any
other country) of any of the Copyright Rights owned by BFC and its affiliates is
pending or, to BFC's knowledge, has been made or is threatened and, to BFC's
knowledge, none of such Copyright Rights is being infringed by others.
(d) To the best of BFC's knowledge, Schedule 3.9(d) lists all
---------------
material domain names and registrations or applications for registration thereof
used by BFC and its affiliates principally in connection with the Business (the
"Internet Rights"). Except as
---------------
<PAGE>
35
disclosed in Schedule 3.9(d), to the knowledge of BFC, (i) BFC and its
---------------
affiliates own, are licensed or have the full right to use and transfer the
Internet Rights; (ii) all such Internet Rights are valid and subsisting, free
and clear of any encumbrances or rights of third parties which would restrict
Buyer's exclusive right to use or transfer such Internet Rights; (iii) none of
the Internet Rights infringe the Internet rights of third parties and (iv) no
claim by third parties with regard to the use of any of such Internet Rights is
pending or has been made or threatened, no valid basis exists for any such claim
and none of such Internet Rights is being infringed by others.
3.10 Insurance.
---------
Schedule 3.10 lists the aggregate coverage amounts and type and generally
-------------
applicable deductibles of all policies of title, liability, fire, casualty
business interruption, workers' compensation and other forms of insurance
insuring the Business and the Assets (excluding self-insurance). BFC has
furnished a true, complete and accurate copy of all such policies to Buyer. All
such policies are in full force and effect. BFC is not in material default
under any provisions of any such policy of insurance nor has received notice of
cancellation of any such insurance. No material claim is pending as of the date
of this Agreement under any such policies as to which BFC has been advised or
been given notice that coverage has been denied or disputed by the underwriter
of such policy.
3.11 Tax Matters.
-----------
(a) BFC and BFC Investments have withheld from employee salaries,
wages and other compensation of Eligible Employees all material Taxes related to
the Business and required to be so withheld, for all periods for which the
statutory period of limitations for the assessment of Tax has not yet expired.
<PAGE>
36
(b) None of the Assets is subject to any liens for Taxes (other than
Permitted Liens).
(c) None of the Assets is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(d) For purposes of this Agreement, "Taxes" shall mean any federal,
-----
state, provincial, local, territorial and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, real estate, excise,
value added, estimated, stamp, alternative or add-on minimum, environmental,
withholding and any other taxes, duties or assessments, together with all
interest, penalties and additions imposed with respect to such amounts.
3.12 Employment and Benefits.
-----------------------
(a) Labor Controversies. Except as described on Schedule 3.12(a) and
------------------- ----------------
except as would not have a Material Adverse Effect, in respect of the Business,
(i) BFC is in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, (ii) there is no unfair labor practice charge or
complaint against BFC pending or, to BFC's knowledge, threatened before the
National Labor Relations Board ("NLRB"), (iii) there is no labor strike,
----
dispute, slowdown, lockout or stoppage actually pending or, to the knowledge of
BFC, threatened against or affecting BFC, (iv) within the past 5 years, BFC has
not experienced any strike, work stoppage or other labor difficulty, (v) to the
knowledge of BFC, there is no representation claim or petition pending before
the NLRB or any similar foreign agency and no question concerning representation
exists relating to the Eligible Employees, (vi) to the knowledge of BFC, there
are no charges with respect to or relating to the Business pending before the
Equal Employment Opportunity Commission or any state, local or foreign agency
<PAGE>
37
responsible for the prevention of unlawful employment practices, nor have there
been any findings of such violations within the past three years, (vii) BFC has
not received any notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of BFC with respect to the Business and no such
investigation is in progress and (viii) BFC is not a party to, or subject to, a
collective bargaining agreement relating to the Eligible Employees, and no
collective bargaining agreement relating to the Eligible Employees is currently
being negotiated. BFC has furnished to Buyer complete and correct copies of all
collective bargaining agreements and ancillary memoranda of understanding
relating to the Eligible Employees.
(b) Employee Benefit Plans. (i) For purposes of this Agreement,
----------------------
"Benefit Plans" shall mean all "employee benefit plans" (within the meaning of
-------------
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, "multiemployer plans" within the
-----
meaning of Sections 3(37) and 4001(a)(3) of ERISA), retirement savings, stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA, (A) under which any employee or
former employee of the Business has any present or future right to benefits and
(B) under which BFC or any of its affiliates has any present or future
liability. Schedule 3.12(b)(i) sets forth a list of each material Benefit Plan.
-------------------
(ii) Except with respect to Benefit Plans for which Buyer is not
assuming any obligations or liabilities thereunder, true, correct and complete
copies of the following documents, with respect to each material Benefit Plan
(but only if applicable), have
<PAGE>
38
been made available to Buyer: (A) the plan and its related trust document,
including any amendments thereto, (B) the most recent annual report filed on
Form 5500 filed with the Internal Revenue Service, (C) summary plan description,
and (D) the most recent actuarial report.
(iii) Except with respect to Benefit Plans for which Buyer is not
assuming any obligations or liabilities thereunder and except where a failure to
do so would not have a Material Adverse Effect, each material Benefit Plan has
been established and administered in accordance with its terms and in compliance
with the applicable provisions of ERISA, the Code and other applicable laws.
(c) Employees. With respect to each of the Eligible Employees set
---------
forth on Schedule 5.7(a)(ii), Schedule 3.12(c) lists each such Eligible Employee
------------------- ----------------
earning more than $75,000 annually in cash compensation as of September 30,
1997, including each such employee's name, total period of employment and
current position or job classification. No Eligible Employee is entitled to a
bonus from BFC as a result of the consummation of the Purchase, except that
certain Eligible Employees hold equity interests or equity equivalents in BFC
and affiliated entities which may be repurchased or cashed-out in connection
with or following the Purchase.
3.13 Compliance with Laws.
--------------------
Except as disclosed on Schedule 3.13 and except for those failures to have,
-------------
to be in full force in effect, to file, retain and maintain and to comply, in
each case, that would not have a Material Adverse Effect, (i) with respect to
the Business, BFC and BFC Investments have all licenses, permits or franchises
issued by any United States or foreign, federal, state, provincial, municipal or
local authority or regulatory body and other governmental
<PAGE>
39
certificates, authorizations and approvals (collectively "Licenses and Permits")
--------------------
required by every United States or foreign, federal, state, provincial,
municipal and local governmental or regulatory body for the operation of the
Business and the use of the Assets; (ii) with respect to the Business, all such
Licenses and Permits are in full force and effect and no action, claim or
proceeding is pending, nor to the knowledge of BFC is threatened, to suspend,
revoke, revise, limit, restrict or terminate any of the Licenses and Permits or
declare any of the Licenses and Permits invalid; (iii) with respect to the
Business, BFC and BFC Investments have filed all necessary reports and
maintained and retained all necessary records pertaining to such Licenses and
Permits; and (iv) with respect to the Business, BFC and BFC Investments have
otherwise complied with all of the laws, ordinances, regulations and orders
applicable to its existence, financial condition, operations, properties or
Business, and BFC has not received any notice to the contrary.
3.14 Finders; Brokers.
----------------
With the exception of fees and expenses payable to Credit Suisse First
Boston Corporation, which shall be BFC's sole responsibility, BFC is not a party
to any agreement with any finder or broker, or in any way obligated to any
finder or broker for any commissions, fees or expenses in connection with the
origin, negotiation, execution or performance of this Agreement.
3.15 Environmental Matters.
---------------------
Except as disclosed on Schedule 3.15:
-------------
(a) BFC is in compliance, and the Assets comply, and at all times
have complied with all Environmental Laws (as defined below) applicable to
the Business
<PAGE>
40
and the Assets, except for violations of Environmental Laws that would not
have a Material Adverse Effect;
(b) BFC holds, is in compliance, and at all times has complied with
all Licenses, Permits, decrees, orders or agreements required or issued
under Environmental Laws necessary for the ownership or operation of the
Business or the Assets, except for the absence of, or noncompliance with,
such Licenses, Permits, decrees, orders or agreements that would not have a
Material Adverse Effect;
(c) prior to the date of this Agreement, BFC has not been subject to,
nor received any written notice of the institution or pendency of, any
lawsuit, action, judicial or administrative proceeding, investigation,
order, judgment, settlement or claim by any person alleging any
Environmental Liability arising from or relating to the Business or the
Assets or any properties or assets formerly owned, operated or otherwise
controlled by BFC and used in the conduct of the Business, except for all
such cases that would not reasonably be expected to have a Material Adverse
Effect;
(d) To the best of BFC's knowledge, no Hazardous Substance has been
released, spilled, discharged, dumped, disposed of, or otherwise came to be
located in, at or beneath any of the Assets or any properties or assets
formerly owned, operated or otherwise controlled by BFC and used in the
conduct of the Business (i) in violation of any Environmental Law, or (ii)
in such manner as would reasonably be expected to cause an Environmental
Liability of BFC, except for all such cases described in this clause (d)
that would not have a Material Adverse Effect;
(e) No Environmental Lien (as defined below) has attached to any of
the Assets, except for those that do not have a Material Adverse Effect;
and
<PAGE>
41
(f) BFC, in the operation of the Business, has not disposed of,
arranged for the disposal of, treated, or arranged for the treatment of,
any Hazardous Substance at any location at which there exists a release or
threatened release of a Hazardous Substance which would reasonably be
expected to result in an Environmental Liability to BFC that would
reasonably be expected to have a Material Adverse Effect.
(g) As used herein:
"Environmental Laws" means any domestic, foreign, federal, state,
------------------
interstate or local statute, law, regulation, order, rule, ordinance,
injunction, judgment, decree, common law or other enforceable requirement
of any governmental entity relating to human health or safety (as relating
to the environment or Hazardous Substances) or the protection of the
environment as are in effect as of the date of this Agreement, including
any of the foregoing related to: (i) Remedial Actions; (ii) the reporting,
licensing, permitting, or investigating of the emission, discharge, release
or threatened release of Hazardous Substances into the air, surface water,
groundwater or land; (iii) the manufacture, release, distribution, use,
generation, treatment, storage, disposal, transport or handling, reporting,
disclosure or indemnification of Hazardous Substances; (iv) any cause of
action based on common law theories, including but not limited to nuisance,
trespass and strict liability; or (v) work place or worker safety and
health, provided, however, that the Occupational Safety and Health Act
-------- -------
shall not be deemed to be an Environmental Law.
"Environmental Liability" means any liability or obligation arising
-----------------------
under Environmental Laws in connection with the Assets or the Business.
<PAGE>
42
"Environmental Lien" means any lien in favor of any governmental
------------------
authority for any (i) liability under any Environmental Law, or (ii)
damages arising from, or costs incurred by, such governmental authority in
response to a release or threatened release of a Hazardous Substance into
the environment.
"Hazardous Substance" means (i) any substance or material regulated or
-------------------
identified under Environmental Laws, (ii) gasoline, diesel fuel or other
petroleum hydrocarbons or polychlorinated biphenyls or asbestos or (iii)
any pollutant, contaminant, hazardous substance, hazardous waste or toxic
substance.
"Remedial Action" means any response action, removal action, remedial
---------------
action, corrective action, notification, disclosure, monitoring program,
sampling program, investigation or other activity pertaining to any
Hazardous Substance, violation of Environmental Laws or compliance with
Environmental Laws.
3.16 Product Guaranty.
----------------
To the best of BFC's knowledge, except as disclosed in Schedule 3.16 and
-------------
except for adulterations, misbranding and violations of the Federal Food, Drug &
Cosmetic Act, as amended (the "FD&C Act"), that would not have a Material
--------
Adverse Effect, no shipment or other delivery of Products made or to be made by
BFC on or prior to the Closing Date was or as of the Closing Date will be, and
no food or food ingredients in inventory on the Closing Date will be as of the
Closing Date (i) adulterated or misbranded within the meaning of the FD&C Act;
(ii) an article which may not under the provisions of Sections 404 or 505 of the
FD&C Act be introduced into interstate commerce; or (iii) adulterated or
misbranded within the meaning of any pure food laws or ordinances of any state,
province or city to which such articles are shipped or to be shipped. All
finished goods inventories delivered to Buyer
<PAGE>
43
hereunder are products which, under the provisions of such laws, can be shipped
and/or sold in interprovincial or foreign commerce and which conform in all
respects to the requirements of such laws and the regulations issued pursuant
thereto except where noncompliance of such laws and regulations would not have a
Material Adverse Effect.
3.17 Machinery.
---------
Except as set forth in Schedule 3.17 and for Permitted Liens, BFC has good
-------------
title to the Machinery, free and clear of all title defects and objections and
liens. Except as set forth in Schedule 3.17, BFC holds good and transferable
-------------
leaseholds in all of the Machinery leased by it, in each case under valid and
enforceable leases. The Machinery is sufficient and adequate to carry on the
Business as presently conducted, and all items thereof are in good operating
condition and repair, ordinary wear and tear excepted.
3.18 Product Recalls.
---------------
Except as disclosed in Schedule 3.18, there has not been, since January 1,
-------------
1995 through the date of this Agreement, any product recall of any product
manufactured, shipped or sold by the Business and from and after the date of
this Agreement until the Closing Date there will not be any such recall that
will have a Material Adverse Effect.
3.19 Customers and Suppliers.
-----------------------
Set forth on Schedule 3.19 is a list of the eight largest U.S. customers of
-------------
the Business and the eight largest suppliers to the Business, in each case based
on dollar volumes during 1996. Except as set forth on Schedule 3.19, as of the
-------------
date of this Agreement none of such customers or suppliers has terminated, or to
the knowledge of BFC, has an intention to terminate, its relationship with the
Businesss.
<PAGE>
44
3.20 [Intentionally Omitted].
-----------------------
3.21 No Undisclosed Liabilities.
--------------------------
Except as disclosed on the Schedules to this Agreement and for liabilities
that would not have a Material Adverse Effect, BFC does not have any
indebtedness or liabilities (absolute or contingent, known or unknown) relating
to the Business, other than liabilities (a) reflected or reserved against or the
1997 Audited Financial Statements, (b) incurred since September 27, 1997 in the
ordinary course of business and not in violation of this Agreement, (c) relating
to executory obligations pursuant to leases or contracts listed on Schedules
---------
3.6(a)(i) or 3.7 or leases or contracts entered into in the ordinary course of
- - - - ----------------
business which are not required to be listed on such Schedules, or (d) relating
to obligations to employees pursuant to Benefit Plans listed on Schedule
--------
3.12(b)(i) or obligations to employees not required to be listed pursuant to
- - - - ----------
Section 3.12. Except as disclosed on Schedule 3.21 or as reflected on the 1997
-------------
Audited Financial Statements, BFC is not directly or indirectly liable upon or
with respect to (by discount, repurchase agreements or otherwise), or obliged in
any other way to provide funds in respect of, or to guarantee or assume, any
debt, obligation or dividend of any person in connection with the Business,
except endorsements in the ordinary course of business in connection with the
deposit, in banks or other financial institutions, of items for collection.
3.22 Entire Business.
---------------
Except for the Excluded Assets and except as set forth in Schedule 3.22,
-------------
the Assets together with the rights and services made available in the Services
Agreement (as defined in Section 5.16) and the Borden License Agreement (as
defined in Section 5.6(a)), constitute all
<PAGE>
45
the assets, properties and rights necessary to conduct the Business in all
material respects as currently conducted.
3.23 No Other Representations or Warranties.
--------------------------------------
Except for the representations and warranties contained in Sections 3.1
through 3.22, including, without limitation, in the Schedules attached hereto to
the extent such Schedules relate to such Sections, neither BFC, nor any other
person makes any other express or implied representation or warranty on behalf
of BFC, including, without limitation, as to the probable success or
profitability of the ownership, use or operation of the Business, and the Assets
by Buyer after the Closing.
3.24 Expiration of Representations and Warranties.
--------------------------------------------
Each of the representations and warranties of BFC set forth in Sections 3.1
through 3.22 shall be deemed repeated and remade by BFC at the Closing as if
made at such time and shall, notwithstanding any investigation on the part of
the Buyer, survive the Closing until October 31, 1999 (provided, however, that
the representations and warranties set forth in Section 3.15 shall survive the
Closing until the five year anniversary of the Closing Date) whereupon all
representations and warranties of BFC contained herein shall be terminated and
extinguished, and thereafter BFC shall have no liability whatsoever with respect
to any such representation or warranty.
4 REPRESENTATIONS OF BUYER
------------------------
Buyer represents and warrants that:
4.1 Corporate Existence.
-------------------
Buyer is a corporation duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite power and authority to
<PAGE>
46
own, lease and operate the properties and assets used in the Business being
purchased hereunder and to carry on the Business as the same is now being
conducted. Buyer is duly authorized, qualified or licensed to do business as a
foreign corporation and is in good standing in every jurisdiction wherein, by
reason of the nature of the Business or the character of the Assets, the failure
to be so qualified would have a material adverse effect on the ability of Buyer
to consummate the transactions contemplated hereby (a "Buyer Material Adverse
----------------------
Effect").
- - - - ------
4.2 Corporate Authority.
-------------------
This Agreement and the other agreements delivered by Buyer hereunder
(collectively, the "Buyer Transaction Documents") and the consummation of all of
---------------------------
the transactions provided for herein and therein have been duly authorized by
the Board of Directors of Buyer and by all requisite corporate, shareholder, or
other action, and Buyer has full power and authority to execute and deliver the
Buyer Transaction Documents and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Buyer, and
constitutes a valid and legally binding obligation of Buyer, enforceable in
accordance with its terms except as enforceability may be (i) limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditor's rights, or (ii) subject to general principles of equity. The
execution and delivery of the Buyer Transaction Documents by Buyer or the
consummation by Buyer of the transactions contemplated hereby and thereby will
not (x) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Buyer, or (y) result in any breach or constitute any
material default under any contract, indenture, mortgage, lease, note or other
agreement or instrument to which Buyer is subject or is a
<PAGE>
47
party, except, in the case of clause (y), for any such breach or default which
would not have a Buyer Material Adverse Effect.
4.3 Governmental Approvals; Consents.
--------------------------------
Buyer is not subject to any order, judgment or decree which would prevent
the consummation of the transactions contemplated hereby. No claim, legal
action, suit, arbitration, governmental investigation, action, or other legal or
administrative proceeding is pending or, to the knowledge of Buyer, threatened
against Buyer which would be reasonably likely to enjoin or delay the
transactions contemplated hereby. No consent, approval, order or authorization
of, license or permit from, notice to or registration, declaration or filing
with, any governmental authority or entity, domestic or foreign, or of any third
party, is or has been required on the part of Buyer in connection with the
execution and delivery of this Agreement or any of the transactional documents,
or the consummation of the transactions contemplated hereby and thereby except
for such consents, approvals, orders or authorizations of, licenses or permits,
filings or notices the failure of which to obtain or make would not have a Buyer
Material Adverse Effect.
4.4 Finders; Brokers.
----------------
Buyer is not a party to any agreement with any finder or broker, or in any
way obligated to any finder or broker for any commissions, fees or expenses, in
connection with the origin, negotiation, execution or performance of this
Agreement.
4.5 Financial Capacity.
------------------
Buyer has binding commitment letters relating to a senior secured credit
facility and "highly confident" letters relating to a Rule 144A senior
subordinated note offering (the "Financing Letters"), and a binding joint equity
-----------------
commitment letter from Warburg, Pincus
<PAGE>
48
Ventures, L.P. and GE Investment Private Placement Partners II, A Limited
Partnership relating to subscriptions for common and preferred stock of Buyer
(the "Equity Letter"), each of which is currently in effect and true and correct
-------------
copies of which are attached hereto as Exhibit A. The Financing Letters and the
Equity Letter together provide all funds necessary to enable Buyer to consummate
the transactions described in this Agreement and to fund all disbursements of
the Business on the Closing Date (the "Financing").
---------
4.6 No Other Representations or Warranties.
--------------------------------------
Except for the representations and warranties contained in Sections 4.1
through 4.5, including, without limitation, in the Schedules attached hereto to
the extent such Schedules relate to such Sections, neither Buyer nor any other
person makes any other express or implied representation or warranty on behalf
of Buyer.
4.7 Expiration of Representations and Warranties.
--------------------------------------------
Each of the representations and warranties of Buyer set forth in Sections
4.1 through 4.5 shall be deemed repeated and remade by Buyer at the Closing as
if made at such time and shall, notwithstanding any investigation on the part of
BFC, survive the Closing until October 31, 1999 whereupon all representations
and warranties of Buyer contained herein shall be terminated and extinguished,
and thereafter Buyer shall have no liability whatsoever with respect to any such
representation or warranty.
5 AGREEMENTS OF BUYER AND BFC
---------------------------
5.1 Operation of the Business.
-------------------------
(a) Except as otherwise contemplated by this Agreement or as disclosed
in Schedule 5.1, BFC covenants that until the Closing it will, and it will cause
------------
BFC Investments to, use all reasonable best efforts to continue, in a manner
consistent with the past practices of
<PAGE>
49
the Business: (i) to conduct, maintain and preserve intact the Business, (ii)
to maintain the ordinary and customary relationships of the Business with its
suppliers, customers and others having business relationships with it, (iii) to
incur capital expenditures, advertising, trade promotion and consumer promotion
expenditures as set forth on Schedule 5.1 and (iv) to finalize the sales plan
------------
(including volume and trade spending) for the first six months of 1998, commence
execution thereof and make presentations thereof to customers, in each case
described in clauses (i) through (iv) with a view toward preserving for Buyer to
and after the Closing Date the Business, the Assets and the goodwill associated
therewith.
(b) Until the Closing Date, BFC shall, and BFC shall cause BFC
Investments to, continue to operate and conduct the Business in the ordinary
course, and maintain its books and records in accordance with past practices and
will not and shall cause BFC Investments not to, without the prior written
approval of Buyer or as otherwise contemplated by this Agreement or Schedule 5.1
------------
take any of the following actions with respect to the Business:
(i) sell, transfer or otherwise dispose of or encumber any of its
properties or assets pertaining to the Business, other than (A) in the ordinary
course of business and (B) any obsolete inventory or equipment which is not
material to the results of operations, financial condition or business of the
Business taken as a whole;
(ii) terminate or amend, modify, renew or extend any BFC Lease,
except for non-material amendments in the ordinary course of business;
(iii) cancel any debts or waive any claims or rights, in each case
pertaining to the Business and material to the Business, except in the ordinary
course of business;
<PAGE>
50
(iv) grant any increase in the compensation of Eligible Employees,
except for increases (A) in the ordinary course of business and consistent with
past practice which do not exceed 5% of annual compensation, (B) as a result of
collective bargaining or (C) as required by any Benefit Plan;
(v) make any capital expenditure or commitment or grant any trade
discounts pertaining to the Business, other than (A) in the ordinary course of
business, (B) as contemplated by Schedule 5.1, or (C) which is not material to
------------
the results of operations, financial condition or business of the Business taken
as a whole;
(vi) except with respect to endorsement of negotiable instruments in
the ordinary course of its Business, incur, assume or guarantee any indebtedness
for borrowed money that would cause the representations and warranties of BFC to
be untrue other than (A) purchase money borrowings, (B) indebtedness for
borrowed money incurred in the ordinary course of business in accordance with
existing credit arrangements, (C) refundings of existing indebtedness, (D)
indebtedness to BFC or an affiliate of BFC and (E) other indebtedness for
borrowed money which is not material to the results of operations, financial
condition, or business of the Business taken as a whole;
(vii) pay or lend or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or arrangement
with, any of its affiliates, in each case except in the ordinary course of
business consistent with past practices;
(viii) make any change in any method of accounting or accounting
principle, method or practice except for any such change required by reason of a
concurrent change in generally accepted accounting principles, or write down the
value of any inventory except in the ordinary course of business consistent with
past practice;
<PAGE>
51
(ix) settle, release or forgive any claim or litigation or waive any
right thereto, in each case pertaining to the Business and material to the
Business, except in the ordinary course;
(x) modify, amend in any material respect or terminate any Disclosed
Contract, enter into any contract that would be a Disclosed Contract if such
contract were in effect as of the date of this Agreement or enter into any
license agreement relating to Trademark Rights; or
(xi) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 Investigation of Business.
-------------------------
Buyer may, prior to the Closing Date, make or cause to be made such
investigation of the business and properties of the Business and of its
financial and legal condition as Buyer deems necessary or advisable. BFC will
permit Buyer and its authorized agents or representatives, including its counsel
and independent accountants, to have full access to the properties, books and
records of the Business (excluding access to perform any environmental audit or
assessment, other than Phase I environmental site assessments, at Buyer's sole
expense, as may be undertaken directly on behalf of Buyer's financing sources
and which shall be performed by an environmental professional reasonably
acceptable to BFC) at reasonable hours to review information and documentation
relative to the properties, books, contracts, commitments and other records of
the Business; provided, however, that Buyer shall not have access to customer
lists (or other customer-specific information) prior to Closing; provided,
further, that no investigation pursuant to this Section 5.2 shall qualify any
representation or warranty of BFC or the conditions to the obligations of Buyer.
Buyer and its representatives will hold in confidence all confidential
information obtained from BFC, its
<PAGE>
52
officers, agents, representatives or employees in accordance with the provisions
of the letter dated May 30, 1997 between General Electric Investment Corporation
("GE Investments") and BFC and the related agreement dated July 18, 1997 between
--------------
GE Investments and E.M. Warburg, Pincus & Co., LLC (collectively, the
"Confidentiality Letter").
----------------------
5.3 Mutual Cooperation; No Inconsistent Action.
------------------------------------------
(a) Subject to the terms and conditions hereof, BFC and Buyer agree
to use their reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including all of the following (i) obtain prior to Closing all licenses,
certificates, permits, approvals, authorizations, qualifications and orders of
governmental authorities as are necessary for the consummation of the
transactions contemplated hereby, including but not limited to such consents and
approvals as may be required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Hart-Scott Act"), as set forth below and any
--------------
similar foreign legislation; (ii) effect all necessary registrations and
filings; and (iii) satisfy the conditions to Closing. BFC and Buyer shall
cooperate fully with each other to the extent reasonable in connection with the
foregoing.
(b) Buyer and BFC shall timely and promptly make all filings which
may be required by each of them in connection with the consummation of the
transactions contemplated hereby under the Hart-Scott Act and any similar
foreign legislation. Each party shall furnish to each other such necessary
information and assistance as the other party may reasonably request in
connection with the preparation of any necessary filings or submissions
<PAGE>
53
by it to any U.S. or foreign governmental agency, including, without limitation,
any filings necessary under the provisions of the Hart-Scott Act.
(c) Each of BFC and Buyer shall notify and keep the other advised as
to (a) any litigation or administrative proceeding pending and known to such
party, or to its knowledge threatened, which challenges the transactions
contemplated hereby and (b) any event or circumstance which would constitute a
breach of their respective representations and warranties in this Agreement
provided, that the failure of BFC or Buyer to comply with clause (b) shall not
- - - - --------
subject BFC or Buyer to any liability hereunder except as and to the extent BFC
or Buyer would be responsible for a breach of such representations and
warranties pursuant to Section 8.1 or 8.2, as applicable (including, without
limitation, the limitations on recovery and the time periods for bringing claims
thereunder). Subject to the provisions of Section 10, hereof, BFC and Buyer
shall not take any action inconsistent with their obligations under this
Agreement or which would materially hinder or delay the consummation of the
transactions contemplated by this Agreement.
5.4 Public Disclosures.
------------------
Prior to the Closing Date, no party to this Agreement will issue any press
release or make any other public disclosures concerning this transaction or the
contents of this Agreement without the prior written consent of the other party.
Notwithstanding the above, nothing in this Section 5.4 will preclude any party
from making any disclosures required by law or regulation or necessary and
proper in conjunction with the filing of any tax return or other document
required to be filed with any federal, state or local governmental body,
authority or agency; provided, that the party required to make the release or
--------
statement shall
<PAGE>
54
allow the other party reasonable time to comment on such release or statement in
advance of such issuance.
5.5 Access to Records and Personnel.
-------------------------------
(a) The parties shall retain the books, records, documents,
instruments, accounts, correspondence, writings, evidences of title and other
papers relating to the Business and the Assets in their possession (the "Books
-----
and Records") for the period of time set forth in their respective records
- - - - -----------
retention policies on the Closing Date or for such longer period as may be
required by law or any applicable court order;
(b) The parties will allow each other reasonable access to such Books
and Records, and to personnel having knowledge of the whereabouts and/or
contents of such Books and Records, for legitimate business reasons, such as the
preparation of tax returns or the defense of litigation. Each party shall be
entitled to recover its out-of-pocket costs (including, without limitation,
copying costs) incurred in providing such records and/or personnel to the other
party. The requesting party will hold in confidence all confidential
information identified as such by, and obtained from, the disclosing party, any
of its officers, agents, representatives or employees, provided, however, that
information (i) which was in the public domain; (ii) was in fact known to the
requesting party prior to disclosure by the disclosing party, its officers,
agents, representatives or employees; or (iii) becomes known to the requesting
party from or through a third party not under an obligation of non-disclosure to
the disclosing party, shall not be deemed to be confidential information.
(c) At the request of BFC, Buyer shall allow any person who is
contemplating the direct or indirect acquisition of all or a substantial portion
of the common stock of BFC to perform, at such person's expense and at such time
or times as are
<PAGE>
55
reasonably acceptable to Buyer, Phase I environmental site assessments of the
Assets (to the extent then owned by Buyer or its affiliates), which assessments
shall be conducted by an environmental professional reasonably acceptable to
Buyer.
5.6 License Agreements and Transactions.
-----------------------------------
(a) On the Closing Date, Buyer, BFC, BFC Investments, Borden and BDH
shall enter into the following transactions in the following order (the "License
-------
Transactions"):
- - - - ------------
(i) (x) BFC Investments shall execute and deliver an
assignment of BFC Investments' rights under the Existing License Agreement
between Borden and BFC Investments and (y) BFC shall execute and deliver an
assignment of BFC's rights under the Existing License Agreement between BFC
Investments and BFC, each substantially in the form attached as Exhibits B-
1 and B-2 hereto, respectively (collectively, the assignments referred to
in clauses (x) and (y) above, the "Assignments"); and
-----------
(ii) immediately after the execution and delivery of the
Assignments, the Existing License Agreements shall be terminated (as to the
portions thereof which shall have been assigned pursuant to the
Assignments), and immediately thereafter Buyer, Borden and BDH shall
execute and deliver a license agreement substantially in the form of the
license agreement set forth in Exhibit C hereto (the "Borden License
--------------
Agreement").
---------
(b) On the Closing Date, Buyer and BFC shall execute and deliver a
license agreement, substantially in the form of Exhibit D hereto (the "Buyer's
-------
License Agreement"), pursuant to which Buyer shall grant to BFC a license to use
- - - - -----------------
the ReaLemon, ReaLime,
<PAGE>
56
RealPrune and RealFig trademarks in the territories outside the United States
set forth on Schedule 5.6(b).
---------------
(c) On the Closing Date, BFC shall execute and deliver an assignment
to Buyer, which shall be reasonably acceptable to Buyer, assigning all of BFC's
right, title and interest in the Trademark License Agreement dated as of
September 4, 1997 BFC and Southern Foods Group, L.P. relating to the Meadow Gold
trademark.
5.7 Employee Relations and Benefits
-------------------------------
(a) Offer to Hire. Effective as of the Closing Date Buyer (i) may
-------------
offer employment to any employee of BFC employed at BFC's headquarters in
Columbus, Ohio who Buyer wishes to hire at comparable positions and rates of pay
(provided that (x) Buyer shall not offer employment to any person set forth on
Schedule 5.7(a)(i) and (y)(1) for each position set forth on Schedule 5.7(a)(ii)
- - - - ------------------ -------------------
under the caption "Positions", Buyer may offer employment only to the persons
whose names are set forth under such caption and (2) with respect to positions
set forth on such Schedule under the caption "No Eligible Employees", Buyer
shall not, without the prior written consent of BFC, offer employment with
respect to such position to any employee of BFC) and (ii) shall offer to hire
all employees (whether or not on disability or otherwise on leave of absence)
primarily involved in the conduct of the Business and who are employed at or
report to the Facilities at comparable positions and rates of pay or subject to
the terms and conditions of the collective bargaining agreements applicable to
any such employees (subject to Section 5.7(e)) (the persons to whom offers may
be made pursuant to clause (i) and the persons described in clause (ii),
collectively, the "Eligible Employees" and the persons to whom offers are made
------------------
pursuant to clause (i) and the
<PAGE>
57
persons described in clause (ii), collectively, the "Offer Employees").
---------------
Eligible Employees shall not include those persons who are former or retired
employees of BFC or its affiliates.
With respect to an Offer Employee described in clause (i) of Section 5.7(a),
unless such person expressly accepts Buyer's offer of employment as of the
Closing Date, such person shall be deemed to have declined Buyer's offer of
employment and shall not become an employee of Buyer as of the Closing Date.
With respect to an Offer Employee described in clause (ii) of Section 5.7(a),
unless such person expressly declines Buyer's offer of employment as of the
Closing Date, such person shall be deemed to have accepted Buyer's offer of
employment and shall become an employee of Buyer as of the Closing Date. Buyer
shall be responsible for any obligations or liabilities to the Transferred
Employees (as defined below) under the Worker Adjustment and Retraining
Notification Act ("WARN") to the extent WARN thresholds are exceeded as a result
----
of actions taken by Buyer after the Closing with respect to Transferred
Employees. Buyer shall not, at any time prior to 90 days after the Closing
Date, effectuate a "plant closing" or "mass layoff", as those terms are defined
in WARN, affecting in whole or in part any site of employment, facility,
operating unit or employee, without notifying BFC in advance and without
complying with the notice requirements and other provisions of WARN.
(b) Transferred Employees. The Offer Employees described in clause (ii) of
---------------------
Section 5.7(a) who accept or are deemed to accept Buyer's offer of employment
and who are covered by a collective bargaining agreement with BFC shall be
referred to herein as "Transferred Union Employees". The Offer Employees (x)
---------------------------
described in clause (ii) of Section 5.7(a) who accept or are deemed to accept
Buyer's offer of employment and who are not covered by a collective bargaining
agreement with BFC and (y) described in clause (i) of
<PAGE>
58
Section 5.7(a) who expressly accept Buyer's offer of employment pursuant to
Section 5.7(a) shall be referred to herein as "Transferred Non-Union Employees".
-------------------------------
Collectively, the Transferred Union Employees and the Transferred Non-Union
Employees shall be referred to herein as the "Transferred Employees". The
---------------------
Transferred Employees shall cease participation in the Benefit Plans as of the
Closing Date.
(c) Terms of Employment. For the period ending one year after the Closing
-------------------
Date, Buyer will provide Transferred Non-Union Employees with benefits under
Buyer's employee benefit plans which are substantially comparable in the
aggregate to the Benefit Plans set forth in Schedule 3.12(b)(i) (other than the
-------------------
BFC post-retirement welfare plans and BFC's nonqualified deferred compensation
plan for executive employees), and, subject to Section 5.7(e), will provide
Transferred Union Employees with such benefits as shall be required under the
terms of any applicable collective bargaining agreement covering such employees
on and after the Closing Date; provided, however, that this Section shall not be
-------- -------
construed as guaranteeing employment to any particular employee for a period
greater than otherwise required by any applicable law; provided, further, that
-------- -------
nothing in this Section shall require Buyer to sponsor a defined benefit plan
for the Transferred Employees following the Closing Date. Except as provided
otherwise in this Section 5.7 or as required by the terms of any collective
bargaining agreements, the terms of the Transferred Employees' employment with
Buyer shall be upon such terms and conditions as Buyer, in its sole discretion,
shall determine.
(d) Past Service Credit. Transferred Employees shall receive credit for
-------------------
all periods of employment prior to the Closing Date, to the extent taken into
account by BFC under the terms of any analogous Benefit Plan maintained by BFC,
under all employee benefit plans as
<PAGE>
59
are adopted or implemented for Transferred Employees by Buyer for purposes of
eligibility, vesting and for purposes of satisfying any service requirements for
early retirement.
(e) Collective Bargaining Agreements. Effective as of the Closing Date,
--------------------------------
Buyer shall assume the collective bargaining agreements listed on Schedule
--------
3.12(a) in respect of the Transferred Union Employees, and shall be solely
- - - - -------
responsible for discharging all liabilities arising thereunder on and after the
Closing Date, however, Buyer shall be free to negotiate in good faith with
recognized collective bargaining agents of the Transferred Union Employees to
attempt to obtain such representative's agreement to modify such assumed
collective bargaining agreements with respect to the benefit plans, programs and
policies to be provided by Buyer for the Transferred Union Employees as of the
Closing Date.
(f) COBRA. Buyer shall have sole responsibility for "continuation
-----
coverage" benefits provided on or after the Closing Date under Buyer's group
health plans to all Transferred Employees, and "qualified beneficiaries" of
Transferred Employees, for whom a "qualifying event" has occurred on or after
the Closing Date. Subject to the preceding sentence, BFC shall have sole
responsibility for "continuation coverage" benefits provided under BFC's group
health plans to all current and former BFC employees, and "qualified
beneficiaries" of current and former BFC employees, for whom a "qualifying
event" has occurred, whether prior to, on or after the Closing Date. The terms
"continuation coverage," "qualified beneficiaries" and "qualifying event" shall
have the meanings ascribed to them under Section 4980B of the Code and Sections
601 through 608 of ERISA.
(g) Post-Retirement Benefits. BFC shall remain solely responsible and
------------------------
liable for all obligations arising or relating to all current and former
employees of the Business under
<PAGE>
60
all Benefit Plans that are post-retirement welfare benefit plans and Buyer shall
have no obligation or liability with respect to any such plans.
(h) Non-Union Nonqualified Retirement Plans. BFC currently maintains non
---------------------------------------
qualified retirement plans (collectively, the "BFC Nonqualified Plans") which
----------------------
provide certain retirement benefits for certain eligible employees of BFC,
including certain Transferred Non-Union Employees. BFC will remain solely
responsible for making all contributions to and the payment of all benefits
under the BFC Nonqualified Plans with respect to the Transferred Employees, and
neither Buyer nor any of its affiliates will have any obligation or liability
with respect to BFC Nonqualified Plans. Effective as of the Closing, BFC will
take all necessary and appropriate action to cause the BFC Nonqualified Plans to
expressly provide that Transferred Non-Union Employees who were participants in
the BFC Nonqualified Plans prior to the Closing Date will have their service
with Buyer and its affiliates credited for benefit eligibility (including early
retirement subsidies) and vesting purposes, but not for benefit accrual or
compensation history purposes.
(i) Vacation. Each Transferred Employee will be credited by Buyer with any
--------
unused vacation earned as of the Closing Date under the vacation policy of BFC
applicable to such Transferred Employee, and BFC shall have no liability
therefor following the Closing Date. Buyer agrees that it will allow the
Transferred Employees to use such credited vacation to the same extent that such
Transferred Employees could have used such credited vacation under the Benefit
Plans. Buyer shall recognize service by each Transferred Employee with BFC for
purposes of determining eligibility and entitlement to vacation leave following
the Closing Date under the applicable vacation policy of Buyer; provided,
however, that this Section 5.7(i) shall not be construed so as to entitle any
Transferred Employee to be credited
<PAGE>
61
with additional vacation benefits under Buyer's vacation policy for periods of
employment prior to the Closing Date.
(j) Severance Benefits. Buyer agrees that, in the event any Transferred
------------------
Non-Union Employee is terminated by Buyer during the one-year period immediately
following the Closing Date, Buyer will provide such Transferred Employee with a
severance benefit which is not less than the cash separation payment that would
have been provided for by BFC's severance pay policy (as set forth on Schedule
--------
5.7(j) hereto) had such Employee been terminated under the same circumstances by
- - - - ------
BFC immediately prior to the Closing Date.
(k) Bonus Plans. BFC shall pay the Transferred Employees any annual
-----------
incentive or sales bonus earned for calendar year 1997 and Buyer shall pay the
Transferred Employees any annual incentive or sales bonus for periods commencing
on or after January 1, 1998.
(l) No Rights Conferred on Employees. Nothing herein, expressed or
--------------------------------
implied, shall confer upon any employee or former employee of BFC or Buyer or
any of their affiliates (including, without limitation, the Transferred
Employees), any rights or remedies (including, without limitation, any right to
employment or continued employment for any specified period) of any nature or
kind whatsoever, under or by reason of this Agreement.
(m) Employee Welfare Benefit Plans. Other than with respect to workers'
------------------------------
compensation, BFC shall retain responsibility for and continue to pay all
hospital, medical, life insurance, disability (including, but not limited to,
long-term disability benefits) and other welfare benefit plan expenses and
benefits, and for all unemployment compensation and other government mandated
benefits (collectively referred to herein as "Welfare Type Plans") for claims
------------------
covered by such plans which are incurred by Transferred Employees and their
dependents prior to the Closing Date. Buyer shall be responsible for all claims
incurred on or
<PAGE>
62
after the Closing Date by Transferred Employees and their dependents under all
Welfare Type Plans, including, without limitation, those plans that are
maintained by Buyer for the Transferred Employees and their dependents. For
purposes of this Section 5.7(m), a claim shall be deemed to have been incurred:
(i) with respect to a death or dismemberment claim, on the actual
date on which such death or dismemberment occurs;
(ii) with respect to a disability or salary continuation claim, on
the date on which the claimant is unable as a result of injury or sickness
to perform the functions of his or her job;
(iii) with respect to a hospitalization, medical, drug or dental
claim, on the date on which the service was received or the supply was
purchased by the claimant; provided, however, that a claim relating to a
-------- -------
claimant's hospital stay shall be deemed to be incurred on the first day of
his or her confinement for that stay; provided, further, that any claims
-------- -------
related to a claimant's hospital stay other than the hospitalization itself
(including, but not limited to, physician's services) shall be deemed to be
incurred on the date on which the relevant service was received or the
relevant supply was consumed;
(iv) with respect to unemployment compensation or other governmental
claims, on the date the incident giving rise to the claim occurred.
Transferred Non-Union Employees shall participate under all Welfare Type Plans
sponsored by Buyer following the Closing Date without any waiting periods,
without any evidence of insurability and without the application of any
preexisting physical or mental condition restrictions (except to the extent
applicable under the Welfare Type Plans sponsored by BFC),
<PAGE>
63
and Buyer shall provide credit for all claims incurred by the Transferred
Employees prior to the Closing Date for purposes of applying deductibles, co-
payments, out-of-pocket maximums and benefit maximums. Notwithstanding anything
to the contrary herein, Buyer shall be responsible for all obligations and
liabilities relating to workers' compensation with respect to the Transferred
Employees (whether arising before, on or after the Closing Date).
(n) Notwithstanding anything to the contrary herein, with respect to
Transferred Employees who have incurred a claim for long-term disability
benefits (as defined in Section 5.7(m) herein) prior to the Closing Date, (i)
until such persons are no longer "disabled" within the meaning of the Borden,
Inc. Total Family Protection Plan (along with any successor plan, the "TFPP"),
----
such persons shall continue to participate in the TFPP on and after the Closing
Date for purposes of medical and disability coverage only and (ii) Buyer shall
not be responsible for any medical or disability claims incurred by such persons
on or after the Closing Date until such time as such persons are actively
employed by Buyer and covered by Buyer's group medical and disability plans.
(o) BFC shall be responsible for all obligations and liabilities relating
to the Transferred Employees with respect to their employment with BFC prior to
the Closing Date and not expressly allocated to Buyer pursuant to this Section
5.7.
5.8 Product Shipment and Inventory Reconciliation.
---------------------------------------------
Within ninety (90) days after Closing, Buyer will remove the Inventory (as
defined below) from any non-public warehouses set forth on Schedule 5.8 which
------------
continue to be owned and/or leased by BFC and its subsidiaries. Buyer shall be
responsible for any warehouse storage charges incurred by BFC with respect to
the Inventory of the Business on and after the Closing Date. Where such
Inventories are stored in a public warehouse, BFC
<PAGE>
64
will provide any necessary authorization to permit Buyer to remain or withdraw
from such public warehouse. Any removal Inventories shall be transported, at
Buyer's expense, to warehouse locations designated by Buyer. Buyer shall also
be responsible for removing, at its sole expense and risk, all equipment and
other items constituting Assets acquired by Buyer hereunder which are located at
any of BFC and its subsidiaries facilities not acquired by Buyer hereunder and
set forth on Schedule 5.8. Buyer shall promptly reimburse BFC for any out-of-
------------
pocket costs, fees and expenses incurred by BFC and its subsidiaries in
connection with the removal of the Assets from the premises of BFC and its
subsidiaries or elsewhere where such Assets may be located. For purposes of
this Section 5.8, the term "Inventory" shall mean all finished products (other
---------
than finished products that have been billed and are being held for customers'
accounts) of the Business on the Closing Date and all work-in-process, raw
materials and packaging materials used in connection therewith, principally
related to the Business.
5.9 "As Is" Condition.
-----------------
Except as otherwise specifically provided by BFC in the representations and
warranties of BFC set forth herein, and subject to the limitations with respect
to such representations and warranties contained in this Agreement, Buyer agrees
that it shall accept all Assets in an "As Is" "Where Is" condition at the
Closing Date.
5.10 Non-Solicitation.
----------------
Until the Closing shall actually have occurred, Buyer acknowledges that it
remains subject to paragraph 7 of the Confidentiality Letter; provided that
--------
Buyer and its affiliates shall be entitled to make offers of employment to
Eligible Employees pursuant to Section 5.7(a)
<PAGE>
65
above; provided, further that such offers shall be conditioned upon the
-------- -------
occurrence of the Closing.
5.11 [Intentionally Omitted].
-----------------------
5.12 Financing.
---------
(a) Buyer shall use its reasonable best efforts to obtain financing
to consummate the transactions contemplated by this Agreement within 60 days of
the date of this Agreement. If for any reason Buyer cannot obtain such financing
by such date on the terms set forth in the Financing Letters, Buyer shall use
its reasonable best efforts to obtain such financing by such date from other
sources; provided, however, the reasonable best efforts shall not be deemed to
--------
include acceptance of financial or other terms that are not, taken as a whole,
at least as favorable in all material respects to Buyer as the terms contained
in the Financing Letter. Buyer shall use its reasonable best efforts to satisfy
at or before the Closing all requirements which are conditions to its closing
all transactions constituting the Financing and to its drawing down the cash
proceeds thereunder.
(b) BFC shall cooperate with Buyer in all reasonable respects to
enable Buyer to obtain the Financing including using its reasonable efforts to
(i) obtain consents of its independent public accountants and comfort letters,
when required, with respect to each of the Financial Statements, at Buyer's sole
cost and expense, so that the Financial Statements can be used in Rule 144A
offering memoranda and registration statements filed under the Securities Act of
1933, as amended, and reports under the Securities Exchange Act of 1934, as
amended (the "Public Filings"), issued or filed by Buyer, (ii) cooperate with
--------------
Buyer so Buyer can obtain information sufficient for Buyer to comply with the
requirements for the Management's Discussion and Analysis portion of the Public
Filings, (iii) compile the
<PAGE>
66
requisite financial information, including supplying financial information for
purposes of comfort letters to be issued in connection with the Public Filings,
(iv) request the independent public accountants of the Business to give full and
complete access to Buyer and its agents to its work papers and any other
supporting information relating to the Financial Statements, subject to
customary agreements sought by independent public accountants in connection with
giving such access, (v) sign customary management representation letters
relating to the Financial Statements, (vi) cooperate in the preparation of
financial statements for the Business that are suitable for inclusion by Buyer
in the Public Filings, including compliance with the applicable provisions of
Regulation S-X, and (vii) provide such personnel as are reasonably requested by
Buyer to participate in roadshow, rating agency and lender presentations and
meetings relating to such Financing so long as such participation does not
interfere with the normal functioning of the Business.
(c) Effective at the opening of business on the Closing Date, Buyer
shall be responsible for funding all disbursements of the Business. Any cash,
cash equivalents, similar investments, certificates of deposit, Treasury bills
and other marketable securities held by the Business at the Closing shall be
treated by the parties consistent with Section 1.3.
5.13 Consumer Claims and Complaints.
------------------------------
The parties shall assure that their respective consumer affairs departments
cooperate and assist each other to assure the expeditious handling of consumer
claims and complaints.
5.14 Promotion/Pricing Allowance.
---------------------------
In the event that customers of the Business bill Buyer or make deductions
against Buyer's otherwise valid invoices for trade promotion or pricing
allowances (such as slotting allowances, returns, retailer or distributor ads,
store display allowances, coupons, trade
<PAGE>
67
deductions and similar items) applicable to any of BFC's businesses other than
the Business, Buyer will promptly forward such bill or a bill for such
deductions, as the case may be, with commercially reasonable supporting
documentation, to BFC which will, in turn, promptly pay all valid claims
supported by such documentation. In the event customers of the Business bill
BFC or make deductions against BFC's otherwise valid invoices for any such trade
promotion or pricing allowances applicable to the Business and incurred on or
after the Closing Date, BFC will promptly forward such bill or a bill for such
deductions, as the case may be, with commercially reasonable supporting
documentation, to Buyer which will, in turn, promptly pay all valid claims
supported by such documentation. With respect to any such trade promotion or
pricing allowances applicable to the Business and incurred prior to the Closing
Date, to the extent the liability for any such allowance is an Assumed Liability
or an Excluded Liability, BFC (in the case of Assumed Liabilities) or Buyer (in
the case of Excluded Liabilities) will promptly forward such bill or a bill for
such deductions, as the case may be, with commercially reasonable supporting
documentation, to the other party which will, in turn, promptly pay all valid
claims supported by such documentation. If either party contests the validity
of any such claims and the parties hereto cannot resolve the issue of validity
after good faith attempts to do so, then either party may make a claim for
indemnity under Sections 8.1 or 8.2, as applicable.
5.15 Administration of Accounts; Customer Inquiries.
----------------------------------------------
(a) All payments and reimbursements made in the ordinary course of
business by any third party in the name of or to BFC or any affiliate thereof in
connection with or arising out of the Assets or Assumed Liabilities after the
Closing Date shall be held by such person in trust for the benefit of Buyer and,
immediately upon receipt by such person
<PAGE>
68
of any such payment or reimbursement, such person shall pay over to Buyer the
amount of such payment or reimbursement without right of set off.
(b) All payments and reimbursements made in the ordinary course of
business by any third party in the name of or to Buyer or any affiliate thereof
in connection with or arising out of the Excluded Assets or Excluded Liabilities
after the Closing Date shall be held by such person in trust for the benefit of
BFC and, immediately upon receipt by such person of any such payment or
reimbursement, such person shall pay over to BFC the amount of such payment or
reimbursement without right of set off.
(c) BFC covenants and agrees that it will, and will cause BFC
Investments to, promptly forward to Buyer any mail (physical, electronic or
otherwise), facsimile or telephone inquiries of actual or potential clients,
customers, suppliers and vendors of or relating to the Business, including,
without limitation, customer orders.
5.16 Services Agreement.
------------------
On the Closing Date, Buyer and BFC shall execute and deliver an agreement,
substantially in the form attached hereto as Exhibit E (the "Services
--------
Agreement"), pursuant to which BFC shall agree to provide certain transition
- - - - ---------
services on the terms and subject to the conditions set forth therein.
5.17 Puerto Rico Distributor Agreement.
---------------------------------
On or prior to the Closing Date, Buyer shall, and BFC shall cause Borden
Foods Puerto Rico, Inc., a Delaware corporation and a subsidiary of BFC ("Borden
------
Puerto Rico"), to execute and deliver a six-month distributor agreement,
- - - - -----------
substantially in the form attached hereto as Exhibit F (the "Puerto Rico
-----------
Distributor Agreement"). If the Puerto Rico Distributor Agreement shall be
- - - - ---------------------
terminated in accordance with its terms, BFC shall cause Borden Puerto
<PAGE>
69
Rico not to assert Dealer's Contract Law, Law 75 of June 24, 1964 (101PRA (S)
278) ("Law 75") or to contest the exclusive jurisdiction and governing law
------
provisions of such agreement; provided, however, that BFC's obligations under
-------- -------
this sentence shall be terminated if BFC shall transfer all or substantially all
of the stock of Borden Puerto Rico to a third party and if, in connection with
such transfer, such third party shall agree to assume BFC's obligations under
this sentence; and provided, further, that if the third party which acquires all
-------- -------
or substantially all of the stock of Borden Puerto Rico is a Puerto Rican
person, then such Puerto Rican person shall agree, in a document subject to the
law and exclusive jurisdiction of a jurisdiction other than Puerto Rico, to
indemnify and hold harmless Buyer against any breach of such Puerto Rican
person's agreement, in connection with a termination of the Puerto Rico
Distributor Agreement in accordance with its terms, to cause Borden Puerto Rico
not to assert Law 75 or to contest the exclusive jurisdiction and governing law
provisions of such agreement
5.18 Canadian Copack and Distribution Agreements.
-------------------------------------------
Following the date hereof, Buyer and BFC (on behalf of itself and/or a
Canadian affiliate) shall negotiate in good faith a co-pack agreement, a
distribution agreement and sales agency agreements (collectively, the "Canadian
--------
Agreements") substantially on the terms set forth on Exhibit G hereto and
- - - - ----------
otherwise on such customary terms as Buyer and BFC shall mutually agree.
5.19 Covenant Not to Compete. (a) BFC and BFC Investments acknowledge
-----------------------
that the agreements and covenants contained in this Section 5.19 are essential
to protect the value of the Business being acquired by Buyer. Therefore, BFC
agrees that for the period commencing on the Closing Date and ending on the
fifth (5th) anniversary of the Closing
<PAGE>
70
Date (such period is hereinafter referred to as the "Restricted Period"),
-----------------
neither BFC nor any of its subsidiaries shall in the territory set forth under
the caption "Territory" on Schedule 5.19 participate or engage, directly or
--------- -------------
indirectly, whether as an employee, agent, officer, consultant, director,
shareholder, partner, joint venturer, investor or otherwise, in developing,
manufacturing, marketing, distributing and selling (i) sweetened condensed milk,
(ii) liquid or powdered non-dairy coffee creamer, (iii) canned egg nog, (iv)
lemon or lime, shelf-stable juice or lemon or lime juice concentrate, (v) liquid
or frozen pie filling (including mincemeat), whether or not shelf stable and
however packaged, and (vi) acid-neutralized instant coffee. Notwithstanding the
foregoing, BFC may (i) own equity securities of a public company in an amount
not to exceed 5% of the issued and outstanding equity securities of such
company, (ii) engage in a transaction whereby, directly or indirectly, it
acquires (whether by merger, stock purchase, purchase of assets or otherwise),
any person or business, or any interest in any person or business, engaged at
the time of such acquisition in the manufacture or sale of any of the foregoing
products, provided that no more than 17.5% of such person's or business's
--------
revenues result from the manufacture or sale of such products, provided,
--------
further, that if at the time of such acquisition such revenues exceed 17.5%,
- - - - -------
this Section 5.19(a) shall not be deemed to be violated if such revenues do not
exceed 17.5% within one year following the consummation of such acquisition or
(iii) participate or engage, directly or indirectly, whether as an employee,
agent, officer, consultant, director, shareholder, partner, joint venturer,
investor or otherwise, in developing, manufacturing, marketing, distributing and
selling the products listed under the caption "Excluded Products" on Schedule
----------------- --------
5.19.
- - - - ----
(b) BFC acknowledges that the value to Buyer of the transactions
contemplated by this Agreement would be substantially diminished if BFC or any
controlled
<PAGE>
71
affiliate were to solicit the employment of any Transferred Employee (other than
an hourly worker or an employee who serves in a clerical function).
Accordingly, BFC agrees that, for a period of two years following the Closing
Date, neither BFC nor any subsidiary of BFC shall solicit the employment of any
employee or employ any person who is an employee of Buyer (other than an hourly
worker or an employee who serves in a clerical function); provided, however,
-------- -------
that the foregoing provision will not prevent BFC from hiring any Transferred
Employee (i) who responds to a public advertisement placed by BFC, (ii) who has
not been employed by Buyer during the preceding six months or (iii) who has been
terminated by Buyer.
(c) Buyer acknowledges that the value to BFC of the transactions
contemplated by this Agreement would be substantially diminished if Buyer or any
controlled affiliate were to solicit the employment of any employee of BFC or
its affiliates (other than pursuant to Section 5.7(a) prior to the Closing Date,
other than as set forth in the following paragraph and other than an hourly
worker or an employee who serves in a clerical function). Accordingly, Buyer
agrees that, for a period of two years following the Closing Date (subject to
the provisions of the following paragraph), neither Buyer nor any subsidiary of
Buyer shall solicit the employment of any employee or employ any person who is
an employee of BFC or any of its affiliates (other than an hourly worker or an
employee who serves in a clerical function); provided, however, that the
-------- -------
foregoing provision will not prevent Buyer from hiring any employee of BFC or
any of its affiliates (i) who responds to a public advertisement placed by
Buyer, (ii) who has not been employed by BFC during the preceding six months or
(iii) who has been terminated by BFC.
<PAGE>
72
Notwithstanding the foregoing, during the period commencing on the
Closing Date and ending on the earlier of the 60th day following the Closing
Date and February 28, 1998, Buyer may offer employment to any employee of BFC
employed at BFC's headquarters in Columbus, Ohio who Buyer wishes to hire at
comparable positions and rates of pay, subject to (1) compliance with the
provisos set forth in clause (i) of Section 5.7(a) and (2) the condition that
Buyer may not make any such offer to any person who shall have been designated
in good faith by BFC pursuant to a notice delivered to Buyer not more than five
days prior to the Closing Date as being ineligible to be hired by Buyer pursuant
to this sentence, provided, that, BFC shall only be permitted to designate (i)
--------
persons who BFC would like to employ to fill the positions listed under the
caption "Positions" and "No Eligible Employees" on Schedule 5.7(a)(ii) (or
-------------------
comparable positions with BFC to the extent any positions listed on such
Schedule relate to the Business but not to BFC's retained businesses and (ii) an
additional 40 persons. Upon express acceptance by any BFC employee to whom
Buyer is permitted to make offers pursuant to the preceding sentence of any such
offer (such date of acceptance, the "Acceptance Date"), for purposes of Section
---------------
5.7, (i) such employee shall be deemed to be a Transferred Non-Union Employee as
of the Acceptance Date and (ii) for purposes of allocating all obligations and
liabilities under Section 5.7 with respect to such person, the references in
Section 5.7 to the Closing Date and the Closing shall be deemed to be references
to the Acceptance Date.
(d) BFC and Buyer agrees that a monetary remedy for a breach of the
agreements set forth in Section 5.19(a), (b) or (c) hereof will be inadequate
and impracticable and further agrees that such a breach would cause irreparable
harm, and that the non-breaching party shall be entitled to temporary and
permanent injunctive relief without the
<PAGE>
73
necessity of proving actual damages. In the event of such a breach, the
breaching party agrees that the non-breaching party shall be entitled to such
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions as a court of competent jurisdiction shall
determine.
(e) If any provision of this Section 5.19 is invalid in part, it
shall be curtailed, as to time, location or scope, to the minimum extent
required for its validity under the laws of the United States and shall be
binding and enforceable with respect to BFC as so curtailed.
(f) The parties agree that $5,000,000 of the Purchase Price will be
allocated to the covenants contained in Section 5.19(a) and the covenants
contained in Section 5.19(b).
5.20 Confidentiality. BFC and BFC Investment each recognizes that by
---------------
reason of its ownership of the Assets, it has acquired confidential information
and trade secrets concerning the operation of the Business, the use or
disclosure of which could cause the Buyer or its affiliates substantial loss and
damages that could not be readily calculated and for which no remedy at law
would be adequate. Accordingly, each of BFC and BFC Investments covenants and
agrees with Buyer that it will not at any time, except in performance of its
obligations to Buyer or with the prior written consent of Buyer, directly or
indirectly, disclose any proprietary, material non-public secret or confidential
information relating to the Business that it may learn or has learned by reason
of its ownership of the Assets, unless (i) such information becomes known to the
public generally through no fault of BFC or BFC Investments or (ii) disclosure
is required in the opinion of counsel to BFC or BFC Investments, by applicable
law, regulation or legal process. The parties agree that the covenant contained
in this Section imposes a reasonable restraint on BFC and BFC
<PAGE>
74
Investments, and their respective applicable employees, in light of the
activities and business of Buyer proposed to be conducted on and after the
Closing Date, assuming the completion of the transactions contemplated hereby,
and the current plans of the Buyer.
5.21 Acquisition of Rights to Confidentiality. At the Closing, BFC shall
----------------------------------------
assign, grant and convey to Buyer all their respective rights under
confidentiality agreements between it and persons other than the Buyer that were
entered into in connection with or relating to a possible sale of the Business
or any part thereof (collectively, the "Other Confidentiality Letters"),
-----------------------------
including the right to enforce all terms of the Other Confidentiality Letters,
but only to the extent the other Confidentiality Letters relate to the Business
or any part thereof and are assignable. At the Closing, BFC shall deliver to
Buyer copies of the Other Confidentiality Letters to the extent permitted by the
terms thereof, provided that if any Other Confidentiality Agreement shall not be
--------
assignable, BFC shall disclose to Buyer the parties to such agreement, but only
to the extent such disclosure is not prohibited by the terms thereof.
5.22 Certain Restrictions. Buyer agrees that it shall not, in any
--------------------
territory set forth on Schedule 1.3(a)(i), use or seek to register any trademark
------------------
or service mark or trade name incorporating the word "Cremora" or any logo
related thereto or used in connection therewith, including any translations,
adaptations or derivations thereof. Any person to whom BFC or any of its
affiliates transfers any trademarks or service marks or trade names
incorporating the word "Cremora" not being sold pursuant to this Agreement shall
be entitled to enforce the provisions of this Section as a third party
beneficiary hereof, but only if and to the extent such person agrees in writing
to a reciprocal provision for Buyer's benefit.
<PAGE>
75
6 CONDITIONS
----------
6.1 Conditions Precedent to Obligations of Buyer, BFC and BFC Investments.
---------------------------------------------------------------------
The respective obligations of Buyer, BFC and BFC Investments to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing Date of the following conditions:
(a) No Injunction, etc. At the Closing Date, there shall be no
-------------------
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the Purchase or the transfer to Buyer
by BFC or BFC Investments of any Assets.
(b) Regulatory Authorizations. All consents, approvals,
-------------------------
authorizations and orders of federal, state and foreign governmental and
regulatory authorities as are necessary in connection with the transfer of the
Assets (the "Required Consents") shall have been obtained, except for Required
-----------------
Consents the failure to obtain which, individually or in the aggregate, are not
material to the operations of the Business taken as a whole or the failure of
which to obtain would not subject the Buyer, BFC, or BFC Investments, or any
officer, director, or agent of any such person to civil or criminal liability;
provided that for purposes of this clause (b) applicable waiting periods
- - - - --------
specified under the HSR Act with respect to the transactions contemplated by
this Agreement shall have lapsed or been terminated.
6.2 Conditions Precedent to Obligation of BFC and BFC Investments.
-------------------------------------------------------------
The obligation of BFC and BFC Investments to consummate the transactions
provided for in this Agreement is subject to fulfillment of each of the
following conditions:
(a) Accuracy of Buyer's Representations and Warranties; Covenants of
----------------------------------------------------------------
Buyer. The representations and warranties of Buyer contained in this Agreement
- - - - -----
(except as
<PAGE>
76
affected by the transactions contemplated in this Agreement) that are qualified
as to materiality shall be true and correct and the representations and
warranties of Buyer set forth in this Agreement and that are not so qualified
shall be true and correct in all material respects, in each case on the date of
this Agreement (except to the extent cured prior to the Closing Date) and on the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly speak as of an earlier date; Buyer
shall have complied in all material respects with all covenants contained in
this Agreement to be performed by it prior to Closing; and BFC shall have
received a certificate signed by an officer of Buyer to such effect;
(b) License Agreements. Buyer shall have executed the Borden License
------------------
Agreement and the Buyer's License Agreement;
(c) Services Agreement. Buyer shall have executed the Services
------------------
Agreement;
(d) Puerto Rico Distributor Agreement. Buyer shall have executed the
---------------------------------
Puerto Rico Distributor Agreement.
(e) Canadian Agreements. Buyer shall have executed the Canadian
-------------------
Agreements;
(f) Assumption Agreement. Buyer shall have executed an undertaking
--------------------
(the "Assumption Agreement") substantially in the form of Exhibit H pursuant to
--------------------
which Buyer agrees to assume the Assumed Liabilities; and
(g) Opinion of Counsel. BFC shall have received a favorable opinion,
------------------
dated as of the Closing Date, from Willkie Farr & Gallagher, counsel to Buyer,
in form and
<PAGE>
77
substance reasonably satisfactory to BFC and its counsel substantially to the
effect as set forth on Exhibit I hereto.
6.3 Conditions Precedent to Obligation of Buyer.
-------------------------------------------
The obligation of Buyer to consummate the transactions provided for in this
Agreement is subject to fulfillment of each of the following conditions:
(a) Accuracy of Representations and Warranties of BFC; Covenants of
---------------------------------------------------------------
BFC. The representations and warranties of BFC contained in this Agreement
- - - - ---
(except as affected by the transactions contemplated in this Agreement) that are
qualified as to materiality shall be true and correct and the representations
and warranties of BFC and BFC Investments set forth in this Agreement and that
are not so qualified shall be true and correct in all material respects, in each
case on the date of this Agreement (except to the extent cured prior to the
Closing Date) and on the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties expressly speak as of an
earlier date; BFC shall have complied in all material respects with all
covenants contained in this Agreement to be performed by it prior to Closing;
and Buyer shall have received a certificate signed by an officer of BFC to such
effect;
(b) License Agreements and the Assignments. BFC Investments and BFC
--------------------------------------
shall each have executed an Assignment, BFC, Borden and BFC Investments shall
have executed the Borden License Agreement and BFC shall have executed the
Buyer's License Agreement;
(c) Services Agreement. BFC shall have executed the Services
------------------
Agreement;
(d) Puerto Rico Distributor Agreement. Borden Puerto Rico shall have
---------------------------------
executed the Puerto Rico Distributor Agreement;
<PAGE>
78
(e) Canadian Agreements. BFC shall have executed the Canadian
-------------------
Agreements;
(f) Bill of Sale. BFC shall have executed a general conveyance,
------------
assignment and bill of sale, substantially in the form of Exhibit J hereof;
(g) Consents and Approvals. All consents, waivers, authorizations and
----------------------
approvals of any person (other than those of any federal, state and foreign
governmental and regulatory authorities which shall be covered by Section
6.1(b)), required in connection with the execution, delivery and performance of
this Agreement (including without limitation the consents and approvals
identified on Schedule 3.3, but excluding consents and approvals of any party to
------------
any of the equipment leases to which BLC/City Corp. is a party listed under the
caption "Personal Property Leases" on such Schedule) shall have been duly
obtained and shall be in full force and effect on the Closing Date, except for
consents, waivers, authorizations and approvals the failure to obtain which,
individually or in the aggregate, would not have a Material Adverse Effect.
(h) No Material Adverse Change. During the period from the date
--------------------------
hereof to the Closing Date, there shall not have been any material adverse
change in the assets, properties, business, prospects, results of operations or
condition (financial or otherwise) of the Business taken as a whole.
(i) Opinions of Counsel. Buyer shall have received (x) a favorable
-------------------
opinion addressed to Buyer and, if requested by Buyer, Buyer's lenders, dated as
of the Closing Date, from the General Counsel of BFC, in form and substance
reasonably satisfactory to Buyer and its counsel substantially to the effect as
set forth on Exhibit K hereto and (y) a favorable opinion addressed to Buyer,
dated as of the Closing Date, from Simpson Thacher & Bartlett,
<PAGE>
79
in form and substance reasonably satisfactory to Buyer and its counsel
substantially to the effect as set forth on Exhibit L hereto.
(j) Financing. Buyer shall have received the proceeds of the
---------
financings necessary to consummate the transactions contemplated by this
Agreement.
7 CLOSING
-------
7.1 Closing Date.
------------
(a) Unless this Agreement shall have been terminated and the
transactions herein shall have been abandoned pursuant to Section 9 hereof, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
-------
take place at the offices of Simpson Thacher & Bartlett, at 10:00 a.m., New York
City time, on the date on which, or within two business days after the date on
which, all of the conditions to the Closing set forth in Section 6 hereof are
satisfied or waived, or such other date, time and place as shall be agreed upon
by BFC and Buyer (the actual date and time being herein called the "Closing
-------
Date").
- - - - ----
7.2 Buyer Deliveries.
----------------
At the Closing, Buyer shall deliver (i) the BFC Purchase Price and the IP
Purchase Price as provided in Section 2.1(b) hereof, (ii) the documents
described in Section 6.2 hereof, (iii) such other documents and instruments as
counsel for Buyer and BFC mutually agree to be reasonably necessary to
consummate the transactions described herein.
7.3 BFC Deliveries.
--------------
At the Closing, BFC and/or BFC Investments shall deliver or cause one or
more of its affiliates to deliver to Buyer the following executed instruments in
such form and substance as indicated in any applicable Schedule hereto, or as is
reasonably acceptable to Buyer:
(a) the documents described in Section 6.3 hereof;
<PAGE>
80
(b) bargain and sale deed with covenant against grantor's acts (or
local equivalent) to each of the BFC Owned Real Properties;
(c) a Non-Foreign Affidavit duly executed and acknowledged stating
that BFC is not a "foreign person" within the meaning of Section 1445(f);
(d) an omnibus assignment, reasonably acceptable to Buyer,
transferring to Buyer all of BFC's right, title and interest in and to the BFC
Owned Real Properties, the improvements located thereon and rights related
thereto;
(e) duly executed and acknowledged title affidavits and/or
certificates as the Title Company (as defined in Section 11.6) shall deem
necessary or desirable in form and substance satisfactory to such title company;
provided, that any such affidavit or certificate shall be in the usual and
- - - - --------
customary form and shall not increase the retained liability of BFC beyond that
specifically provided for in this Agreement in any material respect;
(f) to the extent available to BFC, all plans and specifications,
surveys, guarantees, warranties, operating manuals and keys related to or used
in connection with any of the BFC Real Properties;
(g) physical possession and control of the BFC Owned Real Properties
free and clear of all leases, licenses and occupancy agreements, tenants or
other occupants; and
(h) Such other documents and instruments as counsel for Buyer and BFC
mutually agree to be reasonably necessary to consummate the transactions
described herein.
8 INDEMNIFICATION
---------------
8.1 Indemnification by BFC.
----------------------
(a) BFC shall defend, indemnify and hold Buyer and its affiliates harmless
from and against and in respect of any and all actual losses, liabilities,
damages, judgments,
<PAGE>
81
settlements and expenses, including reasonable attorneys', consultants' and
experts' fees and expenses, incurred directly by Buyer and its affiliates
(hereinafter "Buyer Losses") which arise out of (i) any breach of any of the
------------
representations and warranties contained in Sections 3.1 through 3.22 (other
than Section 3.15), (ii) any breach of any of the representations and warranties
contained in Section 3.15, (iii) any breach by BFC of any of its covenants
(other than the covenant set forth in clause (b) of the first sentence of
Section 5.3(d)) in this Agreement which survive the Closing, (iv) the matters
set forth on Schedule 8.1, (v) the ownership, operation or use of any of the
------------
Excluded Assets or (vi) Excluded Liabilities. Buyer shall give BFC prompt
written notice of any third party claim which may give rise to any indemnity
obligation under this Section, together with the estimated amount of such claim,
and BFC shall have the right to assume the defense of any such claim through
counsel of its own choosing, by so notifying Buyer within thirty (30) days of
receipt of Buyer's written notice; provided, however, that BFC's counsel shall
be reasonably satisfactory to Buyer. Buyer's failure to give prompt notice
shall not affect the indemnification obligations hereunder except to the extent
such failure materially prejudices BFC. If Buyer desires to participate in any
such defense assumed by BFC, it may do so at its sole cost and expense. If BFC
declines to assume any such defense, it shall be liable for all reasonable costs
and expenses of defending such claim incurred by Buyer, including reasonable
fees and disbursements of counsel, consultants and experts and any settlement or
judgment resulting therefrom. Neither party shall, without the prior written
consent of the other party, which shall not be unreasonably withheld, settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction, deed
restriction or decree which would restrict the future activity or conduct of the
<PAGE>
82
other party or any subsidiary or affiliate thereof or if such settlement or
compromise does not include an unconditional release of the other party for any
liability arising out of such claim or demand or any related claim or demand.
(b) The foregoing obligation to indemnify Buyer and its affiliates set
forth in Section 8.1(a) shall be subject to each of the following limitations:
(i) BFC's indemnification obligation for any Buyer Losses under
clauses (i) or (ii) of Section 8.1(a) shall survive only to the extent
specified in Section 3.24 and thereafter all such representations and
warranties of BFC under this Agreement shall be extinguished. No claim for
recovery of Buyer Losses referred to in clauses (i) or (ii) of Section
8.1(a) may be asserted by Buyer after the applicable period referred to in
Section 3.24; provided, however, that claims first asserted in writing with
-------- -------
specificity within such period shall not thereafter be barred;
(ii) No reimbursement for Buyer Losses asserted against BFC under
clause (i) of Section 8.1(a) shall be required unless and until the
cumulative aggregate amount of such Buyer Losses equals or exceeds
$2,500,000 (the "Threshold") and then only to the extent that the
---------
cumulative aggregate amount of Buyer Losses, as finally determined, exceeds
the Threshold; provided that in calculating the Threshold, any Buyer Losses
--------
which individually total less than $25,000 each ("De Minimis Buyer Losses")
-----------------------
shall be excluded in their entirety and BFC in any event shall have no
liability hereunder to Buyer and its affiliates for any such De Minimis
Buyer Losses; provided, further, that such De Minimis Buyer Losses may not
-------- -------
exceed one million dollars ($1,000,000) in the aggregate;
<PAGE>
83
(iii) No reimbursement for Buyer Losses asserted against BFC under
clause (ii) of Section 8.1(a) shall be required unless and until the
cumulative aggregate amount of such Buyer Losses equals or exceeds $500,000
(the "Environmental Threshold") and then only to the extent that the
-----------------------
cumulative aggregate amount of Buyer Losses, as finally determined, exceeds
the Environmental Threshold; and
(iv) BFC's aggregate liability to Buyer and its affiliates under
clauses (i), (ii) and (iv) of Section 8.1(a) for Buyer Losses shall not
exceed 50% of the Purchase Price.
(c) The indemnities provided in this Section 8.1 shall survive the
Closing. Absent fraud, the indemnity provided in this Section 8.1 and injunctive
relief shall be the sole and exclusive remedies of the indemnified party against
the indemnifying party at law or equity for any matter covered by Sections
8.1(a) and (b).
(d) In no event shall BFC be liable to Buyer or its affiliates for
special, indirect, incidental, consequential or punitive damages.
(e) For purposes of clauses (i) or (ii) of Section 8.1(a), in determining
whether there has been a breach of any representation or warranty contained in
Sections 3.1 through 3.22 (other than in the first sentence of Section 3.5) or
the amount of any Buyer Losses resulting from any such breach, such
representations and warranties shall be read without regard to any "Material
Adverse Effect" qualifier contained therein.
(f) Notwithstanding any other provision of this Agreement to the contrary,
a Remedial Action that would otherwise be subject to indemnification under this
Agreement shall be subject to indemnification only to the extent that (i) the
Remedial Action is required by order of a governmental entity pursuant to
Environmental Laws or undertaking the
<PAGE>
84
Remedial Action is otherwise reasonable under the totality of the circumstances
(but without regard to the availability of indemnification pursuant to this
Agreement) and (ii) the Remedial Action is performed in the most cost-effective
manner reasonable under the totality of the circumstances; provided, however,
-------- -------
that any Remedial Action required by order of a governmental authority shall be
deemed cost-effective.
8.2 Indemnification by Buyer.
------------------------
(a) Buyer shall defend, indemnify and hold BFC and its affiliates harmless
from and against and in respect of any and all actual losses, liabilities,
damages, judgements, settlements and expenses, including reasonable attorney's,
consultants' and experts' fees and expenses, incurred directly by BFC and its
affiliates (hereinafter "Seller Losses"; together with Buyer Losses, "Losses")
------------- ------
arising out of or relating to (i) any breach of any of the representations and
warranties contained in Sections 4.1 through 4.5 hereof, (ii) any breach by
Buyer of any of its covenants (other than the covenant set forth in clause (b)
of the first sentence of Section 5.3(e)) in this Agreement which survives the
Closing, (iii) the ownership, operation or use of the Assets on or after the
Closing Date or (iv) all Assumed Liabilities. BFC shall give Buyer prompt
written notice of any third party claim which may give rise to any indemnity
obligation under this Section, together with the estimated amount of such claim,
and Buyer shall have the right to assume the defense of any such claim through
counsel of its own choosing, by so notifying BFC within thirty (30) days of
receipt of BFC's written notice; provided, however, that Buyer's counsel shall
be reasonably satisfactory to BFC. BFC's failure to give prompt notice shall
not affect the indemnification obligations hereunder except to the extent such
failure materially prejudices Buyer. If BFC desires to participate in any such
defense assumed by Buyer it may do so at its sole cost and expense.
<PAGE>
85
If Buyer declines to assume any such defense, it shall be liable for all costs
and expenses of defending such claim incurred by BFC and BFC Investments,
including reasonable fees and disbursements of counsel, consultants and experts
and any settlement or judgment resulting therefrom. Neither party shall,
without the prior written consent of the other party, which shall not be
unreasonably withheld, settle, compromise or offer to settle or compromise any
such claim or demand on a basis which would result in the imposition of a
consent order, injunction, deed restriction or decree which would restrict the
future activity or conduct of the other party or any subsidiary or affiliate
thereof or if such settlement or compromise does not include an unconditional
release of the other party for any liability arising out of such claim or
demand.
(b) The foregoing obligation to indemnify BFC and its affiliates set forth
in Section 8.2(a) shall be subject to each of the following limitations:
(i) Buyer's indemnification obligation for Seller Losses under clause
(i) of Section 8.2(a) shall survive only to the extent specified in Section
4.7 and thereafter all such representations and warranties of Buyer under
this Agreement shall be extinguished. No claim for the recovery of such
Seller Losses referred to in clause (i) of Section 8.2(a) may be asserted
by BFC and BFC Investments after the period specified in Section 4.7;
provided, however, that claims first asserted in writing with specificity
-------- -------
within such period shall not thereafter be barred;
(ii) No reimbursement for Seller Losses asserted against Buyer under
clause (i) of Section 8.2(a) shall be required unless and until the
cumulative aggregate amount of such Seller Losses equals or exceeds
$2,500,000 (the "Buyer Threshold") and then only to the extent that the
---------------
cumulative aggregate amount of Seller Losses, as
<PAGE>
86
finally determined, exceeds said Buyer Threshold; provided that in
--------
calculating such Threshold any Seller Losses which individually total less
than $25,000 each ("De Minimis Seller Losses") shall be excluded in their
------------------------
entirety and Buyer in any event shall have no liability hereunder to BFC
and its affiliates for any such De Minimis Seller Losses; provided,
--------
further, that such De Minimis Seller Losses may not exceed one million
-------
dollars ($1,000,000) in the aggregate.
(iii) Buyer's liability to BFC and its affiliates under clause (i) of
Section 8.2(a) for Seller Losses shall not exceed 50% of the Purchase
Price.
(c) The indemnities provided in this Section 8.2 shall survive the
Closing. Absent fraud, the indemnity provided in this Section 8.2 and injunctive
relief shall be the sole and exclusive remedies of the indemnified party against
the indemnifying party at law or equity for any matter covered by Sections
8.2(a) and (b).
(d) In no event shall Buyer be liable to BFC or its affiliates for
special, indirect, incidental, consequential or punitive damages.
(e) For purposes of clause (i) of Section 8.2(a), in determining whether
there has been a breach of any representation or warranty contained in Sections
4.1 through 4.5 or the amount of any Seller Losses resulting from any such
breach, such representations and warranties shall be read without regard to any
"Material Adverse Effect" qualifier contained therein.
8.3 Indemnification Calculations.
----------------------------
(a) The amount of any Seller Losses or Buyer Losses for which
indemnification is provided under this Section 8.1 or 8.2, as applicable, shall
be computed net of any insurance proceeds received by the indemnified party in
connection with such Losses.
<PAGE>
87
If the amount with respect to which any claim is made under Section 8.1 or 8.2,
as applicable (an "Indemnity Claim") gives rise to an actual Tax Benefit (as
---------------
defined below) to the party making the claim, the indemnity payment shall be
reduced by the amount of the Tax Benefit available to the party making the
claim. To the extent such Indemnity Claim does not give rise to an actual Tax
Benefit, if the amount with respect to which any Indemnity Claim is made gives
rise to a subsequently realized Tax Benefit to the party that made the claim,
such party shall refund to the indemnifying party the amount of such Tax Benefit
when, as and if realized. For the purposes of this Agreement, any subsequently
realized Tax Benefit shall be treated as though it were a reduction in the
amount of the initial Indemnity Claim, and the liabilities of the parties shall
be redetermined as though both occurred at or prior to the time of the indemnity
payment. For purposes of this Section 8.3, a "Tax Benefit" means an amount by
-----------
which the tax liability of the party (or group of corporations including the
party) is reduced (including, without limitation, by deduction, reduction of
income by virtue of increased tax basis or otherwise, entitlement to refund,
credit or otherwise) plus any related interest received from the relevant taxing
authority. Where a party has other losses, deductions, credits or items
available to it, the determination of any Tax Benefit shall be calculated by
comparing the tax liability of the indemnified party, computed without regard to
any losses, deductions, credits or items relating to the indemnity claim, to the
tax liability of the indemnified party, computed after taking into account any
losses, deductions, credits or items relating to the indemnity claim. In the
event that there should be a determination disallowing the Tax Benefit, the
indemnifying party shall be liable to refund to the indemnified party the amount
of any related reduction previously allowed or payments previously made to the
indemnifying party pursuant to this Section 8.3. The amount of the
<PAGE>
88
refunded reduction or payment shall be deemed a payment under this Section 8.3
and thus shall be paid subject to any applicable reductions under this Section
8.3.
(b) The parties agree that any Losses for which indemnification is
provided under Section 8.1 and 8.2 and indemnification payments made pursuant to
this Agreement shall be treated for tax purposes as an adjustment to the
Purchase Price, unless otherwise required by applicable law.
9 TERMINATION
-----------
9.1 Termination Events.
------------------
This Agreement may be terminated and the transactions contemplated herein
may be abandoned:
(a) by mutual consent of the parties hereto;
(b) by BFC, in its sole discretion, after the later of (i) January
31, 1998 or (ii) forty-five days following the Financial Statement Date (as
defined below), if Buyer shall not have received, subject only to the
satisfaction of the conditions to Buyer's obligations to consummate the Purchase
set forth in Section 6.1 and 6.3 (other than Section 6.3(k)), all of the
proceeds of the Financing, and, at BFC's request, provided evidence thereof to
BFC, which evidence shall be in form and substance reasonably satisfactory to
BFC. The "Financial Statement Date" shall mean the date on which the Financial
------------------------
Statements shall be deemed, for purposes of this Agreement, to be in compliance
with the applicable provisions of Regulation S-X. The Financial Statement Date
shall be deemed to have occurred on the seventh day following the date of this
Agreement unless Buyer shall have provided BFC with a notice setting forth
Buyer's belief that the Financial Statements are not in compliance with
Regulation S-X and the basis of its belief in reasonable detail. Upon receipt of
any such
<PAGE>
89
notice within such time period, BFC and Buyer shall cooperate in the preparation
of financial statements for the Business for inclusion by Buyer in the Public
Filings that comply with the applicable provisions of Regulation S-X, and the
date on which such financial statements so comply, in the reasonable judgment of
the parties acting in good faith, shall be deemed to be the Financial Statement
Date.
(c) by BFC or Buyer, by notice to the other, if the Closing shall not
have been consummated on or before March 2, 1998, unless extended by written
agreement of the parties hereto, so long as the party terminating this Agreement
shall not be in default or breach hereunder.
(d) by BFC or Buyer, by notice to the other, if the other shall have
committed a material breach of this Agreement, and such breach is not cured
within sixty (60) days after delivery of a written notice to the breaching party
specifying such default.
9.2 Effect of Termination. In the event of any termination of the
---------------------
Agreement as provided in Section 10.1 above, this Agreement shall forthwith
become wholly void and of no further force and effect and there shall be no
liability on the part of Buyer or BFC Investments or BFC, except that (i) the
obligations of Buyer and BFC under Sections 6.2, 6.11 and 12.6 of this Agreement
shall remain in full force and effect and (ii) termination shall not preclude
either party from suing the other party for breach of this Agreement.
10 ALTERNATIVE DISPUTE RESOLUTION
------------------------------
The parties shall attempt in good faith to resolve any dispute arising out
of or relating to this Agreement promptly by negotiations between executives who
have authority to settle the controversy. Any party may give the other
party(ies) written notice of any dispute not resolved in the normal course of
business. Within twenty (20) days after delivery of said
<PAGE>
90
notice, executives of both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within sixty (60) days of the disputing party's original
notice, or if the parties fail to meet within twenty (20) days, either party may
initiate legal proceedings to resolve the controversy or claim. If a party's
negotiator intends to be accompanied at a meeting by an attorney, the other
party's negotiator shall be given at least three (3) working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
11 MISCELLANEOUS AGREEMENTS OF THE PARTIES
---------------------------------------
11.1 Notices.
-------
All communications provided for hereunder shall be in writing and shall be
deemed to be given when delivered in person or by private courier with receipt,
when telefaxed and received, or three (3) days after being deposited in the
United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Buyer: c/o GE Investment Private Placement Partners II,
a Limited Partnership
3003 Summer Street
Stamford, Connecticut 06905
Attn: Andreas Hildebrand
Fax: 203-326-2375
and
c/o Warburg Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017
Attn: Kewsong Lee
Fax: 212-878-6162
<PAGE>
91
With a Copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Steven J. Gartner, Esq.
Fax: 212-821-8111
If to BFC or BFC
Investments: Nancy G. Brown
Vice President,
Legal and Corporate Affairs
Borden Foods Corporation
180 East Broad Street
Columbus, Ohio 43215-3799
Fax: 614-225-4420
With a Copy to: William F. Stoll
Senior Vice President and
General Counsel
Borden Inc.
180 East Broad Street
Columbus, OH 43215-3799
Fax: 614-627-8374
or to such other address as any such party shall designate by written notice to
the other parties hereto.
11.2 Bulk Transfers.
--------------
Buyer waives compliance with the provisions of all applicable laws relating
to bulk transfers in connection with this sale of assets.
11.3 Transaction Taxes.
-----------------
BFC and Buyer agree to each pay one-half of all sales and transfer taxes,
if any, which may be payable with respect to the consummation of the
transactions contemplated by this Agreement and to the extent any exemptions
from such taxes are available Buyer and BFC shall cooperate to prepare any
certificates or other documents necessary to claim such exemptions.
<PAGE>
92
11.4 Further Assurances; Asset Returns.
---------------------------------
Upon request from time to time, BFC shall execute or cause BFC Investments
to execute and deliver all documents, take all rightful oaths, and do all other
acts that may be reasonably necessary or desirable, in the reasonable opinion of
counsel for Buyer, to perfect or record the title of Buyer, or any successor of
Buyer, to the Assets transferred or to be transferred under this Agreement, or
to aid in the prosecution, defense, or other litigation of any rights arising
from said transfer (provided that Buyer shall reimburse BFC and/or BFC
Investments for all out of pocket costs and expenses resulting from any such
request). In the event that Buyer receives any assets of BFC that are not
intended to be transferred pursuant to the terms of this Agreement, whether or
not related to the Business, Buyer agrees to promptly return such assets to BFC
at BFC's expense.
11.5 Other Covenants.
---------------
To the extent that any consents needed to assign to Buyer any of the Assets
have not been obtained on or prior to the Closing Date this Agreement shall not
constitute an assignment or attempted assignment thereof if such assignment or
attempted assignment would constitute a breach thereof. If any such consent
shall not be obtained on or prior to the Closing Date, then (i) BFC and Buyer,
if required under applicable law, shall use their reasonable efforts in good
faith to obtain such consent as promptly as practicable thereafter and (ii) if
in the reasonable judgment of Buyer such consent may not be obtained, the
parties shall use reasonable efforts in good faith to cooperate, and to cause
each of their respective affiliates to cooperate, in any lawful arrangement
designed to provide for Buyer the benefits under any such Assets.
<PAGE>
93
11.6 Expenses.
--------
Subject to Section 11.3, BFC and Buyer shall each pay their respective
expenses (such as legal, investment banker and accounting fees) incurred in
connection with the origination, negotiation, execution and performance of this
Agreement and the agreements relating to Buyer's financing arrangements in
connection herewith, except that (i) Buyer shall be responsible for the payment
of any filing fee under the Hart-Scott Act and (ii) BFC shall pay one-half of
the amount paid by Buyer to obtain title commitments and surveys relating to the
BFC Owned Properties provided, that BFC shall not be required to pay more than
--------
$40,000 pursuant to this clause (ii) and BFC shall have no liability under this
clause (ii) unless the title insurance order is placed with a title company (the
"Title Company") through a title agent recommended by BFC.
-------------
11.7 Non-Assignability.
-----------------
This Agreement shall inure to the benefit of and be binding on the parties
hereto and their respective successors and permitted assigns. This Agreement
shall not be assigned by either party hereto without the express prior written
consent of the other party, and any attempted assignment, without such consents,
shall be null and void, provided, that Buyer may assign its rights hereunder to
-------- ----
an affiliate and to any party providing financing in connection with the
transactions contemplated hereby, provided, further, that no such assignment
-------- -------
shall relieve Buyer of any of its obligations hereunder.
11.8 Amendment; Waiver.
-----------------
This Agreement may be amended, supplemented or otherwise modified only by a
written instrument executed by the parties hereto. No waiver by either party of
any of the provisions hereof shall be effective unless explicitly set forth in
writing and executed by the
<PAGE>
94
party so waiving. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants, or agreements contained herein, and in any documents delivered or to
be delivered pursuant to this Agreement and in connection with the Closing
hereunder. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
11.9 Schedules and Exhibits.
----------------------
All exhibits and schedules hereto are hereby incorporated by reference and
made a part of this Agreement. All statements contained in schedules, exhibits,
certificates and other instruments attached hereto or delivered or furnished on
behalf of BFC and BFC Investments pursuant hereto or in connection with the
transactions contemplated hereby, shall be deemed representations and warranties
by BFC. Any fact or item which is clearly disclosed on any Schedule or Exhibit
to this Agreement or in the Financial Statements in such a way as to make its
relevance to a representation or representations made elsewhere in this
Agreement or to the information called for by another Schedule or other
Schedules (or Exhibit or other Exhibits) to this Agreement readily apparent
shall be deemed to be an exception to such representation or representations or
to be disclosed on such other Schedule or Schedules (or Exhibit or Exhibits), as
the case may be, notwithstanding the omission of a reference or cross-reference
thereto. Any fact or item disclosed on any Schedule or Exhibit hereto shall not
by reason only of such inclusion be deemed to be material and shall not be
employed as a point of reference in determining any standard of materiality
under this Agreement.
<PAGE>
95
11.10 Third Parties.
-------------
Except as provided in Section 5.22, this Agreement does not create any
rights, claims or benefits inuring to any person that is not a party hereto nor
create or establish any third party beneficiary hereto.
11.11 Governing Law.
-------------
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, except for the BFC Real Property which shall be
governed by the laws of the jurisdictions where such properties are located.
11.12 Consent to Jurisdiction.
-----------------------
Each of the parties hereto, irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York located in the borough of Manhattan in the City of New York, or if such
court does not have jurisdiction, the Supreme Court of the State of New York,
New York County, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto, further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
in Section 11.1 shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the parties hereto, irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) the United States District Court
for the Southern District of New York or (b) the Supreme Court of the State of
New York, New York County, and hereby further irrevocably and unconditionally
waives and agrees not to
<PAGE>
96
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
11.13 Certain Definitions.
-------------------
For purposes of this Agreement, the term:
(i) "affiliate" of a person means a person that directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(ii) "person" means an individual, corporation, partnership,
------
association, trust, incorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(iii) "subsidiary" or "subsidiaries" of Buyer, BFC or any
---------- ------------
other person means any corporation, partnership, joint venture or other
legal entity of which Buyer, BFC or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holder of which is generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity; and
(iv) "the knowledge of" or "the best knowledge of" a party
---------------- ---------------------
hereto when modifying any representation and warranty shall mean that such
party has no knowledge that such representation and warranty is not true
and correct to the same extent as provided in the applicable representation
and warranty, and that:
(A) such party has made appropriate investigations and
inquiries of its officers and responsible employees; and
<PAGE>
97
(B) nothing has come to its attention in the course of such
investigation and inquiries or otherwise which would cause such
party, in the exercise of due diligence, to believe that such
representation and warranty is not true and correct in all material
respects.
BFC shall be deemed to have satisfied the requirements of Subsection
11.13(iv) above by making appropriate investigations and inquiries of the
officers and employees of BFC and BFC Investments listed on Schedule 11.13, and
--------------
no knowledge of any other officer or employee of BFC or BFC Investments shall be
imputed to the persons listed on Schedule 11.13 or to BFC.
--------------
11.14 Entire Agreement.
----------------
This Agreement, and the Schedules and Exhibits hereto set forth the entire
understanding of the parties hereto and no modifications or amendments to this
Agreement shall be binding on the parties unless in writing and signed by the
party or parties to be bound by such modification or amendment.
11.15 Specific Performance.
--------------------
The parties agree that if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that the parties shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
law or equity.
<PAGE>
98
11.16 Section Headings; Table of Contents.
-----------------------------------
The section headings contained in this Agreement and the Table of Contents
to this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
11.17 Severability.
------------
If any provision of this Agreement shall be declared by any court of
competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
11.18 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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BORDEN FOODS CORPORATION
By: /s/ Nancy G. Brown
----------------------------------
Name: Nancy G. Brown
Title: Vice President, General
Counsel and Secretary
EAGLE FAMILY FOODS, INC.
By: /s/ John O'C Nugent
-------------------------------------
Name: John O'C Nugent
Title:President and Chief Executive Officer
The undersigned joins in this Agreement for purposes of Sections 1.1(b), 1.2(b),
1.3(b), 1.4, 1.5, 2.1, 5.4, 5.6, 6.2, 7.3 and 11.4 hereunder.
BFC INVESTMENTS, L.P.
By: Borden Foods Corporation, its
General Partner
By: /s/ Phyllis R. Yeatman
--------------------------------------
Name: Phyllis R. Yeatman
Title: Assistant Secretary
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EAGLE FAMILY FOODS HOLDINGS, INC.
* * * * * * * *
Eagle Family Foods Holdings, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. That the name of the Corporation is Eagle Family Foods Holdings, Inc.
2. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on December 22, 1997.
3. The Board of Directors of the Corporation, by unanimous writtent
consent dated January 14, 1998, adopted resolutions adopting the Amended and
Restated Certificate of Incorporation.
4. The Corporation has not received payment for any of its capital stock.
5. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 241 and 245 of the General Corporation Law
of the State of Delaware.
6. The text of the Amended and Restated Certificate of Incorporation
reads as follows:
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EAGLE FAMILY FOODS HOLDINGS, INC.
* * * * * * * *
Eagle Family Foods Holdings, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: The name of the corporation (the "Corporation") is: EAGLE
FAMILY FOODS HOLDINGS, INC.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is (a) 1,200,000 shares of Common Stock, each of
which shall have a par value of $.01 per share; and (b) 1,000,000 shares of
Preferred Stock, each of which shall have a par value of $.01 per share (the
"Preferred Stock"), of which 816,750 shares shall be designated as "Series A
Non-Voting Preferred Stock" (the "Series A Preferred Stock"). The Preferred
Stock may be issued from time to time in one or more series. The Board of
Directors may fix by resolution the designations, preferences and rights of such
Preferred Stock in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware.
The Series A Preferred Stock and the Common Stock shall have the
designations, powers, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, as set
forth in this Article FOURTH.
SECTION A: SERIES A PREFERRED STOCK
(1) Dividends. (a) The holders of the Series A Preferred Stock shall
---------
be entitled to receive, when and as declared by the Board of Directors out of
any funds legally available therefor, preferential cumulative dividends in cash
at the rate of ten percent (10%) per share per annum of the Stated Value thereof
(as hereinafter defined) and not more, payable as the Board of Directors of the
Corporation may determine, before
<PAGE>
any dividends shall be set apart for or paid upon the Common Stock or any other
stock ranking as to dividends and on liquidation junior to the Series A
Preferred Stock (such stock being referred to hereinafter collectively as
"Junior Stock") in any year. Subject to the foregoing and to Section A(1)(b) of
this Article FOURTH, the Corporation shall not be obligated to pay dividends
until the redemption of such shares of Series A Preferred Stock in accordance
with the terms of Section A(4) of this Article FOURTH. All dividends declared
upon Series A Preferred Stock shall be declared pro rata per share. As used in
this Section A(1) of this Article FOURTH, the term "Stated Value" with respect
to each share of Series A Preferred Stock shall mean the amount of One Hundred
Dollars ($100.00) (subject to adjustment in the event of any stock dividend,
stock split, stock distribution or combination with respect to such shares).
(b) Dividends on the Series A Preferred Stock shall be cumulative and
shall accrue on a daily basis from the date of issuance, whether or not declared
and whether or not in any fiscal year there shall be net profits or surplus
available for the payment of dividends in such fiscal year, so that if in any
fiscal year or years, dividends in whole or in part are not paid upon the Series
A Preferred Stock, unpaid dividends shall accumulate as against the holders of
the Junior Stock. In addition, all accrued but unpaid dividends on the Series A
Preferred Stock shall compound on a semi-annual basis on each December 31 and
June 30.
(c) For so long as the Series A Preferred Stock remains outstanding,
the Corporation shall not pay any dividend upon the Junior Stock, whether in
cash or other property (other than shares of Junior Stock), or purchase, redeem
or otherwise acquire any such Junior Stock. Notwithstanding the provisions of
this Section A(1)(c) of this Article FOURTH, without declaring or paying
dividends on the Series A Preferred Stock, the Corporation may, subject to
applicable law, repurchase or redeem shares of capital stock of the Corporation
from current or former officers or employees of the Corporation pursuant to the
terms of repurchase or similar agreements in effect from time to time, provided
that such agreements have been approved by the Board of Directors.
(2) Liquidation, Dissolution or Winding Up. (a) In the event of any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of any other Preferred
Stock of the Corporation ranking on liquidation prior and in preference to the
Series A Preferred Stock (such Preferred Stock being referred to hereinafter as
"Senior Preferred Stock") upon such liquidation,
-2-
<PAGE>
dissolution or winding up, but before any payment shall be made to the holders
of Junior Stock, an amount equal to the Series A Redemption Price (as
hereinafter defined). If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for the
distribution to its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Preferred Stock shall be insufficient
to pay the holders of shares of Series A Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock,
and any class of stock ranking on liquidation on a parity with the Series A
Preferred Stock, shall, before any payment shall be made to the holders of
Junior Stock, share ratably, in any distribution of the remaining assets and
funds of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect to the shares held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Senior Preferred Stock and Series A Preferred Stock and any
other series of Preferred Stock upon the dissolution, liquidation or winding up
of the Corporation, the holders of shares of Junior Stock then outstanding shall
be entitled to receive the remaining assets and funds of the Corporation
available for distribution to its stockholders.
(c) The merger or consolidation of the Corporation into or with
another corporation, the merger or consolidation of any other corporation into
or with the Corporation, or the sale, conveyance, mortgage, pledge or lease of
all or substantially all the assets of the Corporation shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation for purposes of this
Section A(2) of this Article FOURTH.
(3) Voting. (a) Except as expressly provided in Section A(3)(b) of
------
this Article FOURTH or as required by law, holders of Series A Preferred Stock
shall not be entitled to vote on any matters presented to the stockholders of
the Corporation.
(b) The Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of at least two-thirds of the
then outstanding of shares of Series A Preferred Stock, amend, alter or repeal
the preferences, special rights or other powers of the Series A Preferred Stock
so as to affect adversely the Series A Preferred Stock. For this purpose, the
authorization or issuance of any series of Preferred Stock with preference or
priority over, or being on a parity with the Series A Preferred Stock as to the
right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall be deemed so to affect
adversely the Series A Preferred Stock.
-3-
<PAGE>
(4) Redemption. (a) The Series A Preferred Stock shall be subject to
----------
mandatory redemption (to the extent that such redemption shall not violate any
applicable provisions of the laws of the State of Delaware) at a price per share
equal to One Hundred Dollars ($100.00) (subject to adjustment in the event of
any stock dividend, stock split, stock distribution or combination with respect
to such shares), plus an amount equal to any and all dividends accrued and
unpaid thereon as of the date of such redemption (the "Series A Redemption
Price") (i) upon the closing of a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of equity securities for the account of the Corporation (an
"Initial Public Offering"), or (ii) upon the sale of all or substantially all of
the assets of the Corporation or the merger or consolidation of the Corporation
with or into any other corporation or other entity in which the holders of the
Corporation's outstanding shares before the merger or consolidation do not
retain a majority of the voting power of the surviving corporation or other
entity or (iii) upon the acquisition by any person of shares of Common Stock
representing a majority of the issued and outstanding shares of Common Stock
then outstanding. If the Corporation is unable to redeem any shares of Series A
Preferred Stock because such redemption would violate the applicable laws of the
State of Delaware, then the Corporation shall not be obligated to redeem such
shares at such time but shall redeem such shares as soon thereafter as the
restrictions precluding such redemption or imposing such liability shall no
longer be applicable.
(b) In the event of any redemption of only a part of the then
outstanding Series A Preferred Stock, the Corporation shall effect such
redemption pro rata among the holders thereof (based on the number of shares of
Series A Preferred Stock held on the date of notice of redemption).
(c) In the case of an Initial Public Offering resulting in net
proceeds to the Corporation of not less than $25,000,000, any holder of Series A
Preferred Stock may elect, by giving notice to the Corporation at least ten (10)
days prior to the date or estimated dated fixed as the date of redemption of
Series A Preferred Stock, to receive the Series A Redemption Price then payable
in fully paid and nonassessable shares of the Corporation's Common Stock, par
value $0.01 per share (the "Common Stock"), in which case the Corporation shall
take such action as shall be necessary to issue to such electing holder in such
exchange the applicable number of shares of Common Stock. The number of shares
of Common Stock to be issued in exchange for each share of Series A Preferred
Stock being redeemed shall be determined by dividing (i) the Series A Redemption
Price by (ii) the price per share at which the Common Stock is sold to the
public in the Initial Public Offering less underwriting discounts and
commissions per share of such Common Stock (the "Net Initial
-4-
<PAGE>
Public Offering Price"). To the extent that all or any part of the Series A
Redemption Price payable in shares of Common Stock would result in the issuance
of a fractional share of Common Stock (which shall be determined with respect to
the aggregate number of shares of Common Stock held of record by each holder),
then the product of such fraction multiplied by the Net Initial Public Offering
Price shall be paid in cash (unless there are not legally available funds with
which to make such cash payment, in which event such cash payment shall be made
as soon as possible thereafter).
(d) At least thirty (30) days, but not more than 90 days, prior to
the date or estimated date fixed as the date of the redemption thereof, written
notice shall be mailed, postage prepaid, to each holder of record of Series A
Preferred Stock to be redeemed, at his or its post office address last shown on
the records of the Corporation, notifying such holder of the number of shares so
to be redeemed, specifying the date or estimated date for such redemption and
calling upon such holder to surrender to the Corporation, in the manner and at
the place designated, his or its certificate or certificates representing the
shares to be redeemed (such notice is hereinafter referred to as the "Series A
Redemption Notice"). On or prior to the date or estimated date fixed as the date
of the redemption thereof, each holder of Series A Preferred Stock to be
redeemed shall surrender to the Corporation or to any transfer agent of the
Corporation, his or its certificate or certificates representing such shares,
duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer, and otherwise in the manner and at the place designated
in the Series A Redemption Notice, and on the date actually fixed for the
redemption of such shares, the Series A Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and, to the extent the Series A Redemption
Price is being paid in shares of Common Stock, the holder of such shares of
Series A Preferred Stock shall be entitled to receive stock certificates
evidencing the number of shares of Common Stock for which such shares of Series
A Preferred Stock have been exchanged, and in each case, each surrendered
certificate of Series A Preferred Stock shall be canceled. In the event less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the date fixed as the date of the redemption thereof, unless there shall have
been a default in payment of the Series A Redemption Price (in which event such
rights shall be exercisable until such default is cured), all rights of the
holders of the Series A Preferred Stock designated for redemption in the Series
A Redemption Notice as holders of Series A Preferred Stock of the Corporation
(except the right to receive the Series A Redemption Price and the payment in
respect of any fractional share without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall
-5-
<PAGE>
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. Any shares of Series A Preferred Stock
so redeemed shall be permanently retired, shall no longer be deemed outstanding
and shall not under any circumstances be reissued, and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce the authorized Series A Preferred Stock accordingly.
(e) Except as provided in Section A(4)(a) of this Article FOURTH, the
Corporation shall have no right to redeem the shares of Series A Preferred
Stock. Nothing herein contained shall prevent or restrict the purchase by the
Corporation, from time to time either at public or private sale, of the whole or
any part of the Series A Preferred Stock at such price or prices as the
Corporation may determine, subject to the provisions of applicable law.
Section B: COMMON STOCK
(1) Dividends. Subject to the preferences and other rights of the
---------
Series A Preferred Stock as set out above, the holders of Common Stock shall be
entitled to receive dividends when and as declared by the Board of Directors out
of funds legally available therefor.
(2) Liquidation. In the event of any liquidation, dissolution or
-----------
winding up of the affairs of the Corporation, voluntary or involuntary, after
payment or provision for payment to the holders of Series A Preferred Stock of
the amounts to which they may be entitled as set out above, the remaining assets
of the Corporation available to stockholders shall be distributed equally per
share to the holders of Common Stock.
(3) Voting Rights. Each holder of Common Stock entitled to vote shall
-------------
at every meeting of the stockholders of the Corporation be entitled to one vote
for each share of Common Stock registered in his or her name on the record of
stockholders.
FIFTH: In furtherance and not in limitation of the powers conferred
by statute, the By-Laws of the Corporation may be made, altered, amended or
repealed by the stockholders or by a majority of the entire board of directors.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the
-6-
<PAGE>
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all stockholders or class of stockholders of this Corporation, as the case may
be, and also on this Corporation.
SEVENTH: Elections of directors need not be by written ballot.
EIGHTH: (a) Indemnification. The Corporation shall indemnify to the
---------------
fullest extent permitted under and in accordance with the laws of the State of
Delaware any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, trustee,
employee or agent of or in any other capacity with another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
(b) Payment of Expenses. Expenses incurred in defending a civil or
-------------------
criminal action, suit or proceeding shall (in the case of any action, suit or
proceeding against a director of the Corporation) or may (in the case of any
action, suit or proceeding against an officer, trustee, employee or agent) be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article.
-7-
<PAGE>
(c) Nonexclusivity of Provision. The indemnification and other rights
---------------------------
set forth in this paragraph shall not be exclusive of any provisions with
respect thereto in the By-Laws or any other contract or agreement between the
Corporation and any officer, director, employee or agent of the Corporation.
(d) Effect of Repeal. Neither the amendment nor repeal of
----------------
subparagraph (a), (b) or (c) of this Article EIGHTH, nor the adoption of any
provision of this Amended and Restated Certificate of Incorporation inconsistent
with subparagraph (a), (b) or (c) of this Article EIGHTH, shall eliminate or
reduce the effect of subparagraphs (a), (b) and (c) of this Article EIGHTH, in
respect of any matter occurring before such amendment, repeal or adoption of an
inconsistent provision or in respect of any cause of action, suit or claim
relating to any such matter which would have given rise to a right of
indemnification or right to receive expenses pursuant to subparagraph (a), (b)
or (c) of this Article EIGHTH, if such provision had not been so amended or
repealed or if a provision inconsistent therewith had not been so adopted.
(e) Limitation on Liability. No director shall be personally liable
-----------------------
to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director (a) shall be liable under Section 174 of the General Corporation Law of
the State of Delaware or any amendment thereto or successor provision thereto,
or (b) shall be liable by reason that, in addition to any and all other
requirements for liability, he:
(i) shall have breached his duty of loyalty to the Corporation
or its stockholders;
(ii) shall not have acted in good faith or, in failing to act,
shall not have acted in good faith;
(iii) shall have acted in a manner involving intentional
misconduct or a knowing violation of law or, in failing to act,
shall have acted in a manner involving intentional misconduct or
a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
Any person seeking indemnification under this Article EIGHTH shall be deemed to
have met the standard of conduct required for such indemnification unless the
contrary shall be established. If the General Corporation Law of the State of
Delaware is amended after the date hereof to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation
-8-
<PAGE>
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
-9-
<PAGE>
IN WITNESS WHEREOF, Eagle Family Foods Holdings, Inc. has caused this
Amended and Restated Certificate of Incorporation to be signed by John O'C.
Nugent, its Chief Executive Officer and President, this 14th day of January
1998.
/s/ John O'C. Nugent
-----------------------------
John O'C. Nugent
Chief Executive Officer and
President
-10-
<PAGE>
Exhibit 3.2
EAGLE FAMILY FOODS HOLDINGS, INC.
Incorporated Under the Laws of
the State of Delaware
BY-LAWS
-------
ARTICLE I
OFFICES.
The registered office of Eagle Family Foods Holdings, Inc. (the
"Corporation") in Delaware shall be at 1209 Orange Street in the City of
Wilmington, County of New Castle, in the State of Delaware, and The Corporation
Trust Company shall be the resident agent of this Corporation in charge thereof.
The Corporation may also have such other offices at such other places, within or
without the State of Delaware, as the Board of Directors may from time to time
designate or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS.
Section 1. Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and the transaction of any other business shall be held on
the first day of June each year, or as soon after such date as may be
practicable, in such city and state and at such time and place as may be
designated by the Board of Directors, and set forth in the notice of such
meeting. If said day be a legal holiday, said meeting shall be held on the next
succeeding business day. At the annual meeting any business may be transacted
and any corporate action may be taken, whether stated in the notice of meeting
or not, except as otherwise expressly provided by statute or the Certificate of
Incorporation.
Section 2. Special Meetings. Special meetings of the stockholders for any
----------------
purpose may be called at any time by the Board of Directors, or by the
President, and shall be called by the President at the request of the holders of
a majority of the outstanding shares of capital stock entitled to vote. Special
meetings shall be held at such place or places within or without the State of
Delaware as shall from time to time be designated by the Board of Directors and
stated in the notice of such meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
Section 3. Notice of Meetings. Written notice of the time and place of
------------------
any stockholder's meeting, whether annual or special, shall be given to each
stockholder entitled to vote
<PAGE>
thereat, by personal delivery or by mailing the same to him at his address as
the same appears upon the records of the Corporation at least ten (10) days but
not more than sixty (60) days before the day of the meeting. Notice of any
adjourned meeting need not be given except by announcement at the meeting so
adjourned, unless otherwise ordered in connection with such adjournment. Such
further notice, if any, shall be given as may be required by law.
Section 4. Quorum. Any number of stockholders, together holding at least
------
a majority of the capital stock of the Corporation issued and outstanding and
entitled to vote, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws.
Section 5. Adjournment of Meetings. If less than a quorum shall attend
-----------------------
at the time for which a meeting shall have been called, the meeting may adjourn
from time to time by a majority vote of the stockholders present or represented
by proxy and entitled to vote without notice other than by announcement at the
meeting until a quorum shall attend. Any meeting at which a quorum is present
may also be adjourned in like manner and for such time or upon such call as may
be determined by a majority vote of the stockholders present or represented by
proxy and entitled to vote. At any adjourned meeting at which a quorum shall be
present, any business may be transacted and any corporate action may be taken
which might have been transacted at the meeting as originally called.
Section 6. Voting List. The Secretary shall prepare and make, at least
-----------
ten days before every election of directors, a complete list of the stockholders
entitled to vote, arranged in alphabetical order and showing the address of each
stockholder and the number of shares of each stockholder. Such list shall be
open at the place where the election is to be held for said ten days, to the
examination of any stockholder, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
Section 7. Voting. Each stockholder entitled to vote at any meeting may
------
vote either in person or by proxy, but no proxy shall be voted on or after three
years from its date, unless said proxy provides for a longer period. Each
stockholder entitled to vote shall at every meeting of the stockholders be
entitled to one vote for each share of stock registered in his name on the
record of stockholders. At all meetings of stockholders all matters, except as
otherwise provided by statute, shall be
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<PAGE>
determined by the affirmative vote of the majority of shares present in person
or by proxy and entitled to vote on the subject matter. Voting at meetings of
stockholders need not be by written ballot.
Section 8. Record Date of Stockholders. The Board of Directors is
---------------------------
authorized to fix in advance a date not exceeding sixty days nor less than ten
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining the consent of stockholders for any
purposes, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent, and, in such case, such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation, after such record date fixed as aforesaid.
Section 9. Action Without Meeting. Any action required or permitted to be
----------------------
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Section 10. Conduct of Meetings. The Chairman of the Board of Directors or,
-------------------
in his absence the President or any Vice President designated by the Chairman of
the Board, shall preside at all regular or special meetings of stockholders. To
the
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<PAGE>
maximum extent permitted by law, such presiding person shall have the power to
set procedural rules, including but not limited to rules respecting the time
allotted to stockholders to speak, governing all aspects of the conduct of such
meetings.
ARTICLE III
DIRECTORS.
Section 1. Number and Qualifications: The board of directors shall
-------------------------
consist initially of nine (9) directors, and thereafter shall consist of such
number as may be fixed from time to time by resolution of the Board. The
directors need not be stockholders.
Section 2. Election of Directors: The directors shall be elected by the
---------------------
stockholders at the annual meeting of stockholders.
Section 3. Duration of Office: The directors chosen at any annual meeting
------------------
shall, except as hereinafter provided, hold office until the next annual
election and until their successors are elected and qualify.
Section 4. Removal and Resignation of Directors: Any director may be
------------------------------------
removed from the Board of Directors, with or without cause, by the holders of a
majority of the shares of capital stock entitled to vote, either by written
consent or consents or at any special meeting of the stockholders called for
that purpose, and the office of such director shall forthwith become vacant.
Any director may resign at any time. Such resignation shall take effect at
the time specified therein, and if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall
not be necessary to make it effective, unless so specified therein.
Section 5. Filling of Vacancies: Any vacancy among the directors,
--------------------
occurring from any cause whatsoever, may be filled by a majority of the
remaining directors, though less than a quorum, provided, however, that the
-------- -------
stockholders removing any director may at the same meeting fill the vacancy
caused by such removal, and provided, further, that if the directors fail to
-------- -------
fill any such vacancy, the stockholders may at any special meeting called for
that purpose fill such vacancy. In case of any increase in the number of
directors, the additional directors may be elected by the directors in office
before such increase.
-4-
<PAGE>
Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the next annual election and
until his successor is elected and qualifies.
Section 6. Regular Meetings: The Board of Directors shall hold an annual
----------------
meeting for the purpose of organization and the transaction of any business
immediately after the annual meeting of the stockholders, provided a quorum of
directors is present. Other regular meetings may be held at such times as may
be determined from time to time by resolution of the Board of Directors.
Section 7. Special Meetings: Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board of Directors or by the President.
Section 8. Notice and Place of Meetings: Meetings of the Board of
----------------------------
Directors may be held at the principal office of the Corporation, or at such
other place as shall be stated in the notice of such meeting. Notice of any
special meeting, and, except as the Board of Directors may otherwise determine
by resolution, notice of any regular meeting also, shall be mailed to each
director addressed to him at his residence or usual place of business at least
two days before the day on which the meeting is to be held, or if sent to him at
such place by telegraph or cable, or delivered personally or by telephone, not
later than the day before the day on which the meeting is to be held. No notice
of the annual meeting of the Board of Directors shall be required if it is held
immediately after the annual meeting of the stockholders and if a quorum is
present.
Section 9. Business Transacted at Meetings, etc.: Any business may be
-------------------------------------
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
Section 10. Quorum: A majority of the Board of Directors at any time in
------
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board of
Directors unless the act of a greater number is specifically required by law or
by the Certificate of Incorporation or these By-Laws. The members of the Board
shall act only as the Board and the individual members thereof shall not have
any powers as such.
-5-
<PAGE>
Section 11. Compensation: The directors shall not receive any stated
------------
salary for their services as directors, but by resolution of the Board of
Directors a fixed fee and expenses of attendance may be allowed for attendance
at each meeting. Nothing herein contained shall preclude any director from
serving the Corporation in any other capacity, as an officer, agent or
otherwise, and receiving compensation therefor.
Section 12. Action Without a Meeting: Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 13. Meetings Through Use of Communications Equipment: Members of
------------------------------------------------
the Board of Directors, or any committee designated by the Board of Directors,
shall, except as otherwise provided by law, the Certificate of Incorporation or
these By-Laws, have the power to participate in a meeting of the Board of
Directors, or any committee, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at the meeting.
ARTICLE IV
COMMITTEES.
Section 1. Executive Committee: The Board of Directors may, by resolution
-------------------
passed by a majority of the whole Board, designate two or more of their number
to constitute an Executive Committee to hold office at the pleasure of the
Board, which Committee shall, during the intervals between meetings of the Board
of Directors, have and exercise all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation, subject only to
such restrictions or limitations as the Board of Directors may from time to time
specify, or as limited by the Delaware Corporation Law, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which may
require it.
Any member of the Executive Committee may be removed at any time, with or
without cause, by a resolution of a majority of the whole Board of Directors.
Any person ceasing to be a director shall ipso facto cease to be a member
---- -----
of the Executive Committee.
-6-
<PAGE>
Any vacancy in the Executive Committee occurring from any cause whatsoever
may be filled from among the directors by a resolution of a majority of the
whole Board of Directors.
Section 2. Other Committees: Other committees, whose members need not be
----------------
directors, may be appointed by the Board of Directors or the Executive
Committee, which committees shall hold office for such time and have such powers
and perform such duties as may from time to time be assigned to them by the
Board of Directors or the Executive Committee.
Any member of such a committee may be removed at any time, with or without
cause, by the Board of Directors or the Executive Committee. Any vacancy in a
committee occurring from any cause whatsoever may be filled by the Board of
Directors or the Executive Committee.
Section 3. Resignation: Any member of a committee may resign at any time.
-----------
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective unless so specified therein.
Section 4. Quorum: A majority of the members of a committee shall
------
constitute a quorum. The act of a majority of the members of a committee present
at any meeting at which a quorum is present shall be the act of such committee.
The members of a committee shall act only as a committee, and the individual
members thereof shall not have any powers as such.
Section 5. Record of Proceedings, etc.: Each committee shall keep a
---------------------------
record of its acts and proceedings, and shall report the same to the Board of
Directors when and as required by the Board of Directors.
Section 6. Organization, Meetings, Notices, etc.: A committee may hold
-------------------------------------
its meetings at the principal office of the Corporation, or at any other place
which a majority of the committee may at any time agree upon. Each committee may
make such rules as it may deem expedient for the regulation and carrying on of
its meetings and proceedings. Unless otherwise ordered by the Executive
Committee, any notice of a meeting of such committee may be given by the
Secretary of the Corporation or by the chairman of the committee and shall be
sufficiently given if mailed to each member at his residence or usual place of
business at least two days before the day on which the meeting is to be held, or
if sent to him at such place by telegraph or cable, or delivered personally or
by telephone not later than 24 hours before the time at which the meeting is to
be held.
-7-
<PAGE>
Section 7. Compensation: The members of any committee shall be entitled
------------
to such compensation as may be allowed them by resolution of the Board of
Directors.
ARTICLE V
OFFICERS.
Section 1. Number: The officers of the Corporation shall be a President,
------
one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, and one or more Assistant Treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article V.
The Board of Directors in its discretion may also elect a Chairman of the Board
of Directors.
Section 2. Election, Term of Office and Qualifications: The officers,
-------------------------------------------
except as provided in Section 3 of this Article V, shall be chosen annually by
the Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. The Chairman of the Board of Directors, if any, and the President shall
be directors of the Corporation, and should any one of them cease to be a
director, he shall ipso facto cease to be such officer. Except as otherwise
---- -----
provided by law, any number of offices may be held by the same person.
Section 3. Other Officers: Other officers, including one or more
--------------
additional vice-presidents, assistant secretaries or assistant treasurers, may
from time to time be appointed by the Board of Directors, which other officers
shall have such powers and perform such duties as may be assigned to them by the
Board of Directors or the officer or committee appointing them.
Section 4. Removal of Officers: Any officer of the Corporation may be
-------------------
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
Section 5. Resignation: Any officer of the Corporation may resign at
-----------
any time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary in order to make it effective, unless so specified therein.
-8-
<PAGE>
Section 6. Filling of Vacancies: A vacancy in any office shall be filled
--------------------
by the Board of Directors or by the authority appointing the predecessor in such
office.
Section 7. Compensation: The compensation of the officers shall be fixed
------------
by the Board of Directors, or by any committee upon whom power in that regard
may be conferred by the Board of Directors.
Section 8. Chairman of the Board of Directors: The Chairman of the Board
----------------------------------
of Directors shall be a director and shall preside at all meetings of the Board
of Directors at which he shall be present, and shall have such power and perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 9. President: The President shall, when present, preside at all
---------
meetings of the stockholders, and, in the absence of the Chairman of the Board
of Directors, at meetings of the Board of Directors. He shall have power to
call special meetings of the stockholders or of the Board of Directors or of the
Executive Committee at any time. He shall be the chief executive officer of the
Corporation, and shall have the general direction of the business, affairs and
property of the Corporation, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to the
office of President.
Section 10. Vice-Presidents: The Vice-Presidents, or any of them, shall,
---------------
subject to the direction of the Board of Directors, at the request of the
President or in his absence, or in case of his inability to perform his duties
from any cause, perform the duties of the President, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the President.
The Vice-Presidents shall also perform such other duties as may be assigned to
them by the Board of Directors, and the Board of Directors may determine the
order of priority among them.
Section 11. Secretary: The Secretary shall perform such duties as are
---------
incident to the office of Secretary, or as may from time to time be assigned to
him by the Board of Directors, or as are prescribed by these By-laws.
Section 12. Treasurer: The Treasurer shall perform such duties and have
---------
powers as are usually incident to the office of Treasurer or which may be
assigned to him by the Board of Directors.
-9-
<PAGE>
ARTICLE VI
CAPITAL STOCK.
Section 1. Issue of Certificates of Stock: Certificates of capital stock
------------------------------
shall be in such form as shall be approved by the Board of Directors. They shall
be numbered in the order of their issue and shall be signed by the Chairman of
the Board of Directors, the President or one of the Vice-Presidents, and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
and the seal of the Corporation or a facsimile thereof shall be impressed or
affixed or reproduced thereon, provided, however, that where such certificates
-------- -------
are signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman of the Board of Directors, President, Vice-President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures shall have been used thereon have not ceased
to be such officer or officers of the Corporation.
Section 2. Registration and Transfer of Shares: The name of each person
-----------------------------------
owning a share of the capital stock of the Corporation shall be entered on the
books of the Corporation together with the number of shares held by him, the
numbers of the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Corporation shall be transferable on
the books of the Corporation by the holders thereof in person, or by their duly
authorized attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its agents may
reasonably require. A record shall be made of each transfer.
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of certificates for stock and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.
-10-
<PAGE>
Section 3. Lost, Destroyed and Mutilated Certificates: The holder of any
------------------------------------------
stock of the Corporation shall immediately notify the Corporation of any loss,
theft, destruction or mutilation of the certificates therefor. The Corporation
may issue a new certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost, stolen or destroyed, and the Board of
Directors may, in its discretion, require the owner of the lost, stolen or
destroyed certificate, or his legal representatives, to give the Corporation a
bond, in such sum not exceeding double the value of the stock and with such
surety or sureties as they may require, to indemnify it against any claim that
may be made against it by reason of the issue of such new certificate and
against all other liability in the premises, or may remit such owner to such
remedy or remedies as he may have under the laws of the State of Delaware.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
Section 1. General Discretion of Directors: The Board of Directors shall
-------------------------------
have power to fix and vary the amount to be set aside or reserved as working
capital of the Corporation, or as reserves, or for other proper purposes of the
Corporation, and, subject to the requirements of the Certificate of
Incorporation, to determine whether any, if any, part of the surplus or net
profits of the Corporation shall be declared as dividends and paid to the
stockholders, and to fix the date or dates for the payment of dividends.
ARTICLE VIII
MISCELLANEOUS PROVISIONS.
Section 1. Fiscal Year: The fiscal year of the Corporation shall
-----------
commence on the first day of January and end on the last day of December.
Section 2. Corporate Seal: The corporate seal shall be in such form as
--------------
approved by the Board of Directors and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Section 3. Notices: Except as otherwise expressly provided, any notice
-------
required by these By-Laws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed postpaid wrapper addressed
to the person entitled thereto at his address, as the same appears upon the
books of the Corporation, or by telegraphing or cabling the same
-11-
<PAGE>
to such person at such addresses; and such notice shall be deemed to be given at
the time it is mailed, telegraphed or cabled.
Section 4. Waiver of Notice: Any stockholder or director may at any time,
----------------
by writing or by telegraph or by cable, waive any notice required to be given
under these By-Laws, and if any stockholder or director shall be present at any
meeting his presence shall constitute a waiver of such notice.
Section 5. Checks, Drafts, etc.: All checks, drafts or other orders for
--------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner, as shall from time to time be
designated by resolution of the Board of Directors.
Section 6. Deposits: All funds of the Corporation shall be deposited
--------
from time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board of Directors or the President
may authorize for that purpose.
Section 7. Voting Stock of Other Corporations: Except as otherwise
----------------------------------
ordered by the Board of Directors or the Executive Committee, the President or
the Treasurer shall have full power and authority on behalf of the Corporation
to attend and to act and to vote at any meeting of the stockholders of any
corporation of which the Corporation is a stockholder and to execute a proxy to
any other person to represent the Corporation at any such meeting, and at any
such meeting the President or the Treasurer or the holder of any such proxy, as
the case may be, shall possess and may exercise any and all rights and powers
incident to ownership of such stock and which, as owner thereof, the Corporation
might have possessed and exercised if present. The Board of Directors or the
Executive Committee may from time to time confer like powers upon any other
person or persons.
Section 8. Indemnification of Officers and Directors: The Corporation
-----------------------------------------
shall indemnify any and all of its directors or officers, including former
directors or officers, and any employee, who shall serve as an officer or
director of any corporation at the request of this Corporation, to the fullest
extent permitted under and in accordance with the laws of the State of Delaware.
-12-
<PAGE>
ARTICLE IX
AMENDMENTS.
The Board of Directors shall have the power to make, rescind, alter, amend
and repeal these By-Laws, provided, however, that the stockholders shall have
-------- -------
power to rescind, alter, amend or repeal any by-laws made by the Board of
Directors, and to enact by-laws which if so expressed shall not be rescinded,
altered, amended or repealed by the Board of Directors. No change of the time
or place for the annual meeting of the stockholders for the election of
directors shall be made except in accordance with the laws of the State of
Delaware.
Dated as of December 22, 1997
-13-
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EAGLE FOODS, INC.
EAGLE FOODS, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation was
duly filed with the Secretary of State on November 14, 1997.
SECOND: That the Certificate of Incorporation be amended as set forth
below.
Paragraph 1 shall be deleted and replaced in its entirety as follows:
"The name of the corporation (the "Corporation") is Eagle Family
Foods, Inc."
THIRD: That the Corporation has not received any payment for any of
its stock.
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Christine R. Lesaca, its Sole Incorporator, as of this 19th day of
November 1997, and acknowledges, under penalties of perjury, that the
Certificate is the act and deed of the Corporation and that the facts stated
herein are true.
/s/ Christine R. Lesaca
---------------------------
By: Christine R. Lesaca
Sole Incorporator
<PAGE>
CERTIFICATE OF INCORPORATION
OF
EAGLE FOODS, INC.
* * * * * * * *
1. The name of the corporation (the "Corporation") is: EAGLE FOODS, INC.
2. The address of its registered office in the State of Delaware is 1209 Orange
Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is (a) 250,000 shares of Common Stock, each of which shall
have a par value of $.01 per share; and (b) 250,000 shares of Preferred Stock,
each of which shall have a par value of $.01 per share. The Board of Directors
may fix by resolution the designations, preferences and rights of such Preferred
Stock in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware.
5. The name and mailing address of the incorporator is as follows:
<PAGE>
Christine R. Lesaca
Willkie Farr & Gallagher
One Citicorp Center 153 East
53rd Street New York, New York 10022.
6. In furtherance and not in limitation of the powers conferred by statute, the
By-Laws of the Corporation may be made, altered, amended or repealed by the
stockholders or by a majority of the entire board of directors.
7. Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree
-2-
<PAGE>
to any compromise or arrangement and to any reorganization of this Corporation
as consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all stockholders or class of stockholders of this
Corporation, as the case may be, and also on this Corporation.
8. Elections of directors need not be by written ballot.
9. (a) The Corporation shall indemnify to the fullest extent permitted under
and in accordance with the laws of the State of Delaware any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of or in any
other capacity with another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any
-3-
<PAGE>
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
(b) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding a director
of the Corporation) or may (in the case of any action, suit or proceeding
against an officer, trustee, employee or agent) be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding as
authorized by the Board upon receipt of an undertaking by or on behalf of
the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article.
(c) The indemnification and other rights set forth in this paragraph shall
not be exclusive of any provisions with respect thereto in the By-Laws or
any other contract or agreement between the Corporation and any officer,
director, employee or agent of the Corporation.
(d) Neither the amendment nor repeal of this paragraph 9, subparagraph (a),
(b) or (c), nor the adoption of any provision of this Certificate of
Incorporation inconsistent with paragraph 9, subparagraph (a), (b) or (c),
shall eliminate or reduce the effect of this paragraph 9, subparagraphs
(a), (b)
-4-
<PAGE>
and (c), in respect of any matter occurring before such amendment, repeal
or adoption of an inconsistent provision or in respect of any cause of
action, suit or claim relating to any such matter which would have given
rise to a right of indemnification or right to receive expenses pursuant to
this paragraph 9, subparagraph (a), (b) or (c), if such provision had not
been so amended or repealed or if a provision inconsistent therewith had
not been so adopted.
(e) No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director (a) shall
be liable under Section 174 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision thereto, or (b)
shall be liable by reason that, in addition to any and all other
requirements for liability, he:
(i) shall have breached his duty of loyalty to the Corporation or
its stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall
not have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or
a knowing violation of law or, in failing to act, shall have acted in
a manner involving intentional misconduct or a knowing violation of
law; or
(iv) shall have derived an improper personal benefit.
-5-
<PAGE>
If the General Corporation Law of the State of Delaware is amended
after the date hereof to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
-6-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a Corporation pursuant to the General Corporation Law of the State of
Delaware makes this Certificate, hereby declaring and certifying that this is
her act and deed and the facts herein stated are true and, accordingly, has
hereunto set her hand this 14th day of November 1997.
/s/ Christine R. Lesaca
--------------------------
Christine R. Lesaca
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
-7-
<PAGE>
Exhibit 3.4
EAGLE FAMILY FOODS, INC.
Incorporated Under the Laws of
the State of Delaware
BY-LAWS
-------
ARTICLE I
OFFICES.
The registered office of Eagle Family Foods, Inc. (the "Corporation") in
Delaware shall be at 1209 Orange Street in the City of Wilmington, County of New
Castle, in the State of Delaware, and The Corporation Trust Company shall be the
resident agent of this Corporation in charge thereof. The Corporation may also
have such other offices at such other places, within or without the State of
Delaware, as the Board of Directors may from time to time designate or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS.
Section 1. Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and the transaction of any other business shall be held on
the first day of June each year, or as soon after such date as may be
practicable, in such city and state and at such time and place as may be
designated by the Board of Directors, and set forth in the notice of such
meeting. If said day be a legal holiday, said meeting shall be held on the next
succeeding business day. At the annual meeting any business may be transacted
and any corporate action may be taken, whether stated in the notice of meeting
or not, except as otherwise expressly provided by statute or the Certificate of
Incorporation.
Section 2. Special Meetings. Special meetings of the stockholders for any
----------------
purpose may be called at any time by the Board of Directors, or by the
President, and shall be called by the President at the request of the holders of
a majority of the outstanding shares of capital stock entitled to vote. Special
meetings shall be held at such place or places within or without the State of
Delaware as shall from time to time be designated by the Board of Directors and
stated in the notice of such meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
Section 3. Notice of Meetings. Written notice of the time and place of
------------------
any stockholder's meeting, whether annual or special, shall be given to each
stockholder entitled to vote
<PAGE>
thereat, by personal delivery or by mailing the same to him at his address as
the same appears upon the records of the Corporation at least ten (10) days but
not more than sixty (60) days before the day of the meeting. Notice of any
adjourned meeting need not be given except by announcement at the meeting so
adjourned, unless otherwise ordered in connection with such adjournment. Such
further notice, if any, shall be given as may be required by law.
Section 4. Quorum. Any number of stockholders, together holding at
------
least a majority of the capital stock of the Corporation issued and outstanding
and entitled to vote, who shall be present in person or represented by proxy at
any meeting duly called, shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws.
Section 5. Adjournment of Meetings. If less than a quorum shall attend
-----------------------
at the time for which a meeting shall have been called, the meeting may adjourn
from time to time by a majority vote of the stockholders present or represented
by proxy and entitled to vote without notice other than by announcement at the
meeting until a quorum shall attend. Any meeting at which a quorum is present
may also be adjourned in like manner and for such time or upon such call as may
be determined by a majority vote of the stockholders present or represented by
proxy and entitled to vote. At any adjourned meeting at which a quorum shall be
present, any business may be transacted and any corporate action may be taken
which might have been transacted at the meeting as originally called.
Section 6. Voting List. The Secretary shall prepare and make, at least
-----------
ten days before every election of directors, a complete list of the stockholders
entitled to vote, arranged in alphabetical order and showing the address of each
stockholder and the number of shares of each stockholder. Such list shall be
open at the place where the election is to be held for said ten days, to the
examination of any stockholder, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
Section 7. Voting. Each stockholder entitled to vote at any meeting may
------
vote either in person or by proxy, but no proxy shall be voted on or after three
years from its date, unless said proxy provides for a longer period. Each
stockholder entitled to vote shall at every meeting of the stockholders be
entitled to one vote for each share of stock registered in his name on the
record of stockholders. At all meetings of stockholders all matters, except as
otherwise provided by statute, shall be
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<PAGE>
determined by the affirmative vote of the majority of shares present in person
or by proxy and entitled to vote on the subject matter. Voting at meetings of
stockholders need not be by written ballot.
Section 8. Record Date of Stockholders. The Board of Directors is
---------------------------
authorized to fix in advance a date not exceeding sixty days nor less than ten
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining the consent of stockholders for any
purposes, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent, and, in such case, such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation, after such record date fixed as aforesaid.
Section 9. Action Without Meeting. Any action required or permitted to be
----------------------
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Section 10. Conduct of Meetings. The Chairman of the Board of Directors
-------------------
or, in his absence the President or any Vice President designated by the
Chairman of the Board, shall preside at all regular or special meetings of
stockholders. To the
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maximum extent permitted by law, such presiding person shall have the power to
set procedural rules, including but not limited to rules respecting the time
allotted to stockholders to speak, governing all aspects of the conduct of such
meetings.
ARTICLE III
DIRECTORS.
Section 1. Number and Qualifications: The board of directors shall
-------------------------
consist initially of nine (9) directors, and thereafter shall consist of such
number as may be fixed from time to time by resolution of the Board. The
directors need not be stockholders.
Section 2. Election of Directors: The directors shall be elected by the
---------------------
stockholders at the annual meeting of stockholders.
Section 3. Duration of Office: The directors chosen at any annual meeting
------------------
shall, except as hereinafter provided, hold office until the next annual
election and until their successors are elected and qualify.
Section 4. Removal and Resignation of Directors: Any director may be
------------------------------------
removed from the Board of Directors, with or without cause, by the holders of a
majority of the shares of capital stock entitled to vote, either by written
consent or consents or at any special meeting of the stockholders called for
that purpose, and the office of such director shall forthwith become vacant.
Any director may resign at any time. Such resignation shall take effect at
the time specified therein, and if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall
not be necessary to make it effective, unless so specified therein.
Section 5. Filling of Vacancies: Any vacancy among the directors,
--------------------
occurring from any cause whatsoever, may be filled by a majority of the
remaining directors, though less than a quorum, provided, however, that the
-------- -------
stockholders removing any director may at the same meeting fill the vacancy
caused by such removal, and provided, further, that if the directors fail to
-------- -------
fill any such vacancy, the stockholders may at any special meeting called for
that purpose fill such vacancy. In case of any increase in the number of
directors, the additional directors may be elected by the directors in office
before such increase.
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<PAGE>
Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the next annual election and
until his successor is elected and qualifies.
Section 6. Regular Meetings: The Board of Directors shall hold an annual
----------------
meeting for the purpose of organization and the transaction of any business
immediately after the annual meeting of the stockholders, provided a quorum of
directors is present. Other regular meetings may be held at such times as may
be determined from time to time by resolution of the Board of Directors.
Section 7. Special Meetings: Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board of Directors or by the President.
Section 8. Notice and Place of Meetings: Meetings of the Board of
----------------------------
Directors may be held at the principal office of the Corporation, or at such
other place as shall be stated in the notice of such meeting. Notice of any
special meeting, and, except as the Board of Directors may otherwise determine
by resolution, notice of any regular meeting also, shall be mailed to each
director addressed to him at his residence or usual place of business at least
two days before the day on which the meeting is to be held, or if sent to him at
such place by telegraph or cable, or delivered personally or by telephone, not
later than the day before the day on which the meeting is to be held. No notice
of the annual meeting of the Board of Directors shall be required if it is held
immediately after the annual meeting of the stockholders and if a quorum is
present.
Section 9. Business Transacted at Meetings, etc.: Any business may be
-------------------------------------
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
Section 10. Quorum: A majority of the Board of Directors at any time in
------
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board of
Directors unless the act of a greater number is specifically required by law or
by the Certificate of Incorporation or these By-Laws. The members of the Board
shall act only as the Board and the individual members thereof shall not have
any powers as such.
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<PAGE>
Section 11. Compensation: The directors shall not receive any stated
------------
salary for their services as directors, but by resolution of the Board of
Directors a fixed fee and expenses of attendance may be allowed for attendance
at each meeting. Nothing herein contained shall preclude any director from
serving the Corporation in any other capacity, as an officer, agent or
otherwise, and receiving compensation therefor.
Section 12. Action Without a Meeting: Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 13. Meetings Through Use of Communications Equipment: Members of
------------------------------------------------
the Board of Directors, or any committee designated by the Board of Directors,
shall, except as otherwise provided by law, the Certificate of Incorporation or
these By-Laws, have the power to participate in a meeting of the Board of
Directors, or any committee, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at the meeting.
ARTICLE IV
COMMITTEES.
Section 1. Executive Committee: The Board of Directors may, by
-------------------
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an Executive Committee to hold office at the pleasure
of the Board, which Committee shall, during the intervals between meetings of
the Board of Directors, have and exercise all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
subject only to such restrictions or limitations as the Board of Directors may
from time to time specify, or as limited by the Delaware Corporation Law, and
shall have power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
Any member of the Executive Committee may be removed at any time, with or
without cause, by a resolution of a majority of the whole Board of Directors.
Any person ceasing to be a director shall ipso facto cease to be a member
---- -----
of the Executive Committee.
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<PAGE>
Any vacancy in the Executive Committee occurring from any cause whatsoever
may be filled from among the directors by a resolution of a majority of the
whole Board of Directors.
Section 2. Other Committees: Other committees, whose members need not be
----------------
directors, may be appointed by the Board of Directors or the Executive
Committee, which committees shall hold office for such time and have such powers
and perform such duties as may from time to time be assigned to them by the
Board of Directors or the Executive Committee.
Any member of such a committee may be removed at any time, with or without
cause, by the Board of Directors or the Executive Committee. Any vacancy in a
committee occurring from any cause whatsoever may be filled by the Board of
Directors or the Executive Committee.
Section 3. Resignation: Any member of a committee may resign at any time.
-----------
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective unless so specified therein.
Section 4. Quorum: A majority of the members of a committee shall
------
constitute a quorum. The act of a majority of the members of a committee
present at any meeting at which a quorum is present shall be the act of such
committee. The members of a committee shall act only as a committee, and the
individual members thereof shall not have any powers as such.
Section 5. Record of Proceedings, etc.: Each committee shall keep a
--------------------------
record of its acts and proceedings, and shall report the same to the Board of
Directors when and as required by the Board of Directors.
Section 6. Organization, Meetings, Notices, etc.: A committee may hold
------------------------------------
its meetings at the principal office of the Corporation, or at any other place
which a majority of the committee may at any time agree upon. Each committee may
make such rules as it may deem expedient for the regulation and carrying on of
its meetings and proceedings. Unless otherwise ordered by the Executive
Committee, any notice of a meeting of such committee may be given by the
Secretary of the Corporation or by the chairman of the committee and shall be
sufficiently given if mailed to each member at his residence or usual place of
business at least two days before the day on which the meeting is to be held, or
if sent to him at such place by telegraph or cable, or delivered personally or
by telephone not later than 24 hours before the time at which the meeting is to
be held.
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<PAGE>
Section 7. Compensation: The members of any committee shall be entitled
------------
to such compensation as may be allowed them by resolution of the Board of
Directors.
ARTICLE V
OFFICERS.
Section 1. Number: The officers of the Corporation shall be a President,
------
one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, and one or more Assistant Treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article V.
The Board of Directors in its discretion may also elect a Chairman of the Board
of Directors.
Section 2. Election, Term of Office and Qualifications: The officers,
-------------------------------------------
except as provided in Section 3 of this Article V, shall be chosen annually by
the Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. The Chairman of the Board of Directors, if any, and the President shall
be directors of the Corporation, and should any one of them cease to be a
director, he shall ipso facto cease to be such officer. Except as otherwise
---- -----
provided by law, any number of offices may be held by the same person.
Section 3. Other Officers: Other officers, including one or more
--------------
additional vice-presidents, assistant secretaries or assistant treasurers, may
from time to time be appointed by the Board of Directors, which other officers
shall have such powers and perform such duties as may be assigned to them by the
Board of Directors or the officer or committee appointing them.
Section 4. Removal of Officers: Any officer of the Corporation may be
-------------------
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
Section 5. Resignation: Any officer of the Corporation may resign at
-----------
any time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary in order to make it effective, unless so specified therein.
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<PAGE>
Section 6. Filling of Vacancies: A vacancy in any office shall be filled
--------------------
by the Board of Directors or by the authority appointing the predecessor in such
office.
Section 7. Compensation: The compensation of the officers shall be
------------
fixed by the Board of Directors, or by any committee upon whom power in that
regard may be conferred by the Board of Directors.
Section 8. Chairman of the Board of Directors: The Chairman of the Board
----------------------------------
of Directors shall be a director and shall preside at all meetings of the Board
of Directors at which he shall be present, and shall have such power and perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 9. President: The President shall, when present, preside at all
---------
meetings of the stockholders, and, in the absence of the Chairman of the Board
of Directors, at meetings of the Board of Directors. He shall have power to
call special meetings of the stockholders or of the Board of Directors or of the
Executive Committee at any time. He shall be the chief executive officer of the
Corporation, and shall have the general direction of the business, affairs and
property of the Corporation, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to the
office of President.
Section 10. Vice-Presidents: The Vice-Presidents, or any of them, shall,
---------------
subject to the direction of the Board of Directors, at the request of the
President or in his absence, or in case of his inability to perform his duties
from any cause, perform the duties of the President, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the President.
The Vice-Presidents shall also perform such other duties as may be assigned to
them by the Board of Directors, and the Board of Directors may determine the
order of priority among them.
Section 11. Secretary: The Secretary shall perform such duties as are
---------
incident to the office of Secretary, or as may from time to time be assigned to
him by the Board of Directors, or as are prescribed by these By-laws.
Section 12. Treasurer: The Treasurer shall perform such duties and have
---------
powers as are usually incident to the office of Treasurer or which may be
assigned to him by the Board of Directors.
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<PAGE>
ARTICLE VI
CAPITAL STOCK.
Section 1. Issue of Certificates of Stock: Certificates of capital stock
------------------------------
shall be in such form as shall be approved by the Board of Directors. They shall
be numbered in the order of their issue and shall be signed by the Chairman of
the Board of Directors, the President or one of the Vice-Presidents, and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
and the seal of the Corporation or a facsimile thereof shall be impressed or
affixed or reproduced thereon, provided, however, that where such certificates
-------- -------
are signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman of the Board of Directors, President, Vice-President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures shall have been used thereon have not ceased
to be such officer or officers of the Corporation.
Section 2. Registration and Transfer of Shares: The name of each person
-----------------------------------
owning a share of the capital stock of the Corporation shall be entered on the
books of the Corporation together with the number of shares held by him, the
numbers of the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Corporation shall be transferable on
the books of the Corporation by the holders thereof in person, or by their duly
authorized attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its agents may
reasonably require. A record shall be made of each transfer.
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of certificates for stock and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.
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<PAGE>
Section 3. Lost, Destroyed and Mutilated Certificates: The holder of any
------------------------------------------
stock of the Corporation shall immediately notify the Corporation of any loss,
theft, destruction or mutilation of the certificates therefor. The Corporation
may issue a new certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost, stolen or destroyed, and the Board of
Directors may, in its discretion, require the owner of the lost, stolen or
destroyed certificate, or his legal representatives, to give the Corporation a
bond, in such sum not exceeding double the value of the stock and with such
surety or sureties as they may require, to indemnify it against any claim that
may be made against it by reason of the issue of such new certificate and
against all other liability in the premises, or may remit such owner to such
remedy or remedies as he may have under the laws of the State of Delaware.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
Section 1. General Discretion of Directors: The Board of Directors shall
-------------------------------
have power to fix and vary the amount to be set aside or reserved as working
capital of the Corporation, or as reserves, or for other proper purposes of the
Corporation, and, subject to the requirements of the Certificate of
Incorporation, to determine whether any, if any, part of the surplus or net
profits of the Corporation shall be declared as dividends and paid to the
stockholders, and to fix the date or dates for the payment of dividends.
ARTICLE VIII
MISCELLANEOUS PROVISIONS.
Section 1. Fiscal Year: The fiscal year of the Corporation shall
-----------
commence on the first day of January and end on the last day of December.
Section 2. Corporate Seal: The corporate seal shall be in such form as
--------------
approved by the Board of Directors and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Section 3. Notices: Except as otherwise expressly provided, any notice
-------
required by these By-Laws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed postpaid wrapper addressed
to the person entitled thereto at his address, as the same appears upon the
books of the Corporation, or by telegraphing or cabling the same
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<PAGE>
to such person at such addresses; and such notice shall be deemed to be given at
the time it is mailed, telegraphed or cabled.
Section 4. Waiver of Notice: Any stockholder or director may at any time,
----------------
by writing or by telegraph or by cable, waive any notice required to be given
under these By-Laws, and if any stockholder or director shall be present at any
meeting his presence shall constitute a waiver of such notice.
Section 5. Checks, Drafts, etc.: All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner, as shall from time to time be
designated by resolution of the Board of Directors.
Section 6. Deposits: All funds of the Corporation shall be deposited
--------
from time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board of Directors or the President
may authorize for that purpose.
Section 7. Voting Stock of Other Corporations: Except as otherwise
----------------------------------
ordered by the Board of Directors or the Executive Committee, the President or
the Treasurer shall have full power and authority on behalf of the Corporation
to attend and to act and to vote at any meeting of the stockholders of any
corporation of which the Corporation is a stockholder and to execute a proxy to
any other person to represent the Corporation at any such meeting, and at any
such meeting the President or the Treasurer or the holder of any such proxy, as
the case may be, shall possess and may exercise any and all rights and powers
incident to ownership of such stock and which, as owner thereof, the Corporation
might have possessed and exercised if present. The Board of Directors or the
Executive Committee may from time to time confer like powers upon any other
person or persons.
Section 8. Indemnification of Officers and Directors: The Corporation
-----------------------------------------
shall indemnify any and all of its directors or officers, including former
directors or officers, and any employee, who shall serve as an officer or
director of any corporation at the request of this Corporation, to the fullest
extent permitted under and in accordance with the laws of the State of Delaware.
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<PAGE>
ARTICLE IX
AMENDMENTS.
The Board of Directors shall have the power to make, rescind, alter, amend
and repeal these By-Laws, provided, however, that the stockholders shall have
-------- -------
power to rescind, alter, amend or repeal any by-laws made by the Board of
Directors, and to enact by-laws which if so expressed shall not be rescinded,
altered, amended or repealed by the Board of Directors. No change of the time
or place for the annual meeting of the stockholders for the election of
directors shall be made except in accordance with the laws of the State of
Delaware.
Dated as of November 14, 1997
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<PAGE>
EXHIBIT 4.1
EXECUTION COPY
EAGLE FAMILY FOODS, INC.
$115,000,000
8 3/4% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
January 16, 1998
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Eagle Family Foods, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell $115,000,000 aggregate principal amount of its 8 3/4%
Senior Subordinated Notes due 2008 (the "Securities"). The Securities will be
issued pursuant to an Indenture to be dated as of January 23, 1998 (the
"Indenture") by and among the Company, Eagle Family Foods Holdings, Inc.
("Holdings"), as a guarantor, and IBJ Schroder Bank & Trust Co., as trustee (the
"Trustee"). The Securities will be guaranteed on a senior subordinated and
unsecured basis by Holdings. The Company hereby confirms its agreement with
Chase Securities Inc. ("CSI") and Merrill Lynch & Co. (together with CSI, the
"Initial Purchasers") concerning the purchase of the Securities from the Company
by the several Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated December 30, 1997 (the
"Preliminary Offering Memorandum") and will prepare an offering memorandum dated
the date hereof (the "Offering Memorandum") setting forth information concerning
the Company and the Securities. Copies of the Preliminary Offering Memorandum
have been, and copies of the Offering Memorandum will be, delivered by the
Company to the Initial Purchasers pursuant to the terms of this Agreement. Any
references herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto,
unless otherwise noted. The Company hereby confirms that it has authorized the
use of the Preliminary Offering Memorandum and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial
Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Company and
Holdings will agree to file with the Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Company (the "Exchange Securities") which are
identical in all material respects to the Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
The Securities are being issued in conjunction with the acquisition
(the "Acquisition") by the Company of certain assets related to the Eagle Brand,
ReaLemon, Cremora, None Such, Borden Egg Nog, and Kava brands of Borden Foods
Corporation ("BFC") and BFC Investments, L.P. ("BFC Investments") and certain of
their affiliates for an aggregate purchase
<PAGE>
2
price of approximately $376.5 million, subject to certain post-closing
adjustments. Pursuant to an asset purchase agreement by and among BFC, BFC
Investments and the Company dated November 24, 1997, as amended as of December
9, 1997, and as of January 15, 1998 (as so amended, the "Asset Purchase
Agreement"), the Company will purchase, among other things: (i) four
manufacturing facilities; (ii) all machinery and equipment located at such
facilities; (iii) certain machinery and equipment located at a Canadian BFC
facility; (iv) the trademarks Eagle; Eagle Brand, the Dessert Maker; ReaLemon;
ReaLime; Cremora; Kava; None Such and certain other trademarks in North America
and in certain foreign territories; and (v) a non-compete and non-solicitation
agreement from BFC and certain of its affiliates. In connection with the
Acquisition, BFC will retain receivables, trade payables and most accrued
liabilities relating to the BBNA Business.
Financing for the Acquisition and related fees and expenses will
consist of (i) an $82.5 million equity contribution from Holdings (the "Equity
Contribution") (which is being financed by an aggregate equity contribution in
that amount by GE Investment Private Placement Partners II, a Limited
Partnership ("GEI") and Warburg, Pincus Ventures, L.P. ("Warburg", and together
with GEI, the "Equity Sponsors"), as the Equity Sponsors, and certain members of
the Company's management, (the "Management Investors"), who are expected to
contribute approximately $1.7 million of the Equity Contribution); (ii) $115.0
million of the Securities and (iii) senior secured credit facilities (the
"Senior Credit Facilities") in an aggregate principal amount of $245.0 million,
consisting of a $175.0 million term loan and a $70.0 million revolving credit
facility, under which $16.5 million is expected to be drawn at the time of the
closing of the Acquisition.
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company and
Holdings. The Company and Holdings jointly and severally represent and warrant
to, and agree with, the several Initial Purchasers on and as of the date hereof
that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company and Holdings make no representation or warranty as to information
contained in or omitted from the Preliminary Offering Memorandum or the
Offering Memorandum in reliance upon and in conformity with written
information relating to the Initial Purchasers furnished to the Company by
or on behalf of any Initial Purchaser specifically for use therein (the
"Initial Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information
that, if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the
offer, initial resale and delivery of the Securities by the Initial
Purchasers in the manner contemplated by this Agreement and the Offering
Memorandum, to register the Securities under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
<PAGE>
3
(d) Holdings has no direct or indirect subsidiaries other than the
Company, and the Company has no direct or indirect subsidiaries. Each of
Holdings and the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which its ownership or lease
of property or the conduct of its business requires such qualification, and
has all power and authority necessary to own or hold its properties and to
conduct the business in which it is engaged, except where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a material adverse effect on the financial condition,
results of operations, business or prospects of Holdings or the Company
taken as a whole (a "Material Adverse Effect"). Holdings is not engaged in
any business other than holding its equity interest in the Company.
(e) As of the Closing Date, the Company will have an authorized
capitalization as set forth in the Offering Memorandum under the heading
"Capitalization"; all of the outstanding shares of capital stock of the
Company have been, and of Holdings will be, duly and validly authorized and
issued and are fully paid and non-assessable; and the capital stock of
Holdings and the Company conforms in all material respects to the
description thereof contained in the Offering Memorandum. All outstanding
shares of capital stock of the Company are owned directly by Holdings, free
and clear of any lien, charge, encumbrance, security interest, restriction
upon voting or transfer or any other claim of a third party except as
created in connection with the Senior Credit Facilities.
(f) Each of the Company and Holdings has all corporate power and
authority to execute and deliver this Agreement, the Indenture, the
Registration Rights Agreement, the Securities, the Asset Purchase Agreement
and the documents related to the Senior Credit Facilities (collectively,
the "Transaction Documents"), as applicable, and to perform its obligations
hereunder and thereunder; and all corporate action required to be taken for
the due and proper authorization, execution and delivery of each of the
Transaction Documents and the consummation of the transactions contemplated
thereby have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by each of the Company and Holdings and constitutes a valid and legally
binding agreement of the Company and Holdings.
(h) The Registration Rights Agreement has been duly authorized by
each of the Company and Holdings and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute a
valid and legally binding agreement of the Company and Holdings enforceable
against the Company and Holdings in accordance with its terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law) and except to the extent that rights to indemnity and contribution
thereunder may be limited by federal or state securities laws or the public
policy underlying such laws.
(i) The Indenture has been duly authorized by each of the Company and
Holdings and, when duly executed and delivered in accordance with its terms
by each of the parties thereto, will constitute a valid and legally binding
agreement of the Company and Holdings enforceable against the Company and
Holdings in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law). On the Closing
Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939
<PAGE>
4
and the rules and regulations of the Commission applicable to an indenture
which is qualified thereunder.
(j) The Securities have been duly authorized by the Company and, when
duly executed, authenticated, issued and delivered as provided in the
Indenture and paid for as provided herein, will be duly and validly issued
and outstanding and will constitute valid and legally binding obligations
of the Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
(k) The Asset Purchase Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance with
its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and
by general equitable principles (whether considered in a proceeding in
equity or at law).
(l) Each of the documents governing the Senior Credit Facilities has
been duly authorized, executed and delivered by the Company and Holdings,
as applicable, and constitutes a valid and legally binding agreement of the
Company and Holdings, as applicable, enforceable against the Company and
Holdings, as applicable, in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
(m) Each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(n) (i) The execution, delivery and performance by each of the
Company and Holdings of each of the Transaction Documents to which it is a
party, (ii) the issuance, authentication, sale and delivery of the
Securities and compliance by the Company and Holdings with the terms
thereof and (iii) the consummation of the transactions contemplated by the
Transaction Documents will not, except insofar as the provisions of the
Indenture granting each holder of Securities the right to require the
Company to repurchase such holder's Securities upon the occurrence of a
Change of Control (as defined in the Indenture) may conflict with certain
provisions of the documents governing the Senior Credit Facilities,
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or, except as created in
connection with the Senior Credit Facilities or as described in the
Offering Memorandum under the heading "Business--Trademarks, Copyrights and
Patents", result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or Holdings pursuant
to, any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or Holdings is a party
or by which the Company or Holdings is bound or to which any of the
property or assets of the Company or Holdings is subject except for such
conflicts, breaches, violations or defaults as would not have a Material
Adverse Effect or any material adverse effect on the ability of the Company
or Holdings to perform its obligations under each of the Transaction
Documents to which it is a party, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company or
Holdings or (assuming compliance by the Initial Purchasers with all
applicable federal and state securities laws) any statute, judgment, order,
decree, rule or regulation of any court or arbitrator or
<PAGE>
5
governmental agency or body having jurisdiction over the Company or
Holdings or any of its properties or assets; and no consent, approval,
authorization or order of, or filing or registration with, any such court
or arbitrator or governmental agency or body under any such statute,
judgment, order, decree, rule or regulation is required for the execution,
delivery and performance by the Company or Holdings of each of the
Transaction Documents to which it is a party, the issuance, authentication,
sale and delivery of the Securities and compliance by the Company or
Holdings with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents, except for such consents,
approvals, authorizations, filings, registrations or qualifications (A)
which shall have been obtained or made prior to the Closing Date and (B) as
may be required to be obtained or made under the Securities Act and
applicable state securities laws as provided in the Registration Rights
Agreement.
(o) Coopers & Lybrand, LLP are independent certified public
accountants with respect to the Company and Holdings within the meaning of
Rule 101 of the Code of Professional Conduct of the American Institute of
Certified Public Accountants ("AICPA") and its interpretations and rulings
thereunder, and, to the best knowledge of the Company, Deloitte & Touche
LLP are independent certified public accountants with respect to Borden
Brands North America of BFC within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings
thereunder. The historical financial statements (including the related
notes) contained in the Offering Memorandum have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby and fairly present the
financial position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated. The pro forma financial
information contained in the Offering Memorandum has been prepared on a
basis consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjustments specified
therein), includes all material adjustments to the historical financial
information required by Rule 11-02 of Regulation S-X under the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to reflect the transactions described in the Offering Memorandum,
gives effect to assumptions made on a reasonable basis and fairly presents
the historical and proposed transactions contemplated by the Offering
Memorandum and the Transaction Documents.
(p) There are no legal or governmental proceedings pending to which
the Company or Holdings is a party or of which any property or assets of
either the Company or Holdings is the subject which, singularly or in the
aggregate, if determined adversely to the Company or Holdings, could
reasonably be expected to have a Material Adverse Effect; and to the best
knowledge of the Company and Holdings, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(q) To the best knowledge of the Company, no action has been taken
and no stat ute, rule, regulation or order has been enacted, adopted or
issued by any federal or state governmental agency or body which prevents
the issuance of the Securities or suspends the sale of the Securities in
any such jurisdiction; no injunction, restraining order or order of any
nature by any federal or state court of competent jurisdiction has been
issued with respect to the Company or Holdings which would prevent or
suspend the issuance or sale of the Securities or the use of the
Preliminary Offering Memorandum or the Offering Memorandum in any such
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Company and Holdings, threatened against or affecting
the Company or Holdings before any court or arbitrator or any governmental
agency, body or official, domestic or foreign, which could reasonably be
expected to interfere with or ad versely affect the issuance of the
Securities or in any manner draw into question the valid ity or
enforceability of any of the Transaction Documents or any action taken or
to be taken pursuant thereto; and each of the Company and Holdings has
complied with any and
<PAGE>
6
all requests by any securities authority in any such jurisdiction for
additional information to be included in the Preliminary Offering
Memorandum and the Offering Memorandum.
(r) Neither the Company nor Holdings is, and, upon consummation of
the Transactions, neither the Company nor Holdings will be, (i) in
violation of its respective charter or by-laws, (ii) in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject or (iii) in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject, other than, in
the case of clause (ii) or (iii), such defaults or violations which,
individually or in the aggregate, could not reasonably be expected to have
or result in a Material Adverse Effect.
(s) Each of the Company and Holdings possesses, and, upon
consummation of the Transactions, each of the Company and Holdings will
possess, all material licenses, certificates, authorizations and permits
issued by, and have made, and, upon consummation of the Transactions, will
have made, all declarations and filings with, the appropriate federal,
state or foreign regulatory agencies or bodies which are necessary for the
ownership of its properties or the conduct of its business as described in
the Offering Memorandum, except where the failure to possess or make the
same would not, singularly or in the aggregate, have a Material Adverse
Effect, and neither the Company nor Holdings has received written
notification of any revocation or modification of any such license,
certificate, authorization or permit or has any reason to believe that any
such license, certificate, authorization or permit will not be renewed in
the ordinary course.
(t) Neither the Company nor Holdings is, and, upon consummation of
the Transactions, neither the Company nor Holdings will be, (i) an
"investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of the Commission
thereunder or (ii) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(u) The Company and Holdings maintain a system of internal accounting
controls sufficient to provide reasonable 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 asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reason able intervals and appropriate
action is taken with respect to any differences.
(v) Upon consummation of the Transactions, each of the Company and
Holdings will have insurance covering its properties, operations, personnel
and businesses, which insurance will be in amounts and insure against such
losses and risks as will be adequate to protect the Company and Holdings
and its business.
(w) Each of the Company and Holdings owns or possesses, and, upon
consummation of the Transactions, each of the Company and Holdings will own
or possess, adequate rights to use all patents, patent applications,
trademarks (including, without limitation, Eagle; Eagle Brand, the Dessert
Maker; ReaLemon; ReaLime; Cremora; and None Such), service marks, trade
names, trademark registrations, service mark registrations, copyrights,
licenses and know-how (including trade secrets and other
<PAGE>
7
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of its business, except
where the failure to own or possess any such intellectual property could
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect and except as disclosed in the Offering Memorandum;
and the conduct of its business will not conflict in any material respect
with, and no officer or director of either the Company or Holdings has
received any notice of any written claim of conflict with, any such rights
of others.
(x) Upon consummation of the Transactions, each of the Company and
Holdings will have good and marketable title in fee simple to, or upon
consummation of the Transactions, will have, valid rights to lease or
otherwise use, all items of real and personal property which are material
to the business of the Company and Holdings, in each case free and clear of
all liens, encumbrances, claims and defects and imperfections of title
except as described in the Offering Memorandum or such as (i) do not
materially interfere with the use made and proposed to be made of such
property by the Company or Holdings or (ii) could not reasonably be
expected to have a Material Adverse Effect.
(y) No labor disturbance by or dispute with the employees of the
Company or Holdings exists or, to the best knowledge of the Company or
Holdings, is contemplated or threatened.
(z) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has, or, upon consummation of
the Transactions, will have, occurred with respect to any employee benefit
plan of the Company or Holdings which could reasonably be expected to have
a Material Adverse Effect; both the Company's and Holdings' employee
benefit plan is, and, upon consummation of the Transactions, will be, in
compliance in all material respects with applicable law, including ERISA
and the Code; neither the Company nor Holdings has incurred or expects to
incur liability under Title IV of ERISA with respect to the termination of,
or withdrawal from, any pension plan for which either the Company or
Holdings would have any liability; and each such pension plan that is
intended to be qualified under Section 401(a) of the Code is so qualified
in all material respects and nothing has occurred, whether by action or by
failure to act, which could reasonably be expected to cause the loss of
such qualification.
(aa) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission or other release of any kind of
hazardous or toxic or other wastes or substances by, due to or caused by
the Company or Holdings (or, to the best knowledge of the Company and
Holdings, any other entity (including any predecessor) for whose acts or
omissions the Company or Holdings is or could reasonably be expected to be
liable) upon any of the property now, upon consummation of the Transactions
or previously owned or leased by the Company or Holdings, or upon any other
property, in violation of any statute or any ordinance, rule, regulation,
order, judgment, decree or permit or which would, under any statute or any
ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any
violation or liability which could not reasonably be expected to have,
singularly or in the aggregate with all such violations and liabilities, a
Material Adverse Effect; and there has been no disposal, discharge,
emission or other release of any kind onto such property or into the
environment surrounding such property of any hazardous or toxic or other
wastes or substances with respect to which the Company or Holdings has
knowledge, except for any such disposal, discharge, emission or other
release of any kind
<PAGE>
8
which could not reasonably be expected to have, singularly or in the
aggregate with all such discharges and other releases, a Material Adverse
Effect.
(bb) On and immediately after the Closing Date, each of the Company
and Holdings (after giving effect to the execution of the Indenture and the
issuance of the Securities and to the other transactions related thereto as
described in the Offering Memorandum) will be Solvent. As used in this
paragraph, the term "Solvent" means, with respect to a particular date,
that on such date (i) the present fair market value (or present fair
saleable value) of the assets of the Company or Holdings, as the case may
be, is not less than the total amount required to pay the probable
liabilities of the Company or Holdings, as the case may be, on its total
existing debts and liabilities (including contingent liabilities) as they
become absolute and matured, (ii) the Company or Holdings, as the case may
be, is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business, (iii) assuming the sale of the
Securities as contemplated by this Agreement and the Offering Memorandum,
neither the Company nor Holdings, as the case may be, is incurring debts or
liabilities beyond its ability to pay as such debts and liabilities mature
and (iv) neither the Company nor Holdings, as the case may be, is engaged
in any business or transaction, and neither the Company nor Holdings, as
the case may be, is about to engage in any business or transaction, for
which its property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which the
Company or Holdings, as the case may be, is engaged. 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 the light of all the
facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
(cc) Except as described in the Offering Memorandum, there are, and
upon consummation of the Transactions, there will be, no outstanding
subscriptions, rights, warrants, calls or options to acquire, or
instruments convertible into or (except for the right, under certain
circumstances, of holders of Series A Preferred Stock to elect to receive
the redemption price for such shares in shares of Common Stock)
exchangeable for, or agreements with respect to the sale or issuance of,
any shares of capital stock of or other equity or other ownership interest
in, the Company or Holdings.
(dd) Except as provided in this Agreement, neither the Company nor
Holdings is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Company, Holdings
or the Initial Purchasers for a brokerage commission, finder's fee or like
payment in connection with the offering and sale of the Securities.
(ee) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(ff) None of the Company, Holdings any of their respective affiliates
or any person (other than the Initial Purchasers or their affiliates, as to
whom neither the Company nor Holdings makes any representation) acting on
its or their behalf has engaged in any directed selling efforts (as such
term is defined in Regulation S under the Securities Act ("Regulation S")),
and all such persons have complied and will comply with the offering
restrictions requirement of Regulation S to the extent applicable.
(gg) None of the Company, Holdings or any of their respective
affiliates have, directly or through any agent, sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security
(as such term is defined in the Securities Act), which is or will be
integrated with the sale of the Securities in a manner that would require
regis tration of the Securities under the Securities Act.
<PAGE>
9
(hh) None of the Company, Holdings or any of their respective
affiliates or any other person (other than the Initial Purchasers or their
affiliates, as to whom neither the Company nor Holdings makes any
representation) acting on its or their behalf has engaged, in connection
with the offering of the Securities, in any form of general solic itation
or general advertising within the meaning of Rule 502(c) under the
Securities Act.
(ii) There are no securities of the Company or Holdings registered
under the Exchange Act or listed on a national securities exchange or
quoted in a U.S. automated inter-dealer quotation system.
(jj) Neither the Company nor Holdings has taken and will not take,
directly or indirectly, any action prohibited by Regulation M under the
Exchange Act in connection with the offering of the Securities.
(kk) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in
good faith.
(ll) Neither the Company nor Holdings does business with the
government of Cuba or with any person or affiliate located in Cuba within
the meaning of Florida Statutes Section 517.075.
(mm) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change in the financial condition, results of operations,
business or prospects of the Company or Holdings, whether or not arising in
the ordinary course of business, (ii) neither the Company nor Holdings has
incurred any material liability or obligation, direct or contingent, other
than in the ordinary course of business, (iii) neither the Company nor
Holdings has entered into any material transaction other than in the
ordinary course of business and (iv) there has not been any change in the
capital stock or long-term debt of the Company or Holdings, or any dividend
or distribution of any kind declared, paid or made by the Company or
Holdings on any class of its capital stock.
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97% of the
principal amount thereof. The Company shall not be obligated to deliver any of
the Securities except upon payment for all of the Securities to be purchased as
provided herein.
(b) The Initial Purchasers have advised the Company that they propose
to offer the Securities for resale upon the terms and subject to the conditions
set forth herein and in the Offering Memorandum. Each Initial Purchaser,
severally and not jointly, represents and warrants to, and agrees with, the
Company and Holdings that (i) it is purchasing the Securities pursuant to a
private sale exempt from registration under the Securities Act, (ii) it has not
solicited offers for, or offered or sold, and will not solicit offers for, or
offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of its initial
offering, only (A) within the United States to persons whom it reasonably
believes to be qualified institutional buyers ("Qualified Institutional
Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if
any such person is buying for one or more institutional
<PAGE>
10
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A and in each case, in transactions in accordance with Rule
144A and (B) outside the United States to persons other than U.S. persons in
reliance on and in compliance with Regulation S.
(c) In connection with the offer and sale of Securities in reliance on
Regulation S, each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Company and Holdings that:
(i) The Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in transactions not subject to, the registration
requirements of the Securities Act;
(ii) Such Initial Purchasers have offered and sold the Securities,
and will offer and sell the Securities, (A) as part of their
distribution at any time only in compliance with Regulation S or Rule
144A and (B) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the Closing Date,
only in accordance with Regulation S or Rule 144A or any other
available exemption from registration under the Securities Act;
(iii) None of such Initial Purchasers or any of their affiliates
or any other person acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities,
and all such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(iv) at or prior to the confirmation of sale of any Securities sold
in reliance on Regulation S, it will have sent to each distributor,
dealer or other person receiving a selling concession, fee or other
remuneration that purchase Securities from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered or sold within the United States 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 of the Securities
and the date of original issuance of the Securities, except in
accordance with Regulation S or Rule 144A or any other available
exemption from registration under the Securities Act. Terms used
above have the meanings given to them by Regulation S.";
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the
Securities, except with its affiliates or with the prior written
consent of the Company.
Terms used in this Section 2(c) have the meanings given to them by
Regulation S.
(d) Each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Company and Holdings that (i) it has not
offered or sold and prior to the date six months after the Closing Date
will not offer or sell any Securities to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for
the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of
<PAGE>
11
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public
Offers of Securities Regulations 1995 with respect to anything done by it
in relation to the Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection
with the issue of the Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisement)
(Exemptions), Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
(e) Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such
Initial Purchaser from the Company pursuant hereto, such Initial Purchaser
shall furnish to that purchaser a copy of the Offering Memorandum (and any
amendment or supplement thereto that the Company shall have furnished to
such Initial Purchaser prior to the date of such confirmation of sale). In
addition to the foregoing, each Initial Purchaser acknowledges and agrees
that the Company and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Sections 5(d) and (e) counsel for the
Company and for the Initial Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchasers
and their compliance with their agreements contained in this Section 2, and
each Initial Purchaser hereby consents to such reliance.
(f) The Company acknowledges and agrees that the Initial Purchasers
may sell Securities to any affiliate of an Initial Purchaser and that any
such affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Willkie Farr &
Gallagher, New York, New York, or at such other place as shall be agreed upon by
the Initial Purchasers and the Company, at 10:00 a.m., New York City time, on
January 23, 1998, or at such other time or date, not later than seven full
business days thereafter, as shall be agreed upon by the Initial Purchasers and
the Company (such date and time of payment and delivery being referred to herein
as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of same-
day funds to such account or accounts as the Company shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Trustee, as custodian, of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon
delivery, the Securities shall be in global form, registered in such names and
in such denominations as CSI on behalf of the Initial Purchasers shall have
requested in writing not less than two full business days prior to the Closing
Date. The Company agrees to make one or more global certificates evidencing the
Securities available for inspection by CSI on behalf of the Initial Purchasers
in New York, New York at least 24 hours prior to the Closing Date.
4. Further Agreements of the Company and Holdings. The Company and
Holdings agree with each of the several Initial Purchasers:
(a) (i) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in the light of the circumstances
<PAGE>
12
under which they were made, not misleading; (ii) to advise the Initial
Purchasers promptly of any order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum, of any
suspension of the qualification of the Securities for offering or sale in
any jurisdiction and of the initiation or threatening of any proceeding for
any such purpose; and (iii) to use its best efforts to prevent the issuance
of any such order preventing or suspending the use of the Preliminary
Offering Memorandum or the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to obtain the lifting
thereof at the earliest possible time; and, in the event that such advice
is received by the Initial Purchasers, their use of the Offering Memorandum
shall be suspended until the Company shall have amended or supplemented the
Offering Memorandum to correct such misstatement or omission;
(b) to furnish promptly to each of the Initial Purchasers and counsel
for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by
notice to the Company after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
to furnish to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, unless the Company is then
subject to and in compliance with Section 13 or 15(d) of the Exchange Act
(the foregoing agreement being for the benefit of the holders from time to
time of the Securities and prospective purchasers of the Securities
designated by such holders);
(f) for so long as the Securities are outstanding, to furnish to the
Initial Purchasers copies of any annual reports, quarterly reports and
current reports filed by the Company or Holdings with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated
by the Commission, and such other documents, reports and information as
shall be furnished by the Company and Holdings to the Trustee or to the
holders of the Securities pursuant to the Indenture or the Exchange Act or
any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request to qualify the Securities for offering
and sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may designate and to continue such qualifications in
effect for so long as required for the initial resale of the Securities;
<PAGE>
13
and to arrange for the determination of the eligibility for investment of
the Securities under the laws of such jurisdictions as the Initial
Purchasers may reasonably request; provided that none of the Company,
Holdings or any of their subsidiaries shall be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or
to file a general consent to service of process in any jurisdiction or to
subject itself to taxation in any jurisdiction in which it is not so
subject;
(h) to assist the Initial Purchasers in arranging for the Securities
to be designated Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities to
be eligible for clearance and settlement through The Depository Trust
Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as such term is defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require
registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement (each as defined
in the Registration Rights Agreement), as the case may be, not to, and to
cause its affiliates not to, and not to authorize or knowingly permit any
person (other than the Initial Purchasers or their affiliates, as to whom
neither the Company nor Holdings expresses any opinion) acting on their
behalf to, solicit any offer to buy or offer to sell the Securities by
means of any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; and not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(k) for a period of 180 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company, Holdings or any of
their subsidiaries (other than the Securities or pursuant to the
Registration Rights Agreement, and other than the debt securities issued
under the Senior Credit Facilities) without the prior written consent of
the Initial Purchasers;
(l) during the period from the Closing Date until two years after the
Closing Date, without the prior written consent of the Initial Purchasers,
not to, and not permit any of its affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Securities that have been
reacquired by them, except for Securities purchased by the Company or any
of its affiliates and resold in a transaction registered under the
Securities Act;
(m) not to, for so long as the Securities are outstanding, be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Invest ment Company Act, and to
not be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until CSI on
behalf of the Initial Purchasers shall have notified the Company of the
completion of the resale of the
<PAGE>
14
Securities, not to, and to cause its affiliated purchasers (as defined in
Regulation M under the Exchange Act) not to, either alone or with one or
more other persons, bid for or purchase, for any account in which it or any
of its affiliated purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and not to, and to
cause its affiliated purchasers not to, make bids or purchase for the
purpose of creating actual, or apparent, active trading in or of raising
the price of the Securities;
(o) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date hereof a
copy of the independent accountants' report included in the Offering
Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and performed by
it under this Agreement that are within its control prior to or after the
Closing Date, and to use its reasonable best efforts to satisfy all
conditions precedent on its part to the delivery of the Securities;
(r) to not take any action prior to the Closing Date which would
require the Offering Memorandum to be amended or supplemented pursuant to
Section 4(d);
(s) prior to the Closing Date, not to issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company or Holdings, its condition, financial or
otherwise, or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of business
and consistent with the past practices of the Company and Holdings and of
which the Initial Purchasers are notified), without the prior written
consent of the Initial Purchasers, unless in the judgment of the Company or
Holdings and their counsel, and after notification to the Initial
Purchasers, such press release or communication is required by law; and
(t) to apply the net proceeds from the sale of the Securities as set
forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the several Initial Purchasers to purchase the Securities are
subject to the accuracy, on and as of the date hereof and the Closing Date, of
the representations and warranties of the Company and Holdings contained herein,
to the accuracy of the statements of the Company and its officers made in any
certificates delivered pursuant hereto, to the performance by the Company and
Holdings of their obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers
may agree; and no stop order suspending the sale of the Secu rities in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(b) Neither of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the reasonable opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in the
reasonable opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
<PAGE>
15
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of the Transaction Documents and
the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall be
reasonably satisfactory in all material respects to the Initial Purchasers,
and the Company and Holdings shall have furnished to the Initial Purchasers
all documents and information that they or their counsel may reasonably
request to enable them to pass upon such matters.
(d) Willkie Farr & Gallagher shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company and Holdings,
addressed to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, substantially
to the effect set forth in Annex B hereto.
(e) The Initial Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers
may reasonably require, and the Company shall have furnished to such
counsel such documents and information as they request for the purpose of
enabling them to pass upon such matters.
(f) The Company shall have furnished to the Initial Purchasers letters
(each, an "Initial Letter") from Coopers & Lybrand, LLP and Deloitte &
Touche LLP, addressed to the Initial Purchasers and dated the date hereof,
in form and substance satisfactory to the Initial Purchasers.
(g) The Company shall have furnished to the Initial Purchasers letters
(each, a "Bring-Down Letter") from Coopers & Lybrand, LLP and Deloitte &
Touche LLP, addressed to the Initial Purchasers and dated the Closing Date
(i) stating that they are independent public accountants with respect to
the Company or Borden Brands North America of BFC, as applicable, within
the meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder, (ii) stating, as of the
date of the Bring-Down Letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a date not
more than three business days prior to the date of the Bring-Down Letter),
that the conclusions and findings of such accountants with respect to the
financial information and other matters covered by their Initial Letter are
accurate and (iii) confirming in all material respects the conclusions and
findings set forth in their Initial Letter.
(h) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, signed by William A. Lynch, Chairman
of the Board of Directors and Chief Operating Officer, and John O'C.
Nugent, Chief Executive Officer, President and Director, stating that (A)
such officers have carefully examined the Offering Memorandum, (B) in their
opinion, the Offering Memorandum, as of its date, did not include any
untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and since the date of the Offering Memorandum, no
event has occurred which should have been set forth in a supplement or
amendment to the Offering Memorandum so that the Offering Memorandum (as so
amended or supplemented) would not include any untrue statement of a
material fact and would not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and
(C) as of the Closing Date, the representations and warranties of the
Company and Holdings in this Agreement are true and correct in all material
respects, the Company and Holdings have complied, in all material respects,
with all agreements and satisfied, in all material respects, all conditions
on their part to be performed or satisfied hereunder on or prior to the
Closing Date, and subsequent to the
<PAGE>
16
date of the most recent financial statements contained in the Offering
Memorandum, there has been no material adverse change in the financial
position or results of operation of the Company, Holdings or the BBNA
Business, or any change, or any development including a prospective change,
in or affecting the condition (financial or otherwise), results of
operations, business or prospects of the Company, Holdings or the BBNA
Business.
(i) The Initial Purchasers shall have received a counterpart of the
Registration Rights Agreement which shall have been executed and delivered
by a duly authorized officer of the Company and Holdings.
(j) The Indenture shall have been duly executed and delivered by the
Company, Holdings and the Trustee, and the Securities shall have been duly
executed and delivered by the Company and duly authenticated by the
Trustee.
(k) The Securities shall have been approved by the NASD for trading in
the PORTAL Market.
(l) If any event shall have occurred that requires the Company under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A or
Regulation S under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act or
the Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the reasonable judgment of the Initial
Purchasers would materially impair the ability of the Initial Purchasers to
purchase, hold or effect resales of the Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital stock or long-term debt or any
change, or any development involving a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company and Holdings, taken as a whole, the effect of
which, in any such case described above, is, in the judgment of the Initial
Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Securities on the
terms and in the manner contemplated by this Agreement and the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body which would, as of the Closing Date, prevent the issuance or
sale of the Securities; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction
shall have been issued as of the Closing Date which would prevent the
issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Securities by
any "nationally recognized statistical rating organization", as such term
is defined by the Commission for purposes of Rule 436(g)(2) of the rules
and regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance
or review (other than an announcement with positive implications of a
possible upgrading), its rating of the Securities.
<PAGE>
17
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or limited, or
minimum prices shall have been established on any such exchange or market
by the Commission, by any such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in the Securities in
the over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or (iii) an outbreak or escalation of
hostilities or a declaration by the United States of a national emergency
or war or (iv) a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the
financial markets in the United States shall be such) the effect of which,
in the case of this clause (iv), is, in the reasonable judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or the delivery of the Securities on
the terms and in the manner contemplated by this Agreement and in the
Offering Memorandum (exclusive of any amendment or supplement thereto).
(r) All conditions to the consummation of each of the Transactions
shall have been satisfied or waived and, substantially simultaneously with
the sale of the Securities hereunder, the Acquisition and each of the other
Transactions shall have been consummated in all material respects on the
terms described in the Offering Memorandum.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Section 5(m), (n), (o), (p) or (q)
shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Initial Purchaser agreed but
failed to purchase by other persons satisfactory to the Company and the non-
defaulting Initial Purchasers, but if no such arrangements are made within 36
hours after such default, this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers, the Company or Holdings,
except that the Company and Holdings will continue to be liable for the payment
of expenses to the extent set forth in Sections 8 and 12 and except that the
provisions of Sections 9 and 10 shall not terminate and shall remain in effect.
As used in this Agreement, the term "Initial Purchasers" includes, for all
purposes of this Agreement unless the context otherwise requires, any party not
listed in Schedule 1 hereto that, pursuant to this Section 7, purchases
Securities which a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or Holdings or any non-
defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Securities of a defaulting
Initial Purchaser, either the non-defaulting Initial Purchasers or the Company
may postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Initial Purchasers may be necessary in the Offering Memorandum or in any
other document or arrangement, and the Company agrees to promptly prepare any
amendment or supplement to the Offering Memorandum that effects any such
changes.
<PAGE>
18
8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6 or 7, (b) the Company
shall fail to tender the Securities for delivery to the Initial Purchasers for
any reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company and Holdings shall jointly and severally reimburse the
Initial Purchasers for such out-of-pocket expenses (including reasonable fees
and disbursements of counsel) as shall have been reasonably incurred by the
Initial Purchasers in connection with this Agreement and the proposed purchase
and resale of the Securities. If this Agreement is terminated pursuant to
Section 7 by reason of the default of one or more of the Initial Purchasers, the
Company shall not be obligated to reimburse any defaulting Initial Purchaser on
account of such expenses.
9. Indemnification. (a) The Company and Holdings shall jointly and
severally indemnify and hold harmless each Initial Purchaser, its affiliates,
their respective officers, directors, employees, representatives and agents, and
each person, if any, who controls any Initial Purchaser within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(a) and Section 10 as an "Initial Purchaser"), from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, without limitation, any loss, claim, damage, liability or
action relating to purchases and sales of the Securities), to which that Initial
Purchaser may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or in any information provided by the Company pursuant to Section 4(e)
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company and Holdings shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchasers' Information; and provided, further, that with
respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 9(a)
shall not inure to the benefit of any such Initial Purchaser to the extent that
the sale to the person asserting any such loss, claim, damage, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser results
from the fact that both (A) to the extent required by applicable law, a copy of
the Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Company
with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless the Company, Holdings, their respective affiliates, officers,
directors, employees, representatives and agents, and each person, if any, who
controls either the Company or Holdings within the meaning of the Securities Act
or the Exchange Act (collectively referred to for purposes of this Section 9(b)
and Section 10 as the "Company"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or
<PAGE>
19
the Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Initial Purchasers' Information, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), 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 on claims that are the subject matter
of such proceeding.
<PAGE>
20
The obligations of the Company, Holdings and the Initial Purchasers in
this Section 9 and in Section 10 are in addition to any other liability that the
Company, Holdings or the Initial Purchasers, as the case may be, may otherwise
have, including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and Holdings, on the one
hand, and the Initial Purchasers, on the other, from the offering of the
Securities 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 Company and Holdings, on the one hand, and the Initial Purchasers,
on the other, with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and Holdings, on the one hand, and the Initial Purchasers on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by or on behalf of the Company,
on the one hand, and the total discounts and commissions received by the Initial
Purchasers with respect to the Securities purchased under this Agreement, on the
other, bear to the total gross proceeds from the sale of the Securities under
this Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault 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 the
Company or Holdings or information supplied by the Company or Holdings, on the
one hand, or to any Initial Purchasers' Information, on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company, Holdings
and the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 10, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the Securities
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any 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. The Initial
Purchasers' obligations to contribute as provided in this Section 10 are several
in proportion to their respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company,
Holdings and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company and
the Initial Purchasers and in Section 4(e) with respect to holders and
prospective purchasers of the Securities. Nothing in this Agreement is intended
or shall be construed to give any person, other than the persons referred to in
this Section 11, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
<PAGE>
21
12. Expenses. The Company and Holdings jointly and severally agree
with the Initial Purchasers to pay (a) the costs incident to the authorization,
issuance, sale, preparation and delivery of the Securities and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
any amendments or supplements thereto; (c) the costs of reproducing and
distributing each of the Transaction Documents; (d) the costs incident to the
preparation, printing and delivery of the certificates evidencing the
Securities, including stamp duties and transfer taxes, if any, payable upon
issuance of the Securities; (e) the fees and expenses of the Company's and
Holdings' counsel and independent accountants; (f) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(h) and of preparing, printing and distributing Blue Sky
Memoranda (including related fees and expenses of counsel for the Initial
Purchasers); (g) any fees charged by rating agencies for rating the Securities;
(h) the fees and expenses of the Trustee and any paying agent (including related
fees and expenses of any counsel to such parties); (i) all expenses and
application fees incurred in connection with the application for the inclusion
of the Securities on the PORTAL Market and the approval of the Securities for
book-entry transfer by DTC; and (j) all other costs and expenses incident to the
performance of the obligations of the Company and Holdings under this Agreement
which are not otherwise specifically provided for in this Section 12; provided,
however, that except as provided in this Section 12 and Section 8, the Initial
Purchasers shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, Holdings and the
Initial Purchasers contained in this Agreement or made by or on behalf of the
Company, Holdings or the Initial Purchasers pursuant to this Agreement or any
certificate delivered pursuant hereto shall survive the delivery of and payment
for the Securities and shall remain in full force and effect, regardless of any
termination or cancelation of this Agreement or any investigation made by or on
behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: James C. Neary (telecopier no.: (212) 270-
0994); or
(b) if to the Company or Holdings, shall be delivered or sent by mail
or telecopy transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Jonathan F. Rich;
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
16. Initial Purchasers' Information. The parties hereto acknowledge
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum:
<PAGE>
22
(i) the last paragraph on the front cover page concerning the terms of the
offering by the Initial Purchasers; (ii) the legends on the inside pages
concerning over-allotment and trading activities by the Initial Purchasers; and
(iii) the statements concerning the Initial Purchasers contained in the third,
fourth, fifth, seventh, ninth, twelfth and thirteenths paragraphs under the
heading "Plan of Distribution".
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
23
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
EAGLE FAMILY FOODS, INC.,
by /s/ John O'C. Nugent
-------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Officer
EAGLE FAMILY FOODS HOLDINGS, INC.,
by /s/ John O'C. Nugent
-------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Officer
Accepted:
CHASE SECURITIES INC.,
by /s/ James C. Neary
--------------------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
<PAGE>
24
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED,
by /s/ Mary Beck
-----------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
2 World Financial Center
New York, New York 10281
Attention: Legal Department
<PAGE>
25
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Amount
Initial Purchasers of Securities
- - - - ------------------ -------------
<S> <C>
Chase Securities Inc.................................... $ 69,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated...... 46,000,000
------------
Total................................................ $115,000,000
============
</TABLE>
<PAGE>
26
ANNEX A
Form of Registration Rights Agreement
<PAGE>
27
ANNEX B
Form of Opinion of Counsel for the Company and Holdings
Willkie Farr & Gallagher shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company and Holdings,
addressed to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, substantially to
the effect set forth below:
(i) Each of Holdings and the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification, and has all corporate power and authority necessary to own
or hold its properties and to conduct the business in which it is engaged,
except where the failure to so qualify or have such power or authority
would not, singularly or in the aggregate, have a Material Adverse Effect;
(ii) the Company has an authorized capitalization as set forth in the
Offering Memorandum under the heading "Capitalization"; all of the
outstanding shares of capital stock of Holdings and the Company have been
duly and validly authorized and issued and are fully paid and non-
assessable; and the capital stock of Holdings and the Company conforms in
all material respects to the description thereof contained in the Offering
Memorandum. All outstanding shares of capital stock of the Company are
owned directly by Holdings, free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or any
other claim of a third party except as created in connection with the
Senior Credit Facilities;
(iii) the descriptions in the Offering Memorandum of statutes, legal
and govern mental proceedings and contracts and other documents are
accurate in all material respects; the statements in the Offering
Memorandum under the heading "Certain U.S. Federal Income Tax
Consequences", to the extent that they constitute summaries of matters of
law or regulation or legal conclusions, fairly summarize the matters
described therein in all material respects;
(iv) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder;
(v) each of the Company and Holdings has all corporate power and
authority to execute and deliver each of the Transaction Documents to which
it is a party and to perform its obligations thereunder; and all corporate
action required to be taken for the due and proper authorization, execution
and delivery of each of the Transaction Documents and the consummation of
the transactions contemplated thereby have been duly and validly taken;
(vi) each of the Purchase Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by each of the
Company and Holdings;
(vii) the Indenture has been duly authorized, executed and delivered
by each of the Company and Holdings and, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid and
legally binding agreement of the Company and Holdings enforceable against
the Company and Holdings in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws
<PAGE>
28
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
(viii) the Securities have been duly authorized and issued by the
Company and, assuming due authentication thereof by the Trustee and upon
payment and delivery in accordance with the Purchase Agreement, will
constitute valid and legally binding obligations of the Company entitled to
the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law);
(ix) each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum;
(x) (i) except as set forth in the Offering Memorandum (which
exceptions shall be noted in a schedule attached to such opinion), the
execution, delivery and performance by each of the Company and Holdings of
each of the Transaction Documents to which it is a party, (ii) the
issuance, authentication, sale and delivery of the Securities and
compliance by the Company and Holdings with the terms thereof and (iii) the
consummation of the transactions contemplated by the Transaction Documents
will not, except insofar as the provisions of the Indenture granting each
holder of Securities the right to require the Company to repurchase such
holder's Securities upon the occurrence of a Change of Control (as defined
in the Indenture) may conflict with certain provisions of the documents
governing the Senior Credit Facilities, conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, or, except as created in connection with the Senior Credit
Facilities or as described in the Offering Memorandum under the heading
"Business--Trademarks, Copyrights and Patents", result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or Holdings pursuant to, any material indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or Holdings is a party or by which the Company or Holdings is bound
or to which any of the property or assets of the Company or Holdings is
subject except for such conflicts, breaches violations or defaults as would
not have a Material Adverse Effect or any material adverse effect on the
ability of the Company or Holdings to perform its obligations under each of
the Transaction Documents to which it is a party, nor will such actions
result in any violation of the provisions of the charter or by-laws of the
Company or Holdings or (assuming compliance by the Initial Purchasers with
all applicable federal and state securities laws) any New York or federal
statute, judgment, order, decree, rule or regulation of any court or
arbitrator or governmental agency or body having jurisdiction over the
Company or Holdings or any of its properties or assets; and no consent,
approval, authorization or order of, or filing or registration with, any
such court or arbitrator or governmental agency or body under any such
statute, judgment, order, decree, rule or regulation is required for the
execution, delivery and performance by the Company or Holdings of each of
the Transaction Documents to which it is a party, the issuance,
authentication, sale and delivery of the Securities and compliance by the
Company and Holdings with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations, filings, registrations or
qualifications (A) which shall have been obtained or made prior to the
Closing Date and (B) as may be required to be obtained or made under the
Securities Act and applicable state securities laws as provided in the
Registration Rights Agreement;
(xi) neither the Company nor Holdings is, and, immediately upon
consummation of the Transactions, neither the Company nor Holdings will be,
(A) an "investment company" or a company "controlled by" an investment
company within the meaning of
<PAGE>
29
the Investment Company Act and the rules and regulations of the Commission
thereunder, without taking account of any exemption under the Investment
Company Act arising out of the number of holders of the Company's
securities or (B) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended; and
(xii) assuming the accuracy of the representations, warranties and
agreements of the Company and Holdings and of the Initial Purchasers
contained in the Purchase Agreement, no registration of the Securities
under the Securities Act or qualification of the Indenture under the Trust
Indenture Act of 1939 is required in connection with the issuance and sale
of the Securities by the Company and the offer, initial resale and delivery
of the Securities by the Initial Purchasers in the manner contemplated by
the Purchase Agreement and the Offering Memorandum.
In addition, such opinion shall state that the Initial Purchasers
shall be entitled to rely upon the (i) opinion as to the enforceability of the
Asset Purchase Agreement issued by such counsel to Borden Foods Corporation and
BFC Investments, L.P. dated the Closing Date and (ii) the opinion as to the
enforceability of the documents relating to the Senior Credit Facilities issued
by such counsel to the Administrative Agent, the Documentation Agent, the
Collateral Agent, the Issuing Bank and each of the lenders party thereto,
subject, in each of (i) and (ii), to the assumptions, limitations,
qualifications and exceptions set forth therein.
Such counsel shall also state that they have participated in
conferences with representatives of the Company and Holdings, representatives of
their independent accountants and counsel and representatives of the Initial
Purchasers and their counsel at which conferences the contents of the
Preliminary Offering Memorandum and the Offering Memorandum and any amendment
and supplement thereto and related matters were discussed and, although such
counsel assumes no responsibility for the accuracy, completeness or fairness of
the Offering Memorandum or any amendment or supplement thereto (except as
expressly provided above), nothing has come to the attention of such counsel to
cause such counsel to believe that the Offering Memorandum or any amendment or
supplement thereto (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need express
no belief), as of the date thereof and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to the Initial
Purchasers.
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
================================================================================
Eagle Family Foods, Inc.
8 3/4% Senior Subordinated Notes due 2008
------------------------
INDENTURE
Dated as of January 23, 1998
------------------------
IBJ Schroder Bank & Trust Company,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 31
SECTION 1.03. Incorporation by Reference of
Trust Indenture Act.................................... 31
SECTION 1.04. Rules of Construction.................................... 32
ARTICLE II
The Securities
--------------
SECTION 2.01. Amount of Securities; Issuable
in Series............................................. 33
SECTION 2.02. Form and Dating......................................... 34
SECTION 2.03. Execution and Authentication............................ 35
SECTION 2.04. Registrar and Paying Agent.............................. 36
SECTION 2.05. Paying Agent To Hold Money in Trust..................... 36
SECTION 2.06. Securityholder Lists.................................... 37
SECTION 2.07. Transfer and Exchange................................... 37
SECTION 2.08. Replacement Securities.................................. 38
SECTION 2.09. Outstanding Securities.................................. 39
SECTION 2.10. Temporary Securities.................................... 39
SECTION 2.11 Cancelation............................................. 40
SECTION 2.12 Defaulted Interest...................................... 40
SECTION 2.13 CUSIP Numbers........................................... 40
ARTICLE III
Redemption
----------
SECTION 3.01. Notices to Trustee...................................... 41
SECTION 3.02. Selection of Securities
To Be Redeemed........................................ 41
SECTION 3.03. Notice of Redemption.................................... 42
SECTION 3.04. Effect of Notice of Redemption.......................... 43
SECTION 3.05. Deposit of Redemption Price............................. 43
SECTION 3.06. Securities Redeemed in Part............................. 43
<PAGE>
Contents, p. 2
Page
----
ARTICLE IV
Covenants
---------
SECTION 4.01. Payment of Securities................................... 43
SECTION 4.02. Reports................................................. 44
SECTION 4.03. Limitation on Indebtedness.............................. 44
SECTION 4.04. Limitation on Restricted Payments....................... 45
SECTION 4.05. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.......................................... 51
SECTION 4.06. Limitation on Sales of Assets........................... 52
SECTION 4.07. Limitation on Transactions with
Affiliates............................................ 57
SECTION 4.08. Change of Control....................................... 58
SECTION 4.09. Compliance Certificate.................................. 60
SECTION 4.10. Further Instruments and Acts............................ 60
SECTION 4.11. Future Guarantors....................................... 61
SECTION 4.12. Limitation on Lines of Business......................... 61
SECTION 4.13. Limitation on the Sale or Issuance
of Capital Stock of Subsidiaries...................... 61
SECTION 4.14. Limitation on Subordinated Liens........................ 61
SECTION 4.15. Limitation on Sale and Leaseback
Transactions.......................................... 62
SECTION 4.16. Limitation on Layering Debt............................. 62
SECTION 4.17. Restrictions on Holdings................................ 62
ARTICLE V
Successor Company
-----------------
SECTION 5.01. Mergers, Consolidation or Sale of Assets
of the Company........................................ 63
ARTICLE VI
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default....................................... 65
SECTION 6.02. Acceleration............................................ 67
SECTION 6.03. Other Remedies.......................................... 68
SECTION 6.04. Waiver of Past Defaults................................. 68
SECTION 6.05. Control by Majority..................................... 69
<PAGE>
Contents, p. 3
Page
----
SECTION 6.06. Limitation on Suits..................................... 69
SECTION 6.07. Rights of Holders To
Receive Payment....................................... 69
SECTION 6.08. Collection Suit by Trustee.............................. 70
SECTION 6.09. Trustee May File Proofs of Claim........................ 70
SECTION 6.10. Priorities.............................................. 70
SECTION 6.11. Undertaking for Costs................................... 71
SECTION 6.12. Waiver of Stay or Extension Laws........................ 71
ARTICLE VII
Trustee
-------
SECTION 7.01. Duties of Trustee....................................... 71
SECTION 7.02. Rights of Trustee....................................... 73
SECTION 7.03. Individual Rights of Trustee............................ 74
SECTION 7.04. Trustee's Disclaimer.................................... 74
SECTION 7.05. Notice of Defaults...................................... 74
SECTION 7.06. Reports by Trustee to Holders........................... 74
SECTION 7.07. Compensation and Indemnity.............................. 75
SECTION 7.08. Replacement of Trustee.................................. 76
SECTION 7.09. Successor Trustee by Merger............................. 77
SECTION 7.10. Eligibility; Disqualification........................... 77
SECTION 7.11. Preferential Collection of Claims
Against Company....................................... 78
ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance............................................ 78
SECTION 8.02. Conditions to Defeasance................................ 79
SECTION 8.03. Application of Trust Money.............................. 81
SECTION 8.04. Repayment to Company.................................... 81
SECTION 8.05. Indemnity for Government Obligations.................... 82
SECTION 8.06. Reinstatement........................................... 82
<PAGE>
Contents, p. 4
Page
----
ARTICLE IX
Amendments
----------
SECTION 9.01. Without Consent of Holders.............................. 82
SECTION 9.02. With Consent of Holders................................. 83
SECTION 9.03. Compliance with Trust Indenture Act..................... 85
SECTION 9.04. Revocation and Effect of Consents
and Waivers........................................... 85
SECTION 9.05. Notation on or Exchange
of Securities......................................... 85
SECTION 9.06. Trustee To Sign Amendments.............................. 86
SECTION 9.07. Payment for Consent..................................... 86
ARTICLE X
Subordination
-------------
SECTION 10.01. Agreement To Subordinate................................ 86
SECTION 10.02. Liquidation, Dissolution, Bankruptcy.................... 87
SECTION 10.03. Default on Senior Indebtedness.......................... 87
SECTION 10.04. Acceleration of Payment of Securities................... 88
SECTION 10.05. When Payment or Distribution Must Be
Paid Over............................................. 88
SECTION 10.06. Subrogation............................................. 89
SECTION 10.07. Relative Rights......................................... 89
SECTION 10.08. Subordination May Not Be Impaired by
Company............................................... 89
SECTION 10.09. Rights of Trustee and Paying Agent...................... 89
SECTION 10.10. Payment, Distribution or Notice to
Representative........................................ 90
SECTION 10.11. Article X Not To Prevent Events
of Default or Limit
Right To Accelerate................................... 90
SECTION 10.12. Trust Moneys Not Subordinated........................... 90
SECTION 10.13. Trustee Entitled To Rely................................ 90
SECTION 10.14. Trustee To Effectuate Subordination..................... 91
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness................................... 91
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions............................................ 91
SECTION 10.17. Trustee's Compensation Not
Prejudiced.......................................... 92
<PAGE>
Contents, p. 5
Page
----
ARTICLE XI
Note Guarantees
---------------
SECTION 11.01. Note Guarantees......................................... 92
SECTION 11.02. Limitation on Liability; Release
of Domestic Subsidiary Guarantors..................... 95
SECTION 11.03. Successors and Assigns.................................. 96
SECTION 11.04. No Waiver............................................... 96
SECTION 11.05. Modification............................................ 96
SECTION 11.06. Execution of Supplemental Indenture
for Future Domestic Subsidiary
Guarantors............................................ 96
ARTICLE XII
Subordination of the Note Guarantees
------------------------------------
SECTION 12.01. Agreement To Subordinate................................ 97
SECTION 12.02. Liquidation, Dissolution, Bankruptcy.................... 97
SECTION 12.03. Default on Designated Senior
Indebtedness of a Guarantor.......................... 98
SECTION 12.04. Demand for Payment...................................... 98
SECTION 12.05. When Payment or Distribution Must Be
Paid Over............................................. 99
SECTION 12.06. Subrogation............................................. 99
SECTION 12.07. Relative Rights......................................... 99
SECTION 12.08. Subordination May Not Be Impaired
by a Guarantor........................................ 100
SECTION 12.09. Rights of Trustee and Paying Agent...................... 100
SECTION 12.10. Payment, Distribution or Notice to
Representative........................................ 100
SECTION 12.11. Article XII Not To Prevent Events
of Default or Limit Right To
Accelerate............................................ 100
SECTION 12.12. Trustee Entitled To Rely................................ 101
SECTION 12.13. Trustee To Effectuate Subordination..................... 101
SECTION 12.14. Trustee Not Fiduciary for Holders of
Senior Indebtedness of a Guarantor.................... 102
SECTION 12.15. Reliance by Holders of Senior
Indebtedness of a Guarantor on
Subordination Provisions.............................. 102
SECTION 12.16. Defeasance.............................................. 102
<PAGE>
Contents, p. 6
Page
----
ARTICLE XIII
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls............................ 102
SECTION 13.02. Notices................................................. 102
SECTION 13.03. Communication by Holders with Other
Holders............................................... 103
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent............................................. 103
SECTION 13.05. Statements Required in Certificate or
Opinion............................................... 104
SECTION 13.06. When Securities Disregarded............................. 104
SECTION 13.07. Rules by Trustee, Paying Agent and
Registrar............................................. 105
SECTION 13.08. Legal Holidays.......................................... 105
SECTION 13.09. Governing Law........................................... 105
SECTION 13.10. No Recourse Against Others.............................. 105
SECTION 13.11. Successors.............................................. 105
SECTION 13.12. Multiple Originals...................................... 105
SECTION 13.13. Table of Contents; Headings............................. 105
Appendix A Provisions Relating to Original Securities,
Additional Securities, Private Exchange
Securities and Exchange Securities
Exhibit A Form of Initial Security
Exhibit B Form of Exchange Security
Exhibit C Form of Supplemental Indenture
Exhibit D Form of Letter of Representation
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- - - - ------- ----------
310(a)(1) ............................. 7.10
(a)(2) ............................. 7.10
(a)(3) ............................. N.A.
(a)(4) ............................. N.A.
(b) ............................. 7.08; 7.10
(c) ............................. N.A.
311(a) ............................. 7.11
(b) ............................. 7.11
(c) ............................. N.A.
312(a) ............................. 2.06
(b) ............................. 13.03
(c) ............................. 13.03
313(a) ............................. 7.06
(b)(1) ............................. N.A.
(b)(2) ............................. 7.06
(c) ............................. 13.02
(d) ............................. 7.06
314(a) ............................. 4.02; 4.09
(b) ............................. N.A.
(c)(1) ............................. 13.04
(c)(2) ............................. 13.04
(c)(3) ............................. N.A.
(d) ............................. N.A.
(e) ............................. 13.05
(f) ............................. 4.10
315(a) ............................. 7.01; 7.02
(b) ............................. 7.05
(c) ............................. 7.01
(d) ............................. 7.01
(e) ............................. 6.11
316(a)(last
sentence) ............................. 13.06
(a)(1)(A) ............................. 6.05
(a)(1)(B) ............................. 6.04
(a)(2) ............................. N.A.
(b) ............................. 6.07
317(a)(1) ............................. 6.08
(a)(2) ............................. 6.09
(b) ............................. 2.05
318(a) ............................. 13.01
N.A. means Not Applicable.
_____________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
INDENTURE dated as of January 23, 1998, among EAGLE FAMILY
FOODS, INC., a Delaware corporation (the "Company"), EAGLE FAMILY
FOODS HOLDINGS, INC., a Delaware corporation, as a guarantor
("Holdings" or the "Initial Guarantor"), and IBJ SCHRODER BANK &
TRUST COMPANY, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (i) the Company's 8 3/4%
Senior Subordinated Notes due 2008 issued on the Closing Date (such term and
each other capitalized term used but not defined in this introduction having the
meaning assigned thereto in Article I) (the "Original Securities"), (ii) any
Additional Securities that may be issued on any other Issue Date (all such
Securities in clauses (i) and (ii) being referred to herein collectively as the
"Initial Securities"), (iii) if and when issued as provided in an Exchange and
Registration Rights Agreement, the Company's 8 3/4% Senior Subordinated Notes
due 2008 in exchange for any Initial Securities (the "Exchange Securities") and
(iv) if and when issued as provided in an Exchange and Registration Rights
Agreement, the Private Exchange Securities issued in a Private Exchange Offer
(the "Private Exchange Securities", and together with the Initial Securities and
any Exchange Securities issued hereunder, the "Securities"). Except as
otherwise provided herein, the Securities will be limited to $265,000,000 in
aggregate principal amount outstanding, of which $115,000,000 in aggregate
principal amount will be initially issued on the Closing Date. Subject to the
conditions set forth herein, the Company may issue up to $150,000,000 aggregate
principal amount of Additional Securities.
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
------------
"Acquired Indebtedness" means, with respect to any specified Person,
(i) any Indebtedness of any other Person existing at the time such other Person
is merged with or into, or becomes 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
<PAGE>
2
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Additional Securities" means up to $150,000,000 in aggregate
principal amount of the Company's 8 3/4% Senior Subordinated Note due 2008
initially issued subsequent to the Closing Date pursuant to Article II and in
compliance with Section 4.03.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or executive officer of (a) such specified Person or (b) any Person
described in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of any class, or any series of
- - - - --------
any class, of equity securities of a Person, whether or not voting, shall be
deemed to be control.
"Asset Sale" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer, that does not constitute a Restricted
Payment or an Investment, by such Person of any of its property or assets
(including without limitation, by way of a Sale and Leaseback Transaction and
including the issuance, sale or other transfer of any Capital Stock in any
Subsidiary (including any Intellectual Property Subsidiary) of such Person or
the sale or other transfer of Capital Stock in any Unrestricted Subsidiary of
such Person (including the receipt of proceeds of insurance paid on account of
the loss of or damage to any asset and awards of compensation for any asset
taken by condemnation, eminent domain or similar proceeding, and including the
receipt of proceeds of business interruption insurance), in each case in one or
a series of related transactions; provided that, notwithstanding the foregoing,
--------
the term "Asset Sale" shall not include: (a) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted pursuant to Section 5.01, (b) the sale or lease of
inventory and obsolete equipment or personal property no longer useful in the
business of such Person, in each case in the ordinary course of business,
<PAGE>
3
(c) a transfer of assets by any Person to the Company, an Intellectual Property
Subsidiary or a Wholly Owned Subsidiary of the Company, (d) an issuance of
Capital Stock by any Person to the Company or to a Wholly Owned Subsidiary of
the Company, (e) the sale or other disposition of cash or Cash Equivalents, (f)
the issuance by the Company of shares of its Capital Stock, (g) the licensing of
intellectual property in the ordinary course of business or (h) Asset Swaps
permitted pursuant to Section 4.06(d).
"Asset Swap" means the substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company and another Person or group
of affiliated Persons (which Person or group of affiliated Persons is not
affiliated with the Company) pursuant to an Asset Swap Agreement.
"Asset Swap Agreement" means a definitive agreement, subject only to
customary closing conditions that the Company in good faith believes will be
satisfied, providing for an Asset Swap; provided, however, that any amendment
-------- -------
to, or waiver of, any closing condition that individually or in the aggregate is
material to such Asset Swap shall be deemed to be a new Asset Swap Agreement.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for 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).
"Board" means the board of directors of the Company.
"Business Day" means each day which is not 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" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
<PAGE>
4
Preferred Stock, but excluding any debt securities convertible or exchangeable
into such equity.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any commercial bank of
recognized standing having capital and surplus in excess of $500,000,000 or (ii)
any bank whose short-term commercial paper rating from Standard and Poor's
Rating Group is at least A-1 or the equivalent thereof or from Moody's Investors
Service, Inc. is at least P-1 or the equivalent thereof (any such bank being an
"Approved Lender"), in each case with maturities of not more than twelve months
from the date of acquisition, (c) commercial paper issued by any Approved Lender
(or by the parent company thereof), (d) repurchase obligations of any lender
under the Senior Credit Facilities (as in effect on the Closing Date) or any
Approved Lender and (e) any shares of money market mutual or similar funds
having assets in excess of $500,000,000 or which invest exclusively in the
assets satisfying the requirements of clauses (a) through (d) of this
definition.
"Change of Control" means such time as:
(i) prior to the initial Public Equity Offering by the Company or
Holdings of its common stock, (a) Holdings ceases to be, directly or
indirectly, the beneficial owner of 100% of the voting power of the Voting
Stock of the Company (unless the Company has merged with or into Holdings
in compliance with Section 5.01 or (b) the Initial Shareholders cease to
be, directly or indirectly, the beneficial owners, in the aggregate, of
more than 50% of the voting power of the Voting Stock of the Company and of
Holdings, in each case on a fully-diluted basis, after giving effect to the
conversion and exercise of all outstanding warrants, options any other
securities of the Company or Holdings, as the case may be, convertible into
or exercisable for Voting Stock of the Company or Holdings, as the case may
be (whether or not such securities are then currently convertible or
exercisable); or
<PAGE>
5
(ii) after the initial Public Equity Offering by the Company or
Holdings of its common stock, (a) any "person" or "group" (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) (other than one or
more of the Initial Shareholders) becomes, directly or indirectly, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), by way of
merger, consolidation or otherwise, of 35% or more of the voting power of
the Voting Stock of the Company or Holdings on a fully-diluted basis, after
giving effect to the conversion and exercise of all outstanding warrants,
options and other securities of the Company or Holdings, as the case may
be, convertible into or exercisable for Voting Stock of the Company or
Holdings, as the case may be, (whether or not such securities are then
currently convertible or exercisable) and (b) such person or group is or
becomes, directly or indirectly, the beneficial owner of a greater
percentage of the voting power of the Voting Stock of the Company or
Holdings, as the case may be, calculated on such fully diluted basis, than
the percentage beneficially owned by the Initial Shareholders; or
(iii) the Company or Holdings merges with or into another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges with or
into the Company or Holdings, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company or Holdings, as the
case may be, is converted into or exchanged for cash, securities or other
property, other than any such transaction where (x) the outstanding Voting
Stock of the Company or Holdings, as the case may be, is converted into or
exchanged for (1) Voting Stock (other than Redeemable Stock) of the
surviving or transferee corporation and/or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under this Indenture and (y) immediately after such transaction no
"person" or "group" (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act) (other than one or more of the Initial Shareholders) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have
<PAGE>
6
"beneficial ownership" of all shares that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of (1) 35% or more of the voting
power of the Voting Stock of the surviving or transferee corporation on a
fully diluted basis, after giving effect to the conversion and exercise of
all outstanding warrants, options and other securities of such surviving or
transferee corporation convertible into or exercisable for Voting Stock of
such surviving or transferee corporation (whether or not such securities
are then currently convertible or exercisable) and (2) a greater percentage
of the voting power of the Voting Stock of such surviving or transferee
corporation calculated on such fully diluted basis, than the percentage
beneficially owned by the Initial Shareholders; or
(iv) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted the Board or the board of
directors of Holdings, together with any new members of such Board or board
of directors (a) whose election by such Board or board of directors or
whose nomination for election by the stockholders of the Company or
Holdings, as the case may be, was approved by a vote of a majority of the
members of such Board or board of directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved or (b) elected by the
Initial Shareholders, cease for any reason to constitute a majority of the
directors of the Company or Holdings, as the case may be, then in office.
"Closing Date" means January 23, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the terms of this Indenture and,
thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the indenture securities.
"Consolidated Interest Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four
<PAGE>
7
consecutive fiscal quarters ending at least 45 days prior to the date of such
determination to (ii) the sum of (a) Consolidated Interest Expense for such four
fiscal quarters plus (b) all cash preferred dividends (tax effected) for such
period; provided, however, that:
-------- -------
(a) if the Company or any Subsidiary of the Company (x) has Incurred
any Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction giving rise
to the need to calculate the Consolidated Interest Coverage Ratio is an
Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness and the application of the proceeds thereof as if such
Indebtedness had been Incurred and the proceeds thereof applied on the
first day of such period or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period
that is no longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect to such discharge of such Indebtedness, including application
of the proceeds of such new Indebtedness, as if such defeasance, repayment,
repurchase or discharge had occurred on the first day of such period
(except that, in making such computation, the amount of Indebtedness under
the Revolving Credit Facility or other revolving credit facility shall be
computed based upon the average daily balance of such Indebtedness during
such four-quarter period);
(b) if since the beginning of such period the Company or any of its
Subsidiaries shall have disposed of any company or any business or any
group of assets constituting an operating unit (a "Disposal"), the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets that are the subject of such
Disposal for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period, and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any of its Subsidiaries repaid, repurchased, defeased or
otherwise
<PAGE>
8
discharged with respect to the Company and its continuing Subsidiaries in
connection with such Disposal for such period (or, if the Capital Stock of
any Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Subsidiary to the extent
the Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale);
(c) if since the beginning of such period the Company or any
Subsidiary of the Company (by merger or otherwise) shall have acquired any
company or any business or any group of assets constituting an operating
unit (an "Acquisition"), EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Acquisition occurred on the
first day of such period; and
(d) if since the beginning of such period any Person (that
subsequently became a Subsidiary of the Company or was merged with or into
the Company or any Subsidiary of the Company since the beginning of such
period) shall have made any Disposal or Acquisition that would have
required an adjustment pursuant to clause (b) or (c) above if made by the
Company or a Subsidiary of the Company during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Disposal or Acquisition occurred
on the first day of such period.
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such Hedging Obligations have a
remaining term as at the date of determination in excess of twelve months). If
any Indebtedness bears, at the option of the Company or a Subsidiary of the
Company, a fixed or floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be computed by applying,
at the option of the Company, either a fixed or floating rate. If any
Indebtedness that is being given pro forma effect was Incurred under the
Revolving Credit Facility or any other revolving credit facility, the interest
expense on such Indebtedness shall be computed based upon the average
<PAGE>
9
daily balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries as determined
in accordance with GAAP, plus, to the extent not included in such interest, (i)
the interest component of Capital Lease Obligations and Attributable Debt,
whether paid or accrued, (ii) amortization of debt discount, (iii) non-cash
interest expense, (iv) accrued interest, (v) interest actually paid by the
Company or any such Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (vi) net costs associated with Hedging
Obligations, (vii) the interest portion of any deferred obligation, (viii)
Preferred Stock dividends in respect of all Preferred Stock (including
Redeemable Stock) of Subsidiaries of the Company and Redeemable Stock of the
Company held by Persons other than the Company or a Wholly Owned Subsidiary of
the Company and (ix) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust; provided, however, that there
-------- -------
shall be excluded therefrom (y) any such interest expense in respect of
Qualified Subordinated Indebtedness and (z) any such interest expense of any
Unrestricted Subsidiary of the Company to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Subsidiary of the Company.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its 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
- - - - --------
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 Subsidiary thereof, (ii) the Net
Income (but not loss) of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (which 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 (if
<PAGE>
10
positive) 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, or any dividends or other distributions from, any
Unrestricted Subsidiary of the Company, to the extent otherwise included, shall
be excluded, until distributed in cash to the Company or one of its Subsidiaries
and provided further that, for the purposes of clause (i), Net Income of any
-------- -------
such entity shall be calculated in the same manner that Net Income of the
Company is calculated. Notwithstanding the foregoing, for the purposes of
Section 4.04 only, there shall be excluded from Consolidated Net Income any
payments of interest on Indebtedness, dividends, repayments of principal of
loans or advances, or other transfers of assets, from Unrestricted Subsidiaries
to the Company or any of its Subsidiaries to the extent such payments,
dividends, repayments, advances or transfers increase the amount of Restricted
Payments permitted under Section 4.04(a)(3)(C).
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP, as of the end of the most recent fiscal quarter
of the Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Redeemable Stock of the Company.
"Consolidated Non-Cash Charges" of any Person means, for any period,
the aggregate depreciation, amortization and other non-cash charges of such
Person and its consolidated Subsidiaries for such period, on a consolidated
basis, as determined in accordance with GAAP (excluding any non-cash charge that
requires or represents an accrual or reserve for cash charges for any future
period, other than accruals for future retiree medical obligations made pursuant
to SFAS No. 87, No. 112 and No. 116, as amended or modified).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
<PAGE>
11
under which the Company or any of its Subsidiaries is a party or a beneficiary.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means, with respect to any Person,
(i) so long as the Senior Credit Facilities are outstanding, Indebtedness of
such Person under the Senior Credit Facilities and (ii) thereafter, any other
Senior Indebtedness of such Person permitted under this Indenture the principal
amount of which is $25,000,000 or more and that has been designated by such
Person as "Designated Senior Indebtedness."
"Domestic Subsidiary" means any direct or indirect Subsidiary of the
Company that is organized and existing under the laws of the United States, any
state thereof or the District of Columbia, but shall not include any
Intellectual Property Subsidiary unless such Intellectual Property Subsidiary is
a Wholly Owned Subsidiary of the Company.
"Domestic Subsidiary Guarantee" means any Note Guarantee provided by
any Domestic Subsidiary of the Company pursuant to Section 4.11.
"EBITDA" for any period means the sum of Consolidated Net Income,
income tax expense, Consolidated Interest Expense and Consolidated Non-Cash
Charges deducted in computing Consolidated Net Income, without duplication, in
each case for such period, of such Person and its consolidated Subsidiaries on a
consolidated basis, all determined in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means (i) the Exchange
and Registration Rights Agreement, dated as of the Closing Date, among the
Company, Holdings and the Initial Purchasers and (ii) any other similar exchange
and registration rights agreement relating to Additional Securities.
"Exchange Offer" means a registered exchange offer for Initial
Securities undertaken by the Company pursuant to an Exchange and Registration
Rights Agreement.
<PAGE>
12
"Exchange Securities" means, collectively, debt securities of the
Company that are identical in all material respects to the Initial Securities,
except for the transfer restrictions relating to the Initial Securities, issued
in a like aggregate principal amount of the Initial Securities pursuant to an
Exchange and Registration Rights Agreement.
"Exempt Affiliate Transactions" means (a) transactions between or
among the Company and/or its Wholly Owned Subsidiaries, (b) loans or advances to
employees and officers of the Company or any Subsidiary of the Company in the
ordinary course of business to provide for the payment of reasonable expenses
incurred by such persons in the performance of their responsibilities to the
Company or such Subsidiary or in connection with any relocation, (c) fees,
compensation or employee benefit arrangements paid to and indemnity provided on
behalf of directors, officers or employees of the Company or any Subsidiary of
the Company in the ordinary course of business, (d) any employment agreement
(including customary benefits thereunder) that is in effect on the Closing Date
in the ordinary course of business and any such agreement entered into by the
Company or a Subsidiary of the Company after the Closing Date in the ordinary
course of business of the Company or such Subsidiary, (e) any Restricted Payment
that is not prohibited by Section 4.04 and (f) transactions pursuant to
agreements in effect on the Closing Date, including amendments thereto entered
into after such date; provided that the terms of any such amendment are not, in
--------
the aggregate, less favorable to the Company than the terms of such agreement
prior to such amendment and provided further that such agreements are set forth
-------- -------
in a schedule to this Indenture.
"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the Closing Date, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset or property, the
price that could be negotiated in an arms'-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"Foreign Subsidiary" means any Subsidiary of the Company that is not a
Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of
<PAGE>
13
the Accounting Principles Board of 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.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person,
including any such obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by agreement to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
-------- -------
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb shall have a correlative meaning.
"Guarantors" means the Initial Guarantor and any other Domestic
Subsidiary of the Company that executes a supplemental indenture hereto pursuant
to Section 4.11, and their respective successors and assigns, in each case until
released from the applicable Note Guarantee in accordance with the terms of this
Indenture.
"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.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Holdings" means the party identified as such in this Indenture until
a successor replaces it in accordance with the terms of this Indenture and,
thereafter, means the successor.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any
-------- -------
<PAGE>
14
Indebtedness or Capital Stock of a Person existing at the time such person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary; provided that neither the accrual of interest nor the
--------
accretion of original issue discount shall be considered an Incurrence of
Indebtedness. The terms "Incurred," "Incurrence" and "Incurring" shall each have
a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal (accreted value in the case of Indebtedness
Incurred with original issue discount) of and premium (if any) in respect
of indebtedness of such Person for borrowed money;
(ii) the principal (accreted value in the case of Indebtedness
Incurred with original issue discount) of and premium (if any) in respect
of obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(iii) all Capital Lease Obligations and Attributable Debt of such
Person;
(iv) all obligations of such person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables);
(v) all reimbursement obligations of such Person in respect of
letters of credit, bankers' acceptances or other similar instruments or
credit transactions, other than obligations with respect to letters of
credit securing obligations (other than obligations described in clauses
(i) through (iv) of this definition) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn
upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit;
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Redeemable Stock of
such Person or any Redeemable Stock of such Person's Subsidiaries (but
excluding, in each case, any accrued dividends);
<PAGE>
15
(vii) the amount of Preferred Stock of such Person's Subsidiaries
(but excluding any unaccrued dividends);
(viii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that if such Indebtedness is not assumed by such
-------- -------
Person, the amount of such Indebtedness shall be the lesser of (a) the Fair
Market Value (as determined by the board of directors of such Person, whose
determination shall be conclusive if made in good faith and evidenced by a
resolution of such board of directors) of such asset at such date of
determination and (b) the amount of such Indebtedness of such other Person;
(ix) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and
(x) to the extent not otherwise included in this definition, net
obligations in respect of Hedging Obligations.
For purposes of this definition, the maximum fixed redemption,
repayment or repurchase price of any Redeemable Stock that does not have a fixed
redemption, repayment or repurchase price shall be calculated in accordance with
the terms of such Redeemable Stock as if such Redeemable Stock were redeemed,
repaid or repurchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture; provided, however, that if such
-------- -------
Redeemable Stock is not then permitted to be redeemed, repaid or repurchased,
the redemption, repayment or repurchase price shall be the book value of such
Redeemable Stock as reflected in the most recent financial statements of such
Person. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended from time to time.
"Independent Director" means a director of the Company other than a
director who is a party, or who is a director, officer, employee or Affiliate
(or is related by blood or marriage to any such person) of the other party, to
<PAGE>
16
the transaction in question, and who is, in fact, independent in respect of such
transaction.
"Independent Financial Advisor" means a reputable accounting,
appraisal or nationally recognized investment banking or consulting firm that
is, in the reasonable judgment of the Board, qualified to perform the task for
which such firm has been engaged and disinterested and independent with respect
to the Company.
"Initial Purchasers" means, collectively, Chase Securities Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Initial Shareholders" means the Sponsors and Management Shareholders.
"Intellectual Property Subsidiary" means any Subsidiary of the Company
(i) substantially all the assets of which are comprised of patents, trademarks,
copyrights and other intellectual property, (ii) that is engaged solely in the
business of owning such assets (prior to any sale, lease, conveyance,
disposition of or other transfer of any of such assets to any Person in
accordance with the terms of this Indenture) and licensing such assets to the
Company pursuant to a license agreement or other agreement or arrangement
relating to licensing fees, royalty payments or similar fees or payments that
does not require the payment of any fees or the making of any payments by the
Company to such Intellectual Property Subsidiary in any year in excess of 10% of
the gross revenues for such year attributable to the sales of products using the
patents, trademarks, copyrights or other intellectual property that is the
subject of such agreement or arrangement and other activities incidental
thereto, (iii) contains in its charter, partnership agreement, operating
agreement or other constituent or governing document (A) a provision granting
the Company or any Wholly Owned Subsidiary of the Company control over the
management (including the sale, lease, conveyance disposition of or other
transfer of any of the properties or assets) of such Subsidiary, (B) a
prohibition against the making of any distribution by such Subsidiary to any
Person other than the Company or any Wholly Owned Subsidiary of the Company with
respect to any year (other than in connection with the sale, lease, conveyance,
disposition of or other transfer of any assets of such Subsidiary to any Person
in accordance with the terms of this Indenture) in an amount in excess of 10% of
the difference (if positive) between the revenue of such Subsidiary for such
year and the operating expenses of such
<PAGE>
17
Subsidiary for such year and (C) a provision requiring that all proceeds derived
from the issuance, sale or other transfer of any shares of Capital Stock by such
Subsidiary be distributed to the Company promptly upon receipt thereof and (iv)
that does not Incur Indebtedness and that does not Incur any other obligation
other than as permitted under clause (ii) above.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including an Affiliate) in the form of a direct or
indirect loan (including a Guarantee of Indebtedness or other Obligation),
advance or other extension of credit or capital contribution (by means of any
transfer of cash or other property) (excluding an advance to any officer or
employee of the type specified in clause (b) of the definition of Exempt
Affiliate Transactions and accounts receivable and other extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices), purchase or other acquisition for consideration or ownership of
Indebtedness, Capital Stock or other security issued or owned by any other
Person and any other item that is or would be classified as an investment on a
balance sheet prepared in accordance with GAAP; provided that an acquisition of
--------
assets, Capital Stock or other securities by the Company for consideration
consisting of common equity securities of the Company shall not be deemed to be
an Investment.
"Issue Date" means the date on which any Initial Securities are
originally issued.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Shareholder" means an officer, director or employee of the
Company or any Subsidiary of the Company who is the beneficial owner of any
Capital Stock of the Company or of Holdings.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such
<PAGE>
18
period, 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,
any dispositions pursuant to a Sale and Leaseback Transaction) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries,
(ii) any extraordinary gain or loss, together with any related provision for
taxes on such extraordinary gain or loss, (iii) any gains (but not losses) from
currency exchange transactions not in the ordinary course of business consistent
with past practice and (iv) with respect to the Company, (a) cash restructuring
charges or writeoffs recorded within the one-year period following the Closing
Date in an aggregate amount not to exceed $5,000,000 and (b) other such non-cash
restructuring charges or writeoffs recorded within such one-year period
(excluding any non-cash charge that requires or represents an accrual or reserve
for cash charges for any future period).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
noncash consideration received in any Asset Sale but only as and when received)
net of (i) the amount of cash applied to repay or defease Indebtedness secured
by the asset involved in such Asset Sale, (ii) the direct costs and expenses
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), (iii) any relocation
expenses incurred as a result thereof, (iv) taxes (including income taxes and
taxes payable upon payment or other distribution of funds from a Foreign
Subsidiary to the Company or another Subsidiary of the Company) paid or payable
as a result thereof, (v) any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP, (vi) a reasonable
reserve for the after-tax cost of any indemnification payments (fixed or
contingent) attributable to the seller's indemnities to purchaser in respect of
such Asset Sale undertaken by the Company or any of its Subsidiaries in
connection with such Asset Sale and (vii) if such Person is a Subsidiary of the
Company, any dividends or distributions payable to holders of minority interests
in such Subsidiary from the proceeds of such Asset Sale.
<PAGE>
19
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its 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; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary of the Company) would
permit (upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Note Guarantee" means each unconditional Guarantee, on a senior
subordinated and unsecured basis, of the obligations with respect to the
Securities issued by a Guarantor. Each Note Guarantee entered after the Closing
Date shall be evidenced by delivery of a supplemental indenture substantially in
the form of Exhibit C hereto.
"Obligations" means any principal, interest, special interest,
penalties, premiums, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company or of a Guarantor, as applicable.
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers of the Company, and, with respect to a
Guarantor, a certificate signed by two Officers of such Guarantor.
"Opinion of Counsel" means a written opinion from
legal counsel who and which is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company.
"pari passu," as applied to the ranking of any Indebtedness of a
---- -----
Person in relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not subordinate in right of payment to any
Indebtedness or (ii) is subordinate in right of payment to the same Indebtedness
as is the other, and is so subordinate to the same extent, and is not
subordinate in right of
<PAGE>
20
payment to each other or to any Indebtedness as to which the other is not so
subordinate.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company under the Senior Credit Facilities
(and of any future Domestic Subsidiaries under the Domestic Subsidiary
Guarantees), or any refinancing thereof, in an aggregate principal amount
at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) not to exceed $265,000,000, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount or the commitments with respect to such
Indebtedness pursuant to Section 4.06;
(ii) the Existing Indebtedness of the Company;
(iii) the Indebtedness of the Company under the Securities (other
than any Additional Securities) and of any future Domestic Subsidiaries
under the Domestic Subsidiary Guarantees;
(iv) Indebtedness (including Acquired Indebtedness) of the Company
or any of its Subsidiaries 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 used in the business of the
Company or such Subsidiary or any Refinancing Indebtedness thereof
(provided that the requirements of clause (ii) of the definition of
Refinancing Indebtedness need not be met for the purposes of this clause
(iv)), in an aggregate principal amount not to exceed $20,000,000 at any
time outstanding;
(v) Refinancing Indebtedness of the Company or any of its
Subsidiaries;
(vi) Indebtedness of the Company owing to and held by any of its
Wholly Owned Subsidiaries or Indebtedness of a Subsidiary of the Company
owing to and held by the Company and any of its Wholly Owned Subsidiaries;
provided, however, that (i) any subsequent issuance or transfer of Capital
-------- -------
Stock that results in any such Indebtedness being held by a Person other
than a Wholly Owned Subsidiary of the Company and (ii) any sale or
<PAGE>
21
other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Subsidiary of the Company shall be deemed, in
each case, to constitute an Incurrence of such Indebtedness by the Company
or such Subsidiary, as the case may be;
(vii) (a) Hedging Obligations that are Incurred by the Company or any
of its Subsidiaries for the purpose of fixing or hedging interest rate risk
with respect to any floating rate Indebtedness that is permitted by this
Indenture to be Incurred, (b) Indebtedness for letters of credit relating
to workers' compensation claims and self-insurance or similar requirements
in the ordinary course of business, (c) Indebtedness in respect of
performance, surety or appeal bonds in the ordinary course of business and
(d) Indebtedness in respect of any Currency Agreement;
(viii) Indebtedness of the Company to the extent the proceeds thereof
are immediately used after the Incurrence thereof to purchase Securities
tendered in an offer to purchase made as a result of a Change of Control;
(ix) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations (or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any Subsidiary of the Company
pursuant to such agreements), in any case Incurred in connection with the
disposition of any business, assets or Subsidiary of the Company (other
than Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Subsidiary of the Company in
connection with such disposition;
(x) Qualified Subordinated Indebtedness of the Company or a
Domestic Subsidiary;
(xi) Indebtedness of Foreign Subsidiaries in an amount not at any
time exceeding $10,000,000; and
(xii) Indebtedness of the Company and its Subsidiaries (in addition
to Indebtedness permitted by any other clause of this paragraph) in an
aggregate
<PAGE>
22
principal amount at any time outstanding not to exceed $20,000,000.
"Permitted Investments" means (a) any Investments in the Company; (b)
any Investments in Cash Equivalents; (c) Investments made as a result of the
receipt of noncash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.06; (d) Investments outstanding as of the
Closing Date; (e) Investments in property or assets to be used in (or in
Subsidiaries and any entity that, as a result of such Investment, is a
Subsidiary engaged in) the same or a similar line of business as the Company or
any of its Subsidiaries was engaged in on the Closing Date or any reasonable
extensions or expansions thereof and Investments in the form of any purchase or
other acquisition for consideration or ownership of additional Capital Stock of
any of the Subsidiaries of the Company permitted under this Indenture; (f)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses in accordance with
GAAP; (g) loans or advances to employees made in the ordinary course of business
that do not in the aggregate exceed $10,000,000 at any time outstanding; (h)
accounts receivables and other extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices; (i) Investments in
any broker or customer; provided that the aggregate amount of such Investments
--------
in all brokers and customers shall not at any time exceed $5,000,000; (j)
Investments in dealers or customers received as distributions on debt claims
under a plan or plans of reorganization in any bankruptcy proceeding filed by or
against any dealer or customer under Chapter 11 of Title 11 of the United States
Code; provided that the Company liquidates such Investments as soon as
--------
practicable; and (k) Investments in Indebtedness incurred by the Company or any
Subsidiary of the Company in compliance with Section 4.03. The term "Permitted
Investments" shall not include the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of any Intellectual Property
Subsidiary that are not owned by the Company.
"Permitted Liens" means Liens securing Indebtedness of a Person
existing at the time that such Person is merged into or consolidated with the
Company or a Subsidiary of the Company or its assets are acquired by such
Person; provided that such Liens were not created in contemplation of such
--------
merger or consolidation or purchase and do not extend to any assets of the
Company or any Subsidiary of the Company, other than the surviving person and
its Subsidiaries or such assets.
<PAGE>
23
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Private Exchange Securities" means, collectively, debt securities of
the Company that are identical in all material respects to Exchange Securities,
except for the transfer restrictions relating to such Private Exchange
Securities, issued by the Company (under the same indenture as the Exchange
Securities) simultaneously with the delivery of the Exchange Securities in an
Exchange Offer, to any Holder that holds any Initial Securities acquired by it
that have, or that are reasonably likely to be determined to have, the status of
an unsold allotment in an initial distribution, or to any Holder that is not
entitled to participate in an Exchange Offer, upon the request of any such
Holder, in exchange for a like aggregate principal amount of Initial Securities
held by such Holder.
"Productive Assets" means assets of a kind used or usable by the
Company and its Subsidiaries in the Company's business or any Related Business.
"Public Equity Offering" means an underwritten primary public offering
of the common stock of the Company or of the common stock of Holdings pursuant
to an effective registration statement filed with the SEC in accordance with the
Securities Act (whether alone or in conjunction with a secondary public
offering).
"Purchase Money Obligations" of any Person means any obligations of
such Person to any seller or any other Person Incurred or assumed to finance the
construction and/or acquisition of real or personal property to be used in the
business of such Person or any of its Subsidiaries in
<PAGE>
24
an amount that is not more than 100% of the cost of such property, and Incurred
in contemplation of, or within 180 days after, the date of such acquisition
(excluding accounts payable to trade creditors Incurred in the ordinary course
of business).
"Qualified Subordinated Indebtedness" means Subordinated Indebtedness
owing to an Initial Shareholder or any Affiliate of any Initial Shareholder (or,
in the case of Qualified Subordinated Indebtedness issued by the Company to
purchase, redeem or otherwise acquire or retire for value any shares of Capital
Stock of any Intellectual Property Subsidiary, to any other Person) that (i)
does not require or permit any payment for any reason upon or in respect
thereof, whether principal, interest or otherwise, prior to the Stated Maturity
thereof, except in additional Qualified Subordinated Indebtedness, (ii) does not
permit any acceleration thereof at any time prior to the date that is 365 days
after the payment in full in cash of the Securities, (iii) has a Stated Maturity
that is not earlier than the fifth anniversary of the Stated Maturity of the
Securities, (iv) does not contain any affirmative, negative, financial or
operating covenants and (v) is expressly subordinated in right of payment to all
other Indebtedness of the Company on substantially the same terms that it is
subordinated in right of payment to the Securities.
"Redeemable Stock" means with respect to any Person, Capital Stock of
such Person 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
(unless any redemption or repurchase of such Capital Stock thereupon is required
by any such terms, but only to the extent that a payment in respect thereof
would be permitted under Section 4.04, 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 which is one
year after the date on which the Securities mature.
"Refinancing Indebtedness" means any Indebtedness of the Company or
any of its 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 Subsidiaries; provided that: (i) the principal
--------
amount of such Refinancing Indebtedness does not exceed the principal amount of
the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses and penalties and premiums
incurred in connection
<PAGE>
25
therewith); (ii) such Refinancing Indebtedness 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) such Refinancing Indebtedness ranks in right of payment to the
Securities at least to the same extent as the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is Incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Registration Default" means (i) the failure of the Company to file
with the SEC the applicable registration statement as required by an Exchange
and Registration Rights Agreement, (ii) the failure of the registration
statement prepared in connection with an Exchange Offer or any shelf
registration statement relating to the offer and sale of the Transfer Restricted
Securities by the Holders thereof from time to time to be declared effective as
required by an Exchange and Registration Rights Agreement, (iii) the failure to
consummate an Exchange Offer as required by an Exchange and Registration Rights
Agreement or (iv) the failure of any shelf registration statement relating to
the offer and sale of the Transfer Restricted Securities by the Holders thereof
from time to time to remain effective as provided in an Exchange and
Registration Rights Agreement.
"Related Business" means any business which is the same as or related,
ancillary or complimentary to the business of the Company on the Closing Date,
as reasonably determined by the Board.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Resolution" means, with respect to the Company, a copy of a
resolution certified by the secretary or an assistant secretary of the Company
to have been duly adopted by the Board and to be in full force and effect on the
date on which such certification delivered to the Trustee, and, with respect to
a Guarantor, a copy of a resolution certified by the secretary or an assistant
secretary of such Guarantor to have been duly adopted by the board of directors
of such Guarantor and to be in full force and effect on the date on which such
certification delivered to the Trustee.
<PAGE>
26
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) of Appendix A hereto.
"Revolving Credit Facility" means that certain senior secured
revolving credit facility provided to the Company by The Chase Manhattan Bank,
Merrill Lynch Capital Corporation and certain other lenders on the Closing Date
in an amount equal to $70,000,000 and/or any successor facility or facilities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Subsidiary of the Company of any property,
whether owned by the Company or any Subsidiary of the Company as of the Closing
Date or later acquired, which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such property.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Securityholder" or "Holder" means the Person in whose name a Security
is registered on the Registrar's books.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Senior Credit Facilities" means the Revolving Credit Facility and the
Term Credit Facility, including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced, restated or
refinanced from time to time.
"Senior Indebtedness" means with respect to Indebtedness of the
Company, (i) Indebtedness Incurred under
<PAGE>
27
the Senior Credit Facilities and (ii) any other Indebtedness permitted to be
Incurred under the terms of this Indenture, unless the instrument under which
such Indebtedness is Incurred expressly provides that it is on parity with or
subordinated in right of payment to any Indebtedness for money borrowed.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for Federal, state, local or other taxes, (x)
any Indebtedness of the Company to any of its Subsidiaries, Unrestricted
Subsidiaries or other Affiliates, (y) any Trade Payables or (z) any Indebtedness
that is Incurred in violation of this Indenture. Senior Indebtedness shall
include (a) the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding pursuant to
any Bankruptcy Law) in accordance with and at the rate (including any rate
applicable upon any default, to the extent lawful) specified in any document
evidencing the Senior Indebtedness (whether or not the claim for such interest
is allowed as a claim after such filing in any proceeding under such Bankruptcy
Law) and (b) all other obligations with respect to any Senior Indebtedness
(including all reimbursement obligations in respect of letters of credit issued
under the Senior Credit Facilities and all obligations for fees, expenses,
indemnities and other amounts payable thereunder or in connection therewith).
"Senior Indebtedness" of any Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Securities
and any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
---- -----
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness. "Senior
Subordinated Indebtedness" of a Guarantor has a correlative meaning.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary or Unrestricted Subsidiary of the Company that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for
more than 5.0% of the consolidated revenues of the Company and its Subsidiaries
or (ii) as of the end of such fiscal year, was the owner of more than 5.0% of
the consolidated assets of the Company and its Subsidiaries, all as set forth on
the most recently available consolidated financial statements of the Company for
such fiscal year.
"Special Interest" means an amount equal to $0.192 per week per $1,000
principal amount of Securities
<PAGE>
28
constituting Transfer Restricted Securities held by each Holder until all
Registration Defaults have been cured.
"Sponsors" means, collectively, GE Investment Private Placement
Partners II, a Limited Partnership, and Warburg, Pincus Ventures, L.P. and any
successor funds.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of an
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Indebtedness" means Indebtedness of the Company or any
Domestic Subsidiary if the instrument creating or evidencing such Indebtedness
or pursuant to which such Indebtedness is outstanding provides that such
Indebtedness is subordinated in right of payment to the Securities or any
Domestic Subsidiary Guarantees of any such Domestic Subsidiary, as the case may
be, and may be subordinated to Senior Indebtedness.
"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 such 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 one or more Subsidiaries
of such Person (or any combination thereof). Notwithstanding the foregoing, an
Unrestricted Subsidiary and all of its Subsidiaries shall not be a Subsidiary of
the Company for any purposes of this Indenture.
"Term Credit Facility" means that certain senior secured term loan
provided to the Company by The Chase Manhattan Bank, Merrill Lynch Capital
Corporation and certain other lenders on the Closing Date, in an aggregate
principal amount of $175,000,000.
<PAGE>
29
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any Indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
of such Person in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means (i) each Initial Security until
the date on which such Security has been exchanged for a freely transferable
Exchange Security in an Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which it has been effectively registered
under the Securities Act and disposed of in accordance with a shelf registration
statement on an appropriate form under the Securities Act relating to the offer
and sale of the Transfer Restricted Securities by the Holders thereof from time
to time in accordance with the methods of distribution set forth in such
registration statement, (iii) each Initial Security or Private Exchange Security
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act or (iv) any other Security that bears or is required to bear the
Restricted Securities Legend. Upon the occurrence of any of the events
described in clause (i), (ii) or (iii), the Company shall deliver to the Trustee
an Officers' Certificate stating that such event has occurred.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the terms of this Indenture and,
thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
within the Corporate Trust Administration of the Trustee (or any successor group
of the Trustee) or any other officer of the Trustee performing functions similar
to those customarily performed by the above-designated officers, and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his or her knowledge or familiarity with the
particular subject.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
<PAGE>
30
"Unrestricted Subsidiary" means (i) any Person that (a) at the time of
determination shall be designated an Unrestricted Subsidiary by the Board in the
manner provided below and (b) would, but for such designation, be a Subsidiary
of the Company and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless
at the time of designation such Subsidiary or any Subsidiary of such Subsidiary
owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that either
-------- -------
(a) the Subsidiary to be so designated has total assets of $1,000 or less or (b)
if such Subsidiary has assets greater than $1,000, then such designation would
be permitted under Section 4.04 as a "Restricted Payment" after giving effect to
the designation. The Board may designate any Unrestricted Subsidiary to be a
Subsidiary; provided, however, that immediately after giving pro forma effect to
-------- -------
such designation (1) the Company could Incur $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test in Section 4.03 and
(2) no Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complies with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"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 product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments at final maturity, in respect thereof, by (b) the
number of years (calculated
<PAGE>
31
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.
Unrestricted Subsidiaries shall not be included in the definition of Wholly
Owned Subsidiary for any purposes of this Indenture.
SECTION 1.02. Other Definitions.
------------------
Defined in
Term Section
---- ------------
"Affiliate Transaction"........................ 4.07(a)
"Asset Sale Offer"............................. 4.06(c)(1)
"Asset Sale Offer Amount"...................... 4.06(c)(3)
"Asset Sale Purchase Date"..................... 4.06(c)(2)
"Bankruptcy Law"............................... 6.01
"cash"......................................... 4.06(a)
"Change of Control Offer"...................... 4.08(b)
"Change of Control Payment".................... 4.08(a)
"Change of Control Payment Date"............... 4.08(b)(3)
"conflicting interest"......................... 7.10
"covenant defeasance option"................... 8.01(b)
"CUSIP"........................................ 2.13
"Custodian".................................... 6.01
"Event of Default"............................. 6.01
"Excess Proceeds".............................. 4.06(c)(1)
"Exempt Asset Sale"............................ 4.06(a)
"Guaranteed Obligations"....................... 11.01
"legal defeasance option"...................... 8.01(b)
"Legal Holiday"................................ 13.08
"Notice of Default"............................ 6.01
"Paying Agent"................................. 2.04
"Payment Blockage Notice"...................... 10.03
"Payment Default".............................. 6.01(7)
"protected purchaser".......................... 2.08
"Registrar".................................... 2.04
"Restricted Payment"........................... 4.04
"Subordinated Reorganization Securities"....... 10.02(2)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference
<PAGE>
32
in and made a part of this Indenture. The following TIA terms have the following
meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the Note Guarantees.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
<PAGE>
33
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
The Securities
--------------
SECTION 2.01. Amount of Securities; Issuable in Series. Except as
-----------------------------------------
otherwise provided herein, the aggregate principal amount of Securities which
may be authenticated and delivered under this Indenture is $265,000,000. The
Securities may be issued in one or more series. All Securities of any one
series shall be substantially identical except as to denomination.
With respect to any Additional Securities issued after the Closing
Date (except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 2.07, 2.08, 2.09 or 3.06 or Appendix A hereto), there shall be (i)
established in or pursuant to a Board Resolution and (ii) (A) set forth or
determined in the manner provided by the Company in an Officer's Certificate or
(B) established in one or more indentures supplemental hereto, prior to the
issuance of such Additional Securities:
(1) whether such Additional Securities shall be issued as part of a
new or existing series of Securities and the title of such Additional
Securities (which shall distinguish the Additional Securities of the series
from Securities of any other series);
(2) the aggregate principal amount of such Additional Securities which
may be authenticated and delivered under this Indenture, which shall be in
an aggregate principal amount not to exceed $150,000,000 (except for
Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the same series
pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A hereto and
except for Securities which, pursuant to Section 2.03, are deemed never to
have been authenticated and delivered hereunder);
<PAGE>
34
(3) the issue price and issuance date of such Additional Securities,
including the date from which interest on such Additional Securities shall
accrue;
(4) if applicable, that such Additional Securities shall be issuable
in whole or in part in the form of one or more Global Securities (as
defined in Appendix A hereto) and, in such case, the respective
depositaries for such Global Securities, the form of any legend or legends
which shall be borne by such Global Securities in addition to or in lieu of
those set forth in Exhibit A hereto and any circumstances in addition to or
in lieu of those set forth in Section 2.3 of Appendix A hereto in which any
such Global Security may be exchanged in whole or in part for Additional
Securities registered, or any transfer of such Global Security in whole or
in part may be registered, in the name or names of Persons other than the
depositary for such Global Security or a nominee thereof; and
(5) if applicable, that such Additional Securities shall not be issued
in the form of Initial Securities as set forth in Exhibit A hereto, but
shall be issued in the form of Exchange Securities as set forth in Exhibit
B hereto.
If any of the terms of any Additional Securities are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or any Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate or the indenture supplemental hereto setting forth the
terms of the Additional Securities. In addition, an Opinion of Counsel with
respect to the issuance of such Additional Securities, which Opinion of Counsel
shall be substantially in the form of the Opinion of Counsel delivered on behalf
of the Company on the Closing Date, shall be delivered to the Trustee at the
time of the delivery of the Officers' Certificate or the indenture supplemental
hereto.
SECTION 2.02. Form and Dating. Provisions relating to the Original
----------------
Securities, the Additional Securities, the Private Exchange Securities and the
Exchange Securities are set forth in Appendix A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The (i) Original
Securities and the Trustee's certificate of authentication, (ii) Additional
Securities (if issued as Transfer Restricted Securities) and the Trustee's
certificate of authentication and (iii) Private
<PAGE>
35
Exchange Securities and the Trustee's certificate of authentication shall each
be substantially in the form of Exhibit A hereto, which is hereby incorporated
in and expressly made a part of this Indenture. The Exchange Securities (and any
Additional Securities issued other than as Transfer Restricted Securities) and
the Trustee's certificate of authentication shall each be substantially in the
form of Exhibit B hereto, which is hereby incorporated in and expressly made a
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company or any Guarantor is subject, if any, or usage. Any such notation, legend
or endorsement shall be furnished to the Trustee in writing. Each Security shall
be dated the date of its authentication. The terms of the Securities set forth
in Appendix A hereto and Exhibits A and B hereto are part of the terms of this
Indenture.
SECTION 2.03. Execution and Authentication. One or more Officers of
-----------------------------
the Company shall sign the Securities for the Company by manual or facsimile
signature.
If an Officer of the Company whose signature is on a Security no
longer holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
manual signature of the Trustee shall be conclusive evidence that the Security
has been authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in Appendix A hereto.
The Trustee (at the expense of the Company) may appoint an
authenticating agent reasonably acceptable to the Company to authenticate the
Securities. Any such appointment shall be evidenced by an instrument signed by
a Trust Officer, a copy of which shall be furnished to the Company. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Registrar, any Paying
Agent or any agent for service of notices and demands.
<PAGE>
36
The Company initially appoints the Trustee as (i) Registrar and Paying
Agent in connection with the Securities, and (ii) the Securities Custodian (as
defined in Appendix A hereto) with respect to the Global Securities (as defined
in Appendix A hereto).
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
---------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more transfer agents and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with the
Registrar, any transfer agent or any Paying Agent not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.07.
The Company or any of its domestically organized Wholly Owned Subsidiaries may
act as Registrar, transfer agent or Paying Agent.
The Company may remove the Registrar or any Paying Agent upon written
notice to the Registrar or such Paying Agent and to the Trustee; provided,
--------
however, that no such removal shall become effective until (1) acceptance of an
- - - - -------
appointment by a successor as evidenced by an appropriate agreement entered into
by the Company and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or any Paying Agent may resign
at any time upon written notice.
SECTION 2.05. Paying Agent To Hold Money in Trust. On or prior to
------------------------------------
each due date of the principal and interest, including Special Interest, on any
Security, the Company shall deposit with the Paying Agent (or if the Company or
any of its domestically organized Wholly Owned Subsidiaries is acting as Paying
Agent, segregate and hold in trust for the benefit of the Persons entitled
thereto) a
<PAGE>
37
sum sufficient to pay such principal and interest, including Special Interest,
when so becoming due. The Company shall require each Paying Agent (other than
the Trustee) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying Agent
for the payment of principal of or interest, including Special Interest, on the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. If the Company or any of its domestically organized Wholly
Owned Subsidiaries acts as Paying Agent, it shall segregate the money held by it
as Paying Agent and hold it as a separate trust fund. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed by the Paying Agent. Upon complying with this
Section 2.05, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.07. Transfer and Exchange. The Securities shall be issued
----------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401(a)(l) of the
Uniform Commercial Code are met. When Securities are presented to the Registrar
with a request to exchange them for an equal principal amount of Securities of
other denominations, the Registrar shall make the exchange as requested if the
same requirements are met. To permit registration of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Company may require payment of a sum sufficient to pay
all taxes, assessments or other governmental charges in connection with any
transfer or exchange pursuant to this Section 2.07. The Company shall not be
required to make, and the Registrar need not register, transfers or exchanges of
Securities selected for redemption (except, in the case
<PAGE>
38
of Securities to be redeemed in part, the portion thereof not to be redeemed) or
any Securities for a period of 15 days before a selection of Securities to be
redeemed.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Guarantors, the Trustee, the Registrar, any transfer
agent and any Paying Agent may deem and treat the Person in whose name a
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest, if any, including Special
Interest, on such Security and for all other purposes whatsoever, whether or not
such Security is overdue, and none of the Company, any Guarantor, the Trustee,
the Registrar, any transfer agent or any Paying Agent shall be affected by
notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interest in such Global Security
may be effected only through a book-entry system maintained by (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.08. Replacement Securities. If a mutilated Security is
-----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. Such Holder shall furnish an indemnity bond sufficient in the
judgment of the Trustee to protect the Company, the Trustee, the Registrar, any
transfer agent and any Paying Agent from any loss that any of them may suffer
<PAGE>
39
if a Security is replaced. The Company and the Trustee may charge the Holder for
their expenses in replacing a Security. In the event any such mutilated, lost,
destroyed or wrongfully taken Security has become or is about to become due and
payable, the Company in its discretion may pay such Security instead of issuing
a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.09. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
2.09 as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest, including Special Interest, payable on that date
with respect to the Securities (or portions thereof) to be redeemed or maturing,
as the case may be, and the Paying Agent is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10. Temporary Securities. In the event that Definitive
---------------------
Securities (as defined in Appendix A hereto) are to be issued under the terms of
this Indenture, until such Definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of Definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the
<PAGE>
40
Company shall prepare and the Trustee shall authenticate Definitive Securities
and deliver them in exchange for temporary Securities upon surrender of such
temporary Securities at the office or agency of the Company, without charge to
the Holder.
SECTION 2.11. Cancelation. The Company at any time may deliver
------------
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation, destroy such Securities and deliver a certificate of destruction
signed by a Trust Officer to the Company. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancelation. The Trustee shall not authenticate Securities in place
of canceled Securities other than pursuant to the terms of this Indenture.
SECTION 2.12. Defaulted Interest. If the Company defaults in a
-------------------
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities
--------------
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
- - - - -------- -------
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
<PAGE>
41
ARTICLE III
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
-------------------
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any (provided, however, that the
-------- -------
Company shall have previously notified the Trustee in writing of any securities
exchange upon which the Securities are listed), and that the Trustee shall deem
to be fair and appropriate and in accordance with methods generally used at the
time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
<PAGE>
42
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) if any Securities are to be redeemed only in part, the portion of
the principal amount of such Securities to be redeemed;
(7) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(8) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(9) the CUSIP number, if any, printed on the Securities being
redeemed; and
(10) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide
<PAGE>
43
the Trustee with the information required by this Section 3.03.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, including Special
Interest, to the redemption date; provided, however, that if the redemption
-------- -------
date is after a regular record date and on or prior to the interest payment
date, the accrued interest shall be payable to the Securityholder of the
redeemed Securities registered on the relevant record date. Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on
----------------------------
the redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a domestically organized Wholly Owned Subsidiary of the Company is
the Paying Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions of Securities called for redemption
that have been delivered by the Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall promptly pay
----------------------
the principal of and interest, including Special Interest, on the Securities on
the dates and in the manner provided in the Securities and in this Indenture.
Principal and interest, including Special Interest, shall be considered paid on
the date due if on such date the Trustee or the Paying Agent holds in accordance
with this Indenture money sufficient to pay all principal and interest,
including Special Interest, then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from
<PAGE>
44
paying such money to the Securityholders on that date pursuant to the terms of
this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports. Whether or not required by the rules and
--------
regulations of the SEC, so long as any Securities are outstanding, the Company
shall furnish to the Trustee and to the Holders of Securities within 15 days
after it is or would have been required to file them with the SEC (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a section entitled "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 and (ii) all current reports that would be
required to be filed with the SEC 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 SEC, at any time after the Company files a registration
statement with respect to the Exchange Offer undertaken by the Company pursuant
to the Exchange and Registration Rights Agreement dated as of the Closing Date
or a shelf registration statement relating to the offer and sale of Transfer
Restricted Securities by the Holders thereof from time to time, the Company
shall (i) file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and (ii) if
the SEC will not accept such filing, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to securities analysts and prospective investors. In addition, for so
long as any Securities remain outstanding, the Company shall furnish to the
Trustee, to the Holders of Securities 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. The Company also shall comply with
the other provisions of TIA (S) 314(a).
SECTION 4.03. Limitation on Indebtedness. The Company shall not, and
---------------------------
shall not permit any of its Subsidiaries to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that the Company and its Subsidiaries may Incur
-------- -------
Indebtedness (including
<PAGE>
45
Acquired Indebtedness) if: (i) the Consolidated Interest Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is Incurred would have been at least 1.75 to 1.00 with
respect to any Incurrence on or before January 15, 2001, or at least 2.00 to
1.00 thereafter, determined on a pro forma basis (including a pro forma
application of the Net Proceeds therefrom), as if the additional Indebtedness
had been Incurred at the beginning of such four-quarter period; and (ii) no
Default or Event of Default (except any as may be cured through the application
of proceeds of such Indebtedness) shall have occurred and be continuing or would
occur as a consequence thereof.
For purposes of determining any particular amount of Indebtedness
under this Section 4.03, Guarantees, Liens or Obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the definition of Permitted Indebtedness, the Company, in its sole
discretion, shall classify such item of Indebtedness and shall only be required
to include the amount and type of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments.
----------------------------------
(a) The Company shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to: (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving the Company), except
dividends or distributions payable solely in its Capital Stock (other than
Redeemable Stock) and except dividends or distributions payable solely to the
Company or any Wholly Owned Subsidiary of the Company; (ii) purchase (except as
a Permitted Investment), redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any direct or indirect parent of the Company or
any Subsidiary of the Company (including any Intellectual Property Subsidiary)
or any Unrestricted Subsidiary or other Affiliate of the Company (other than any
such Capital Stock owned by the Company or any Wholly Owned Subsidiary of the
Company); (iii) make any principal payment on, or purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to a scheduled mandatory
sinking fund payment date or Stated Maturity any (a) Subordinated Indebtedness
of the Company or (b) Subordinated Indebtedness
<PAGE>
46
of any Domestic Subsidiary; or (iv) make any Restricted Investment (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being herein referred to as a "Restricted
Payment"), unless, at the time of and after giving effect to such Restricted
Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) 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 (other than
Permitted Indebtedness) pursuant to the Consolidated Interest Coverage
Ratio test set forth in the first paragraph of Section 4.03; and
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made by the Company and its Subsidiaries
after the Closing Date, is less than the sum of:
(A) 50% of the Consolidated Net Income of the Company for the
period (treated as one accounting period) from the beginning of the
first fiscal quarter commencing after the Closing Date 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 a
deficit, minus 100% of such deficit), plus
(B) 100% of the aggregate Net Cash Proceeds received by the
Company from the issue or sale after the Closing Date of Capital Stock
of the Company or of debt securities of the Company that have been
converted into such Capital Stock (other than (x) Capital Stock (or
convertible debt securities) sold to a Subsidiary of the Company or an
Unrestricted Subsidiary of the Company, (y) Redeemable Stock or debt
securities that have been converted into Redeemable Stock and (z)
except as provided for in clause (D), an employee participation plan
or other trust
<PAGE>
47
established by the Company or any of its Subsidiaries), plus
(C) 100% of the net reduction in Investments in any Unrestricted
Subsidiary of the Company resulting from payments of interest on
Indebtedness, dividends, repayments of principal of loans or advances,
or other transfers of assets, in each case to the Company or any
Subsidiary of the Company from such Unrestricted Subsidiary (except to
the extent that any such payment is included in the calculation of
Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Subsidiaries of the Company; provided that the amount
--------
included in this clause (C) shall not exceed the amount of Investments
previously made by the Company and its Subsidiaries in such
Unrestricted Subsidiary, plus
(D) 100% of the aggregate Net Cash Proceeds received by the
Company from the issue or sale after the Closing Date of Capital Stock
(other than Redeemable Stock) of the Company to any employee
participation plan or similar trust; provided, however, that if such
-------- -------
plan or trust Incurs any Indebtedness to, or Guaranteed by, the
Company or any of its Subsidiaries to finance the acquisition of such
Capital Stock, such aggregate amount shall be limited to such Net Cash
Proceeds less such Indebtedness Incurred to or Guaranteed by the
Company or any of its Subsidiaries and any increase in the
Consolidated Net Worth of the Company resulting from principal
repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock, plus
(E) the amount by which Indebtedness of the Company or its
Subsidiaries is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Closing Date of any Indebtedness of the Company or
its Subsidiaries convertible or exchangeable into Capital Stock of the
Company (less the amount of any cash, or other property other than
such Capital Stock, distributed by the Company or any Subsidiary of
the Company upon such conversion or exchange).
<PAGE>
48
(b) The foregoing provisions, however, will not prohibit:
(i) the payment of any dividend or distribution by any Subsidiary of
the Company that is not a Wholly Owned Subsidiary of the Company so long as
any such dividend or distribution is paid to all shareholders of such
Subsidiary on a pro rata basis;
(ii) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(iii) the making of any Restricted Payment in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company or any Unrestricted Subsidiary of the Company) of
Capital Stock of the Company (other than Redeemable Stock); provided that
--------
any net cash proceeds that are utilized for any such Restricted Payment,
and any Net Income resulting therefrom, shall be excluded from Section
4.04(a)(3);
(iv) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or Subordinated Indebtedness of the Company in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a Subsidiary or any Unrestricted Subsidiary of the Company) of
other Capital Stock of the Company (other than any Redeemable Stock);
provided that any net cash proceeds that are utilized for any such
--------
redemption, repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, shall be excluded from Section 4.04(a)(3);
(v) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of any Intellectual Property Subsidiary owned by
any Person other than the Company or any Wholly Owned Subsidiary of the
Company so long as the consideration paid in connection with any such
purchase, redemption, acquisition or retirement is solely in the form of
Qualified Subordinated Indebtedness;
(vi) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness, including premium, if
any, and accrued and unpaid interest, with the proceeds of Qualified
Subordinated Indebtedness;
<PAGE>
49
(vii) Investments at any one time outstanding in an aggregate amount
not to exceed $25,000,000 in any Person or Persons the primary business of
which is related, ancillary or complementary to the businesses of the
Company and its Subsidiaries on the date of such Investments (provided that
Investments in any such Person or Persons with respect to which the Company
or any of its Wholly Owned Subsidiaries owns less than 50% of the
outstanding voting Capital Stock of any such Person may not exceed
$15,000,000 at any one time outstanding);
(viii) any payment by the Company or any of its Subsidiaries directly
or through any direct or indirect parent company (a) in connection with the
repurchase of outstanding shares of Capital Stock of the Company or
Holdings following the death, disability or termination of employment of
Management Shareholders and (b) of amounts required to be paid to
participants or former participants in employee benefit plans upon any
termination of employment by such participants as provided in the documents
related thereto, in an aggregate amount (for both clauses (a) and (b))
not to exceed $5,000,000 in any fiscal year (provided that any unused
amount may be carried over to any subsequent fiscal year subject to a
maximum amount of $10,000,000 in any fiscal year);
(ix) Investments in Currency Agreements;
(x) any repurchase of equity interests deemed to occur upon
exercise of stock options if such equity interests represent a portion of
the exercise price of such option;
(xi) payments to Holdings pursuant to any tax sharing agreement
under which the Company is allocated its proportionate share of the actual
tax liability of the affiliated group of corporations that file
consolidated Federal income tax returns (or that file state or local income
tax returns on a consolidated basis);
(xii) loans, advances, dividends or distributions by the Company or
any of its Subsidiaries to Holdings to pay for corporate, administrative
and operating expenses in the ordinary course of business, including
payment of directors' and officers' insurance premiums, key man life
insurance premiums, directors' fees, and fees, expenses and indemnities
incurred in connection
<PAGE>
50
with the issuance of any Initial Securities and any other transactions
consummated in connection therewith on any Issue Date (including the
registration under applicable laws and regulations of its debt securities
as required by any Exchange and Registration Rights Agreement); and
(xiii) (A) loans, advances, dividends or distributions by the
Company or any of its Subsidiaries to Holdings not to exceed an amount
necessary to permit Holdings to pay (1) its costs (including all
professional fees and expenses) incurred to comply with its reporting
obligations under Federal or state laws or under this Indenture, including
as described under Section 4.02, or in connection with reporting or other
obligations under the Senior Credit Facilities or any related collateral
documents or guarantees, (2) its expenses incurred in connection with any
public offering of equity securities which has been terminated by the
board of directors of Holdings, the net proceeds of which were specifically
intended to be received by or contributed or loaned to the Company, and (B)
loans or advances by the Company or any of its Subsidiaries to Holdings not
to exceed an amount necessary to permit Holdings to pay its interim
expenses incurred in connection with any public offering of equity
securities the net proceeds of which are specifically intended to be
received by or contributed or loaned to the Company, which, unless such
offering shall have been terminated by the board of directors of Holdings,
shall be repaid to the Company promptly out of the proceeds of such
offering. In computing the amount of Restricted Payments for purposes of
clause (a)(3) of this Section 4.04, Restricted Payments under clauses
(b)(ii) and (b)(viii) of this Section 4.04 shall be included, and
Restricted Payments under clauses (b)(i), (b)(iii), (b)(iv), (b)(v),
(b)(vi), (b)(vii), (b)(ix), (b)(x), (b)(xi), (b)(xii) and (b)(xiii) of this
Section 4.04 shall not be included.
(c) The amount of all Restricted Payments (other than cash) shall be
the Fair Market Value (as determined by the Board, whose determination shall be
conclusive if made in good faith and evidenced in a Board Resolution) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. 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
<PAGE>
51
setting forth the basis upon which the calculations required by this Section
4.04 were computed, which calculations may be based upon the Company's latest
available financial statements.
SECTION 4.05. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
- - - - -----------------------
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary of the Company to (i)(a) pay dividends or make
any other distributions to the Company or any of its Subsidiaries on its Capital
Stock or 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
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries, or (iii) transfer any of its properties or assets to the Company
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(1) Existing Indebtedness as in effect on the Closing Date;
(2) the Senior Credit Facilities as in effect as of the Closing Date,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof; provided
--------
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more
restrictive, taken as a whole, in any material respect (as determined by
the Board, whose determination shall be conclusive if made in good faith
and evidenced by a Board Resolution) with respect to such dividend and
other payment restrictions than those contained in the Senior Credit
Facilities as in effect on the Closing Date;
(3) this Indenture, the Securities and the Domestic Subsidiary
Guarantees;
(4) applicable law;
(5) Refinancing Indebtedness; provided that the restrictions contained
--------
in the agreements governing such Refinancing Indebtedness are no more
restrictive, taken as a whole, in any material respect (as determined by
the Board, whose determination shall be conclusive if
<PAGE>
52
made in good faith and evidenced by a Board Resolution) than those
contained in the agreements governing the Indebtedness being refinanced;
(6) Indebtedness of a Person existing at the time such Person becomes
a Subsidiary of the Company (provided that (1) such Indebtedness is not
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary of the Company, (2) such encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person so acquired and its Subsidiaries and (3) such Indebtedness
is otherwise permitted to be incurred pursuant to the provisions of Section
4.03;
(7) Secured Indebtedness otherwise permitted to be incurred pursuant
to Sections 4.03 and 4.14 to the extent that such Indebtedness limits the
right of the debtor to dispose of the assets securing such Indebtedness;
(8) customary non-assignment provisions restricting subletting or
assignment of any lease or other agreement entered into by the Company or
any of its Subsidiaries;
(9) customary net worth provisions contained in leases and other
agreements entered into by the Company or any of its Subsidiaries in the
ordinary course of business; and
(10) customary restrictions with respect to a Subsidiary of the
Company pursuant to an agreement that has been entered into for the sale or
other disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary.
SECTION 4.06. Limitation on Sales of Assets.
------------------------------
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, engage in an Asset Sale (except an Asset Sale (an
"Exempt Asset Sale") the Net Proceeds of which plus the Net Proceeds of all
other Asset Sales concurrently or previously made in the same fiscal year do not
exceed $3,000,000) unless (i) the Company (or the Subsidiary) receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (as determined by the Board, whose determination shall be conclusive if
made in good faith and evidenced by a Board Resolution), and in the case of a
lease of assets, a lease providing for rent and other conditions which are no
less
<PAGE>
53
favorable to the Company (or the Subsidiary) in any material respect than the
then prevailing market conditions (as determined by the Board, whose
determination shall be conclusive if made in good faith and evidenced by a Board
Resolution) of the assets or Capital Stock sold or otherwise disposed of, and
(ii) at least 80% (100% in the case of lease payments) of the consideration
therefor received by the Company (or the Subsidiary) is in the form of cash or
Cash Equivalents; provided that for purposes of this clause (ii), "cash" shall
--------
include the amount of any Indebtedness for money borrowed and any Capital Lease
Obligation that (x) is assumed by the transferee of any such assets or other
property in such Asset Sale or (y) with respect to the sale or other disposition
of all of the Capital Stock of any Subsidiary of the Company, remains the
liability of such Subsidiary subsequent to such sale or other disposition, but
only to the extent that such assumption, sale or other disposition, as the case
may be, is effected on a basis under which there is no further recourse to the
Company or any of its Subsidiaries with respect to such liability.
(b) Notwithstanding Section 4.06(a), the Company shall not permit any
Intellectual Property Subsidiary to sell, lease, convey, dispose of or otherwise
transfer any of its properties or assets in one or a series of related
transactions (other than the granting of licenses to the Company as permitted
under this Indenture) unless, at the time of such sale, lease, conveyance,
disposition or other transfer, such Intellectual Property Subsidiary is a Wholly
Owned Subsidiary of the Company.
(c) (1) The Company may apply Net Proceeds of an Asset Sale, at its
option, within 360 days from the receipt of such Net Proceeds (i) to permanently
reduce Senior Indebtedness other than Indebtedness under the Revolving Credit
Facility, (ii) to permanently reduce Indebtedness under the Revolving Credit
Facility (and to correspondingly reduce commitments with respect thereto), (iii)
to acquire another business (including through purchase of stock or merger) or
other assets, in each case in, or used or useful in, the same or a similar line
of business as the Company or any of its Subsidiaries was engaged in on the
Closing Date or any reasonable extensions or expansions thereof or (iv) to
reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to loss,
damage or taking to the extent that the Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking. Pending the final
application of any such Net
<PAGE>
54
Proceeds, the Company may temporarily reduce Indebtedness under the Revolving
Credit Facility (without any obligation to reduce the commitments thereunder) or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture.
Any Net Proceeds from Asset Sales (other than Exempt Asset Sales) that
are not applied or invested as provided and in the relevant time period
described in the first sentence of this Section 4.06(c)(1) shall be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10,000,000, the Company shall make an offer to all Holders of
Securities (and, at its option, holders of other pari passu Indebtedness) (an
---- -----
"Asset Sale Offer") to purchase the maximum principal amount of Securities (and
such other Indebtedness) 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, including Special Interest (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), to the date of purchase, in accordance
with the procedures set forth in Section 4.06(c)(2). Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero. If the
aggregate purchase price of Securities tendered pursuant to the Asset Sale Offer
is less than the Net Proceeds allotted to the purchase of the Securities, the
Company may apply the remaining Net Proceeds to general corporate purposes.
(2) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Asset Sale Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that such Holder may elect to have such Holder's Securities
purchased by the Company either in whole or in part (subject to prorationing as
hereinafter described in the event the Asset Sale Offer is oversubscribed) in
integral multiples of $1,000 of principal amount, at the applicable purchase
price. The notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice (the "Asset Sale Purchase Date") and
shall contain such information concerning the Asset Sale Offer and the business
of the Company which the Company in good faith believes will enable such Holders
to make an informed decision (which at a minimum shall include (i) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) in respect of the Company, the most
<PAGE>
55
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K in respect of the Company filed subsequent to such Quarterly Report,
other than Current Reports describing Asset Sales otherwise described in the
offering materials (or corresponding successor reports) and (ii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Asset Sale Offer.
(3) Not later than the date upon which written notice of an Asset
Sale Offer is delivered to the Trustee as provided in Section 4.06(c)(2), the
Company shall deliver to the Trustee an Officers' Certificate as to (i) the
amount of the Asset Sale Offer (the "Asset Sale Offer Amount"), (ii) the
allocation of the Net Proceeds from the Asset Sale pursuant to which such Asset
Sale Offer is being made and (iii) the compliance of such allocation with the
provisions of Section 4.06(c)(1). On such date, the Company shall also
irrevocably deposit with the Trustee or with a paying agent (or, if the Company
is acting as its own paying agent, segregate and hold in trust) an amount equal
to the Asset Sale Offer Amount to be held for payment in accordance with the
provisions of this Section 4.06(c)(3). On the Asset Sale Purchase Date, the
Company shall deliver, or cause to be delivered, to the Trustee for cancelation
the Securities or portions thereof that have been properly tendered to, and are
to be accepted by, the Company. The Paying Agent shall promptly mail or deliver
payment to each tendering Holder in the amount of the applicable purchase price.
In the event that the aggregate purchase price of the Securities (and other pari
----
passu Indebtedness) delivered by the Company to the Trustee is less than the
- - - - -----
Asset Sale Offer Amount, the Trustee shall deliver the excess to the Company
immediately after completion of the Asset sale Offer in accordance with this
Section 4.06.
(4) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Paying Agent at the address specified in the notice at least five Business Days
prior to the Asset Sale Purchase Date. Holders shall be entitled to withdraw
their election if the Paying Agent receives not later than three Business Days
prior to the Asset Sale Purchase Date, a telegram, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security which was delivered by the Holder for purchase and a statement that
such Holder is withdrawing its election to have such Security purchased. If on
the Asset Sale Purchase Date the aggregate principal
<PAGE>
56
amount of Securities (and other pari passu Indebtedness) included in the Asset
---- -----
Sale Offer surrendered by holders thereof exceeds the Asset Sale Offer Amount,
the Company shall select the Securities (and such other pari passu Indebtedness)
---- -----
to be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(5) At the time the Company delivers, or causes to be delivered,
Securities to the Trustee which are to be accepted for purchase, the Company
shall also deliver an Officers' Certificate stating that such Securities are to
be accepted by the Company pursuant to and in accordance with the terms of this
Section 4.06. A Security shall be deemed to have been accepted for purchase at
the time the Paying Agent, directly or through an agent, mails or delivers
payment therefor to the surrendering Holder.
(6) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.06 by virtue
thereof.
(d) The provisions of Section 4.06(a) shall not prohibit an Asset
Swap if (i) at the time of entering into the related Asset Swap Agreement or
immediately after giving effect to such Asset Swap, no Default or Event of
Default shall have occurred or be continuing or would occur as a consequence
thereof, (ii) in the event that the EBITDA associated with the Productive Assets
that are the subject of such Asset Swap for the period of the most recent four
consecutive fiscal quarters ending at least 45 days prior to the date on which
the related Asset Swap Agreement is executed by the parties thereto exceeds
$3,000,000, the Company provides to the Trustee a written opinion of an
Independent Financial Advisor that such Asset Swap is fair to the Company from a
financial point of view and (iii) the EBITDA associated with the Productive
Assets that are the subject of such Asset Swap for the period of the most recent
four consecutive fiscal quarters ending at least 45 days
<PAGE>
57
prior to the date on which the related Asset Swap Agreement is executed by the
parties thereto, when aggregated with the EBITDA associated with all other
Productive Assets that were the subject of any previously completed Asset Swap
for the period of the most recent four consecutive fiscal quarters ending at
least 45 days prior to the date on which each related Asset Purchase Agreement
was executed by the parties thereto, does not exceed $10,000,000. For purposes
of computing the EBITDA associated with the Productive Assets that are the
subject of an Asset Swap, the Company shall allocate selling, general and
administrative expenses to such Productive Assets such that the ratio of the
selling, general and administrative expenses allocated to such Productive Assets
for the relevant period to the total selling, general and administrative
expenses of the Company and its consolidated Subsidiaries for such period is
equal to the ratio of the revenues attributable to such Productive Assets for
such period to the total revenues of the Company and its consolidated
Subsidiaries for such period.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
-------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, after the Closing Date, in any one or a series of related
transactions, sell, lease, transfer or otherwise dispose of any of its
properties, assets or services to, or make any payment to, or purchase any
property, assets or services from, or enter into or make any agreement, loan,
advance or Guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), other than Exempt Affiliate
Transactions, unless (i) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Subsidiary with
an unrelated Person, as evidenced by an Officers' Certificate delivered by the
Company to the Trustee, and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction entered into after the Closing Date
involving aggregate consideration in excess of $5,000,000, a resolution of a
committee of Independent Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and has been approved by such committee or, in the event there are no
Independent Directors, an opinion as to the fairness to the Company or such
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an Independent Financial Advisor and (b) with respect to an Affiliate
Transaction entered into after the Closing Date involving aggregate
consideration in excess of $25,000,000, or in
<PAGE>
58
connection with the sale or other transfer in one or a series of related
transactions of any patents, trademarks, copyrights or other intellectual
property to any Intellectual Property Subsidiary and the related sale or other
transfer in one or a series of related transactions of any interest in such
Intellectual Property Subsidiary (other than any such sale or transfer to the
Company or any Wholly Owned Subsidiary of the Company), an opinion as to the
fairness to the Company or such Subsidiary of such Affiliate Transaction from a
financial point of view issued by an Independent Financial Advisor.
(b) The provisions of Section 4.07(a) shall not prohibit the Company
from entering into any license agreement or other agreement or arrangement
relating to licensing fees, royalty payments or similar fees or payments with
any Intellectual Property Subsidiary that provides for the payment of any fees
or the making of any payments by the Company to the Intellectual Property
Subsidiary in any year in excess of 10% of the gross revenues for such year
attributable to the sales of products using the patents, trademarks, copyrights
or other intellectual property that is the subject of such agreement or
arrangement.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
------------------
Holder shall have the right to require that the Company repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, including
Special Interest, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) (the "Change of Control Payment"), in accordance with the
terms contemplated in Section 4.08(b). In the event that at the time of such
Change of Control the terms of the Senior Indebtedness restrict or prohibit the
repurchase of Securities pursuant to this Section 4.08, then prior to the
mailing of the notice to Holders provided for in Section 4.08(b) but in any
event within 30 days following any Change of Control, the Company shall (i)
repay in full all Senior Indebtedness or offer to repay in full all Senior
Indebtedness and repay the Senior Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the agreements governing
the Senior Indebtedness to permit the repurchase of the Securities as provided
for in Section 4.08(b).
<PAGE>
59
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, including Special Interest, to the
date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest
payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be a Business Day no earlier than
30 days nor later than 60 days from the date such notice is mailed) (the
"Change of Control Payment Date"); and
(4) the instructions determined by the Company, consistent with this
Section 4.08, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Paying Agent at the address specified in the notice at least five Business Days
prior to the Change of Control Payment Date. Holders shall be entitled to
withdraw their election if the Paying Agent receives not later than three
Business Days prior to the Change of Control Payment Date a telegram, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing its election to have such Security
purchased.
(d) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the
<PAGE>
60
Company. The Paying Agent shall promptly mail to each Holder of Securities so
tendered the Change of Control Payment for such Securities, and the Trustee
shall promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Security equal in principal amount to any unpurchased
portion of the Securities surrendered; provided that each such new Security
--------
shall be in a principal amount of $1,000 or an integral multiple thereof. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
(e) Notwithstanding the foregoing provisions of this Section 4.08,
the Company will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in Section
4.08(b) applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.08. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue
thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
-----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The fiscal year of the Company ends on December 31 of
each year. The Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
-----------------------------
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as
<PAGE>
61
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
SECTION 4.11. Future Guarantors. The Company shall cause each of its
------------------
future Domestic Subsidiaries to enter into a supplemental indenture,
substantially in the form of Exhibit C hereto, providing for such Domestic
Subsidiary to Guarantee payment of the Securities. Each Note Guarantee provided
by each Domestic Subsidiary shall be limited to an amount not to exceed the
maximum amount that can be Guaranteed by the relevant Subsidiary without
rendering such Guarantee, as it relates to such Subsidiary, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SECTION 4.12. Limitation on Lines of Business. The Company shall not,
--------------------------------
and shall not permit any Subsidiary to, engage in any business, other than a
Related Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Subsidiaries. The Company shall not sell any shares of Capital Stock of any of
- - - - -------------
its Subsidiaries to any Person (other than to the Company or a Wholly Owned
Subsidiary of the Company), and shall not permit any of its Subsidiaries,
directly or indirectly, to issue or sell any shares of its Capital Stock to any
Person (other than to the Company or a Wholly Owned Subsidiary of the Company),
unless, immediately after giving effect to such sale or issuance, such
Subsidiary would no longer be a Subsidiary of the Company; provided, however,
-------- -------
that this Section 4.13 shall not prohibit (i) the Company or any of its
Subsidiaries from selling or disposing of all of the Capital Stock of any of its
Subsidiaries, (ii) the creation of any Subsidiary of the Company that, at the
time of the initial issuance of any shares of Capital Stock of such Subsidiary,
is not a Wholly Owned Subsidiary of the Company or (iii) the designation of a
Subsidiary as an Unrestricted Subsidiary in compliance with this Indenture. The
proceeds of any sale of such Capital Stock permitted under this provision will
be treated as Net Proceeds of an Asset Sale and must be applied in accordance
with the terms of Section 4.06.
SECTION 4.14. Limitation on Subordinated Liens. The Company shall
---------------------------------
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
create or suffer to exist any Lien (other than Permitted Liens) on any of its
property or assets, whether owned on the Closing Date or thereafter acquired,
securing any Indebtedness other than Senior Indebtedness, unless the Securities
or, in the case
<PAGE>
62
of a Subsidiary of the Company, its Note Guarantee, are secured equally and
ratably with such other Indebtedness; provided that if such Indebtedness is by
--------
its terms expressly subordinate to the Securities in the case of the Company or
to the Note Guarantee in the case of a Subsidiary of the Company, the Lien
securing such Indebtedness shall be subordinate or junior to the Lien securing
the Securities or the Note Guarantee, as the case may be, with the same relative
priority as such Indebtedness shall have with respect to the Securities or the
Note Guarantee, as the case may be.
SECTION 4.15. Limitation on Sale and Leaseback Transactions. The
----------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, enter into
any Sale and Leaseback Transaction. Notwithstanding the foregoing, the Company
or any Subsidiary of the Company may enter into a Sale and Leaseback Transaction
if: (i) after giving pro forma effect to any such Sale and Leaseback
Transaction, the Company shall be in compliance with Sections 4.03 and 4.14;
(ii) the gross cash proceeds of such Sale and Leaseback Transaction are at least
equal to the Fair Market Value of such property (as determined by the Board,
whose determination shall be conclusive if made in good faith and evidenced by a
Board Resolution); and (iii) the Company shall apply the net cash proceeds of
the sale as provided under Section 4.06, to the extent required therein.
SECTION 4.16. Limitation on Layering Debt. The Company shall not
----------------------------
Incur any Indebtedness that is subordinate or junior in right of payment to any
Senior Indebtedness of the Company and senior in any respect in right of payment
to the Securities.
SECTION 4.17. Restrictions on Holdings. Holdings may not hold any
-------------------------
assets other than the Capital Stock of the Company and other minimal assets
related to the business of owning the Capital Stock of the Company and may not
incur any liabilities other than the liabilities under the Securities and the
Senior Credit Facilities and tax liabilities and other liabilities in the
ordinary course of business. Holdings must at all times own 100% of the Capital
Stock of the Company and may not sell, transfer or otherwise dispose of any
shares of Capital Stock of the Company. Holdings may not engage in any business
other than owning the Capital Stock of the Company, unless Holdings and the
Company have merged in compliance with the provisions of this Indenture, the and
other activities reasonably incidental thereto.
<PAGE>
63
ARTICLE V
Successor Company
-----------------
SECTION 5.01. Merger, Consolidation or Sale of Assets of the Company.
------------------------------------------------------
(a) The Company shall not, in a single transaction or series of related
transactions, consolidate with or merge with or into (whether or not the Company
is the surviving corporation), or directly and/or indirectly through its
Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions, to another Person, or allow any Person to merge into the
Company (other than the consolidation or merger of a Wholly Owned Subsidiary
with or into the Company) (provided that the creation of a Lien by a Person on
or in any of its assets shall not in and of itself constitute the sale,
assignment, transfer, lease, conveyance or other disposition of the asset or
assets subject to the Lien) unless:
(i) either (a) the Company is the surviving corporation or (b) 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 and existing under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes all the
obligations of the Company under the Securities and this Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the
Trustee;
(ii) immediately after giving effect to such transaction no Default
or Event of Default exists; and
(iii) the Company or, if other than the Company, the entity or Person
formed by or surviving any such consolidation or merger, 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 (other than Permitted Indebtedness) pursuant to
the Consolidated Interest Coverage Ratio test set forth in 4.03(a).
<PAGE>
64
(b) The provisions of Section 5.01(a) shall not prohibit the Company
from transferring patents, trademarks, copyrights and other intellectual
property to one or more Intellectual Property Subsidiaries.
(c) In the event of any transaction (other than a lease) described
in, and complying with, Section 5.01(a) in which the Company is not the
surviving Person and the surviving Person assumes all the obligations of the
Company under the Securities and this Indenture pursuant to a supplemental
indenture, such surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, and the Company will be
discharged from its obligations under this Indenture and the Securities;
provided that solely for the purpose of calculating amounts described in Section
- - - - --------
4.04(a)(3), any such surviving Person shall only be deemed to have succeeded to,
and be substituted for, the Company with respect to the period subsequent to the
effective time of such transaction, and the Company (before giving effect to
such transaction) shall be deemed to be the "Company" for such purposes for all
prior periods.
(d) For purposes of Section 5.01(a), the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(e) Prior to the consummation of any transaction described in, and
complying with, Section 5.01(a), the Company shall deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel (which may rely as to the
matters set forth in Section 5.01(a)(ii) and Section 5.01(a)(iii) on such
Officers' Certificate), each stating that (i) such transaction (and any
supplemental indenture executed in connection therewith) is in compliance with
the requirements set forth in this Article V, (ii) all conditions precedent to
the effectiveness of such transaction (and any supplemental indenture executed
in connection therewith) have been satisfied and (iii) any supplemental
indenture executed in connection therewith constitutes the legal, valid and
binding obligation of the obligor thereunder, subject to customary exceptions.
<PAGE>
65
ARTICLE VI
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
------------------
(1) the Company defaults in any payment of interest, including Special
Interest, on any Security when the same becomes due and payable, whether or
not such payment shall be prohibited by Article X, and such default
continues for a period of 30 days;
(2) the Company (i) defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable at
its Stated Maturity, upon redemption, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article X or (ii) fails
to redeem or purchase Securities when required pursuant to this Indenture
or the Securities, whether or not such redemption or purchase shall be
prohibited by Article X;
(3) the Company fails to comply with Section 5.01;
(4) the Company or Holdings, as the case may be, fails to comply with
Section 4.06 or 4.08;
(5) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.07, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 and such failure continues for
30 days after the notice specified below;
(6) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2), (3)
or (4) above) and such failure continues for 30 days after the notice
specified below;
(7) there exists a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is Guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or Guarantee exists on the
Closing Date, or is created after the Closing Date, which default (a) is
caused by a failure to pay principal of or interest on such Indebtedness
when due
<PAGE>
66
after giving effect to applicable grace periods (a "Payment Default") or
(b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, totals $10,000,000 or more;
(8) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(10) any judgment or decree for the payment of money in excess of
$10,000,000 or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary and is not discharged,
waived or stayed, or fully covered by insurance, and
<PAGE>
67
either (A) an enforcement proceeding has been commenced by any creditor
upon such judgment or decree or (B) there is a period of 45 days following
the entry of such judgment or decree during which such judgment or decree
is not discharged, waived or the execution thereof stayed; or
(11) any Note Guarantee shall cease to be in full force and effect
(except as contemplated by the terms thereof) or any Guarantor or Person
acting by or on behalf of such Guarantor shall deny or disaffirm its
obligations under this Indenture or any Note Guarantee and such Default
continues for 10 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (5), (6) or (10) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (7) or (11) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (5), (6) or (10), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in Section 6.01(8) or (9) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or
<PAGE>
68
the Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(8) or (9) with respect to the
Company occurs, the principal of and interest on all the Securities shall ipso
----
facto become and be immediately due and payable without any declaration or other
- - - - -----
act on the part of the Trustee or any Securityholders. The Holders of a majority
in principal amount of the Securities by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest or Special Interest on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
------------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest or Special Interest on a Security (ii) a Default
arising from the failure to redeem or purchase any Security when required
pursuant to the terms of this Indenture or (iii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
<PAGE>
69
SECTION 6.05. Control by Majority. The Holders of a majority in
--------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
--------------------
receive payment of principal, premium (if any) or interest, including Special
Interest, when due, no Securityholder may pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee security or indemnity
against any loss, liability or expense that is reasonably satisfactory to
the Trustee in its sole discretion;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding
-------------------------------------
any other provision of this
<PAGE>
70
Indenture, the right of any Holder to receive payment of principal of and
interest, including Special Interest, on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary of
the Company or any Guarantor, their creditors or their property and, unless
prohibited by law or applicable regulations, may vote on behalf of the Holders
in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
-----------
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, including Special Interest, ratably,
without preference or priority of any kind, according to the amounts due
<PAGE>
71
and payable on the Securities for principal, interest and Special Interest,
respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
---------------------------------
nor any Guarantor (to the extent it may lawfully do so) shall at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and each of the Company and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE VII
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their
<PAGE>
72
exercise as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture but need
not verify the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
<PAGE>
73
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or indemnity against such risk or liability that is reasonably
satisfactory to it in its sole discretion is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
------------------
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel from the Company. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
--------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
<PAGE>
74
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document, but the Trustee may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. The Registrar, any transfer agent, the
Paying Agent or any co-paying agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
---------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing and if it is known to the Trustee (which, to the extent permitted by
the TIA, shall be known to a Trust Officer), the Trustee shall mail to each
Securityholder notice of the Default within 90 days after the occurrence
thereof. Except in the case of a Default in payment of principal of or interest
on any Security (including payments pursuant to the mandatory redemption
provisions of such Security, if any), the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
------------------------------
practicable after each May 15 beginning with the May 15 following the Closing
Date, and in any event prior to July 15 in each year, the Trustee shall mail to
each Securityholder a brief report dated as of May 15 that
<PAGE>
75
complies with Section 313(a) of the TIA. The Trustee shall also comply with
Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company and each
---------------------------
Guarantor, jointly and severally, shall pay to the Trustee from time to time
such compensation for its services as the Company and the Trustee shall agree in
writing. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company and each Guarantor,
jointly and severally, shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Company
and each Guarantor, jointly and severally, shall indemnify the Trustee, in its
individual capacity and as Trustee, and its officers, directors and employees
against any and all loss, liability, claim, damage or expense (including
reasonable attorneys' fees) incurred by or in connection with the administration
of this trust and the performance of its or their duties hereunder. The Trustee
shall notify the Company of any claim for which it may seek indemnity promptly
upon a Trust Officer obtaining actual knowledge thereof; provided, however, that
-------- -------
any failure so to notify the Company shall not relieve the Company or any
Guarantor of its indemnity obligations hereunder. The Company shall defend the
claim and the indemnified party shall provide reasonable cooperation at the
Company's expense in the defense. Such indemnified parties may have separate
counsel and the Company and the Guarantors shall have the joint responsibility
to pay the fees and expenses of such counsel; provided, however, that the
-------- -------
Company and the Guarantors shall not be required to pay such fees and expenses
if any of them assumes such indemnified parties' defense and, in such
indemnified parties' reasonable judgment, there is no conflict of interest
between the Company and the Guarantors and such parties in connection with such
defense. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by an indemnified party through such party's
own wilful misconduct, negligence or bad faith.
<PAGE>
76
To secure the Company's and the Guarantors' payment obligations in
this Section 7.07, the Trustee shall have a lien prior to the Securities on all
money or property held or collected by the Trustee other than money or property
held in trust to pay principal of and interest, including Special Interest, on
particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(7) or (8) with respect to the Company,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
-----------------------
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held
<PAGE>
77
by it as Trustee to the successor Trustee upon payment of all sums due and
payable to it at such time, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
----------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor Trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
------------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of
<PAGE>
78
TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the TIA, the Trustee and the Company shall in
all respects comply with the provisions of Section 310(b) of the TIA within 90
Business Days thereof. Nothing herein shall prevent the Trustee from filing with
the SEC the application referred to in the penultimate paragraph of Section
310(b) of the TIA.
SECTION 7.11. Preferential Collection of Claims Against Company. The
--------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.08) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and the Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations on which payment of principal and interest, including Special
Interest, when due will be sufficient to pay at maturity or upon redemption all
outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.08), and
if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture in a manner satisfactory to the Trustee on written demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its obligations under the Securities (and the obligations
<PAGE>
79
of the Guarantors under their respective Note Guarantees) and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or
4.17 and the operation of Section 6.01(5), 6.01(7) and 6.01(10) ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. In the
event that the Company terminates all of its obligations under the Securities
and this Indenture by exercising either its legal defeasance option, the
obligations under the Note Guarantees shall each be terminated simultaneously
with the termination of such obligations.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(5),
6.01(7) and 6.01(10).
Upon satisfaction of the conditions set forth herein and upon written
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 2.11, 7.07, 7.08 and
in this Article VIII shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
(d) Notwithstanding clause (a) and (b) above, the Company shall not
exercise its legal defeasance option or its covenant defeasance option while the
Senior Credit Facilities are outstanding unless such defeasance is permitted
thereunder or the holders of the Indebtedness represented by the Senior Credit
Facilities (or a Representative thereof) consent to such legal defeasance or
covenant defeasance and the Company has delivered an Officers' Certificate and
an Opinion of Counsel to such effect to the Trustee.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
-------------------------
legal defeasance option or its covenant defeasance option only if:
<PAGE>
80
(1) the Company irrevocably deposits with the Trustee, in trust, for
the benefit of the Holders of the Securities, cash in U.S. dollars, U.S.
Government Obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest, including Special Interest, on the outstanding Securities on
the Stated Maturity or on the applicable redemption date, as the case may
be, and the Company specifies whether the Securities are being defeased to
maturity or to a particular redemption date;
(2) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
Closing Date, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a
result of such legal defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such legal defeasance had not occurred;
(3) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
confirming that the Holders of the outstanding Securities will not
recognize income, gain or loss for Federal income tax purposes as a result
of such covenant defeasance and will be subject to Federal income tax on
the same amounts in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 95th day
after the date of deposit;
<PAGE>
81
(5) such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company delivers to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Securities over other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(7) the Company delivers to the Trustee an Officers' Certificate and
an Option of Counsel, each stating that all conditions precedent provided
for relating to the legal defeasance option or the covenant defeasance
option have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
---------------------------
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest, including Special
Interest, on the Securities. Money and securities so held in trust are not
subject to Article X.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
---------------------
shall promptly turn over to the Company upon written request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest, including Special Interest, that
remains unclaimed for two years, and, thereafter, Securityholders entitled to
the money must look to the Company for payment as general creditors.
<PAGE>
82
SECTION 8.05. Indemnity for Government Obligations. The Company
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
--------------
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
-------- -------
the Company has made any payment of interest, including Special Interest, on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE IX
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company and the
---------------------------
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
<PAGE>
83
(4) to add additional Note Guarantees with respect to the Securities
or to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder; or
(8) to provide for the issuance of the Exchange Securities, Private
Exchange Securities or Additional Securities, which shall have terms
substantially identical in all material respects to the Original Securities
(except that the transfer restrictions contained in the Original Securities
shall be modified or eliminated, as appropriate), and which shall be
treated, together with any outstanding Original Securities, as a single
issue of securities.
An amendment under this Section 9.01 may not make any change that
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent to such change and the Company delivers to the Trustee an
Officers' Certificate stating that the requisite consent to such change has been
obtained.
After an amendment under this Section 9.01 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.01.
SECTION 9.02. With Consent of Holders. The Company, the Guarantors
------------------------
and the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection
<PAGE>
84
with a tender offer or exchange for the Securities). However, without the
consent of each Securityholder affected, an amendment may not:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the Stated Maturity of any
Securities or alter the provisions with respect to the redemption of the
Securities (other than provisions relating to Sections 4.06 and 4.08);
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Securities (except a rescission of
acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of the Securities and a waiver of the payment
default that resulted from such acceleration);
(5) make any Security payable in money other than that stated in the
Securities;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of or premium, if any, or interest on the Securities;
(7) waive a redemption payment with respect to any Security (other
than a payment required by Sections 4.06 or 4.08);
(8) amend or modify any Note Guarantees; or
(9) make any change in the foregoing amendment, supplement and waiver
provisions.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless
<PAGE>
85
the holders of such Senior Indebtedness (or any group or Representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
--------------------------------- ------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once both (i) the requisite number of
consents have been received by the Company or the Trustee and (ii) such
amendment or waiver has been executed by the Company and the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
--------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security
<PAGE>
86
to deliver it to the Trustee. The Trustee may place an appropriate notation on
the Security regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
---------------------------
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing any amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel from the Company
stating that such amendment is authorized or permitted by this Indenture and
that such amendment is the legal, valid and binding obligation of the Company
and the Guarantors enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any of
--------------------
its Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Securities for or as an inducement to any consent, waiver or amendment of
any terms or provisions of the Securities, unless such consideration is offered
to be paid or agreed to be paid to all Holders of Securities which so consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
ARTICLE X
Subordination
-------------
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
-------------------------
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment in full of
all Senior Indebtedness of the Company, which shall include borrowings under the
Senior
<PAGE>
87
Credit Facilities, whether outstanding on the Closing Date or thereafter
incurred, and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. The Securities shall in all respects
rank pari passu with all other Senior Subordinated Indebtedness of the Company
---- -----
and only Indebtedness of the Company that is Senior Indebtedness of the Company
shall rank senior to the Securities in accordance with the provisions set forth
herein. For purposes of this Article X, the Indebtedness evidenced by the
Securities shall be deemed to include the Special Interest payable pursuant to
the provisions set forth in the Securities and any Exchange and Registration
Rights Agreement. All provisions of this Article X shall be subject to Section
10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
-------------------------------------
distribution to creditors of the Company in a total or partial liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(1) the holders of Senior Indebtedness will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the documentation governing the
applicable Senior Indebtedness whether or not the claim for such interest
is allowed as a claim after such filing) before Holders of Securities will
be entitled to receive any payment or distribution with respect to the
Securities; and
(2) until all Obligations with respect to Senior Indebtedness are paid
in full in cash, any payment or distribution to which Holders of Securities
would be entitled shall be made to the holders of Senior Indebtedness
(except that Holders of Securities may receive securities that are
subordinated at least to the same extent as the Securities to Senior
Indebtedness and to any securities issued in exchange for Senior
Indebtedness ("Subordinated Reorganization Securities") and Holders of
Securities may recover payments made from the trust described under Article
VIII).
SECTION 10.03. Default on Senior Indebtedness. The Company may not
-------------------------------
make any payment upon or in respect of the Securities and may not otherwise
purchase, redeem or
<PAGE>
88
otherwise retire any Securities (except in Subordinated Reorganization
Securities or from the trust described in Section 8.02) or make any deposit
described in Section 8.02 if (i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Indebtedness of the Company
(or any other Senior Indebtedness having a principal amount at the time of
determination in excess of $25,000,000) occurs and is continuing or (ii) any
other default occurs and is continuing with respect to Designated Senior
Indebtedness of the Company which permits holders of the Designated Senior
Indebtedness of the Company as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from the holders or the Representative of the holders of the Designated
Senior Indebtedness of the Company.
Payments on the Securities shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in the case of a nonpayment default, upon the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of the
Designated Senior Indebtedness of the Company has been accelerated. No new
period of payment blockage may be commenced by a Payment Blockage Notice unless
and until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
--------------------------------------
the Securities is accelerated because of an Event of Default, the Company shall
promptly notify the holders of the Designated Senior Indebtedness (or their
Representative) of the acceleration. If any Designated Senior Indebtedness is
outstanding, the Company may not pay the Securities until five Business Days
after such holders or the Representative of the Designated Senior Indebtedness
receive notice of such acceleration and, thereafter, may pay the Securities only
if this Article X otherwise permits payment at that time.
SECTION 10.05. When Payment or Distribution Must Be Paid Over. If a
-----------------------------------------------
payment or distribution is made to Securityholders that because of this Article
X should not have been made to them, the Securityholders who receive the payment
or distribution shall hold it in trust for holders of Senior Indebtedness of the
Company and pay it over to them as their interests may appear.
<PAGE>
89
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
------------
Company is paid in full in cash and until the Securities are paid in full in
cash, Securityholders shall be subrogated to the rights of holders of such
Senior Indebtedness to receive distributions applicable to Senior Indebtedness.
A payment or distribution made under this Article X to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on such Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article X defines the relative
----------------
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest, including Special Interest, in respect of, the Securities in
accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive payments or distributions
otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
---------------------------------------------
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
-----------------------------------
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article X. The Company, the Registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness of the Company may give the notice; provided,
--------
however, that, if an issue of Senior Indebtedness of the Company has a
- - - - -------
Representative, only the Representative may give the notice.
<PAGE>
90
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article X with
respect to any Senior Indebtedness of the Company which may at any time be held
by it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. Payment, Distribution or Notice to Representative.
--------------------------------------------------
Whenever a payment or distribution is to be made or a notice given to holders of
Senior Indebtedness of the Company, the payment or distribution may be made and
the notice given to their Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
---------------------------------------------------
Right To Accelerate. The failure to make a payment pursuant to the Securities
- - - - --------------------
by reason of any provision in this Article X shall not be construed as
preventing the occurrence of a Default. Nothing in this Article X shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
------------------------------
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article X, and none of the
Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
-------------------------
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Company for the
<PAGE>
91
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of such Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
X. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article X, the Trustee may request such Person to furnish
evidence (which evidence may include an Officers' Certificate from the Company)
to the reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article X, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
------------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- - - - -------------
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Securityholders or
the Company or any other Person, money or assets to which any holders of Senior
Indebtedness of the Company shall be entitled by virtue of this Article X or
otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Securityholder by accepting a Security
- - - - -------------------------
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired
<PAGE>
92
before or after the issuance of the Securities, to acquire and continue to hold,
or to continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in
--------------------------------------
this Article X shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE XI
Note Guarantees
---------------
SECTION 11.01. Note Guarantees. Each Guarantor hereby jointly and
----------------
severally unconditionally and irrevocably guarantees, as a primary obligor and
not merely as a surety, to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of and interest,
including Special Interest, in respect of the Securities when due, whether at
Stated Maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture (including obligations
to the Trustee) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company whether
for expenses, indemnification or otherwise under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from each such Guarantor, and that each such Guarantor shall
remain bound under this Article XI notwithstanding any extension or renewal of
any Guaranteed Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
<PAGE>
93
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Guaranteed Obligations;
or (f) any change in the ownership of such Guarantor, except as provided in
Section 11.02(b).
Each Guarantor hereby waives any right to which it may be entitled to
have its obligations hereunder divided among the Guarantors, such that such
Guarantor's obligations would be less than the full amount claimed. Each
Guarantor hereby waives any right to which it may be entitled to have the assets
of the Company first be used and depleted as payment of the Company's or such
Guarantor's obligations hereunder prior to any amounts being claimed from or
paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Company be sued prior to an action
being initiated against such Guarantor.
Each Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
The Note Guarantee of each Guarantor is, to the extent and in the
manner set forth in Article XII, subordinated and subject in right of payment to
the prior payment in full in cash of the principal of and premium, if any, and
interest on all Senior Indebtedness of the relevant Guarantor and is made
subject to such provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06,
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of set off, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the
<PAGE>
94
Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Guarantor or would otherwise operate as a discharge
of any Guarantor as a matter of law or equity.
Each Guarantor agrees that its Note Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. Each
Guarantor further agrees that its Note Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on, including Special Interest, any Guaranteed Obligation when
and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Guaranteed
Obligation, each Guarantor hereby promises to and shall, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Holders or the Trustee an amount equal to the sum of (i) the unpaid principal
amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such
Guaranteed Obligations (but only to the extent not prohibited by law) and (iii)
all other monetary obligations of the Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranteed Obligations
guaranteed hereby until payment in full of all Guaranteed Obligations and all
obligations to which the Guaranteed Obligations are subordinated as provided in
Article XII. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article VI for the purposes of any Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect
<PAGE>
95
of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in
Article VI, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section 11.01.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 11.01.
Upon request of the Trustee, each Guarantor shall execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
SECTION 11.02. Limitation on Liability; Release of Domestic
--------------------------------------------
Subsidiary Guarantors. (a) Any term or provision of this Indenture to the
- - - - ----------------------
contrary notwithstanding, the maximum, aggregate amount of the Guaranteed
Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Indenture, as it
relates to such Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) In the event of a sale or other disposition of all or
substantially all of the assets of any Domestic Subsidiary Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Domestic Subsidiary Guarantor, by way of merger,
consolidation or otherwise, such Domestic Subsidiary Guarantor (in the event of
a sale or other disposition of all of the Capital Stock of such Domestic
Subsidiary Guarantor) shall be released and relieved of its Obligations under
its Note Guarantee or the Person acquiring the property (in the event of a sale
or other disposition of all or substantially all of the assets of such Domestic
Subsidiary Guarantor) (other than a Domestic Subsidiary Guarantor) shall not be
required to enter into a Domestic Subsidiary Guarantee; provided, in each case,
--------
that such transaction is carried out pursuant to and in accordance with Section
4.06 and Section 5.01. Upon delivery by the Company to the Trustee of an
Officers' Certificate and Opinion of Counsel to the effect that such sale or
other disposition was made by the Company in accordance with the provisions of
this Indenture, including without limitation Section 4.06 and Section 5.01
hereof, the Trustee shall
<PAGE>
96
execute any documents reasonably required in order to evidence the release of
any such Domestic Subsidiary Guarantor from its obligations under its Domestic
Subsidiary Guarantee. Any Domestic Subsidiary Guarantor not released from its
obligations under its Domestic Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Securities and for the other
obligations of any Guarantor under this Indenture as provided in this Article
XI.
SECTION 11.03. Successors and Assigns. This Article XI shall be
-----------------------
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
----------
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
-------------
any provision of this Article XI, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
----------------------------------------------
Domestic Subsidiary Guarantors. Each Domestic Subsidiary which is required to
- - - - -------------------------------
become a Guarantor pursuant to Section 4.11 shall promptly execute and deliver
to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant
to which such Subsidiary shall
<PAGE>
97
become a Guarantor under this Article XI and shall guarantee the Guaranteed
Obligations hereby. Concurrently with the execution and delivery of such
supplemental indenture, the Company shall deliver to the Trustee an Opinion of
Counsel and an Officers' Certificate to the effect that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors'
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Note Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
ARTICLE XII
Subordination of the Note Guarantees
------------------------------------
SECTION 12.01. Agreement To Subordinate. Each Guarantor agrees, and
-------------------------
each Securityholder by accepting a Security agrees, that the obligations of a
Guarantor hereunder are subordinated in right of payment, to the extent and in
the manner provided in this Article XII, to the prior payment in full of all
Senior Indebtedness of such Guarantor and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness of such
Guarantor. The obligations hereunder with respect to a Guarantor shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of such
---- -----
Guarantor and shall rank senior to all existing and future Subordinated
Obligations of such Guarantor; and only Indebtedness of such Guarantor that is
Senior Indebtedness of such Guarantor shall rank senior to the obligations of
such Guarantor in accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
-------------------------------------
distribution to creditors of a Guarantor in a total or partial liquidation or
dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor or its property,
an assignment for the benefit of creditors or any marshaling of such Guarantor's
assets and liabilities:
(1) the holders of Senior Indebtedness of such Guarantor will be
entitled to receive payment in full
<PAGE>
98
in cash of all Obligations due in respect of such Senior Indebtedness
(including interest after the commencement of any such proceeding at the
rate specified in the documentation governing the applicable Senior
Indebtedness whether or not the claim for such interest is allowed as a
claim after such filing) before Holders of Securities will be entitled to
receive any payment or distribution with respect to the Note Guarantee; and
(2) until all Obligations with respect to Senior Indebtedness of such
Guarantor are paid in full in cash, any payment or distribution that would
have been made under the Note Guarantee shall be made to the holders of
such Senior Indebtedness (except that Holders of Securities may receive
Subordinated Reorganization Securities of such Guarantor).
SECTION 12.03. Default on Designated Senior Indebtedness of a
----------------------------------------------
Guarantor. A Guarantor shall not make any payment upon or in respect of its
- - - - ----------
Note Guarantee (except in Subordinated Reorganization Securities of such
Guarantor), if (i) a default in the payment of the principal of, premium, if
any, or interest on Designated Senior Indebtedness of such Guarantor (or any
other Senior Indebtedness having a principal amount at the time of determination
in excess of $25,000,000) occurs and is continuing or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness of such
Guarantor which permits holders of the Designated Senior Indebtedness of such
Guarantor as to which such default relates to accelerate its maturity and the
Trustee receives a Payment Blockage Notice from the holders or the
representative of the holders of the Designated Senior Indebtedness of such
Guarantor. Payments under the applicable Note Guarantee may and shall be resumed
(a) in the case of a payment default, upon the date on which such default is
cured or waived and (b) in the case of a nonpayment default, upon the earlier of
the date on which such nonpayment default is cured or waived or 179 days after
the date on which the applicable Payment Blockage Notice is received, unless the
maturity of the Designated Senior Indebtedness of such Guarantor has been
accelerated. No new period of payment blockage may be commenced by a Payment
Blockage Notice unless and until 360 days have elapsed since the effectiveness
of the immediately prior Payment Blockage Notice.
SECTION 12.04. Demand for Payment. If payment of the Securities is
-------------------
accelerated because of an Event of Default
<PAGE>
99
and a demand for payment is made on a Guarantor pursuant to Article XI, such
Guarantor shall promptly notify the holders of the Designated Senior
Indebtedness of such Guarantor (or the Representative of such holders) of such
demand. If any Designated Senior Indebtedness of such Guarantor is outstanding,
such Guarantor may not pay its Note Guarantee until five Business Days after
such holders or the Representative of the holders of the Designated Senior
Indebtedness of such Guarantor receive notice of such demand and, thereafter,
may pay its Note Guarantee only if this Article XII otherwise permits payment at
that time.
SECTION 12.05. When Payment or Distribution Must Be Paid Over. If a
-----------------------------------------------
payment or distribution is made to Securityholders that because of this Article
XII should not have been made to them, the Securityholders who receive the
payment or distribution shall hold such payment or distribution in trust for
holders of the Senior Indebtedness of the relevant Guarantor and pay it over to
them as their interests may appear.
SECTION 12.06. Subrogation. After all Designated Senior Indebtedness
------------
of a Guarantor is paid in full in cash and until the Securities are paid in full
in cash, Securityholders shall be subrogated to the rights of holders of
Designated Senior Indebtedness of such Guarantor to receive distributions
applicable to Designated Senior Indebtedness of such Guarantor. A payment or
distribution made under this Article XII to holders of Designated Senior
Indebtedness of such Guarantor which otherwise would have been made to
Securityholders is not, as between such Guarantor and Securityholders, a payment
by such Guarantor on Designated Senior Indebtedness of such Guarantor.
SECTION 12.07. Relative Rights. This Article XII defines the
----------------
relative rights of Securityholders and holders of Designated Senior Indebtedness
of a Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Securityholders, the obligation
of a Guarantor which is absolute and unconditional, to make payments with
respect to the Guaranteed Obligations to the extent set forth in Article
XI; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by a Guarantor under its obligations with
respect to the Guaranteed Obligations, subject to the rights of holders of
Designated Senior Indebtedness of such
<PAGE>
100
Guarantor to receive distributions otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor. No
-------------------------------------------------
right of any holder of Designated Senior Indebtedness of a Guarantor to enforce
the subordination of the obligations of such Guarantor hereunder shall be
impaired by any act or failure to act by such Guarantor or by its failure to
comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
-----------------------------------
Section 12.03, the Trustee or the Paying Agent may continue to make payments on
the Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article XII. A Guarantor, the Registrar, the Paying Agent, a Representative or
a holder of Designated Senior Indebtedness of a Guarantor may give the notice;
provided, however, that if an issue of Designated Senior Indebtedness of a
- - - - -------- -------
Guarantor has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of a Guarantor with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article XII
with respect to any Senior Indebtedness of a Guarantor which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness of
such Guarantor; and nothing in Article VII shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article XII shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Payment, Distribution or Notice to Representative.
--------------------------------------------------
Whenever a payment or distribution is to be made or a notice given to holders of
Senior Indebtedness of a Guarantor, the payment or distribution may be made and
the notice given to their Representative (if any).
SECTION 12.11. Article XII Not To Prevent Events of Default or Limit
-----------------------------------------------------
Right To Accelerate. The failure of a Guarantor to make a payment on any of its
- - - - --------------------
obligations by reason of any provision in this Article XII shall not be
construed as preventing the occurrence of a default by such
<PAGE>
101
Guarantor under such obligations. Nothing in this Article XII shall have any
effect on the right of the Securityholders or the Trustee to make a demand for
payment on a Guarantor pursuant to Article XI.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
-------------------------
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Designated
Senior Indebtedness of a Guarantor for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Designated Senior Indebtedness such Guarantor and other Indebtedness of a
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
XII. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Designated
Senior Indebtedness of a Guarantor to participate in any payment or distribution
pursuant to this Article XII, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Designated Senior Indebtedness of such Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article XII,
and, if such evidence is not furnished, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.01 and 7.02 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article XII.
SECTION 12.13. Trustee To Effectuate Subordination. Each
------------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Designated Senior Indebtedness of each of the Guarantors as provided
in this Article XII and appoints the Trustee as attorney-in-fact for any and all
such purposes.
<PAGE>
102
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness of a Guarantor. The Trustee shall not be deemed to owe any
- - - - ----------------------------
fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the relevant Guarantor or any other Person, money or
assets to which any holders of Senior Indebtedness of such Guarantor shall be
entitled by virtue of this Article XII or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
-----------------------------------------------
Guarantor on Subordination Provisions. Each Securityholder by accepting a
- - - - --------------------------------------
Security acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of a Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
SECTION 12.16. Defeasance. The terms of this Article XII shall not
-----------
apply to payments from money or the proceeds of U.S. Government Obligations held
in trust by the Trustee for the payment of principal of and interest on the
Securities pursuant to the provisions described in Section 8.03.
ARTICLE XIII
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls. If any provision of
-----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
<PAGE>
103
SECTION 13.02. Notices. Any notice or communication shall be in
--------
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, NY 10591
Telecopier no.: (973) 263-3748
Attention of: Chief Financial Officer
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Telecopier no.: (212) 858-2952
Attention of: Corporate Trust Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by
<PAGE>
104
the Company to the Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining whether
----------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, any Guarantor or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any Guarantor shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so
<PAGE>
105
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
---------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
--------------
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 13.10. No Recourse Against Others. No director, officer,
---------------------------
employee, incorporator or stockholder of the Company or Holdings, as such, shall
have any liability for any obligations of the Company or Holdings under the
Securities or this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities.
SECTION 13.11. Successors. All agreements of the Company and each
-----------
Guarantor in this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
-------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
----------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted
<PAGE>
106
for convenience of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.
<PAGE>
107
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
EAGLE FAMILY FOODS, INC.,
by /s/ John O'C. Nugent
-------------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Office
EAGLE FAMILY FOODS HOLDINGS, INC.,
by /s/ John O'C. Nugent
-------------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Office
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee,
by /s/ Stephen J. Giurlando
-------------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
<PAGE>
APPENDIX A
PROVISIONS RELATING TO ORIGINAL SECURITIES,
-------------------------------------------
ADDITIONAL SECURITIES, PRIVATE EXCHANGE SECURITIES
--------------------------------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions
-----------
1.1 Definitions
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary Regulation S Global Security or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Security, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security bearing the Restricted Securities Legend (if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Exchange and Registration Rights Agreement" means (i) the Exchange
and Registration Rights Agreement, dated as of the Closing Date, among the
Company, Holdings and the Initial Purchasers and (ii) any other similar exchange
and registration rights agreement relating to Additional Securities.
"Exchange Offer" means a registered exchange offer for Initial
Securities undertaken by the Company pursuant to an Exchange and Registration
Rights Agreement.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
<PAGE>
2
"Initial Purchasers" means Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
"Private Exchange" means an offer by the Company, pursuant to an
Exchange and Registration Rights Agreement, to issue and deliver to certain
purchasers, in exchange for the Initial Securities held by such purchasers as
part of their initial distribution, a like aggregate principal amount of Private
Exchange Securities.
"Private Exchange Securities" means, collectively, debt securities of
the Company that are identical in all material respects to Exchange Securities,
except for the transfer restrictions relating to such Private Exchange
Securities, issued by the Company (under the same indenture as the Exchange
Securities) simultaneously with the delivery of the Exchange Securities in an
Exchange Offer, to any Holder that holds any Initial Securities acquired by it
that have, or that are reasonably likely to be determined to have, the status of
an unsold allotment in an initial distribution, or to any Holder that is not
entitled to participate in an Exchange Offer, upon the request of any such
Holder, in exchange for a like aggregate principal amount of Initial Securities
held by such Holder.
"Purchase Agreement" means (i) the Purchase Agreement dated January
16, 1998, among the Company, Holdings and the Initial Purchasers and (ii) any
other similar purchase agreement relating to Additional Securities.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S under the Securities
Act.
"Restricted Period", with respect to any Securities, means the period
of 40 consecutive days beginning on and including the later of (i) the day on
which such Securities are first offered to persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the Issue Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
<PAGE>
3
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered and sold
to QIB's in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary) or any successor person thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement filed by
the Company in connection with the offer and sale of Initial Securities pursuant
to an Exchange and Registration Rights Agreement.
"Transfer Restricted Securities" means (i) each Initial Security until
the date on which such Security has been exchanged for a freely transferable
Exchange Security in an Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which it has been effectively registered
under the Securities Act and disposed of in accordance with a shelf registration
statement on an appropriate form under the Securities Act relating to the offer
and sale of the Transfer Restricted Securities by the Holders thereof from time
to time in accordance with the methods of distribution set forth in such
registration statement, (iii) each Initial Security or Private Exchange Security
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act or (iv) any other Security that bears or is required to bear the
Restricted Securities Legend. Upon the occurrence of any of the events
described in clause (i), (ii) or (iii), the Company shall deliver to the Trustee
an Officers' Certificate stating that such event has occurred.
<PAGE>
4
1.2 Other Definitions
-----------------
Defined in
----------
Term Section:
---- -------
"Accredited Investor"................................... 2.3(e)(i)
"Agent Members"......................................... 2.1(b)
"clearing agency"....................................... 2.4(a)
"IAI Global Security"................................... 2.1(a)
"Global Security"....................................... 2.1(a)
"Permanent Regulation S Global Security"................ 2.3(d)(ii)
"Regulation S".......................................... 2.1
"Rule 144A"............................................. 2.1
"Rule 144A Global Security"............................. 2.1(a)
"Temporary Regulation S Global Security"................ 2.1(a)
2. The Securities
--------------
2.1 Form and Dating
---------------
The Initial Securities offered on the date hereof will be issued by
the Company pursuant to the Indenture and offered and sold by the Company, from
time to time, pursuant to a Purchase Agreement. The Initial Securities offered
on the date hereof will be resold, initially only to QIBs in reliance on Rule
144A under the Securities Act ("Rule 144A") and in reliance on Regulation S
under the Securities Act ("Regulation S"). Such Initial Securities may
thereafter be transferred to, among others, QIBs, purchasers in reliance on
Regulation S and, except as set forth below, IAIs under Rule 501. Additional
Securities offered after the Closing Date may be offered and sold by the Company
from time to time pursuant to one or more Purchase Agreements in accordance with
applicable law.
(a) Global Securities. Rule 144A Securities shall be issued
------------------
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
temporary global Securities (collectively, the "Temporary Regulation S Global
Security"), in each case without interest coupons and bearing the Global
Securities Legend and Restricted Securities Legend, which shall be deposited on
behalf of the purchasers of the Securities represented thereby with the
Securities Custodian, and registered in the name of the Depositary or a nominee
of the Depositary, duly executed by the Company and authenticated by the Trustee
as provided in
<PAGE>
5
this Indenture. One or more global securities in definitive, fully registered
form without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security") shall
also be issued on the Issue Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture to accommodate transfers of beneficial interests in the Securities to
IAI's subsequent to the initial distribution. Beneficial ownership interests in
the Temporary Regulation S Global Security will not be exchangeable for
interests in the Rule 144A Global Security, the IAI Global Security, a Permanent
Regulation S Global Security (as defined below) or any other Security without a
Restricted Securities Legend until the expiration of the Restricted Period. Upon
the expiration of the Restricted Period, beneficial interests in the Securities
represented by the Temporary Regulation S Global Security may be exchanged for
interests in the Permanent Regulation S Global Security as described below in
Section 2.3(d). The Rule 144A Global Security, the IAI Global Security, the
Temporary Regulation S Global Security and the Permanent Regulation S Global
Security are each referred to herein as a Global Security and are collectively
referred to herein as "Global Securities." The aggregate principal amount of the
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depositary or its nominee as
hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
----------------------
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depositary for such Global Security or Global Securities or the
nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as Securities Custodian or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the
<PAGE>
6
Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
----------------------
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make
---------------
available for delivery, upon receipt of an Officers' Certificate from the
Company, (1) Original Securities for original issue on the Closing Date in an
aggregate principal amount of $115,000,000, (2) subject to the terms of this
Indenture, Additional Securities in an aggregate principal amount of up to
$150,000,000 and (3) the (A) Exchange Securities for issue only in an Exchange
Offer, and (B) Private Exchange Securities for issue only in a Private Exchange,
in the case of each of (A) and (B) pursuant to an Exchange and Registration
Rights Agreement and for a like principal amount of Initial Securities exchanged
pursuant thereto. Such Officers' Certificate shall specify the amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated, whether or not the Securities are to bear the
Restricted Securities Legend and whether the Securities are to be Initial
Securities or Exchange Securities. In addition, an Opinion of Counsel with
respect to the issuance of such Additional Securities, which Opinion of Counsel
shall be substantially in the form of the Opinion of Counsel delivered on behalf
of the Company on the Closing Date, shall be delivered to the Trustee at the
time of the delivery of such Officers' Certificate. The aggregate principal
amount of Securities outstanding at any time may not exceed $265,000,000, except
as provided in Section 2.08 of this Indenture. Notwithstanding anything to the
contrary in this Appendix A or otherwise in this Indenture, any issuance of
Additional Securities after the Closing Date shall be in a principal amount of
at least $10,000,000, whether such Additional Securities are of the same or a
different series that the Original Securities.
<PAGE>
7
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
---------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar with a
- - - - -----------
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-------- -------
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section 2.3(b)
or pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse side of the Initial Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Company so requests, an Opinion of
Counsel or other
<PAGE>
8
evidence reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- - - - -----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Company and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit D to this
Indenture or (C) outside the United States in an offshore transaction
within the meaning of Regulation S and in compliance with Rule 904 under
the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
<PAGE>
9
(c) Transfer and Exchange of Global Securities. (i) The transfer and
-------------------------------------------
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor. A transferor of a beneficial interest in a Global Security
shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Security and
such account shall be credited in accordance with such instructions with a
beneficial interest in such Global Security and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred. In the case of a transfer of a
beneficial interest in either the Permanent Regulation S Global Security or the
Rule 144A Global Security for an interest in the IAI Global Security, the
transferee must furnish a signed letter substantially in the form of Exhibit D
to this Indenture to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 prior to the
consummation of an Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities may
be exchanged only in accordance
<PAGE>
10
with such procedures as are substantially consistent with the provisions of
this Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that such transfers
comply with Rule 144A, Regulation S or such other applicable exemption from
registration under the Securities Act, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(d) Restrictions on Transfer of Temporary Regulation S Global
---------------------------------------------------------
Security. (i) Prior to the expiration of the Restricted Period, interests in
- - - - ---------
the Temporary Regulation S Global Security may only be held through Euroclear or
Cedel. During the Restricted Period, beneficial ownership interests in the
Temporary Regulation S Global Security may only be sold, pledged or transferred
through Euroclear or Cedel in accordance with the Applicable Procedures and only
(A) to the Company, (B) so long as such security is eligible for resale pursuant
to Rule 144A, to a person whom the selling holder reasonably believes is a QIB
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule
144A, (C) in an offshore transaction in accordance with Regulation S, (D)
pursuant to an exemption from registration under the Securities Act provided by
Rule 144 (if applicable) under the Securities Act, (E) to an IAI purchasing for
its own account, of for the account of such an IAI, in a minimum principal
amount of Securities of $250,000 or (F) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. Prior to the
expiration of the Restricted Period, transfers by an owner of a beneficial
interest in the Regulation S Temporary Global Note to a transferee who takes
delivery of such interest through the Rule 144A Global Note or the IAI Global
Note will be made only in accordance with Applicable Procedures and upon receipt
by the Trustee of a written certification from the transferor of the beneficial
interest in the form provided on the reverse of the Initial Security to the
effect that such transfer is being made to (i) a person whom the transferor
reasonably believes is a QIB within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A or (ii) an IAI purchasing for its own
account, or for the account of such an IAI, in a minimum principal amount of the
Securities of $250,000. Such written certification will no longer be required
after the expiration of the Restricted Period.
<PAGE>
11
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Security may be
exchanged for interests in a permanent global security in definitive, fully
registered form without the Restricted Security Legend (the "Permanent
Regulation S Global Security") upon certification to the Trustee that such
interests are owned either by non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or transfer not
subject to, the registration requirements of the Securities Act. Upon the
expiration of the Restricted Period, the Trustee shall prepare and
authenticate the Permanent Regulation S Global Security in accordance with
the terms of this Indenture and deliver it to the Company for execution.
The Company shall then execute the Permanent Regulation S Global Security
and return it to the Trustee as Securities Custodian. Any transfers of
beneficial ownership interests in the Temporary Regulation S Global
Security made in reliance on Regulation S shall thenceforth be recorded by
the Trustee by making an appropriate increase in the principal amount of
the Permanent Regulation S Global Security and a corresponding decrease in
the principal amount of the Temporary Regulation S Global Security. At such
time as the principal amount of the Temporary Regulation S Global Security
has been reduced to zero, the Trustee shall cancel the Temporary Regulation
S Global Security and deliver it to the Company.
(e) Legend. (i) Except as permitted by the following paragraphs (ii),
-------
(iii) or (iv), each Security certificate evidencing the Global Securities and
the Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR OF A PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING
THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER
THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON WHOM THE
<PAGE>
12
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S")
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS
ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION,
AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES
IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY
IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT
OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND
THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OF RULE 902 UNDER) REGULATION S."
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
<PAGE>
13
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Security pursuant to Rule 144 under the Securities Act the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security that does not bear the
legends set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule
144 (such certification to be in the form set forth on the reverse of the
Initial Security).
(iii) Upon a sale or transfer of any Initial Security acquired
pursuant to Regulation S, all requirements that such Initial Security bear
the Restricted Securities Legend will cease to apply and the requirements
requiring any such Initial Security be issued in global form will continue
to apply.
(iv) Any Additional Securities sold in a registered offering shall
not be required to bear the Restricted Securities Legend.
(f) Cancelation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Securities.
- - - - -----------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee
<PAGE>
14
shall authenticate, Definitive Securities and Global Securities at the
Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Section 3.06, 4.06, 4.08 and 9.05).
(iii) The Company shall not be required to make, and the Registrar
need not register, transfers or exchanges of Securities selected for
redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Registrar and the Paying Agent
may deem and treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Registrar or the Paying Agent shall be affected
by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
-----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
<PAGE>
15
redemption or repurchase) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Securities
shall be given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Definitive Securities. (a) A Global Security deposited with the
----------------------
Depositary or with the Trustee as Securities Custodian pursuant to Section 2.1
shall be transferred to the beneficial owners thereof in the form of Definitive
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as a Depositary for such Global
Security or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, and a successor depositary is not appointed
by the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
<PAGE>
16
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security in the form of a Definitive Security delivered
in exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of Definitive Securities in any fully registered
form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF] FACE OF INITIAL SECURITY
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR OF A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
("REGULATION S") (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
<PAGE>
2
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR
HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]
<PAGE>
[FORM OF] FACE OF SECURITY
No. $__________
8 3/4% Senior Subordinated Note due 2008
CUSIP No. ______
EAGLE FAMILY FOODS, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum of Dollars
on January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
<PAGE>
2
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
EAGLE FAMILY FOODS, INC.,
by _____________________________
Name:
Title:
[CORPORATE SEAL]
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by _________________________
Authorized Signatory
<PAGE>
[FORM OF] REVERSE SIDE OF SECURITY
8 3/4% Senior Subordinated Note due 2008
1. Interest
--------
(a) EAGLE FAMILY FOODS, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on January 15 and July 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January 23, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
(b) Special Interest. The holder of this Security is entitled to the
-----------------
benefits of an Exchange and Registration Rights Agreement, dated as of January
23, 1998, among the Company, Eagle Family Foods Holdings, Inc., (the
"Guarantor") and the Initial Purchasers named therein (the "Exchange and
Registration Rights Agreement"). Capitalized terms used in this paragraph (b)
but not otherwise defined have the meanings assigned to them in the Exchange and
Registration Rights Agreement. If (i) the Shelf Registration Statement or
Exchange Offer Registration Statement, as applicable, under the Exchange and
Registration Rights Agreement is not filed with the Commission on or prior to 90
days after the date of the Indenture, (ii) the Exchange Offer Registration
Statement or, as the case may be, the Shelf Registration Statement, is not
declared effective within 150 days after the date of the Indenture, (iii) the
Exchange Offer is not consummated on or prior to 180 days after the date of the
Indenture, or (iv) the Shelf Registration Statement is filed and declared
effective within 180 days after the date of the Indenture but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will pay
Special Interest to each holder of Transfer Restricted Securities, during the
period of such
<PAGE>
2
Registration Default, in an amount equal to $0.192 per week per $1,000 principal
amount of the Securities constituting Transfer Restricted Securities held by
such holder until the applicable Registration Statement is filed or declared
effective, the Exchange Offer is consummated or the Shelf Registration Statement
again becomes effective, as the case may be. All accrued Special Interest shall
be paid to holders in the same manner as interest payments on the Securities on
semi-annual payment dates which correspond to interest payment dates for the
Securities. Following the cure of all Registration Defaults, the accrual of
Special Interest will cease. The Trustee shall have no responsibility with
respect to the determination of the amount of any such Special Interest.
2. Method of Payment
-----------------
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the January 1 or July 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company no later than five business
days prior to the relevant due date for payment. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made by wire
- - - - -------- -------
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than five business days prior to the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, IBJ Schroder Bank & Trust Company, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and
<PAGE>
3
change the Registrar or any Paying Agent without notice. The Company or any of
its domestically organized Wholly Owned Subsidiaries may act as Registrar,
transfer agent or Paying Agent.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of
January 23, 1998 (the "Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the
------
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior subordinated unsecured obligations of the
Company limited to $265,000,000 aggregate principal amount at any one time
outstanding (subject to Section 2.08 of the Indenture), of which $115,000,000 in
aggregate principal were initially issued on January 23, 1998. This Security is
one of the Initial Securities referred to in the Indenture. The Securities
include the Initial Securities and any Exchange Securities issued in exchange
for Initial Securities. The Initial Securities and the Exchange Securities are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Company and its Subsidiaries
to, among other things, make certain Investments and other Restricted Payments,
pay dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by
Subsidiaries of the Company, issue or sell shares of capital stock of such
Subsidiaries, enter into or permit certain transactions with Affiliates, enter
into Sale and Leaseback Transactions, create or incur Liens and make asset
sales. The Indenture also imposes limitations on the ability of the Company to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal and
interest on the Securities and all other amounts payable by the Company under
the Indenture and the Securities when and as the same shall be due and payable,
<PAGE>
4
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Guarantors have, jointly and severally,
unconditionally guaranteed the Guaranteed Obligations on a senior subordinated
basis pursuant to the terms of the Indenture.
5. Optional Redemption
-------------------
Except as set forth in the following paragraph, the Securities will
not be redeemable at the option of the Company prior to January 15, 2003.
Thereafter, the Securities will be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any), including Special Interest, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on January 15 of the years set
forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 104.375%
2004 102.917%
2005 101.458%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to January
15, 2002, the Company may (but shall not have the obligation to) redeem up to
35% of the original aggregate principal amount of the Securities (calculated
giving effect to any issuance of Additional Securities) at a redemption price of
108.75% of the original principal amount thereof, plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date) with the proceeds of one or more Public Equity Offerings made by the
Company or of a capital contribution made by Holdings to the common equity
capital of the Company with the net proceeds of a Public Equity Offering made by
Holdings; provided that at least 65% of the aggregate principal amount of
--------
Securities (calculated giving effect to any issuance of Additional Securities)
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 75 days of the date
- - - - -------- -------
of the closing of such Public Equity Offering.
<PAGE>
5
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before a date for redemption to each Holder of
Securities to be redeemed at such Holder's registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
-------------
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company and each Guarantor
agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
<PAGE>
6
10. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed or 15 days before an interest payment
date.
11. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
14. Amendment, Waiver
-----------------
Except as provided in the next two succeeding paragraphs, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Securities), and any
<PAGE>
7
existing default or compliance with any provision of the Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including consents obtained
in connection with a tender offer or exchange offer for Securities).
Without the consent of each Holder affected, an amendment, supplement
or waiver may not (with respect to any Securities held by a nonconsenting
Holder): (i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver; (ii) reduce the principal of or
change the Stated Maturity of any Securities or alter the provisions with
respect to the redemption of the Securities (other than provisions relating to
Sections 4.06 and 4.08 of the Indenture); (iii) reduce the rate of or change the
time for payment of interest on any Security; (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Securities (except a rescission of acceleration of the Securities by the Holders
of at least a majority in aggregate principal amount of the Securities and a
waiver of the payment default that resulted from such acceleration); (v) make
any Security payable in money other than that stated in the Securities; (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Securities to receive payments of principal
of or premium, if any, or interest on the Securities; (vii) waive a redemption
payment with respect to any Security (other than a payment required by Sections
4.06 or 4.08 of the Indenture); (viii) amend or modify any Note Guarantees; or
(ix) make any change in the foregoing amendment, supplement and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Securities, the Company and the Trustee may amend or supplement the Indenture to
cure any ambiguity, omission, defect or inconsistency, to comply with Article V
of the Indenture, to provide for uncertificated Securities in addition to or in
place of certificated Securities, to add additional Note Guarantees with respect
to the Securities or to secure the Securities, to add to the covenants of the
Company for the benefit of the Holders or to surrender any right or power herein
conferred upon the Company, to comply with any requirements of the SEC in
connection with qualifying, or maintaining the qualification of, the Indenture
under the TIA, to make any change that does not adversely affect the rights of
any Holder of Securities or to provide for the issuance of or to provide
<PAGE>
8
for the issuance of the Exchange Securities, Private Exchange Securities or
Additional Securities.
15. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power under
the Indenture. The Holders of a majority in aggregate principal amount of the
Securities, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
16. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
--------------------------
No director, officer, employee, incorporator or stockholder of the
Company or Holdings, as such, shall have any liability for any obligations of
the Company or Holdings under the Securities or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Securities by accepting a Security waives and releases all such
liability. The waiver
<PAGE>
9
and release are part of the consideration for issuance of the Securities. Such
waiver may not be effective to waive liabilities under the Federal securities
laws, and it is the view of the SEC that such waiver is against public policy.
18. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security with its manual signature.
19. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
<PAGE>
10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
-----------------------------------------------------
(Print or type assignee's name, address and zip code)
---------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee:
Date: ___________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
<PAGE>
11
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
<PAGE>
12
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [_] to the Company; or
(2) [_] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [_] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [_] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) [_] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) [_] pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box
-------- -------
(4), (5) or (6) is checked, the Trustee may require, prior to registering
any such transfer of the Securities, such legal opinions, certifications
and
<PAGE>
13
other information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: ___________________ ________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
14
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of Amount of Principal amount Signature of
Exchange decrease increase of this Global authorized
in Principal in Principal Security following signatory of
Amount of this Amount of this such decrease or Trustee or
Global Security Global Security increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
___
/ /
---
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:_______________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee
<PAGE>
EXHIBIT B
[FORM OF] FACE OF EXCHANGE SECURITY
No. $__________
8 3/4% Senior Subordinated Note due 2008
CUSIP No. ______
EAGLE FAMILY FOODS, INC., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum of Dollars
on January 15, 2008.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
EAGLE FAMILY FOODS, INC.,
by ____________________
Name:
Title:
[CORPORATE SEAL]
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by _________________________
Authorized Signatory
<PAGE>
[FORM OF] REVERSE SIDE OF EXCHANGE SECURITY
8 3/4% Senior Subordinated Note due 2008
1. Interest
--------
(a) EAGLE FAMILY FOODS, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on January 15 and July 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January 23, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the January 1 or July 1 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
- - - - -------- -------
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or
<PAGE>
2
such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, IBJ Schroder Bank & Trust Company, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change the Registrar and the Paying Agent without
notice. The Company or any of its domestically organized Wholly Owned
Subsidiaries may act as Registrar, transfer agent or Paying Agent.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of
January 23, 1998 (the "Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the
------
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are senior subordinated unsecured obligations of the
Company limited to $265,000,000 aggregate principal amount at any one time
outstanding (subject to Section 2.08 of the Indenture), of which $115,000,000 in
aggregate principal were initially issued on January 23, 1998. This Security is
one of the Initial Securities referred to in the Indenture. The Securities
include the Initial Securities and any Exchange Securities issued in exchange
for Initial Securities. The Initial Securities and the Exchange Securities are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Company and its Subsidiaries
to, among other things, make certain Investments and other Restricted Payments,
pay dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by
Subsidiaries of the Company, issue or sell shares of capital stock of such
Subsidiaries, enter into or permit certain transactions with Affiliates, enter
into Sale and Leaseback Transactions, create or incur Liens and make asset
sales. The Indenture also imposes limitations on the ability of the Company to
consolidate or
<PAGE>
3
merge with or into any other Person or convey, transfer or lease all or
substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal and
interest on the Securities and all other amounts payable by the Company under
the Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Guarantors have, jointly and severally,
unconditionally guaranteed the Guaranteed Obligations on a senior subordinated
basis pursuant to the terms of the Indenture.
5. Optional Redemption
-------------------
Except as set forth in the following paragraph, the Securities will
not be redeemable at the option of the Company prior to January 15, 2003.
Thereafter, the Securities will be redeemable at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any), including thereon, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 104.375%
2004 102.917%
2005 101.458%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to January
15, 2002, the Company may (but shall not have the obligation to) redeem up to
35% of the original aggregate principal amount of the Securities (calculated
giving effect to any issuance of Additional Securities) at a redemption price of
108.75% of the original principal amount thereof, plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date) with the proceeds of one or more Public Equity Offerings made by the
Company or of a capital contribution made by Holdings to the common equity
capital
<PAGE>
4
of the Company with the net proceeds of a Public Equity Offering made by
Holdings; provided that at least 65% of the aggregate principal amount of
--------
Securities (calculated giving effect to any issuance of Additional Securities)
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 75 days of the date
- - - - -------- -------
of the closing of such Public Equity Offering.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before a date for redemption to each Holder of
Securities to be redeemed at such Holder's registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
-------------
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid
<PAGE>
5
before the Securities may be paid. The Company and each Guarantor agrees, and
each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed or 15 days before an interest payment
date.
11. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
<PAGE>
6
14. Amendment, Waiver
-----------------
Except as provided in the next two succeeding paragraphs, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Securities), and any existing default or compliance with any
provision of the Indenture or the Securities may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Securities
(including consents obtained in connection with a tender offer or exchange offer
for Securities).
Without the consent of each Holder affected, an amendment, supplement
or waiver may not (with respect to any Securities held by a nonconsenting
Holder): (i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver; (ii) reduce the principal of or
change the Stated Maturity of any Securities or alter the provisions with
respect to the redemption of the Securities (other than provisions relating to
Sections 4.06 and 4.08 of the Indenture); (iii) reduce the rate of or change the
time for payment of interest on any Security; (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Securities (except a rescission of acceleration of the Securities by the Holders
of at least a majority in aggregate principal amount of the Securities and a
waiver of the payment default that resulted from such acceleration); (v) make
any Security payable in money other than that stated in the Securities; (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Securities to receive payments of principal
of or premium, if any, or interest on the Securities; (vii) waive a redemption
payment with respect to any Security (other than a payment required by Sections
4.06 or 4.08 of the Indenture); (viii) amend or modify any Note Guarantees; or
(ix) make any change in the foregoing amendment, supplement and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Securities, the Company and the Trustee may amend or supplement the Indenture to
cure any ambiguity, omission, defect or inconsistency, to comply with Article V
of the Indenture, to provide for uncertificated Securities in addition to or in
place of certificated Securities, to add additional Note Guarantees with respect
to the Securities or to secure the Securities, to add to the
<PAGE>
7
covenants of the Company for the benefit of the Holders or to surrender any
right or power herein conferred upon the Company, to comply with any
requirements of the SEC in connection with qualifying, or maintaining the
qualification of, the Indenture under the TIA, to make any change that does not
adversely affect the rights of any Holder of Securities or to provide for the
issuance of or to provide for the issuance of the Exchange Securities, Private
Exchange Securities or Additional Securities.
15. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power under
the Indenture. The Holders of a majority in aggregate principal amount of the
Securities, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
16. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
<PAGE>
8
17. No Recourse Against Others
--------------------------
No director, officer, employee, incorporator or stockholder of the
Company or Holdings, as such, shall have any liability for any obligations of
the Company or Holdings under the Securities or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Securities by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Securities. Such waiver may not be effective to waive liabilities under the
Federal securities laws, and it is the view of the SEC that such waiver is
against public policy.
18. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security with its manual signature.
19. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE>
9
The Company will furnish to any Holder of Securities upon written
request and without charge to the Holder a copy of the Indenture which has in it
the text of this Security.
<PAGE>
10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
-----------------------------------------------------
(Print or type assignee's name, address and zip code)
--------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
Signature Guarantee:
Date: ___________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
<PAGE>
11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
__
| |
|__|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:_______________________________________
Signature must be guaranteed by a participant in a recognized
signature guaranty medallion program or other signature guarantor
acceptable to the Trustee.
<PAGE>
EXHIBIT C
[FORM OF SUPPLEMENTAL INDENTURE]
SUPPLEMENTAL INDENTURE dated as of [ ], among
[GUARANTOR] (the "New Guarantor"), a subsidiary of EAGLE FAMILY
FOODS, INC. (or its successor), a Delaware corporation (the
"Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H :
WHEREAS the Company and Eagle Family Foods Holdings, Inc. (an
"Existing Guarantor") has heretofore executed and delivered to the Trustee an
Indenture (the "Indenture") dated as of January 23, 1998, providing for the
issuance on the date thereof of an aggregate principal amount of $115,000,000 of
8 3/4% Senior Subordinated Notes due 2008 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Company's obligations under
the Securities pursuant to a Note Guarantee on the terms and conditions set
forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Company and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly
-----------------------
and severally with all the Existing Guarantors, to unconditionally guarantee the
Company's obligations under the Securities on the terms and subject to the
conditions set forth in Article X of the Indenture and
<PAGE>
2
to be bound by all other applicable provisions of the Indenture and the
Securities.
2. Ratification of Indenture; Supplemental Indentures Part of
----------------------------------------------------------
Indenture. Except as expressly amended hereby, the Indenture is in all respects
- - - - ----------
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee makes no
--------------------------------
representation as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of this
-------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section headings herein are for
-------------------
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
----------------------------------------
Name:
Title:
<PAGE>
3
EAGLE FAMILY FOODS, INC.,
by
----------------------------------------
Name:
Title:
EAGLE FAMILY FOODS HOLDINGS, INC.,
by
----------------------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee,
by
----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT D
[Form of Letter of Representation]
Eagle Family Foods, Inc.
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Dear Ladies and Gentlemen:
This certificate is delivered to request a transfer of $
principal amount of the 8 3/4% Senior Subordinated Notes due 2008 (the
"Securities") of Eagle Family Foods, Inc. (the "Company").
Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Securities
and invest in or purchase securities similar to the Securities in the normal
course of our business. We and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the later of the date which is two
years
<PAGE>
2
after (X) the later of (A) the date of original issue or (B) the date on which
this Security was acquired from an affiliate of the Company or (Y) the date that
is three months after the last date on which the Company or any affiliate of the
Company was the owner of such Securities (or any predecessor thereto) only (a)
to the Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside the United States within the meaning of
Regulation S under the Securities Act or (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor", in each case in a transaction involving
a minimum principal amount of Securities of $250,000 or (f) pursuant to any
other available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (e) above prior to the
later of the date which is two years after (X) the later of (A) the date of
original issue or (B) the date on which this Security was acquired from an
affiliate of the Company or (Y) the date that is three months after the last
date on which the Company or any affiliate of the Company was the owner of such
Securities (or any predecessor thereto), the transferor shall deliver a letter
from the transferee substantially in the form of this letter to the Company and
the Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee reserve the right
prior to any offer, sale or other transfer prior to the later of the date which
is two years after (X) the later of (A) the date of original issue or (B) the
date on which this Security was acquired from an affiliate of the Company or (Y)
the date that is three months after the last date on
<PAGE>
3
which the Company or any affiliate of the Company was the owner of such
Securities (or any predecessor thereto) of the Securities pursuant to clause
(d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
TRANSFEREE:___________________
BY____________________________
<PAGE>
EXHIBIT 4.3
EAGLE FAMILY FOODS, INC.
$115,000,000
8 3/4 % SENIOR SUBORDINATED NOTES DUE 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
January 23, 1998
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Eagle Family Foods, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and Merrill Lynch &
Co. (together with CSI, the "Initial Purchasers"), upon the terms and subject to
the conditions set forth in a purchase agreement dated January 16, 1998 (the
"Purchase Agreement"), $115,000,000 aggregate principal amount of its 8 3/4%
Senior Subordinated Notes due 2008 (the "Securities"). Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company and Holdings agree with the Initial
Purchasers, for the benefit of the holders (including the Initial Purchasers) of
the Securities, the Exchange Securities (as defined herein) and the Private
Exchange Securities (as defined herein) (collectively, the "Holders"), as
follows:
1. Registered Exchange Offer. The Company and Holdings shall (i)
prepare and, not later than 90 days following the date of original issuance of
the Securities (the "Issue Date"), file with the Commission a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer to the Holders of the
Securities (the "Registered Exchange Offer") to issue and deliver to such
Holders, in exchange for the Securities, a like aggregate principal amount of
debt securities of the Company (the "Exchange Securities") that are identical in
all material respects to the Securities, except for the transfer restrictions
relating to the Securities, (ii) use their reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 150 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 180 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Securities will
be issued under the Indenture or an indenture (the "Exchange Securities
Indenture") among the Company, Holdings,
<PAGE>
2
as a guarantor, and the Trustee or such other bank or trust company that is
reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange
Securities Trustee"), such indenture to be identical in all material respects to
the Indenture, except for the transfer restrictions relating to the Securities
(as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or of Holdings or an Exchanging Dealer (as
defined herein) not complying with the requirements of the next sentence, (b) is
not an Initial Purchaser holding Securities that have, or that are reasonably
likely to have, the status of an unsold allotment in an initial distribution,
(c) acquires the Exchange Securities in the ordinary course of such Holder's
business and (d) has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities) and to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company,
Holdings, the Initial Purchasers and each Exchanging Dealer acknowledge that,
pursuant to current interpretations by the Commission's staff of Section 5 of
the Securities Act, each Holder that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making activities
or other trading activities, for Exchange Securities (an "Exchanging Dealer"),
is required to deliver a prospectus containing substantially the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
<PAGE>
3
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company and Holdings shall use their reasonable best efforts to
keep the Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein in order to permit such prospectus
to be used by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided that (i) in
the case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer, such period shall be the lesser of 180 days
and the date on which all Exchanging Dealers have sold all Exchange Securities
held by them and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Exchange Securities for a period of not less than 180 days
after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company and Holdings that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or Holdings or, if it is such an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and Holdings
will ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming
<PAGE>
4
part of any Exchange Offer Registration Statement, and any supplement to such
prospectus, does not, as of the consummation of the Registered Exchange Offer,
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 180 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(a) The Company and Holdings shall use their reasonable best efforts
to file as promptly as practicable (but in no event more than 30 days after
so required or requested pursuant to this Section 2) with the Commission,
and thereafter shall use their reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined below) by the Holders thereof from time
to time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement").
(b) The Company and Holdings shall use their reasonable best efforts
to keep the Shelf Registration Statement continuously effective in order to
permit the prospectus forming part thereof to be used by Holders of
Transfer Restricted Securities for a period ending on the earlier of (i)
two years from the Issue Date or such shorter period that will terminate
when all the Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto and (ii) the date on
which the Securities become eligible for resale without volume restrictions
pursuant to Rule 144 under the Securities Act (in any such case, such
period being called the "Shelf Registration Period"). The Company and
Holdings shall be deemed not to have used their reasonable best efforts to
keep the Shelf Registration Statement effective during the requisite period
if either of them voluntarily takes any action that would result in Holders
of Transfer Restricted Securities covered thereby not being able to offer
and sell such Transfer Restricted Securities during that period, unless
such action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company and
Holdings will ensure that (i) any Shelf Registration Statement and any
amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities
Act and the rules and regulations of the Commission thereunder, (ii) any
Shelf Registration Statement and any amendment thereto (in either case,
other than with respect to information included therein in reliance upon or
in conformity with written information furnished to the Company by or on
behalf of any Holder specifically for use therein (the "Holders'
Information")) does not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such
prospectus (in either case, other than with respect to Holders'
Information), does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
5
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company and
Holdings fail to fulfill their obligations under Section 1 or Section 2, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 90 days after the Issue Date, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is not declared effective within 150 days after the Issue Date
(or in the case of a Shelf Registration Statement required to be filed in
response to a change in law or the applicable interpretations of Commission's
staff, if later, within 45 days after publication of the change in law or
interpretation), (iii) the Registered Exchange Offer is not consummated on or
prior to 180 days after the Issue Date, or (iv) the Shelf Registration Statement
is filed and declared effective within 180 days after the Issue Date (or in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of Commission's staff, if later,
within 45 days after publication of the change in law or interpretation) but
shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
30 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company will be obligated to pay liquidated damages to each
Holder of Transfer Restricted Securities, during the period of one or more such
Registration Defaults, in an amount equal to $ 0.192 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder until (i)
the applicable Registration Statement is filed, (ii) the Exchange Offer
Registration Statement is declared effective and the Registered Exchange Offer
is consummated, (iii) the Shelf Registration Statement is declared effective or
(iv) the Shelf Registration Statement again becomes effective, as the case may
be. Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. As used herein, the term "Transfer Restricted Securities"
means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in this Section 3(a), the Company shall not be required to pay liquidated
damages to a Holder of Transfer Restricted Securities if such Holder failed to
comply with its obligations to make the representations set forth in the second
to last paragraph of Section 1 or failed to provide the information required to
be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on
each interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
<PAGE>
6
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to
reflect in each such document, when so filed with the Commission, such
comments as any Initial Purchaser may reasonably propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
and (iii) if requested by any Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or Holdings of any
notification with respect to the suspension of the qualification of
the Securities, the Exchange Securities or the Private Exchange
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company and Holdings will make every reasonable effort to
obtain the withdrawal at the earliest possible time of any order suspending
the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
<PAGE>
7
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company and Holdings
consent to the use of such prospectus or any amendment or supplement
thereto by each of the selling Holders of Transfer Restricted Securities in
connection with the offer and sale of the Transfer Restricted Securities
covered by such prospectus or any amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules and, if any Initial Purchaser or Exchanging Dealer or any
such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as such Initial Purchaser,
Exchanging Dealer or other persons may reasonably request; and the Company
and Holdings consent to the use of such prospectus or any amendment or
supplement thereto by any such Initial Purchaser, Exchanging Dealer or
other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company and Holdings will use their reasonable best efforts to register or
qualify, or cooperate with the Holders of Securities, Exchange Securities
or Private Exchange Securities included therein and their respective
counsel in connection with the registration or qualification of, such
Securities, Exchange Securities or Private Exchange Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any
such Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities, Exchange Securities or Private Exchange
Securities covered by such Registration Statement; provided that neither
the Company nor Holdings will be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
(i) The Company and Holdings will cooperate with the Holders of
Securities, Exchange Securities or Private Exchange Securities to
facilitate the timely preparation and delivery of certificates representing
Securities, Exchange Securities or Private Exchange Securities to be sold
pursuant to any Registration Statement free of any restrictive legends and
in such denominations and registered in such names as the Holders thereof
may request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company and Holdings are required to
maintain an effective Registration Statement, the Company and Holdings will
promptly prepare and file with the Commission a post-effective amendment to
the Registration Statement or a supplement to the related prospectus or
file any other required document so that, as thereafter delivered to
purchasers of the Securities, Exchange Securities or Private Exchange
Securities from a Holder, the prospectus will not include an untrue
statement of a material fact or omit to
<PAGE>
8
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may
be, and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Company and Holdings will comply with all applicable rules and
regulations of the Commission and will make generally available to its
security holders as soon as practicable after the effective date of the
applicable Registration Statement an earning statement satisfying the
provisions of Section 11(a) of the Securities Act; provided that in no
event shall such earning statement be delivered later than 45 days after
the end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the applicable Registration
Statement, which statement shall cover such 12-month period.
(m) The Company and Holdings will cause the Indenture or the Exchange
Securities Indenture, as the case may be, to be qualified under the Trust
Indenture Act of 1939 as required by applicable law in a timely manner.
(n) The Company and Holdings may require each Holder of Transfer
Restricted Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the Holder
and the distribution of such Transfer Restricted Securities as the Company
and Holdings may from time to time reasonably require for inclusion in such
Shelf Registration Statement, and the Company and Holdings may exclude from
such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after receiving
such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of
any notice from the Company pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities
until such Holder's receipt of copies of the supplemental or amended
prospectus contemplated by Section 4(j) or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company and Holdings are required to
maintain an effective Registration Statement (the "Effectiveness Period"),
such Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies
of the supplemental or amended prospectus contemplated by Section 4(j) (if
an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company and
Holdings shall enter into such customary agreements (including, if
requested, an underwriting agreement in customary form) and take all such
other action, if any, as Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold or the managing underwriters (if any) shall
reasonably request in order to facilitate any disposition of Securities,
Exchange Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement.
<PAGE>
9
(q) In the case of a Shelf Registration Statement, the Company and
Holdings shall (i) make reasonably available for inspection by a
representative of, and Special Counsel (as defined below) acting for,
Holders of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records, pertinent
corporate documents and properties of the Company and Holdings and any of
their subsidiaries and (ii) use their reasonable best efforts to have their
respective officers, directors, employees, accountants and counsel supply
all relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection with
such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company and
Holdings shall, if requested by Holders of a majority in aggregate
principal amount of the Securities, Exchange Securities and Private
Exchange Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration Statement,
use their reasonable best efforts to cause (i) their counsel to deliver an
opinion relating to the Shelf Registration Statement and the Securities,
Exchange Securities or Private Exchange Securities, as applicable, in
customary form, (ii) their respective officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) and (iii) their independent public
accountants to provide a comfort letter or letters in customary form,
subject to receipt of appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company and Holdings shall, jointly
and severally, bear all expenses incurred in connection with the performance of
their obligations under Sections 1, 2, 3 and 4, and the Company will reimburse
the Initial Purchasers and the Holders for the reasonable fees and disbursements
of one firm of attorneys (in addition to any local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Securities, the
Exchange Securities and the Private Exchange Securities to be sold pursuant to
each Registration Statement (the "Special Counsel") acting for the Initial
Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and Holdings shall, jointly and severally, indemnify and
hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
"Holder") from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, without limitation, any
loss, claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company and
Holdings shall not be liable in
<PAGE>
10
any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
further, that with respect to any such untrue statement in or omission from any
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) a copy of the final prospectus was not sent or given
to such person at or prior to the written confirmation of the sale of such
Securities, Exchange Securities or Private Exchange Securities to such person
and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company or Holdings with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, Holdings, their respective affiliates,
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the "Company"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other
<PAGE>
11
charges of such counsel for the indemnified party will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based upon advice of counsel to the indemnified
party) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), 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 on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company or Holdings from the offering and sale of the
Securities, on the one hand, and a Holder with respect to the sale by such
Holder of Securities, Exchange Securities or Private Exchange Securities, on the
other, 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 Company and Holdings, on the one hand, and such Holder, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
Holdings, on the one hand, and a Holder, on the other, with respect to such
offering and such sale shall be deemed to be in the same proportion as the total
net proceeds from the offering of the Securities (before deducting expenses)
received by or on behalf of the Company as set forth in the table on the cover
of the Offering Memorandum, on the one hand, bear to the total proceeds received
by such Holder with respect to its sale of Securities, Exchange Securities or
Private Exchange Securities, on the other. The relative fault 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 the Company or Holdings or information supplied by
the Company or Holdings, on the one hand, or to any Holders' Information
supplied by such Holder, on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The parties hereto agree that it would not
be just and equitable if contributions pursuant to this Section 7 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an
<PAGE>
12
indemnified party as a result of the loss, claim, damage or liability, or action
in respect thereof, referred to above in this Section 7 shall be deemed to
include, for purposes of this Section 7, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
or preparing to defend any such action or claim. Notwithstanding the provisions
of this Section 7, an indemnifying party that is a Holder of Securities,
Exchange Securities or Private Exchange Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities, Exchange Securities or Private Exchange Securities sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
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.
8. Rules 144 and 144A. Each of the Company and Holdings shall use
its reasonable best efforts to file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any time
the Company or Holdings is not required to file such reports, it will, upon the
written request of any Holder of Transfer Restricted Securities, make publicly
available other information so long as necessary to permit sales of such
Holder's securities pursuant to Rules 144 and 144A. Each of the Company and
Holdings covenants that it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including, without limitation,
the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of
Transfer Restricted Securities, each of the Company and Holdings shall deliver
to such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Company or Holdings to register any of its securities
pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
<PAGE>
13
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Chase Securities Inc. and Merrill Lynch & Co.;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company or Holdings, initially at the address of the
Company set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company, Holdings and their successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or Holdings or
by any Holder of any of their obligations under this Agreement, each Holder or
the Company or Holdings, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages (other than
the recovery of damages for a breach by the Company or Holdings of its
obligations under Sections 1 or 2 hereof for which liquidated damages have been
paid pursuant to Section 3 hereof), will be entitled to specific performance of
its rights under this Agreement. Each of the Company and Holdings and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(i) No Inconsistent Agreements. Each of the Company and Holdings
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in
<PAGE>
14
this Agreement or otherwise conflicts with the provisions hereof, (ii) it has
not previously entered into any agreement which remains in effect granting any
registration rights with respect to any of its debt securities to any person and
(iii) without limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Securities, it shall not grant to any person the
right to request the Company or Holdings to register any debt securities of the
Company or Holdings under the Securities Act unless the rights so granted are
not in conflict or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. None of the Company, Holdings nor
any of their security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company or Holdings in any Shelf Registration or Registered Exchange Offer
other than Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
15
Please confirm that the foregoing correctly sets forth the agreement
among the Company, Holdings and the Initial Purchasers.
Very truly yours,
EAGLE FAMILY FOODS, INC.,
by /s/ John O'C. Nugent
------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Officer
EAGLE FAMILY FOODS HOLDINGS, INC.,
by /s/ John O'C. Nugent
------------------------------
Name: John O'C. Nugent
Title: President and Chief Executive Officer
Accepted:
CHASE SECURITIES INC.,
by /s/ James C. Neary
---------------------------
Authorized Signatory
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED,
by /s/ Mary Beck
---------------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company and
Holdings have agreed that, for a period of 180 days after the Expiration Date
(as defined herein), the Company will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company and
Holdings have agreed that, for a period of 180 days after the Expiration Date,
the Company will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition,
until ____________________________________, 1998, all dealers effecting
transactions in the Exchange Securities may be required to deliver a prospectus.
Neither the Company nor Holdings will receive any proceeds from any
sale of Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the Exchange Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and Holdings have agreed to pay all
expenses incident to the Registered Exchange Offer (including the expenses of
one counsel for the Holders of the Securities) other than commissions or
concessions of any broker-dealers and will indemnify the Holders of the
Securities (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE>
ANNEX D
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.4
================================================================================
CREDIT AGREEMENT
dated as of
January 23, 1998
among
EAGLE FAMILY FOODS, INC.,
as Borrower,
EAGLE FAMILY FOODS HOLDINGS, INC.,
The Lenders Party Hereto,
THE CHASE MANHATTAN BANK,
as Administrative Agent,
Collateral Agent, Issuing
Bank and Swingline Lender,
and
MERRILL LYNCH CAPITAL CORPORATION,
as Documentation Agent
CHASE SECURITIES INC. and
MERRILL LYNCH PIERCE, FENNER & SMITH INCORPORATED,
as Co-Arrangers
================================================================================
<PAGE>
CREDIT AGREEMENT dated as of January 23, 1998, among EAGLE
FAMILY FOODS, INC., as Borrower, EAGLE FAMILY FOODS HOLDINGS,
INC., the LENDERS party hereto, THE CHASE MANHATTAN BANK, as
Administrative Agent, Collateral Agent, Issuing Bank and
Swingline Lender and MERRILL LYNCH CAPITAL CORPORATION, as
Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the
--------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acquired Business" means the BFC Assets and the BFC Investments
-----------------
Assets (as each such term is defined in the Asset Purchase Agreement, which
terms include the Eagle Brand, ReaLemon/ReaLime, None Such, Borden Egg Nog,
Cremora and Kava brands) and the Assumed Liabilities (as defined in the Asset
Purchase Agreement).
"Acquisition" means the acquisition, pursuant to the Asset Purchase
-----------
Agreement, by the Borrower from BFC and BFC Investments of the Acquired Business
for consideration consisting of a cash payment on the Effective Date by the
Borrower to BFC (for itself and as agent for BFC Investments, Borden, Inc., BDH
Two, Inc. and/or Borden Foods Investments Corporation) in the amount of
$376,500,000, subject to certain post-closing adjustments.
"Acquisition Documents" means the Asset Purchase Agreement and each
---------------------
other agreement or instrument entered into by the Borrower, BFC and/or BFC
Investments to effectuate the Asset Purchase Agreement.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
--------------------
as administrative agent for the Lenders hereunder.
<PAGE>
2
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means the Administrative Agent, the Collateral Agent and the
------
Documentation Agent.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Revolving Lender,
---------------------
the percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day with respect to any ABR Loan or
---------------
Eurodollar Loan that is a Revolving Loan or a Term Loan, or with respect to the
commitment fees payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption "Revolving Loan--Eurodollar Spread", "--
ABR Spread", "Term Loan--Eurodollar Spread", "--ABR Spread" or "Commitment Fee
Rate", as the case may be, based upon the Leverage Ratio as of the most recent
determination date; provided that until the delivery by the Borrower to the
--------
Administrative Agent of the Borrower's financial statements for the period
ending December 31, 1998, and so long as no Event of Default described in
paragraph (a) or (b) of Article VII shall have occurred and be continuing, the
"Applicable Rate" shall be the applicable rate per annum set forth below in
Category 1:
<TABLE>
<CAPTION>
=================================================================================================
Revolving Loan Term Loan
-------------- ---------
Leverage Ratio Eurodollar ABR Eurodollar ABR Commitment
--------------
Spread Spread Spread Spread Fee Rate
- - - - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Category 1
----------
2.00% 1.00% 2.25% 1.25% 0.500%
Greater than 5.5 to 1.00
- - - - --------------------------------------------------------------------------------------------------
Category 2
----------
Greater than 5.0 to 1.00 but 1.75% 0.75% 2.00% 1.00% 0.500%
less than or equal to 5.5 to
1.00
- - - - --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
3
<TABLE>
- - - - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Category 3
-----------
Greater than 4.0 to 1.00 but 1.50% 0.50% 1.75% 0.75% 0.375%
less than or equal to 5.0 to
1.00
- - - - --------------------------------------------------------------------------------------------------
Category 4
-----------
1.25% 0.25% 1.50% 0.50% 0.375%
Less than or equal to 4.0 to
1.00
==================================================================================================
</TABLE>
For purposes of the foregoing, (i) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of the Borrower's fiscal year
based upon the Borrower's consolidated financial statements delivered pursuant
to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting
from a change in the Leverage Ratio shall be effective during the period
commencing on and including the date of delivery to the Administrative Agent of
such consolidated financial statements indicating such change and ending on the
date immediately preceding the effective date of the next such change; provided
--------
that the Leverage Ratio shall be deemed to be in Category 1 (A) at any time that
an Event of Default described in paragraph (a) or (b) of Article VII has
occurred and is continuing or (B) if the Borrower fails to deliver the
consolidated financial statements required to be delivered by it pursuant to
Section 5.01(a) or (b), during the period from the expiration of the time for
delivery thereof until such consolidated financial statements are delivered.
"Approved Fund" means, with respect to any Lender that is a fund that
-------------
invests in bank loans, any other fund that invests in bank loans and is managed
or advised by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Assessment Rate" means, for any day, the annual assessment rate in
---------------
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
--------
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as
------------------------
of November 24, 1997, among the Borrower, BFC and BFC Investments, as amended as
of December 7, 1997, and as of January 15, 1998, and as such agreement may be
further amended from time to time after the Effective Date in accordance with
this Agreement.
"Asset Swap" means the substantially concurrent purchase and sale, or
----------
exchange, of Productive Assets between the Borrower and another Person or group
of affiliated Persons (which Person or group of affiliated Persons is not
affiliated with the Company) pursuant to an Asset Swap Agreement.
<PAGE>
4
"Asset Swap Agreement" means a definitive agreement, subject only to
--------------------
customary closing conditions that the Borrower in good faith believes will be
satisfied, providing for an Asset Swap; provided, however, that any amendment
-------- -------
to, or waiver of, any closing condition that individually or in the aggregate is
material to such Asset Swap shall be deemed to be a new Asset Swap Agreement.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Average Working Capital Adjustment" means, on the last day of any
----------------------------------
fiscal quarter of the Borrower, the difference between (a) Net Working Capital
on such day and (b) the average of Net Working Capital on such day and Net
Working Capital on the last day of each of the three immediately preceding
fiscal quarters; provided that (i) for purposes of calculating the Average
--------
Working Capital Adjustment as of the last day of each of the first, second and
third fiscal quarters of 1998, the amount determined pursuant to clause (b)
shall be (A) in the case of the first fiscal quarter, the difference between (1)
Net Working Capital as of March 31, 1998, and (2) the quotient of the sum of (w)
Net Working Capital as of March 31, 1998, plus (y) Net Working Capital as of the
Closing Date divided by two, (b) in the case of the second fiscal quarter, the
difference between (1) Net Working Capital as of June 30, 1998, and (2) the
quotient of the sum of (w) Net Working Capital as of June 30, 1998, plus (x) Net
Working Capital as of March 31, 1998, plus (y) Net Working Capital as of the
Closing Date divided by three, and (C) in the case of the third fiscal quarter,
the difference between (1) Net Working Capital as of September 30, 1998, and (2)
the quotient of the sum of (w) Net Working Capital as of September 30, 1998,
plus (x) Net Working Capital as of June 30, 1998, plus (y) Net Working Capital
as of March 31, 1998, plus (z) Net Working Capital as of the Closing Date
divided by four, and (ii) the Average Working Capital Adjustment will be capped
at $15,000,000 at any time.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"BFC" means Borden Foods Corporation, a Delaware corporation.
---
"BFC Investments" means BFC Investments, L.P., a Delaware limited
---------------
partnership.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Bond" means the bond issued or to be issued by the Borrower to and in
----
favor of the Collateral Agent, for its own benefit and on behalf and for the
benefit of, and as the holder of an irrevocable power of attorney of, the other
Secured Parties, in the principal amount of twenty-five million dollars
($25,000,000) in the lawful currency of Canada, together with all renewals
thereof, substitutions thereafter and supplements thereto.
<PAGE>
5
"Bond Pledge Agreement" means the bond pledge agreement executed or to
---------------------
be executed between the Borrower and the Collateral Agent, for its own benefit
and on behalf and for the benefit of, and as the holder of an irrevocable power
of attorney of, the other Secured Parties, as such agreement may be amended,
supplemented or restated from time to time.
"Borrower" means Eagle Family Foods, Inc., a Delaware corporation.
--------
"Borrowing" means (a) Loans of the same Class and Type, made,
---------
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, or (b) a Swingline Loan.
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
--------------------
property, plant and equipment and other capital expenditures of the Borrower and
its consolidated Subsidiaries that are (or would be) set forth in a consolidated
statement of cash flows of the Borrower for such period prepared in accordance
with GAAP and (b) Capital Lease Obligations incurred by the Borrower and its
consolidated Subsidiaries during such period.
"Capital Lease Obligations" of any Person means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means any of the following events:
-----------------
(a) prior to the initial Public Equity Offering by Holdings or the
Borrower of its common stock, (i) the Sponsors shall fail to own and have
the right to vote shares representing at least 51% of the aggregate
ordinary voting power represented by the issued and outstanding capital
stock of Holdings or (ii) the Sponsors shall not have the right to elect at
least a majority of the board of directors of Holdings;
(b) after the initial Public Equity Offering of Holdings or the
Borrower, (i) the Sponsors shall fail to own and have the right to vote
shares representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Holdings (or of
the Borrower if Holdings has merged into the Borrower in connection with
the initial Public Equity Offering of the Borrower) or (ii) any Person or
group (within the meaning of the Securities Exchange Act of 1934 and the
rules of
<PAGE>
6
the Securities and Exchange Commission thereunder as in effect on the date
hereof) other than the Sponsors becomes, directly or indirectly, the
beneficial owner of a percentage of shares representing the aggregate
ordinary voting power represented by the issued and outstanding capital
stock of Holdings (or of the Borrower if Holdings has merged into the
Borrower in connection with the initial Public Equity Offering by the
Borrower) that is greater than the percentage of such shares owned by the
Sponsors ;
(c) prior to the merger of Holdings into the Borrower in connection
with the initial Public Equity Offering by the Borrower, any Person other
than Holdings shall acquire ownership, directly or indirectly, beneficially
or of record, of any shares of capital stock of the Borrower; or
(d) at any time, (i) occupation of a majority of the seats (other than
vacant seats) on the board of directors of Holdings or the Borrower by
Persons who were neither (x) nominated by the board of directors of
Holdings or the Borrower, respectively, nor (y) appointed by directors so
nominated or (ii) the occurrence of any change in control or similar event
(however denominated) with respect to Holdings or the Borrower under and as
defined in the Subordinated Debt Documents or in any other indenture or
agreement in respect of Material Indebtedness to which Holdings, the
Borrower or a Subsidiary is a party.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Term Loans or Swingline Loans and, when used in reference to any Commitment,
refers to whether such Commitment is a Revolving Commitment or Term Commitment.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" means any and all "Collateral", as defined in any
----------
applicable Security Document.
"Collateral Agent" means The Chase Manhattan Bank, in its capacity as
----------------
collateral agent for the Lenders hereunder.
"Commitment" means a Revolving Commitment, Term Commitment or any
----------
combination thereof (as the context requires).
<PAGE>
7
"Consolidated Cash Interest Expense" means, for any period, the
----------------------------------
interest expense, to the extent paid or payable in cash (including the interest
component in respect of Capital Lease Obligations) by the Borrower and the
Subsidiaries during such period, determined on a consolidated basis in
accordance with GAAP.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
-------------------
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income for such period, the sum of (a)
the aggregate amount of Consolidated Cash Interest Expense for such period, (b)
the aggregate amount of income tax expense for such period, (c) all amounts
attributable to depreciation and amortization for such period, (d) other noncash
charges during such period (except any noncash charge that requires an accrual
of a cash reserve for anticipated cash charges for any period other than
accruals for future retiree medical obligations made pursuant to SFAS No. 87,
No. 112 and No. 116, as amended or modified), including noncash purchase price
accounting charges taken in the 1998 fiscal year, and one-time, non-recurring
charges of up to $3,600,000 taken in fiscal year 1998 associated with the
development of management information systems and severance payments and (e)
Sponsor Capital Contributions (to the extent such Sponsor Capital Contributions
do not exceed, in any relevant period of four consecutive fiscal quarters, the
lesser of (x) $10,000,000 and (y) the amount of expenses included in the
calculation of Consolidated EBITDA for such period, net of direct product
contributions, incurred in connection with new product launches or the
development of new products), minus, to the extent added (or, in the case of
clause (iii) below, not deducted) in determining such Consolidated Net Income,
(i) any interest income, (ii) any non-cash income or gain and (iii) the amount
of cash paid during such period in respect of retiree medical obligations.
"Consolidated Net Income" means, for any period, net income or loss of
-----------------------
the Borrower and the Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, provided that there shall be excluded from such
net income or loss (a) the income of any Person in which any other Person (other
than the Borrower or any of the Subsidiaries or any director holding qualifying
shares in compliance with applicable law) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of the Subsidiaries by such Person during such period, (b) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
or is merged into or consolidated with the Borrower or any of the Subsidiaries
or the date that Person's assets are acquired by the Borrower or any of the
Subsidiaries, (c) any after-tax gains or losses attributable to sales of assets
out of the ordinary course of business and (d) to the extent not included in
clauses (a) through (c) above, any extraordinary gains or non-cash extraordinary
losses.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
<PAGE>
8
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, rules, regulations, codes,
------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to public health.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Holdings, the Borrower or any Subsidiary directly
or indirectly resulting from or based upon (a) violation of any Environmental
Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Financing" means the contribution by the Sponsors and
----------------
Management Investors to Holdings of an aggregate cash amount of not less than
$82,500,000 in exchange for the issuance to the Sponsors and Management
Investors of all the outstanding capital stock of Holdings, and the contribution
by Holdings to the Borrower of at least $82,500,000 of cash so received in
exchange for the issuance to Holdings of all the outstanding capital stock of
the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator appointed by or
<PAGE>
9
on behalf of the PBGC of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence
by the Borrower or any of its ERISA Affiliates of any liability with respect to
the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g)
the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt
by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any
notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
----------------
VII.
"Excess Cash Flow" means, for any fiscal year, the excess of: (a) the
----------------
sum, without duplication, of (i) Consolidated EBITDA for such fiscal year, (ii)
extraordinary cash income of the Borrower and its Subsidiaries, if any, during
such fiscal year and not included in Consolidated EBITDA and (iii) the decrease,
if any, in Net Working Capital from the beginning to the end of such fiscal
year, less (b) the sum, without duplication, of (i) the amount of any cash
income taxes payable by the Borrower and its Subsidiaries with respect to such
fiscal year, (ii) Consolidated Cash Interest Expense for such fiscal year, (iii)
Capital Expenditures made in cash in accordance with Section 6.11 during such
fiscal year, (iv) scheduled principal repayments of Indebtedness made by the
Borrower and its Subsidiaries during such fiscal year, (v) optional and
mandatory prepayments of the principal of Loans during such fiscal year, but
only to the extent that such prepayments by their terms cannot be reborrowed or
redrawn and do not occur in connection with a refinancing of all or any portion
of the Loans, (vi) extraordinary cash expenses and losses paid or incurred by
the Borrower and its Subsidiaries, if any, during such fiscal year and not
included in Consolidated EBITDA, (vii) the increase, if any, in Net Working
Capital from the beginning to the end of such fiscal year, provided that, to the
--------
extent otherwise included therein, the Net Proceeds of any Prepayment Event
shall be excluded from the calculation of Excess Cash Flow to the extent used to
prepay the Term Loans in accordance with Section 2.11(b).
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income, capital,
branch profits or franchise taxes imposed on (or measured by) its net income,
capital or profits by the United States of America or any state or political
subdivision thereof, or by the jurisdiction or any state or political
subdivision thereof under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located (provided however that no Lender shall
--------
be deemed to be located in any jurisdiction solely as a result of receiving any
payment under or taking any action related to any Loan), and (b) in the case of
a Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.19(b)), any withholding tax (i) that is in effect and would
apply to amounts payable to such Foreign Lender at the time such Foreign Lender
becomes a party to this Agreement (or designates a new lending office) except to
the extent that such Foreign Lender (or its assignor,
<PAGE>
10
if any) was entitled, at the time of designation of such new lending office (or
assignment), to receive additional amounts from the Borrower with respect to any
withholding tax pursuant to Section 2.17(a), or (ii) that is attributable to
such Foreign Lender's failure to comply with 2.17(e).
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Financing Transactions" means (a) the execution, delivery and
----------------------
performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans, the use of the proceeds thereof and the issuance
of Letters of Credit hereunder, (b) the execution, delivery and performance by
each Loan Party of the Subordinated Debt Documents to which it is to be a party,
the issuance of the Subordinated Notes and the use of the proceeds thereof and
(c) the Equity Financing.
"Foreign Lender" means any Lender that is organized under the laws of
--------------
a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized under the
------------------
laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"GEI" means GE Investment Private Placement Partners II, a Limited
---
Partnership, a Delaware limited partnership, and its Affiliates.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of
<PAGE>
11
guaranteeing any Indebtedness or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including
---------------
any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
--------
collection or deposit in the ordinary course of business.
"Guarantee Agreements" means the Parent Guarantee Agreement and the
--------------------
Subsidiary Guarantee Agreement.
"Hazardous Materials" means all explosive or radioactive substances or
-------------------
wastes and all substances or wastes of any nature that are regulated, restricted
or subject to any prohibition by, under or pursuant to any Environmental Law as
a "hazardous waste", "hazardous substance", "toxic pollutant", "special waste",
"dangerous waste", "infectious waste", "medical waste", "hazardous air
pollutant", "hazardous water pollutant", specifically including any pesticide,
petroleum or petroleum distillate, asbestos or asbestos-containing materials,
polychlorinated biphenyls and radon gas.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Holdings" means Eagle Family Foods Holdings, Inc., a Delaware
--------
corporation.
"Hypothec" means the hypothec, in a form reasonably acceptable to the
--------
Collateral Agent, made or to be made by the Borrower in favor of the Collateral
Agent for its own benefit and on behalf and for the benefit of, and as holder of
an irrevocable power of attorney of, the other Secured Parties.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (d) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (e) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed (it being understood that the
amount of such Indebtedness shall be deemed to be the lesser of (x) the stated
amount of such Indebtedness and (y) the fair market value of the assets subject
to such Lien), (f) all Guarantees by such Person of Indebtedness of others, (g)
all Capital Lease
<PAGE>
12
Obligations of such Person, (h) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (i) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Indemnity, Subrogation and Contribution Agreement" means the
-------------------------------------------------
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the Borrower, the Subsidiary Guarantors and the Collateral
Agent.
"Information Memorandum" means the Confidential Information Memorandum
----------------------
dated December 1997 relating to the Borrower and the Transactions.
"Insignificant Foreign Subsidiary" means, at any time, one or more
--------------------------------
Foreign Subsidiaries that, at such time, individually or in the aggregate, have
total assets of not more than $10,000,000 (or the equivalent in a foreign
currency).
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Revolving Borrowing or Term Borrowing in accordance with Section
2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan (other
---------------------
than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period,
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid.
"Interest Period" means with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
--------
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
<PAGE>
13
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
------------
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Revolving Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
-------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the
term "Lenders" includes the Swingline Lender.
"Letter of Credit" means any letter of credit issued pursuant to this
----------------
Agreement.
"Leverage Ratio" means, on any date, the ratio of (a) Total Debt as of
--------------
such date to (b) Consolidated EBITDA for the period of four consecutive fiscal
quarters of the Borrower most recently ended as of such date, provided that for
--------
purposes of calculating Consolidated EBITDA as of the last day of each of the
first, second and third fiscal quarters of 1998, the amount determined pursuant
to clause (b) above shall be determined using for any fiscal quarter of 1997 the
amounts set forth on Schedule 1.01(b) hereto as the Consolidated EBITDA for each
such fiscal quarter.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge, prior claim (within the
meaning of the Civil Code
<PAGE>
14
of the Province of Quebec) or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such asset and (c)
in the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Loan Documents" means this Agreement, the Guarantee Agreements, the
--------------
Security Documents and the Indemnity, Subrogation and Contribution Agreement.
"Loan Parties" means Holdings, the Borrower and the Subsidiary Loan
------------
Parties.
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement.
"Management Investors" means William A. Lynch, John O'C. Nugent,
--------------------
Jonathan F. Rich, James A. Byrne, Richard A. Lumpp, and any other officer,
director or employee of the Borrower or Holdings or any Subsidiary of the
Borrower who is the beneficial owner of any of the capital stock of the Borrower
or Holdings.
"Material Adverse Effect" means a material adverse effect, after
-----------------------
taking into account any applicable insurance and any applicable indemnification
by BFC under the Asset Purchase Agreement (to the extent the provider of such
insurance or indemnification has the financial ability to support its
obligations with respect thereto and is not disputing or refusing to acknowledge
same), on (a) the business, operations or financial condition, of Holdings, the
Borrower and the Subsidiaries taken as a whole, (b) the ability of any Loan
Party to perform any of its obligations under any Loan Document or (c) the
rights of or benefits available to the Lenders under the Loan Documents taken as
a whole.
"Material Indebtedness" means Indebtedness (other than the Loans and
---------------------
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of Holdings, the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $5,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of Holdings,
the Borrower or any Subsidiary in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that Holdings, the Borrower or such Subsidiary would be required to pay if such
Hedging Agreement were terminated at such time.
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage" means a mortgage, deed of trust, assignment of leases and
--------
rents or other security document, substantially in the form of Exhibit I,
granting a Lien on any Mortgaged Property to secure the Obligations. Each
Mortgage shall be reasonably satisfactory in form and substance to the
Collateral Agent.
"Mortgaged Property" means, initially, each parcel of real property
------------------
and the improvements thereto owned by a Loan Party and identified on Schedule
1.01(a), and includes
<PAGE>
15
each other parcel of real property and improvements thereto with respect to
which a Mortgage is granted pursuant to Section 5.12 or 5.13.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event (a) the cash proceeds
------------
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, net of (b) the sum of (i) all
reasonable fees and out-of-pocket expenses (including appraisals, and legal,
title and recording tax expenses and commissions) paid by Holdings, the Borrower
and the Subsidiaries to third parties (other than Affiliates) in connection with
such event, (ii) in the case of a sale or other disposition of an asset
(including pursuant to a casualty or condemnation), the amount of all payments
required to be made by Holdings, the Borrower and the Subsidiaries as a result
of such event to repay Indebtedness (other than Loans) secured by such asset or
otherwise subject to mandatory prepayment as a result of such event, and (iii)
the amount of all taxes (including sales and value added taxes and including
taxes payable in connection with the transfer of funds to the Borrower or any of
its Subsidiaries in connection with a prepayment pursuant to this Agreement)
paid (or reasonably estimated to be payable) by Holdings, the Borrower and the
Subsidiaries, and the amount of any reserves (whether or not contained in an
escrow or other similar arrangements) established by Holdings, the Borrower and
the Subsidiaries to fund contingent liabilities reasonably estimated to be
payable, in each case during the year that such event occurred or the next
succeeding year and that are directly attributable to such event (as determined
reasonably and in good faith by the chief financial officer of the Borrower).
"Net Working Capital" means, at any date, (a) the sum of (i) accounts
-------------------
receivable and (ii) inventory (including finished goods, work in process and raw
materials and supplies) of the Borrower and its consolidated Subsidiaries as of
such date minus (b) accounts payable of the Borrower and its consolidated
Subsidiaries as of such date, all determined on a consolidated basis in
accordance with GAAP. Net Working Capital at any date may be a positive or
negative number. Net Working Capital increases when it becomes more positive or
less negative and decreases when it becomes less positive or more negative.
"Obligations" has the meaning assigned to such term in the Guarantee
-----------
Agreements, the Security Agreement and the Hypothec, respectively.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
"Parent Guarantee Agreement" means the Parent Guarantee Agreement,
--------------------------
substantially in the form of Exhibit D, made by Holdings in favor of the
Collateral Agent for the benefit of the Secured Parties.
<PAGE>
16
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1 to
----------------------
the Security Agreement or any other form approved by the Collateral Agent.
"Permitted Acquisition" means any acquisition of assets from, or
---------------------
shares or other equity interests in, any Person if (a) at the time thereof and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing, (b) such acquisition shall not have been
preceded by an unsolicited tender offer for such Person by the Borrower or any
of its Affiliates, (c) all transactions related thereto shall be consummated in
accordance with applicable laws, (d) in the case of any acquisition of shares or
other equity interests in any Person, such acquisition is an acquisition of 100%
of the shares or other equity interests of such Person, (e) all actions required
to be taken, if any, with respect to any acquired or newly formed Subsidiary
under subsection 5.12 shall have been or shall be simultaneously taken, (f) such
assets, shares or other equity interests pertain to a line of business related
to the businesses of the Borrower and its Subsidiaries as of the Effective Date,
(g) after giving effect to such acquisition, the Borrower shall be in
compliance, on a pro forma basis, with all the covenants set forth in this
Agreement and (h) neither the Borrower nor any of its Subsidiaries shall assume
or otherwise become liable for any Indebtedness in connection with such
acquisition (except for Indebtedness permitted by Section 6.01).
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes, assessments and other governmental
charges that are not yet due or, if due, are (i) not delinquent or (ii) are
being contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII;
(f) easements, licenses, covenants, zoning and building restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not
<PAGE>
17
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
and
(g) liens arising by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights as to
deposit accounts or other funds maintained with a creditor depository
institution;
provided that the term "Permitted Encumbrances" shall not include any Lien
- - - - --------
securing Indebtedness.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above; and
(e) shares of money market mutual or similar funds having assets in
excess of $500,000,000 and which invest exclusively in assets satisfying
the requirements of clauses (a) through (d) of this definition.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
<PAGE>
18
"Pledge Agreement" means the Pledge Agreement, substantially in the
----------------
form of Exhibit G, among the Borrower, Holdings, the Subsidiaries party thereto
and the Collateral Agent for the benefit of the Secured Parties.
"Prepayment Event" means:
----------------
(a) any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of the Borrower or
any Subsidiary, other than (i) dispositions described in clauses (a), (b)
and (c) of Section 6.05 and (ii) other dispositions resulting in aggregate
Net Proceeds not exceeding $3,000,000 during any fiscal year of the
Borrower; or
(b) any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of, any property
or asset of the Borrower or any Subsidiary, but only to the extent that the
Net Proceeds therefrom have not been applied to acquire other Productive
Assets within 270 days after such event; or
(c) the incurrence by Holdings, the Borrower or any Subsidiary of any
Indebtedness of the type described in clause (a) or (b) of the definition
thereof, other than Indebtedness permitted by Section 6.01.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Productive Assets" means assets of a kind used or usable by the
-----------------
Borrower and its Subsidiaries in the Borrower's business or any Related
Business.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of the common stock of Holdings (or of the Borrower if the Borrower has merged
into Holdings in connection with the initial Public Equity Offering by the
Borrower) pursuant to an effective registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act of
1933, as amended (whether alone or in conjunction with a secondary public
offering).
"Redeemable Preferred Stock" means preferred 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 one year after the Term Loan Maturity Date.
"Register" has the meaning set forth in Section 9.04.
--------
<PAGE>
19
"Related Business" means any business which is the same as or related,
----------------
ancillary or complimentary to the business of the Company on the date hereof, as
reasonably determined by the Board.
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, trustees, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having Revolving
----------------
Exposures, Term Loans and unused Commitments representing at least a majority of
the sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
------------------
in cash, securities or other property) with respect to any shares of any class
of capital stock of Holdings, the Borrower or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any such shares of capital stock of
Holdings, the Borrower or any Subsidiary or any option, warrant or other right
to acquire any such shares of capital stock of Holdings, the Borrower or any
Subsidiary.
"Revolving Availability Period" means the period from and including
-----------------------------
the Effective Date to but excluding the earlier of the Revolving Maturity Date
and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit and Swingline Loans hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender's Revolving
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. The initial
amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or
in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Revolving Commitment, as applicable. The initial aggregate amount
of the Lenders' Revolving Commitments is $70,000,000.
"Revolving Exposure" means, with respect to any Lender at any time,
------------------
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure and Swingline Exposure at such time.
"Revolving Lender" means a Lender with a Revolving Commitment or, if
----------------
the Revolving Commitments have terminated or expired, a Lender with Revolving
Exposure.
"Revolving Loan" means a Loan made pursuant to clause (b) of Section
--------------
2.01.
"Revolving Maturity Date" means December 31, 2004.
-----------------------
"S&P" means Standard & Poor's Rating Service.
---
<PAGE>
20
"Secured Parties" has the meaning assigned to such term in the
---------------
Security Agreement.
"Security Agreement" means the Security Agreement, substantially in
------------------
the form of Exhibit H, among the Borrower, Holdings and the Collateral Agent for
the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the Pledge
------------------
Agreement, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 (including,
when delivered, the Bond, the Bond Pledge Agreement and the Hypothec) to secure
any of the Obligations.
"Sponsor Capital Contributions" means, for any fiscal quarter of the
-----------------------------
Borrower, all cash contributions (other than the Equity Financing) made by
Holdings to the Borrower (or to the Borrower directly if Holdings has merged
into the Borrower in connection with the initial Public Equity Offering of the
Borrower) prior to the end of such quarter out of the proceeds of cash
contributions made to Holdings (or to the Borrower, as the case may be) by one
or more Sponsors or their Affiliates or Management Investors, which
contributions (if in a form other than common equity) shall be subordinated to
the Obligations of Holdings or the Borrower, as applicable, on terms
satisfactory to the Administrative Agent (including that the stated maturity or
redemption date of any such Sponsor Capital Contributions shall be later than 10
years from the Effective Date and that no portion of any such Sponsor Capital
Contributions shall be subject to mandatory cash payments of any kind (whether
of principal, cash interest, cash dividends, capital or otherwise) while any
Obligations of the Borrower are outstanding).
"Sponsors" means Warburg and GEI.
--------
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D or
any successor regulation or law. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"Stockholders Agreement" means the Stockholders Agreement dated as of
----------------------
January 23, 1998, among Warburg, GEI and the Management Investors, as such
agreement may be amended from time to time in accordance with this Agreement.
<PAGE>
21
"Subordinated Notes" means 8 3/4% Senior Subordinated Notes due 2008
------------------
of the Borrower issued on the Effective Date in an aggregate principal amount of
$115,000,000.
"Subordinated Debt Documents" means the indenture under which the
---------------------------
Subordinated Notes are issued and all other instruments, agreements and other
documents evidencing or governing the Subordinated Notes or providing for any
Guarantee or other right in respect thereof.
"subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower; provided that,
---------- --------
solely for purposes of clause (h), (i), (j) or (k) of Article VII, the term
"Subsidiary" shall not include any Insignificant Foreign Subsidiaries.
"Subsidiary Guarantee Agreement" means the Subsidiary Guarantee
------------------------------
Agreement, substantially in the form of Exhibit E, made by the Subsidiary Loan
Parties in favor of the Collateral Agent for the benefit of the Secured Parties.
"Subsidiary Loan Party" means any Subsidiary that is not a Foreign
---------------------
Subsidiary.
"Swingline Exposure" means, at any time, the aggregate principal
------------------
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Applicable Percentage of the total
Swingline Exposure at such time.
"Swingline Lender" means The Chase Manhattan Bank, in its capacity as
----------------
lender of Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
--------------
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Term Commitment" means, with respect to each Lender, the commitment,
---------------
if any, of such Lender to make a Term Loan hereunder on the Effective Date,
expressed as an amount representing the maximum principal amount of the Term
Loan to be made by such Lender hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.08 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of each Lender's Term Commitment
<PAGE>
22
is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to
which such Lender shall have assumed its Term Commitment, as applicable. The
initial aggregate amount of the Lenders' Term Commitments is $175,000,000.
"Term Lender" means a Lender with a Term Commitment or an outstanding
-----------
Term Loan.
"Term Loan" means a Loan made pursuant to clause (a) of Section 2.01.
---------
"Term Maturity Date" means December 31, 2005.
------------------
"Three-Month Secondary CD Rate" means, for any day, the secondary
-----------------------------
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Debt" means, as of any date of determination, without
----------
duplication, (a) the aggregate principal amount of Indebtedness of the Borrower
and the Subsidiaries outstanding as of such date, determined on a consolidated
basis in accordance with GAAP (other than (i) Sponsor Capital Contributions (to
the extent such Sponsor Capital Contributions are included as Indebtedness) and
(ii) Indebtedness of the type referred to in clause (h) or (i) of the definition
of the term "Indebtedness", except to the extent of any unreimbursed drawings
thereunder) minus (b) the Average Working Capital Adjustment as of such date of
-----
determination.
"Transaction Costs" means financing fees, investment banking fees and
-----------------
legal and accounting fees incurred in connection with the Transactions.
"Transactions" means the Acquisition and the Financing Transactions.
------------
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Warburg" means Warburg, Pincus Ventures, L.P., a Delaware limited
-------
partnership and its successor funds.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
<PAGE>
23
SECTION 1.02. Classification of Loans and Borrowings. For purposes
---------------------------------------
of this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
- - - - -----
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
---- ----
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
----
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
----------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
-----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments. Subject to the terms and conditions set
------------
forth herein, each Lender agrees, severally and not jointly, (a) to make a Term
Loan to the Borrower on the Effective Date in a principal amount not exceeding
its Term Commitment and/or (b) to make Revolving Loans to the Borrower from time
to time during the Revolving Availability Period in an aggregate principal
amount that will not result in such Lender's Revolving
<PAGE>
24
Exposure exceeding such Lender's Revolving Commitment. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Loans. Amounts repaid in respect of
Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
---------------------
Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; provided that the Commitments of the Lenders are
--------
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing and Term
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith. Each Swingline Loan shall be an
ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan;
provided that any exercise of such option shall not affect the obligation of the
- - - - --------
Borrower to repay such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000. At the time that each ABR Revolving Borrowing is made,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing
--------
may be in an aggregate amount that is equal to the entire unused balance of the
total Revolving Commitments or that is required to finance the reimbursement of
an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan
shall be in an amount that is an integral multiple of $100,000 and not less than
$500,000. Borrowings of more than one Type and Class may be outstanding at the
same time; provided that there shall not at any time be more than a total of ten
--------
Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Revolving Maturity Date or Term Maturity Date, as applicable.
SECTION 2.03. Requests for Borrowings. To request a Revolving
------------------------
Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 11:00 a.m., New York City time, three Business Days before the date
of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than
11:00 a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Revolving Borrowing to
--------
finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e) may be given not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written
<PAGE>
25
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving Borrowing
or Term Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Revolving Borrowing, then the Borrower shall
be deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Swingline Loans. (a) Subject to the terms and
----------------
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
to the Borrower from time to time during the Revolving Availability Period, in
an aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding
$10,000,000 or (ii) the sum of the total Revolving Exposures exceeding the total
Revolving Commitments; provided that the Swingline Lender shall not be required
--------
to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline Loan.
The Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.06(e), by
<PAGE>
26
remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the
requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Revolving Lender,
specifying in such notice such Lender's Applicable Percentage of such Swingline
Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to the Administrative
Agent, for the account of the Swingline Lender, such Lender's Applicable
Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges
and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Revolving Lender shall comply with its obligation
under this paragraph by wire transfer of immediately available funds, in the
same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
------- --------
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Revolving Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Revolving
Lenders that shall have made their payments pursuant to this paragraph and to
the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
------------------ --------
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- - - - -----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing
<PAGE>
27
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
of this Section), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the Borrower also shall submit a letter of credit application on
the Issuing Bank's standard form in connection with any request for a Letter of
Credit. The Issuing Bank agrees that such terms and conditions shall not contain
any financial or operating covenants or require any Lien not otherwise
contemplated by this Agreement. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit the Borrower shall be deemed to represent and warrant
that), after giving effect to such issuance, amendment, renewal or extension (i)
the LC Exposure shall not exceed $5,000,000 and (ii) the total Revolving
Exposures shall not exceed the total Revolving Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
----------------
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
---------------
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to
pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
--------------
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City
<PAGE>
28
time, on the day of receipt, or (ii) the Business Day immediately following the
day that the Borrower receives such notice, if such notice is not received prior
to such time on the day of receipt; provided that the Borrower may, subject to
--------
the conditions to borrowing set forth herein, request in accordance with Section
2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or
Swingline Loan in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each
Revolving Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender's Applicable Percentage thereof.
Promptly following receipt of such notice, each Revolving Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due from
the Borrower, in the same manner as provided in Section 2.06 with respect to
Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to
------- --------
the payment obligations of the Revolving Lenders), and the Administrative Agent
shall promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Administrative Agent
shall distribute such payment to the Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this paragraph to reimburse the
Issuing Bank, then to such Lenders and the Issuing Bank as their interests may
appear. Any payment made by a Revolving Lender pursuant to this paragraph to
reimburse the Issuing Bank for any LC Disbursement (other than the funding of
ABR Revolving Loans or a Swingline Loan as contemplated above) shall not
constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
---------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
--------
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are
<PAGE>
29
caused by the Issuing Bank's failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
------------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
--------
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
-----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
- - - - --------
pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
--------------------------------
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.12(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under
<PAGE>
30
this Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
-----------------------
be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to 105% of the LC Exposure as of
such date plus any accrued and unpaid interest thereon; provided that the
--------
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. Each
such deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrower under this Agreement.
The Administrative Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal, over such account. Other than any interest
earned on the investment of such deposits, which investments shall be made at
the option and sole discretion of the Administrative Agent and at the Borrower's
risk and expense, such deposits shall not bear interest. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of Revolving
Lenders with LC Exposure representing greater than 50% of the total LC
Exposure), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make
----------------------
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
--------
provided in Section 2.04. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
--------
an LC Disbursement as provided in Section 2.05(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the
<PAGE>
31
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and
-------------------
Term Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
Periods therefor, all as provided in this Section. The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 and paragraph
(f) of this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
<PAGE>
32
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
(f) A Borrowing of any Class may not be converted to or continued as
a Eurodollar Borrowing if after giving effect thereto (i) the Interest Period
therefor would commence before and end after a date on which any principal of
the Loans of such Class is scheduled to be repaid and (ii) the sum of the
aggregate principal amount of outstanding Eurodollar Borrowings of such Class
with Interest Periods ending on or prior to such scheduled repayment date plus
the aggregate principal amount of outstanding ABR Borrowings of such Class would
be less than the aggregate principal amount of Loans of such Class required to
be repaid on such scheduled repayment date.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
-----------------------------------------
previously terminated, (i) the Term Commitments shall terminate at 5:00 p.m.,
New York City time, on the Effective Date and (ii) the Revolving Commitments
shall terminate on the Revolving Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class; provided that (i) each reduction of the
--------
Commitments of any Class shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not
terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.11,
the sum of the Revolving Exposures would exceed the total Revolving Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the
<PAGE>
33
Administrative Agent shall advise the Lenders of the contents thereof. Each
notice delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Revolving Commitments delivered by
- - - - --------
the Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or reduction
of the Commitments of any Class shall be permanent. Each reduction of the
Commitments of any Class shall be made ratably among the Lenders in accordance
with their respective Commitments of such Class.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
-------------------------------------
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each Term
Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of
the Revolving Maturity Date and the first date after such Swingline Loan is made
that is the 15th or last day of a calendar month and is at least five Business
Days after such Swingline Loan is made; provided that on each date that a
--------
Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then
outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
<PAGE>
34
SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment
---------------------------
pursuant to paragraph (c) of this Section, the Borrower shall repay Term
Borrowings on each date set forth below in the aggregate principal amount set
forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1998 $ 250,000
June 30, 1998 $ 250,000
September 30, 1998 $ 250,000
December 31, 1998 $ 250,000
March 31, 1999 $ 250,000
June 30, 1999 $ 250,000
September 30, 1999 $ 250,000
December 31, 1999 $ 250,000
March 31, 2000 $ 250,000
June 30, 2000 $ 250,000
September 30, 2000 $ 250,000
December 31, 2000 $ 250,000
March 31, 2001 $ 250,000
June 30, 2001 $ 250,000
September 30, 2001 $ 250,000
December 31, 2001 $ 250,000
March 31, 2002 $ 250,000
June 30, 2002 $ 250,000
September 30, 2002 $ 250,000
December 31, 2002 $ 250,000
March 31, 2003 $ 2,500,000
June 30, 2003 $ 2,500,000
September 30, 2003 $ 2,500,000
December 31, 2003 $ 2,500,000
March 31, 2004 $10,000,000
June 30, 2004 $10,000,000
September 30, 2004 $10,000,000
December 31, 2004 $10,000,000
March 31, 2005 $30,000,000
June 30, 2005 $30,000,000
September 30, 2005 $30,000,000
Term Maturity Date $30,000,000
</TABLE>
(b) To the extent not previously paid, all Term Loans shall be due
and payable on the Term Maturity Date.
(c) If the initial aggregate amount of the Lenders' Term Commitments
exceeds the aggregate principal amount of Term Loans that are made on the
Effective Date, then the scheduled repayments of Term Borrowings to be made
pursuant to this Section shall be reduced ratably by an aggregate amount equal
to such excess. Any prepayment of a Term Borrowing, whether or not pursuant to
this Section 2.10(c), shall be applied to reduce the subsequent
<PAGE>
35
scheduled repayments of the Term Borrowings to be made pursuant to this Section
ratably; provided that any prepayment of a Term Borrowing made pursuant to
--------
Section 2.11(a) may be applied, at the Borrower's option, first, to reduce the
scheduled repayments of the Term Borrowings to be made pursuant to this Section
during the succeeding 12 months, in order of maturity, and, second, to reduce
the remaining scheduled repayments of the Term Borrowings to be made pursuant to
this Section ratably.
(d) Prior to any repayment of any Term Borrowings hereunder, the
Borrower shall select the Borrowing or Borrowings to be repaid and shall notify
the Administrative Agent by telephone (confirmed by telecopy) of such selection
not later than 11:00 a.m., New York City time, three Business Days before the
scheduled date of such repayment; provided that each repayment of Term
--------
Borrowings shall be applied to repay any outstanding ABR Term Borrowings before
any other Term Borrowings. Each repayment of a Borrowing shall be applied
ratably to the Loans included in the repaid Borrowing. Repayments of Term
Borrowings shall be accompanied by accrued interest on the amount repaid.
SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the
--------------------
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) In the event and on each occasion that any Net Proceeds are
received by or on behalf of Holdings, the Borrower or any Subsidiary in respect
of any Prepayment Event, the Borrower shall, immediately after such Net Proceeds
are received, prepay Term Borrowings in an aggregate amount equal to such Net
Proceeds.
(c) Following the end of each fiscal year of the Borrower, commencing
with the fiscal year ending December 31, 1998, the Borrower shall prepay Term
Borrowings in an aggregate amount equal to 50% of Excess Cash Flow for such
fiscal year. Each prepayment pursuant to this paragraph shall be made on or
before the date which is 90 days after the end of the fiscal year for which
Excess Cash Flow is being calculated.
(d) Subject to the requirements of paragraphs (b) and (c) of this
Section 2.11, prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (e) of this Section; provided that each prepayment of Borrowings of
--------
any Class shall be applied to prepay ABR Borrowings of such Class before any
other Borrowings of such Class.
(e) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment, (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New
York City time, one Business Day before the date of prepayment or (iii) in the
case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City
time, on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date, the principal amount of each Borrowing or portion
thereof to be prepaid and,
<PAGE>
36
in the case of a mandatory prepayment, a reasonably detailed calculation of the
amount of such prepayment; provided that, if a notice of optional prepayment is
--------
given in connection with a conditional notice of termination of the Revolving
Commitments as contemplated by Section 2.08, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with Section
2.08. Promptly following receipt of any such notice (other than a notice
relating solely to Swingline Loans), the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that would be permitted in the case of an advance of a Borrowing
of the same Type as provided in Section 2.02, except as necessary to apply fully
the required amount of a mandatory prepayment. Each prepayment of a Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.13.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
-----
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Applicable Rate on the average daily unused amount of each
Commitment of such Lender during the period from and including the Effective
Date to but excluding the date on which such Commitment terminates. Accrued
commitment fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Revolving
Commitments terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360
days and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). For purposes of computing commitment
fees with respect to Revolving Commitments, a Revolving Commitment of a Lender
shall be deemed to be used to the extent of the outstanding Revolving Loans and
LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be
disregarded for such purpose).
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Rate as interest on Eurodollar Revolving Loans on the average daily amount of
such Lender's LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to have
any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue
at the rate of 1/4 of 1% per annum on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank's standard fees (other than fees payable as a percentage of the undrawn
amount of the Letter of Credit) with respect to the issuance, amendment, renewal
or extension of any Letter of Credit or processing of drawings thereunder.
Participation fees and fronting fees accrued through and including the last day
of March, June, September and December of each year shall be payable on the
third Business Day following such last day, commencing on the first such date to
occur after the Effective Date; provided that all such fees shall be payable on
--------
the date on which the Revolving Commitments terminate and any such fees accruing
after the date on which the Revolving Commitments terminate shall be payable on
demand. Any other fees
<PAGE>
37
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
---------
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments; provided that (i) interest accrued
--------
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment of
an ABR Revolving Loan prior to the end of the Revolving Availability Period),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
<PAGE>
38
SECTION 2.14. Alternate Rate of Interest. If prior to the
---------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
----------------
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking
<PAGE>
39
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- -------
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the
-----------------------
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan or Term Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(e) and is revoked in accordance therewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense (other than any comprised of loss of Eurodollar
Spread included in Applicable Rate) attributable to such event. In the case of
a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of the
present value of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), less (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The
<PAGE>
40
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of
------
any obligation of the Borrower hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; provided that if the Borrower shall be required to deduct any
--------
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder or under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate containing a summary calculation of the amount of such
payment or liability delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate, it being understood that a
Foreign Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest" may, for purposes of satisfying the foregoing requirement, deliver a
Form W-8, or any subsequent versions thereof or successors thereto (and, if such
Lender delivers a Form W-8, a certificate representing that such Lender is
<PAGE>
41
not a "bank" for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)).
(f) If the Administrative Agent or any Lender receives a refund
solely in respect of Indemnified Taxes or Other Taxes, it shall pay over such
refund to the Borrower to the extent that it has already received indemnity
payments or additional amounts pursuant to this Section 2.17 with respect to
such Indemnified Taxes or Other Taxes giving rise to the refund, net of all
reasonable out-of-pocket expenses and without interest (other than interest paid
by the relevant Governmental Authority with respect to such refund); provided,
--------
however, that the Borrower shall, upon request of the Administrative Agent or
- - - - -------
such Lender, repay such refund (plus penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or
such Lender if the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. Nothing contained herein shall require
the Administrative Agent or such Lender to make its tax returns (or any other
information relating to its taxes which it deems confidential) available to the
Borrower or any other person.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs. (a) The Borrower shall make each payment required to be made by it
- - - - -----
hereunder or under any other Loan Document (whether of principal, interest, fees
or reimbursement of LC Disbursements, or of amounts payable under Section 2.15,
2.16 or 2.17, or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made
in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
<PAGE>
42
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Revolving Loans, Term Loans
and participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if any such participations
--------
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 9.03(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
<PAGE>
43
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a)
-----------------------------------------------
If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, or to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment) if, in the judgment of
such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender defaults in its obligation to fund Loans hereunder,
or if any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
--------
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the Issuing Bank and Swingline
Lender), which consent shall not unreasonably be withheld or delayed and (ii)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts).
A Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.
ARTICLE III
Representations and Warranties
------------------------------
Each of Holdings and the Borrower represents and warrants to the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower
---------------------
and its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could
<PAGE>
44
not reasonably be expected to result in a Material Adverse Effect, is qualified
to do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions to be
------------------------------
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each
of Holdings and the Borrower and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of Holdings, the
Borrower or such Loan Party (as the case may be), enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
-------------------------------------
and the making of each Loan (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect and
except filings necessary to perfect Liens created under the Loan Documents, and
except for filings necessary and appropriate to register the Subordinated Notes
under the Securities Act of 1933, as amended, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of Holdings, the Borrower or any of its Subsidiaries or any order of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon Holdings, the Borrower
or any of its Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by Holdings, the Borrower or any of its
Subsidiaries, except, as disclosed in the offering documents for the
Subordinated Notes, the provisions of Section 6.07 of this Agreement may
conflict with the provisions of the Subordinated Notes requiring the Borrower to
offer to repurchase the Subordinated Notes upon a Change of Control (as defined
therein) and (d) will not result in the creation or imposition of any Lien on
any asset of Holdings, the Borrower or any of its Subsidiaries, except Liens
created under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
------------------------------------------------
The Borrower has heretofore furnished to the Lenders the combined balance sheet
and the related combined statements of operations, owner's investment and cash
flows of Borden Brands North America ("BBNA") (i) as of and for the two fiscal
years ended December 31, 1996, and (ii) for the nine months ended September 27,
1997, reported on by Deloitte & Touche LLP, independent public accountants.
Such financial statements present fairly, in all material respects, the combined
financial position and results of operations and cash flows of the Acquired
Business as of such dates and for such periods in accordance with GAAP, subject
to year-end audit adjustments.
(b) The Borrower has heretofore furnished to the Lenders its pro
forma consolidated balance sheet as of the Effective Date, prepared giving
effect to the Transactions as if the Transactions had occurred on such date.
Such pro forma consolidated balance sheet (i) has been prepared in good faith
based on the same assumptions used to prepare the pro forma financial statements
included in the Information Memorandum (which assumptions are believed
<PAGE>
45
as of the Effective Date by Holdings and the Borrower to be reasonable), (ii) is
based on the best information available as of the Effective Date to Holdings and
the Borrower after due inquiry, (iii) accurately reflects all adjustments
necessary to give effect to the Transactions and (iv) presents fairly, in all
material respects, the pro forma financial position of the Borrower and its
consolidated Subsidiaries as of the Effective Date as if the Transactions had
occurred on such date.
(c) Except as disclosed in the financial statements referred to above
or the notes thereto or in the Information Memorandum and except for the
Disclosed Matters, after giving effect to the Transactions, none of Holdings,
the Borrower or its Subsidiaries has, as of the Effective Date, any material
contingent liabilities, unusual long-term commitments or unrealized losses.
(d) Since September 27, 1997, there has been no material adverse
change in the business, operations or financial condition of Holdings, the
Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of Holdings, the Borrower and
-----------
its Subsidiaries has good title to, or valid leasehold interests in, all its
real and personal property material to its business (including its Mortgaged
Properties), except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of Holdings, the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by Holdings,
the Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05 sets forth the address of each real property that
is owned or leased by the Borrower or any of its Subsidiaries as of the
Effective Date after giving effect to the Transactions.
(d) As of the Effective Date, neither Holdings, the Borrower nor any
of its Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
-------------------------------------
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of Holdings or the Borrower,
threatened against or affecting Holdings, the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be
<PAGE>
46
expected, individually or in the aggregate, to result in a Material Adverse
Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan
Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither Holdings, the Borrower
nor any of its Subsidiaries (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received written notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of Holdings,
------------------------------------
the Borrower and its Subsidiaries is in compliance with all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither
--------------------------------------
Holdings, the Borrower nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of Holdings, the Borrower and its
------
Subsidiaries has timely filed or caused to be filed all material Tax returns and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which Holdings, the Borrower or
such Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
------
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. As of the Effective Date, the present value
of all accumulated benefit obligations under each Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did not
exceed by more than $500,000 the fair market value of the assets of such Plan,
and the present value of all accumulated benefit obligations of all underfunded
Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not exceed by more than $500,000 the fair
market value of the assets of all such underfunded Plans.
<PAGE>
47
SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders
-----------
all agreements, instruments and corporate or other restrictions to which
Holdings, the Borrower or any of its Subsidiaries is subject, and all other
matters known to any of them, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Neither the
Information Memorandum nor any of the other reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or thereunder
(as modified or supplemented by other information so furnished) when taken as a
whole contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
--------
projected financial information, Holdings and the Borrower represent only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time, it being understood that actual results may differ
from projections.
SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries
-------------
other than the Borrower and the Borrower's Subsidiaries. Schedule 3.12 sets
forth the name of, and the ownership interest of the Borrower in, each
Subsidiary of the Borrower and identifies each Subsidiary that is a Subsidiary
Loan Party, in each case as of the Effective Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of
----------
all insurance maintained by or on behalf of the Borrower and its Subsidiaries as
of the Effective Date. As of the Effective Date, all premiums in respect of such
insurance have been paid when due and payable.
SECTION 3.14. Labor Matters. As of the Effective Date, there are no
--------------
strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary
pending or, to the knowledge of Holdings or the Borrower, threatened. The hours
worked by and payments made to employees of Holdings, the Borrower and the
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Federal, state, local or foreign law dealing with such matters.
All payments due from Holdings, the Borrower or any Subsidiary, or for which any
claim may be made against Holdings, the Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of Holdings, the Borrower or such
Subsidiary. The consummation of the Transactions will not give rise to any
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which Holdings, the Borrower or any
Subsidiary is bound.
SECTION 3.15. Solvency. Immediately after the consummation of the
---------
Transactions to occur on the Effective Date and immediately following the making
of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts
<PAGE>
48
and other liabilities become absolute and matured; (c) each Loan Party will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (d) each Loan Party
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted following the Effective Date.
SECTION 3.16. Senior Indebtedness. The Obligations constitute
--------------------
"Senior Indebtedness" under and as defined in the Subordinated Debt Documents.
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to make
---------------
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of each of (i) Willkie Farr & Gallagher, counsel for
the Borrower, substantially in the form of Exhibit B, and (ii) local
counsel in each jurisdiction where Collateral is located, substantially in
the form of Exhibit C, and, in the case of each such opinion required by
this paragraph, covering such other matters relating to the Loan Parties,
the Loan Documents or the Transactions as the Required Lenders shall
reasonably request. The Borrower hereby requests such counsel to deliver
such opinions.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of each
Loan Party, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the
Transactions, all in form and substance satisfactory to the Administrative
Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced,
<PAGE>
49
reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by any Loan Party hereunder or under any other Loan
Document.
(f) The Administrative Agent shall have received counterparts of the
Pledge Agreement signed on behalf of Holdings, the Borrower and each
Subsidiary Loan Party, together with stock certificates representing all
the outstanding shares of capital stock of the Borrower and each Subsidiary
owned by or on behalf of any Loan Party as of the Effective Date after
giving effect to the Transactions (except that stock certificates
representing shares of voting stock of any directly owned Foreign
Subsidiary may be limited to 65% of the outstanding shares of voting stock
of such Foreign Subsidiary), promissory notes evidencing all intercompany
Indebtedness owed to any Loan Party by Holdings, the Borrower or any
Subsidiary as of the Effective Date after giving effect to the Transactions
and stock powers and instruments of transfer, endorsed in blank, with
respect to such stock certificates and promissory notes.
(g) The Administrative Agent shall have received counterparts of the
Security Agreement signed on behalf of the Borrower and each Subsidiary
Loan Party, together with the following (subject to Section 5.13(c)):
(i) all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create
or perfect the Liens intended to be created under the Security
Agreement; and
(ii) a completed Perfection Certificate dated the Effective Date
and signed by an executive officer or Financial Officer of the
Borrower, together with all attachments contemplated thereby,
including the results of a search of the Uniform Commercial Code (or
equivalent) filings made with respect to the Loan Parties in the
jurisdictions contemplated by the Perfection Certificate and copies of
the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Administrative
Agent that the Liens indicated by such financing statements (or
similar documents) are permitted by Section 6.02 or have been
released.
(h) The Administrative Agent shall have received (i) counterparts of
a Mortgage with respect to each Mortgaged Property signed on behalf of the
record owner of such Mortgaged Property, (ii) a policy or policies of title
insurance issued by a nationally recognized title insurance company,
insuring the Lien of each such Mortgage as a valid first Lien on the
Mortgaged Property described therein, free of any other Liens except as
permitted by Section 6.02, together with such endorsements, coinsurance and
reinsurance as the Collateral Agent or the Required Lenders may reasonably
request, and (iii) such surveys, abstracts and appraisals as may be
required pursuant to such Mortgages or as the Administrative Agent or the
Required Lenders may reasonably request.
<PAGE>
50
(i) The Administrative Agent shall have received (i) counterparts of
the Parent Guarantee Agreement signed on behalf of Holdings, (ii)
counterparts of the Subsidiary Guarantee Agreement signed on behalf of each
Subsidiary Loan Party and (iii) counterparts of the Indemnity, Subrogation
and Contribution Agreement signed on behalf of the Borrower and each
Subsidiary Loan Party.
(j) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in
effect.
(k) Holdings shall have received not less than $82,500,000 in cash
from the Equity Financing and shall have contributed at least $82,500,000
of cash to the Borrower in the form of common equity (it being understood
that a portion of such cash contribution will be used as set forth on
Schedule 6.08).
(l) The Borrower shall have received gross cash proceeds of not less
than $115,000,000 from the issuance of the Subordinated Notes. The terms
and conditions of the Subordinated Notes and the provisions of the
Subordinated Debt Documents shall be satisfactory in all respects to the
Lenders, it being understood that the terms and conditions set forth in the
Preliminary Offering Memorandum dated December 30, 1997, are satisfactory
in all respects. The Administrative Agent shall have received (or
arrangements satisfactory to the Administrative Agent for such receipt
shall have been made) copies of the Subordinated Debt Documents, certified
by a Financial Officer as complete and correct.
(m) All consents and approvals required to be obtained from any
Governmental Authority or other Person in connection with the Acquisition
shall have been obtained, and all applicable waiting periods and appeal
periods shall have expired, in each case without the imposition of any
burdensome conditions and there shall be no action by any Governmental
Authority, actual or threatened, that could reasonably be expected to
restrain, prevent or impose material burdensome conditions on the
Transactions or the other transactions contemplated hereby. The
Acquisition shall have been, or substantially simultaneously with the
initial funding of Loans on the Effective Date shall be, consummated in
accordance with the Acquisition Documents and applicable law, without any
amendment to or waiver of any material terms or conditions of the
Acquisition Documents not approved by the Required Lenders. The
Administrative Agent shall have received (or arrangements satisfactory to
the Administrative Agent for such receipt shall have been made) copies of
the Acquisition Documents and all certificates, opinions and other
documents delivered thereunder, certified by a Financial Officer as
complete and correct.
(n) The Lenders shall have received a pro forma consolidated balance
sheet of the Borrower as of the Effective Date, reflecting all pro forma
adjustments as if the Transactions had been consummated on such date, and
such pro forma consolidated balance sheet shall be consistent in all
material respects with the forecasts and other information previously
provided to the Lenders. After giving effect to the Transactions and the
other transactions contemplated hereby, neither Holdings, the Borrower nor
any of its Subsidiaries shall have outstanding any shares of preferred
stock or any
<PAGE>
51
Indebtedness, other than (i) Indebtedness incurred under the Loan
Documents, (ii) the Subordinated Notes and (iii) the Indebtedness set forth
on Schedule 6.01. The aggregate amount of fees and expenses (including
underwriting discounts and commissions) payable or otherwise borne by
Holdings, the Borrower and its Subsidiaries in connection with the
Transactions shall not exceed $12,500,000.
(o) The Agents shall be satisfied with the arrangements for the
retention of management of the Borrower, after giving effect to the
Transactions and the other transactions contemplated hereby.
(p) The Agents shall be satisfied that the estimated Consolidated
EBITDA of the Acquired Business for the four-fiscal-quarter period ending
December 31, 1997 will not be inconsistent in any material respect with the
financial projections previously delivered to the Agents.
(q) Since September 27, 1997, there has been no material adverse
change in the business, operations, prospects or financial condition of
Holdings, the Borrower and its Subsidiaries, taken as a whole.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on
January 31, 1998 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
------------------
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of each Loan Party set forth
in the Loan Documents shall be true and correct on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of
such Letter of Credit, as applicable (other than those which expressly
relate to a specified date).
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by Holdings
and the Borrower on the date thereof as to the matters specified in paragraphs
(a) and (b) of this Section.
<PAGE>
52
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, each of Holdings and the
Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
-------------------------------------------
Borrower will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, and setting forth, commencing with the fiscal year ended
December 31, 1999, in each case in comparative form the figures for the
previous fiscal year, all reported on by Coopers & Lybrand, LLP, or other
independent public accountants of recognized national standing (without a
"going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material
respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, and setting forth, commencing with the fiscal
quarter ended March 31, 1999, in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by one of
its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Sections 6.11, 6.12 and
6.13 and (iii) stating whether any change in GAAP or in the application
thereof has occurred since the date of the Borrower's audited financial
statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
<PAGE>
53
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting
rules or guidelines); provided that no such certificate shall be required
if the Borrower has used its best efforts to obtain the same and such
accountants are unwilling to provide such a certificate and other
independent certified public accountants of recognized national standing
are unwilling to provide such a certificate;
(e) as soon as practicable, and in any event within 60 days after the
commencement of each fiscal year of the Borrower, a detailed consolidated
budget for such fiscal year (including a projected consolidated balance
sheet and related statements of projected operations and cash flow as of
the end of and for such fiscal year) and, promptly when available, any
significant revisions of such budget;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Holdings, the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, as
the case may be; and
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
Holdings, the Borrower or any Subsidiary, or compliance with the terms of
any Loan Document, as the Administrative Agent or any Lender may reasonably
request.
SECTION 5.02. Notices of Material Events. Holdings and the Borrower
---------------------------
will furnish to the Administrative Agent and each Lender prompt written notice
of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting
Holdings, the Borrower or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of Holdings, the Borrower and its Subsidiaries in an
aggregate amount exceeding $5,000,000.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
<PAGE>
54
SECTION 5.03. Information Regarding Collateral. (a) The Borrower
---------------------------------
will furnish to the Administrative Agent prompt written notice of any change (i)
in any Loan Party's corporate name or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in any Loan Party's identity or corporate structure or (iv) in any Loan
Party's Federal Taxpayer Identification Number. The Borrower agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. The Borrower also agrees promptly to notify the
Administrative Agent if any material portion of the tangible Collateral is
damaged or destroyed.
(b) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to clause (a) of Section
5.01, the Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer and the chief legal officer of the Borrower setting forth the
information required pursuant to Section 2 of the Perfection Certificate or
confirming that there has been no change in such information since the date of
the Perfection Certificate delivered on the Effective Date or the date of the
most recent certificate delivered pursuant to this Section.
SECTION 5.04. Existence; Conduct of Business. Each of Holdings and
-------------------------------
the Borrower will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names used in the conduct of its
business; provided that the foregoing shall not prohibit any merger,
--------
consolidation, liquidation or dissolution permitted under Section 6.03 and shall
not require any such action if the failure to take such action could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.05. Payment of Obligations. Each of Holdings and the
-----------------------
Borrower will, and will cause each of its Subsidiaries to, pay, settle or
discharge (a) all Taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (b) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a Lien upon any of
its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that none of Holdings,
the Borrower or any Subsidiary shall be required to pay any such Tax,
assessment, charge, levy, claim or Indebtedness which (x) is being contested in
good faith by appropriate proceedings and as to which adequate reserves therefor
have been established in accordance with GAAP, unless the failure to make any
such payment (i) would give rise to an immediate right to foreclose on a Lien
securing such amounts or (ii) would have a Material Adverse Effect or (y) if the
aggregate amount of such unpaid tax, assessment, charge, levy, claim or
Indebtedness does not exceed $5,000,000 (taking into account applicable
insurances or indemnities to the extent the provider
<PAGE>
55
of such insurance or indemnity has been notified thereof, has the financial
ability to support its obligations with respect thereto and is not disputing the
same).
SECTION 5.06. Maintenance of Properties. Each of Holdings and the
--------------------------
Borrower will, and will cause each of its Subsidiaries to, keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 5.07. Insurance. Each of Holdings and the Borrower will, and
----------
will cause each of its Subsidiaries to, at all times maintain in full force and
effect, with financially sound and reputable insurance companies, insurance on
all property owned, occupied or controlled by it in at least such amounts
(including deductibles) and against at least such risks insured against in the
same general area by companies engaged in the same or a similar business and
such other insurance as may be required by law. Each of Holdings and the
Borrower will, and will cause each Subsidiary to, furnish to the Administrative
Agent, upon written request of the Administrative Agent, a summary of the
insurance carried together with certificates of insurance and other evidence of
such insurance, if any, naming the Administrative Agent as an additional insured
and/or loss payee.
SECTION 5.08. Casualty and Condemnation. (a) The Borrower will
--------------------------
furnish to the Administrative Agent and the Lenders prompt written notice of any
casualty or other insured damage to any material portion of any Collateral or
the commencement of any action or proceeding for the taking of any Collateral or
any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section results
in Net Proceeds (whether in the form of insurance proceeds, condemnation award
or otherwise), the Administrative Agent is authorized to collect such Net
Proceeds and, if received by Holdings, the Borrower or any Subsidiary, such Net
Proceeds shall be paid over to the Administrative Agent; provided that (i) if
--------
the aggregate Net Proceeds in respect of such event (other than proceeds of
business income insurance) are less than $2,000,000, such Net Proceeds shall be
paid over to the Borrower unless a Default has occurred and is continuing, and
(ii) all proceeds of business income insurance shall be paid over to the
Borrower unless a Default has occurred and is continuing. All such Net Proceeds
retained by or paid over to the Administrative Agent shall be held by the
Administrative Agent and released from time to time to pay the costs of
repairing, restoring or replacing the affected property in accordance with the
terms of the applicable Security Document, subject to the provisions of the
applicable Security Document regarding application of such Net Proceeds during a
Default.
(c) If any Net Proceeds retained by or paid over to the
Administrative Agent as provided above continue to be held by the Administrative
Agent on the date that is 270 days after the occurrence of the event resulting
in such Net Proceeds, then such Net Proceeds shall be applied to prepay Term
Borrowings as provided in Section 2.11(b).
SECTION 5.09. Books and Records; Inspection and Audit Rights. Each
-----------------------------------------------
of Holdings and the Borrower will, and will cause each of its Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and
<PAGE>
56
transactions in relation to its business and activities. Each of Holdings and
the Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested and, in the case of any
Lender (other than the Administrative Agent or the Collateral Agent or as
provided in Section 9.03), at the sole expense of such Lender.
SECTION 5.10. Compliance with Laws. Each of Holdings and the
---------------------
Borrower will, and will cause each of its Subsidiaries to, comply with all laws,
rules, regulations and orders of any Governmental Authority applicable to it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of
--------------------------------------
the Term Loans, together with the proceeds of the Equity Financing and the
Subordinated Notes, will be used only for the payment of (a) amounts payable
under the Acquisition Documents as consideration for the Acquisition and (b)
fees and expenses payable in connection with the Transactions. The proceeds of
the Revolving Loans and Swingline Loans will be used only for general corporate
purposes; provided that up to $20,000,000 of the proceeds of the Revolving Loans
--------
may be used to finance Permitted Acquisitions. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails
a violation of any of the Regulations of the Board, including Regulations G, U
and X. Letters of Credit will be issued only for general corporate purposes.
SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary
------------------------
is formed or acquired after the Effective Date, the Borrower will notify the
Administrative Agent and the Lenders thereof and (a) if such Subsidiary is a
Subsidiary Loan Party, the Borrower will cause such Subsidiary to become a party
to the Subsidiary Guarantee Agreement, the Indemnity, Subrogation and
Contribution Agreement and each applicable Security Document within three
Business Days after such Subsidiary is formed or acquired and promptly take such
actions to create and perfect Liens on such Subsidiary's assets to secure the
Obligations as the Administrative Agent or the Required Lenders shall reasonably
request and (b) if any shares of capital stock or Indebtedness of such
Subsidiary are owned by or on behalf of any Loan Party, the Borrower will cause
such shares and promissory notes evidencing such Indebtedness to be pledged
pursuant to the Pledge Agreement within three Business Days after such
Subsidiary is formed or acquired (except that, except as otherwise provided by
Section 5.13, if such Subsidiary is a directly owned Foreign Subsidiary, shares
of voting stock of such Foreign Subsidiary to be pledged pursuant to the
Security Agreement may be limited to 65% of the outstanding shares of voting
stock of such Foreign Subsidiary).
SECTION 5.13. Further Assurances. (a) Each of Holdings and the
-------------------
Borrower will, and will cause each Subsidiary Loan Party to, execute any and all
further documents, financing statements, agreements and instruments, and take
all such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required under any applicable law, or which the
<PAGE>
57
Administrative Agent or the Required Lenders may reasonably request, to
effectuate the transactions contemplated by the Loan Documents or to grant,
preserve, protect or perfect the Liens created or intended to be created by the
Security Documents or the validity or priority of any such Lien, all at the
expense of the Loan Parties. Holdings and the Borrower also agree to provide to
the Administrative Agent, from time to time upon request, evidence reasonably
satisfactory to the Administrative Agent as to the perfection and priority of
the Liens created or intended to be created by the Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Borrower will
promptly notify the Administrative Agent and the Lenders thereof, and, if
requested by the Administrative Agent or the Required Lenders, the Borrower will
cause such assets to be subjected to a Lien securing the Obligations and will
take, and cause the Subsidiary Loan Parties to take, such actions as shall be
necessary or reasonably requested by the Administrative Agent to grant and
perfect such Liens, including actions described in paragraph (a) of this
Section, all at the expense of the Loan Parties. Without limiting the generality
of the foregoing and notwithstanding Section 5.12(b), if the Collateral Agent
reasonably requests the Borrower to pledge or to cause to be pledged more than
65% of the voting stock of any directly owned Foreign Subsidiary or the capital
stock of any indirectly owned Foreign Subsidiary and such pledge may be
accomplished without causing adverse tax consequences to the Borrower, then the
Borrower shall pledge such voting stock or cause such capital stock to be
pledged to the Collateral Agent for the benefit of the Secured Parties;
provided, however, that, following any such pledge described in this sentence,
- - - - -------- -------
if the Borrower notifies the Collateral Agent that the continued existence of
such pledge is reasonably likely to cause adverse tax consequences to the
Borrower, then, so long as no Event of Default shall have occurred and be
continuing, the Collateral Agent shall promptly release such pledge to the
extent necessary to eliminate such adverse tax consequences.
(c) On or before the date that is 10 Business Days after the date of
this Agreement, the Administrative Agent shall have received (i) documentation
evidencing the granting and perfecting of the Liens of the Collateral Agent in
all assets of any Loan Party that are located in the Province of Alberta or the
Province of Quebec as of such date and (ii) a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated as of such
date) of Stikeman, Elliot with respect to such Liens, in each case in a form
that is reasonably satisfactory to the Administrative Agent. In connection
therewith, the Borrower shall deliver to the Administrative Agent one original
of the Bond as well as counterparts of the Bond Pledge Agreement and the
Hypothec signed on behalf of the Borrower together with all documents and
instruments, including an application for registration in the Register of
Personal and Movable Real Rights of the Province of Quebec, required by law or
reasonably requested by the Administrative Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created under the
Hypothec.
(d) Nothing in this Section 5.13 shall require the Borrower or any
Subsidiary to obtain the consent of third parties in order to provide any of the
Liens described in this Section.
<PAGE>
58
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, each of Holdings and the Borrower covenants and
agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The
----------------------------------------
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) the Subordinated Notes and Guarantees of such Subordinated Notes
pursuant to the terms thereof;
(iii) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof
or result in an earlier maturity date or decreased weighted average life
thereof;
(iv) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary; provided that
--------
Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or
any Subsidiary Loan Party shall be subject to Section 6.04;
(v) Guarantees by the Borrower of Indebtedness of any Subsidiary and
by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;
provided that Guarantees by the Borrower or any Subsidiary Loan Party of
--------
Indebtedness of any Subsidiary that is not a Loan Party shall be subject to
Section 6.04;
(vi) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by
a Lien on any such assets prior to the acquisition thereof; provided that
--------
(A) such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement and (B)
the aggregate principal amount of Indebtedness permitted by this clause
(vi) shall not exceed $2,000,000 at any time outstanding, and extensions,
renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof;
(vii) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that (A) such Indebtedness exists at the time such
--------
Person becomes a
<PAGE>
59
Subsidiary and is not created in contemplation of or in connection with
such Person becoming a Subsidiary and (B) the aggregate principal amount of
Indebtedness permitted by this clause (vii) shall not exceed $5,000,000 at
any time outstanding, and extensions, renewals and replacements of any such
Indebtedness that do not increase the principal amount thereof;
(viii) Sponsor Capital Contributions;
(ix) Indebtedness to sellers or their Affiliates in connection with
Permitted Acquisitions provided that such Indebtedness is subordinated on
terms satisfactory to the Administrative Agent (including that the stated
maturity thereof shall be later than 10 years from the Effective Date and
that no portion thereof shall be subject to mandatory cash payments of any
kind (whether of principal, interest, dividends, capital or otherwise)
until the Obligations have been repaid in full); and
(x) other unsecured Indebtedness in an aggregate principal amount
not exceeding $7,500,000 at any time outstanding.
(b) Holdings will not create, incur, assume or permit to exist any
Redeemable Preferred Stock or any Indebtedness except Indebtedness created under
the Loan Documents and in respect of its subordinated guarantee of the
Subordinated Notes.
(c) The Borrower will not, nor will it permit any Subsidiary to,
issue any preferred stock, and neither Holdings nor the Borrower will, nor will
they permit any Subsidiary to, be or become liable in respect of any obligation
(contingent or otherwise) to purchase, redeem, retire, acquire or make any other
payment (other than dividends permitted under Section 6.07) in respect of any
shares of capital stock of Holdings, the Borrower or any Subsidiary or any
option, warrant or other right to acquire any such shares of capital stock;
provided, however, that nothing in this Section 6.01(c) shall prevent (i) the
Borrower or any Subsidiary of the Borrower from acquiring the equity securities
of any Subsidiary not owned by it if such purchase is otherwise permitted by
this Agreement, (ii) any Subsidiary from issuing preferred stock to the
Borrower, so long as such preferred stock is pledged to the Collateral Agent to
secure the Obligations, to the extent required by the Loan Documents, or (iii)
any Subsidiary from issuing preferred stock to any third party, provided that
--------
for purposes of Section 6.01(a), such preferred stock shall be deemed to be
Indebtedness of such Subsidiary with an aggregate principal amount equal to the
stated value thereof.
SECTION 6.02. Liens. (a) The Borrower will not, and will not permit
------
any Subsidiary to, create, incur, assume or permit to exist any Lien on any
property or asset now
<PAGE>
60
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
provided that (A) such Lien shall not apply to any other property or asset
--------
of the Borrower or any Subsidiary and (B) such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals
and replacements thereof that do not increase the outstanding principal
amount thereof;
(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; provided that
--------
(A) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary , as the case may be, (B)
such Lien shall not apply to any other property or assets of the Borrower
or any Subsidiary and (C) such Lien shall secure only those obligations
which it secures on the date of such acquisition or the date such Person
becomes a Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof; and
(v) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; provided that (A) such security
--------
interests secure Indebtedness permitted by clause (vi) of Section 6.01(a),
(B) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement and (C) such security
interests shall not apply to any other property or assets of the Borrower
or any Subsidiary.
(b) Holdings will not create, incur, assume or permit to exist any
Lien on any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in
respect thereof, except Liens created under the Pledge Agreement and Permitted
Encumbrances.
SECTION 6.03. Fundamental Changes. (a) Neither Holdings nor the
--------------------
Borrower will, nor will they permit any Subsidiary to, merge into or consolidate
with any other Person, or permit any other Person to merge into or consolidate
with it, or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing (i) any Subsidiary may merge into the Borrower in a transaction in
which the Borrower is the surviving corporation, (ii) any Person may merge into
any Subsidiary in a transaction in which the surviving entity is a Subsidiary,
(iii) Holdings may merge into the Borrower in connection with the initial Public
Equity Offering by the Borrower and (iv) any Subsidiary may liquidate or
dissolve if the Borrower determines in good
<PAGE>
61
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders; provided that any
--------
such merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by Section
6.04.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of substantially the type conducted by the Borrower and its
Subsidiaries on the date of execution of this Agreement and businesses
reasonably related thereto.
(c) Holdings will not engage in any business or activity other than
the ownership of all the outstanding shares of capital stock of the Borrower and
activities incidental thereto. Holdings will not own or acquire any assets
(other than shares of capital stock of the Borrower, cash and Permitted
Investments) or incur any liabilities (other than liabilities under the Loan
Documents, liabilities imposed by law, including tax liabilities, and other
liabilities incidental to its existence and permitted business and activities).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
--------------------------------------------
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
- - - - -------------
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(a) the Acquisition;
(b) Permitted Investments;
(c) investments, loans or advances existing on the date hereof and set
forth on Schedule 6.04, to the extent such investments, loans or advances
would not be permitted under any other clause of this Section;
(d) investments by the Borrower in the capital stock of the
Subsidiaries; provided that (i) any such shares of capital stock held by a
--------
Loan Party shall be pledged pursuant to the Security Agreement (subject to
the limitations applicable to voting stock of a Foreign Subsidiary referred
to in Section 5.12), (ii) the amount of investments by the Borrower in
Subsidiaries that are not Loan Parties, together with the amount of all
outstanding loans or advances to such Subsidiaries, shall not exceed 10% of
the total assets of the Borrower and its consolidated Subsidiaries at the
time of such investment, loan or advance and after giving effect thereto
and (iii) at the time any investment, loan or advance described in (ii) is
made, the portion of Consolidated EBITDA attributable to all Subsidiaries
that are not Loan Parties taken as a whole for the most recent four
consecutive fiscal quarters shall not exceed 15% of the Consolidated EBITDA
for such period, provided that for purposes of this clause (iii) only,
--------
Consolidated EBITDA for
<PAGE>
62
the most recent four consecutive fiscal quarters shall be determined, at
any time following the end of the first, second and third fiscal quarters
of 1998 but prior to the end of the next succeeding fiscal quarter, by
using for any fiscal quarter of 1997 the amounts set forth on Schedule
1.01(b) hereto as the Consolidated EBITDA for each such fiscal quarter;
(e) loans or advances made by the Borrower to any Subsidiary and made
by any Subsidiary to the Borrower or any other Subsidiary; provided that
--------
(i) any such loans and advances made by a Loan Party shall be evidenced by
a promissory note pledged pursuant to the Pledge Agreement, (ii) the
outstanding amount of all such loans and advances by Loan Parties to
Subsidiaries that are not Loan Parties, together with the amount of
investments in such Subsidiaries, shall not exceed 10% of the total assets
of the Borrower and its consolidated Subsidiaries at the time of such loan
or advance and after giving effect thereto and (iii) at the time any loan
or advance described in (ii) is made, the Consolidated EBITDA attributable
to all Subsidiaries that are not Loan Parties taken as a whole for the most
recent four consecutive fiscal quarters shall not exceed 15% of the
Consolidated EBITDA for such period, provided that for purposes of this
--------
clause (iii) only, Consolidated EBITDA for the most recent four consecutive
fiscal quarters shall be determined, at any time following the end of the
first, second and third fiscal quarters of 1998 but prior to the end of the
next succeeding fiscal quarter, by using for any fiscal quarter of 1997 the
amounts set forth on Schedule 1.01(b) hereto as the Consolidated EBITDA for
each such fiscal quarter;
(f) Guarantees constituting Indebtedness permitted by Section 6.01;
provided that a Subsidiary shall not Guarantee the Subordinated Debt unless
--------
(A) such Subsidiary also has Guaranteed the Obligations pursuant to the
Subsidiary Guarantee Agreement and (B) such Guarantee of the Subordinated
Debt is subordinated to such Guarantee of the Obligations on terms no less
favorable to the Lenders than the subordination provisions of the
Subordinated Debt;
(g) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(h) Permitted Acquisitions, provided that the aggregate amount of the
--------
consideration (including the aggregate principal amount of all Indebtedness
assumed or issued by the Borrower or any Subsidiary in connection
therewith) for all Permitted Acquisitions shall not exceed the sum of (x)
up to $80,000,000 of Sponsor Capital Contributions plus (y) $20,000,000 (it
being understood that in computing the aggregate amount of consideration
paid as of any date the amount of gross proceeds received upon sale of any
assets previously acquired in a Permitted Acquisition shall be subtracted);
(i) Asset Swaps, provided that (i) at the time of entering into the
--------
related Asset Swap Agreement or immediately after giving effect to such
Asset Swap, no Default or Event of Default shall have occurred or be
continuing or would occur as a consequence thereof, (ii) in the event that
the portion of Consolidated EBITDA associated with the
<PAGE>
63
Productive Assets that are the subject of such Asset Swap for the period of
the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date on which the related Asset Swap Agreement is executed by
the parties thereto exceeds $3,000,000, the Company provides to the Lenders
a written opinion of a nationally recognized independent investment banking
firm that such Asset Swap is fair to the Company from a financial point of
view and (iii) the portion of Consolidated EBITDA associated with the
Productive Assets that are the subject of such Asset Swap for the period of
the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date on which the related Asset Swap Agreement is executed by
the parties thereto, when aggregated with the portion of Consolidated
EBITDA associated with all other Productive Assets that were the subject of
any previously completed Asset Swap for the period of the most recent four
consecutive fiscal quarters ending at least 45 days prior to the date on
which each related Asset Purchase Agreement was executed by the parties
thereto, does not exceed $10,000,000, and provided further that (A) for
--------
purposes of clause (ii) and clause (iii) of this Section 6.04(i) only,
Consolidated EBITDA for the most recent four consecutive fiscal quarters
shall be determined, at any time following the end of the first, second and
third fiscal quarters of 1998 but prior to the end of the next succeeding
fiscal quarter, by using for any fiscal quarter of 1997 the amounts set
forth on Schedule 1.01(b) hereto as the Consolidated EBITDA for each such
fiscal quarter and (B) for purposes of computing the Consolidated EBITDA
associated with the Productive Assets that are the subject of an Asset
Swap, the Company shall allocate selling, general and administrative
expenses to such Productive Assets such that the ratio of the selling,
general and administrative expenses allocated to such Productive Assets for
the relevant period to the total selling, general and administrative
expenses of the Company and its consolidated Subsidiaries for such period
is equal to the ratio of the revenues attributable to such Productive
Assets for such period to the total revenues of the Company and its
consolidated Subsidiaries for such period;
(j) Investments received in consideration of sales or other
dispositions permitted under clause (e) of Section 6.05; and
(k) other investments in an aggregate amount not to exceed $3,000,000
at any time outstanding; provided that (i) the Borrower may make additional
--------
investments not otherwise prohibited hereunder to the extent financed
solely with Sponsor Capital Contributions and (ii) any Indebtedness
incurred by a Person that (x) is not a Subsidiary and (y) in which the
Borrower or any of its Subsidiaries has made an investment permitted by
this clause (k) shall not be (A) consolidated on the balance sheet of the
Borrower and its Subsidiaries in accordance with GAAP or (B) recourse to
Holdings, the Borrower or any Subsidiary or to any of their respective
assets.
SECTION 6.05. Asset Sales. The Borrower will not, and will not
------------
permit any of its Subsidiaries to, sell, transfer, lease or otherwise dispose of
any asset, including any capital stock of another Person, nor will the Borrower
permit any of it Subsidiaries to issue any
<PAGE>
64
additional shares of such Subsidiary's capital stock or other ownership interest
in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted
Investments and non-exclusive licenses of intellectual property, in each
case in the ordinary course of business;
(b) sales, transfers and dispositions to the Borrower or a Subsidiary;
provided that any such sales, transfers or dispositions to a Subsidiary
--------
that is not a Loan Party shall (i) be deemed an investment in such
Subsidiary and (ii) be made in compliance with Section 6.04;
(c) Asset Swaps permitted under Section 6.04(i);
(d) sales, transfers or dispositions of assets constituting
investments permitted under Section 6.04(j); and
(e) sales, transfers and dispositions of assets that are not permitted
by any other clause of this Section; provided that the aggregate fair
--------
market value of all assets sold, transferred or otherwise disposed of in
reliance upon this clause (d) shall not exceed $10,000,000 during any
fiscal year of the Borrower,
provided that all sales, transfers, leases and other dispositions permitted
- - - - --------
hereby shall be made for fair value and (other than sales, transfers and other
dispositions permitted under clause (b) or (c)) for at least 80% cash
consideration.
SECTION 6.06. Hedging Agreements. The Borrower will not, and will
-------------------
not permit any of its Subsidiaries to, enter into any Hedging Agreement, other
than Hedging Agreements entered into in the ordinary course of business to hedge
or mitigate risks to which the Borrower or any Subsidiary is exposed in the
conduct of its business or the management of its liabilities.
SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness.
------------------------------------------------------
(a) Neither Holdings nor the Borrower will, nor will they permit any Subsidiary
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except (i) Holdings may declare and pay dividends with
respect to its capital stock payable solely in additional shares of its capital
stock (other than Redeemable Preferred Stock), (ii) Subsidiaries may declare and
pay dividends ratably with respect to their capital stock, (iii) the Borrower or
any Subsidiary may acquire the equity securities of any Subsidiary not owned by
it if such purchase is otherwise permitted by this Agreement, (iv) the Borrower
may make Restricted Payments to Holdings to enable Holdings to make Restricted
Payments, not exceeding $5,000,000 during any fiscal year, pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Subsidiaries (including for the purpose of
repurchasing equity securities following the death, disability or termination of
employment of employees or former employees of Holdings), provided that any
--------
unused portion of such amount in any fiscal year (without giving effect to this
proviso) may be carried forward to the next fiscal year only, and (v) the
Borrower may pay dividends to
<PAGE>
65
Holdings at such times and in such amounts as shall be necessary to permit
Holdings to pay for (a) corporate, administrative and operating expenses in the
ordinary course of business, including payment of directors' and officers'
insurance premiums, key man life insurance premiums, reasonable and customary
directors' fees and fees, expenses and indemnities incurred in connection with
the issuance of the Subordinated Notes and the Transactions, (b) the costs of
Holdings (including all professional fees and expenses) incurred to comply with
its reporting obligations under federal or state laws or under the Subordinated
Note Documents or the Loan Documents or similar instruments, (c) the expenses of
Holdings incurred in connection with any public offering of equity securities,
the net proceeds of which were specifically intended to be received by or
contributed or loaned to the Borrower, and (d) amounts due under any tax sharing
agreement under which the Borrower and its Subsidiaries are allocated its
proportionate share of the actual tax liability of the affiliated group of
corporations that file consolidated federal income tax returns (or that file
state or local income tax returns on a consolidated basis).
(b) Neither Holdings nor the Borrower will, nor will they permit
any Subsidiary to, make or agree to pay or make, directly or indirectly, any
payment or other distribution (whether in cash, securities or other property) of
or in respect of principal of or interest on any Indebtedness, or any payment or
other distribution (whether in cash, securities or other property), including
any sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancelation or termination of any Indebtedness, except:
(i) payment of Indebtedness created under the Loan Documents;
(ii) payment of (x) interest and principal in respect of any
Indebtedness, other than the Subordinated Notes or other subordinated
Indebtedness and (y) regularly scheduled interest and principal payments as
and when due in respect of the Subordinated Notes and other subordinated
Indebtedness, other than payments in respect of the Subordinated Notes or
other subordinated indebtedness prohibited by the subordination provisions
thereof;
(iii) refinancings of Indebtedness to the extent permitted by Section
6.01;
(iv) payment of secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness; and
(v) repurchases of Subordinated Notes that are required to be made
with the proceeds of voluntary sales or transfers of property or assets
pursuant to the provisions of the Subordinated Debt Documents, to the
extent such proceeds are not required to be used to prepay Borrowings
pursuant to Section 2.11 hereof.
SECTION 6.08. Transactions with Affiliates. Neither Holdings nor the
-----------------------------
Borrower will, nor will they permit any Subsidiary to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) transactions in the ordinary course of business
that are at prices and on terms and conditions not less favorable to Holdings,
the Borrower or such Subsidiary than could be obtained on an arm's-length basis
<PAGE>
66
from unrelated third parties, (b) transactions between or among the Borrower and
the Subsidiary Loan Parties not involving any other Affiliate and (c) any
Restricted Payment permitted by Section 6.07, (d) loans or advances to employees
and officers of the Borrower or any Subsidiary of the Borrower in the ordinary
course of business to provide for the payment of reasonable expenses incurred by
such persons in the performance of their responsibilities to the Borrower or
such Subsidiary or in connection with any relocation, (e) fees, compensation or
employee benefit arrangements paid to and indemnity provided on behalf of
directors, officers or employees of the Borrower or any Subsidiary of the
Borrower in the ordinary course of business (f) employment agreements (including
customary benefits thereunder) entered into at any time by the Borrower or any
Subsidiary of the Borrower in the ordinary course of business and (g)
transactions pursuant to agreements listed on Schedule 6.08 in effect on the
Effective Date, including amendments thereto entered into after the Effective
Date; provided that the terms of any such amendment are not, in the aggregate,
--------
less favorable to the Borrower than the terms of such agreement prior to such
amendment.
SECTION 6.09. Restrictive Agreements. Neither Holdings nor the
-----------------------
Borrower will, nor will they permit any Subsidiary to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon the ability of any Subsidiary
to pay dividends or other distributions with respect to any shares of its
capital stock or to make or repay loans or advances to the Borrower or any other
Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary;
provided that the foregoing shall not apply to (a) restrictions and conditions
- - - - --------
imposed by law or by any Loan Document or Subordinated Debt Document, (b)
restrictions and conditions existing on the date hereof identified on Schedule
6.09 (but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or condition), (c)
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (d) customary net worth provisions contained in leases and
other similar agreements and (e) any provisions contained in any Indebtedness of
a Person existing at the time such Person becomes a Subsidiary of the Borrower
(provided that (i) such Indebtedness is not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Borrower, (ii) such
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person acquired and its Subsidiaries and (iii) such
Indebtedness is otherwise permitted to be incurred under this Agreement).
SECTION 6.10. Amendment of Material Documents. Neither Holdings nor
--------------------------------
the Borrower will, nor will they permit any Subsidiary to, amend, modify or
waive any of its rights (or any subordination provision) under (a) any
Subordinated Debt Document, or (b) if it could be reasonably expected to have a
Material Adverse Effect, (i) its certificate of incorporation, by-laws or other
organizational documents, (ii) the Acquisition Documents or (iii) the
Stockholders Agreement.
<PAGE>
67
SECTION 6.11. Capital Expenditures. Holdings and the Borrower will
---------------------
not permit the aggregate amount of Capital Expenditures made by the Borrower and
its Subsidiaries in any fiscal year to exceed the amount set forth below
opposite such year:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1998 $12,000,000
1999 $ 8,000,000
2000 $ 6,000,000
2001 $ 5,000,000
2002 $ 5,000,000
</TABLE>
provided, however, that (a) up to $3,000,000 of any unused portion of the amount
- - - - -------- -------
of permitted Capital Expenditures set forth for fiscal year 1998 in the
preceding table may be carried forward for a maximum of three succeeding fiscal
years and (b) up to $3,000,000 of any unused portion of the amount of permitted
Capital Expenditures set forth for fiscal year 1999 in the preceding table may
be carried forward for a maximum of three succeeding fiscal years.
SECTION 6.12. Leverage Ratio. Holdings and the Borrower will not
---------------
permit the Leverage Ratio as of the last day of any period of four consecutive
fiscal quarters ending during any period set forth below to exceed the ratio set
forth below opposite such period:
Period Ratio
------ -----
Effective Date - 6.9 to 1.0
September 30, 1999
October 1, 1999 - 6.5 to 1.0
September 30, 2000
October 1, 2000 - 6.0 to 1.0
September 30, 2001
October 1, 2001 - 5.5 to 1.0
September 30, 2002
Thereafter 5.0 to 1.0
SECTION 6.13. Consolidated Cash Interest Expense Coverage Ratio.
--------------------------------------------------
Holdings and the Borrower will not permit the ratio of (a) Consolidated EBITDA
to (b) Consolidated Cash Interest Expense for any four-fiscal-quarter period
ending during any period set forth below to be less than the ratio set forth
below opposite such period, provided that for purposes of calculating such ratio
--------
as of the last day of each of the first, second and third fiscal quarters of
1998, the amounts determined pursuant to clause (a) and clause (b) above shall
be determined by multiplying Consolidated EBITDA or Consolidated Cash Interest
<PAGE>
68
Expense, as applicable, for the period commencing on the first day of the first
fiscal quarter of 1998 and ending as of the end of such fiscal period by (i) 4,
in the case of the first fiscal quarter, (ii) 2, in the case of the second
fiscal quarter and (iii) 4/3, in the case of the third fiscal quarter:
Period Ratio
------ -----
Effective Date - 1.50 to 1.00
December 31, 1999
January 1, 2000 - 1.75 to 1.00
December 31, 2000
January 1, 2001 - 2.00 to 1.00
December 31, 2001
Thereafter 2.25 to 1.00
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, when and
as the same shall become due and payable, and such failure shall continue
unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of Holdings, the Borrower or any Subsidiary in or in connection with any
Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove to
have been incorrect in any material respect when made or deemed made;
<PAGE>
69
(d) Holdings or the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.04 (with
respect to the existence of Holdings or the Borrower) or 5.11 or in
Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 15 days after notice thereof from
the Administrative Agent to the Borrower (which notice will be given at the
request of any Lender);
(f) Holdings, the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due
and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both, but, solely in respect of Hedging Agreements, only after the lapse of
five days) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material Indebtedness
to become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; provided that this
--------
clause (g) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets securing
such Indebtedness or to provisions requiring the offer to purchase
outstanding debt in the event of a sale of assets of the Borrower or its
Subsidiaries;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of Holdings, the Borrower or any Subsidiary or its debts,
or of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Holdings, the Borrower or
any Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall be
entered;
(i) Holdings, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for Holdings, the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
<PAGE>
70
(j) Holdings, the Borrower or any Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against Holdings, the
Borrower, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of Holdings,
the Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse
Effect;
(m) any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by any Loan Party not to be, a valid and
perfected Lien on any Collateral, with the priority required by the
applicable Security Document, except (i) as a result of the sale or other
disposition of the applicable Collateral in a transaction permitted under
the Loan Documents or (ii) as a result of the Administrative Agent's
failure to maintain possession of any stock certificates, promissory notes
or other instruments delivered to it under the Collateral Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, with the consent of the Required Lenders,
the Administrative Agent may, and at the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then out standing to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
<PAGE>
71
ARTICLE VIII
The Administrative Agent and the Collateral Agent
---------------------------------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
The Chase Manhattan Bank as Administrative Agent and Collateral Agent (for
purposes of this Article VIII, collectively, the "Agent") and authorizes the
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto. For greater certainty
and without limiting the powers of the Collateral Agent herein and for the
purposes of constituting security on the Borrower's property located in the
Province of Quebec pursuant to the Hypothec as security for the due payment of
all obligations of the Borrower under the Bond and the performance by the
Borrower of all of its obligations contained in the Bond, each of the Secured
Parties (other than the Collateral Agent) hereby irrevocably grants to the
Collateral Agent, for the purposes of holding, on behalf of and for the benefit
of all present and future Secured Parties (other than the Collateral Agent), the
security constituted by the Borrower under the Hypothec, a power of attorney
(within the meaning of the Civil Code of Quebec) for all present and future
Secured Parties (other than the Collateral Agent). The Collateral Agent hereby
accepts such power of attorney for the purposes of holding the security created
under the Hypothec on behalf of and for the benefit of all present and future
Secured Parties (other than the Collateral Agent). To the extent that any Person
becomes a Secured Party under this Agreement after the date of execution hereof,
then such Secured Party, by becoming bound by the terms and conditions of this
Agreement, whether by assignment or otherwise, shall be automatically deemed to
have ratified and consented to the irrevocable granting by the other Secured
Parties to the Collateral Agent of the power of attorney constituted hereunder.
The bank serving as the Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not the Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if it
were not the Agent hereunder.
The Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Loan Documents that the Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth in the Loan Documents, the
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to Holdings, the Borrower or any
of its Subsidiaries that is communicated to or obtained by the bank serving as
Agent or any of its Affiliates in any capacity. The Agent shall not be liable
to any Lender for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided
<PAGE>
72
in Section 9.02) or in the absence of its own gross negligence or wilful
misconduct. The Agent shall not be deemed to have knowledge of any Default
unless and until written notice thereof is given to the Agent by Holdings, the
Borrower or a Lender, and the Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the
validity, enforceability, effectiveness or genuineness of any Loan Document or
any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than
to confirm receipt of items expressly required to be delivered to the Agent.
The Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
The Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents appointed by the Agent. The
Agent and any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor to the Agent
as provided in this paragraph, the Agent may resign at any time by notifying the
Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor. So long as no
Default or Event of Default shall have occurred and be continuing, the
appointment of a new Agent shall require the consent of the Borrower (which
consent shall not be unreasonably withheld). If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a
successor Agent which shall be a bank with an office in New York, New York, or
an Affiliate of any such bank, having a combined capital and surplus of at least
$250,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Agent's resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
<PAGE>
73
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.
The Borrower and the Secured Parties (other than the Collateral Agent)
hereby irrevocably agree that, notwithstanding the provisions of Section 32 of
the Special Corporate Powers Act (Quebec), the Collateral Agent may, as the
Person holding the power of attorney of the other Secured Parties, acquire any
title to indebtedness secured by any hypothec in its favor related to this
Agreement or any other Loan Document.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices. Except in the case of notices and other
--------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to Holdings or the Borrower, to it at 220 White Plains Road,
Tarrytown, New York 10591, Attention of President (Telecopy No. [ ]);
with a copy to Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022, Attention of William E. Hiller, Esq.
(Telecopy No. (212) 821-1111);
(b) if to the Administrative Agent, the Issuing Bank or the Swingline
Lender, to The Chase Manhattan Bank, Loan and Agency Services Group, One
Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of
Margaret Swales (Telecopy No. (212) 552-5658), with a copy to The Chase
Manhattan Bank, 270 Park Avenue, New York 10017, Attention of Neil Boylan
(Telecopy No. (212) 270-1848);
(c) if to the Documentation Agent, to Merrill Lynch Capital
Corporation at World Financial Center, North Tower, New York, NY 10281,
Attention of Sheila McGillicuddy (Telecopy No. (212) 449-8230); and
(d) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
<PAGE>
74
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
--------------------
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by Holdings, the Borrower and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the Administrative Agent and the Loan Party or Loan Parties that
are parties thereto, in each case with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Commitment of any Lender
- - - - --------
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of
any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) change any of the provisions of
this Section or the definition of "Required Lenders" or any other provision of
any Loan Document specifying the number or percentage of Lenders (or Lenders of
any Class) required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such Class, as the case may be), (vi) release
Holdings or any Subsidiary Loan Party from its Guarantee under the Security
Agreement (except as expressly provided in the Security Agreement), or limit its
liability in respect of such Guarantee, without the written consent of each
Lender, (vii) release all or substantially all of the Collateral from the Liens
of the Security Documents, without the written consent of each Lender, or (viii)
change any provisions of any Loan Document in a manner that by its terms
adversely affects the rights in respect of payments due to Lenders holding
<PAGE>
75
Loans of any Class differently than those holding Loans of any other Class,
without the written consent of Lenders holding a majority in interest of the
outstanding Loans and unused Commitments of each affected Class; provided
--------
further that (A) no such agreement shall amend, modify or otherwise affect the
- - - - -------
rights or duties of the Administrative Agent, the Issuing Bank or the Swingline
Lender without the prior written consent of the Administrative Agent, the
Issuing Bank or the Swingline Lender, as the case may be, and (B) any waiver,
amendment or modification of this Agreement that by its terms affects the rights
or duties under this Agreement of the Revolving Lenders (but not the Term
Lenders) or the Term Lenders (but not the Revolving Lenders) may be effected by
an agreement or agreements in writing entered into by Holdings, the Borrower and
requisite percentage in interest of the affected Class of Lenders.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
-----------------------------------
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with the Loan Documents, including its rights under
this Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
----------
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of any
Loan Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective obligations
thereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or release of Hazardous Materials
on or from any Mortgaged Property or any other property owned or operated by the
Borrower or any of its Subsidiaries, or any Environmental Liability related in
any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
--------
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or
<PAGE>
76
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as
the case may be, such Lender's pro rata share (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
--------
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such. For purposes hereof, a Lender's "pro rata
share" shall be determined based upon its share of the sum of the total
Revolving Exposures, outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, neither Holdings nor
the Borrower shall assert, and each hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later
than 10 days after written demand therefor setting forth a computation of the
amount due and reasonable supporting documentation.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
-----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Administrative Agent, the Issuing
Bank and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that (i)
--------
except in the case of an assignment to a Lender or an Affiliate of a Lender or
an Approved Fund, each of the Borrower and the Administrative Agent (and, in the
case of an assignment of all or a portion of a Revolving Commitment or any
Lender's obligations in respect of its LC Exposure or Swingline Exposure, the
Issuing Bank and the Swingline Lender) must give their prior written consent to
such assignment (which consent shall not be unreasonably withheld), (ii) except
in the case of an
<PAGE>
77
assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an
assignment of the entire remaining amount of the assigning Lender's Commitment
or Loans, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $5,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, (iii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement, except that this clause (iii) shall not be
construed to prohibit the assignment of a proportionate part of all the
assigning Lender's rights and obligations in respect of one Class of Commitments
or Loans, (iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower otherwise
----------------
required under this paragraph shall not be required if an Event of Default under
clause (h) or (i) of Article VII has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to paragraph (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and Holdings, the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, the Issuing Bank and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall
<PAGE>
78
be effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
-----------
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
- - - - --------
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) Holdings, the Borrower,
the Administrative Agent, the Issuing Bank and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce the Loan Documents and to approve
any amendment, modification or waiver of any provision of the Loan Documents;
provided that such agreement or instrument may provide that such Lender will
- - - - --------
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.02(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section;
provided that the amount payable to the seller of the participation and the
- - - - --------
Participant in the aggregate shall not exceed the amount which would otherwise
be payable had a participation not been sold. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.18(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
---------
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and
<PAGE>
79
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Administrative
Agent, the Issuing Bank or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit
is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Letters of Credit and the Commitments or the termination
of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
-----------------------------------------
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to
-------------
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
----------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
<PAGE>
80
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process. (a) This Agreement shall be construed in accordance with and governed
- - - - --------
by the law of the State of New York.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that the Administrative Agent, the Issuing Bank or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against Holdings, the Borrower or its properties in
the courts of any jurisdiction.
(c) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
---------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
<PAGE>
81
SECTION 9.11. Headings. Article and Section headings and the Table
---------
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent,
----------------
the Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to a written
agreement containing provisions substantially the same as those of this Section,
to any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement, (g) with
the consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to the Administrative Agent, the Issuing Bank or any Lender on
a nonconfidential basis from a source other than Holdings or the Borrower. For
the purposes of this Section, "Information" means all information received from
-----------
Holdings or the Borrower relating to Holdings or the Borrower or its business,
other than any such information that is available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
Holdings or the Borrower; provided that, in the case of information received
--------
from Holdings or the Borrower after the date hereof, such information is clearly
identified at the time of delivery as confidential or contains business plans or
projections. The Lenders shall use all information supplied by or on behalf of
the Borrower under this Agreement and the other Loan Documents solely in
connection with the Loan Documents and the Obligations and/or in dealing with
its other credits with Holdings, the Borrower or the Subsidiaries. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
-------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
-------
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
------------
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such
<PAGE>
82
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.
<PAGE>
83
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.
EAGLE FAMILY FOODS, INC.,
by
/s/ JOHN O'C. NUGENT
----------------------------------
Name: John O'C. Nugent
Title: CEO and President
EAGLE FAMILY FOODS HOLDINGS, INC.,
by
/s/ JOHN O'C. NUGENT
----------------------------------
Name: John O'C. Nugent
Title: CEO and President
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent, Collateral Agent, Issuing Bank
and Swingline Lender,
by
/s/ LAURIE B. PERPER
----------------------------------
Name: Laurie B. Perper
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION,
individually and as Documentation
Agent,
by
/s/ SHEILA MCGILLICUDDY
----------------------------------
Name: Sheila McGillicuddy
Title: Vice President
<PAGE>
84
BANKBOSTON, N.A.,
by
/s/ WILLIAM M. CLARK
----------------------------------
Name: William M. Clark
Title: Managing Director
THE BANK OF NOVA SCOTIA,
by
/s/ STEPHEN LOCKHART
----------------------------------
Name: Stephen Lockhart
Title: Vice President
CREDIT AGRICOLE INDOSUEZ,
by
/s/ CHERYL A. SOLOMENTO
----------------------------------
Name: Cheryl A. Solomento
Title: Vice President
by
/s/ CRAIG WELCH
----------------------------------
Name: Craig Welch
Title: First Vice President
FIRST UNION NATIONAL BANK,
by
/s/ JORGE GONZALEZ
----------------------------------
Name: Jorge Gonzalez
Title: Senior Vice President
FLEET NATIONAL BANK,
<PAGE>
85
by
/s/ MARK S. PELLETIER
----------------------------------
Name: Mark S. Pelletier
Title: Assistant Vice President
SOCIETE GENERALE,
by
/s/ CATHERINE A. SCALLIER-LOISEAU
----------------------------------
Name: Catherine A. Scallier-Loiseau
Title: Director
<PAGE>
86
BANK OF HAWAII,
by
/s/ JOSEPH T. DONALDSON
----------------------------------
Name: John T. Donaldson
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
by
/s/ DAVID C. MCLAUGHLIN
----------------------------------
Name: David C. McLaughlin
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH,
by
/s/ TEIJI TERAMOTO
----------------------------------
Name: Teiji Teramoto
Title: Vice President and
Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH,
by
/s/ SHUICHI TAJIMA
----------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
SUMMIT BANK
by
/s/ WAYNE R. TROTMAN
----------------------------------
Name: Wayne R. Trotman
Title: Vice President and
Regional Manager
PRIME INCOME TRUST
<PAGE>
87
by
/s/ RAJESH K. GUPTA
----------------------------------
Name: Rajesh K. Gupta
Title: Senior Vice President
KZH-ING-2 CORPORATION
by
/s/ VIRGINIA R. CONWAY
----------------------------------
Name: Virginia R. Conway
Title: Authorized Agent
KZH-SOLIEL CORPORATION,,
by
/s/ VIRGINIA R. CONWAY
----------------------------------
Name: Virginia R. Conway
Title: Authorised Agent
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
by
/s/ JEFFREY W. MAILLET
----------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and
Director
ACM CREDIT OPPORTUNITIES MASTER FUND,
by
Alliance Capital Management L.P.,
its Investment Advisor
by
/s/ JOEL SEREBRANSKY
----------------------------------
Name: Joel Serebransky
Title: Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.,
as Manager on behalf of ALLIANCE
CAPITAL FUNDING, L.L.C.
<PAGE>
88
by
ALLIANCE CAPITAL MANAGEMENT
CORPORATION, General partner of
Alliance Capital Management L.P.,
by
/s/ JOEL SEREBRANSKY
----------------------------------
Name: Joel Serebransky
Title: Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY,
by
/s/ MARY ANN MCCARTHY
----------------------------------
Name: Mary Ann McCarthy
Title: Managing Director
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
-----------
<S> <C>
SECTION 1.01. Defined Terms................................................ 1
-------------
SECTION 1.02. Classification of Loans and Borrowings....................... 18
--------------------------------------
SECTION 1.03. Terms Generally.............................................. 18
---------------
SECTION 1.04. Accounting Terms; GAAP....................................... 19
----------------------
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments.................................................. 19
-----------
SECTION 2.02. Loans and Borrowings......................................... 19
--------------------
SECTION 2.03. Requests for Borrowings...................................... 20
-----------------------
SECTION 2.04. Swingline Loans.............................................. 20
---------------
SECTION 2.05. Letters of Credit............................................ 21
-----------------
SECTION 2.06. Funding of Borrowings........................................ 24
---------------------
SECTION 2.07. Interest Elections........................................... 25
------------------
SECTION 2.08. Termination and Reduction of Commitments..................... 26
----------------------------------------
SECTION 2.09. Repayment of Loans; Evidence of Debt......................... 26
------------------------------------
SECTION 2.10. Amortization of Term Loans................................... 27
--------------------------
SECTION 2.11. Prepayment of Loans.......................................... 28
-------------------
SECTION 2.12. Fees......................................................... 29
----
SECTION 2.13. Interest..................................................... 30
--------
SECTION 2.14. Alternate Rate of Interest................................... 30
--------------------------
SECTION 2.15. Increased Costs.............................................. 31
---------------
SECTION 2.16. Break Funding Payments....................................... 32
----------------------
SECTION 2.17. Taxes........................................................ 32
-----
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.. 33
-----------------------------------------------------------
SECTION 2.19. Mitigation Obligations; Replacement of Lenders............... 34
-----------------------------------------------
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers ....................................... 35
--------------------
SECTION 3.02. Authorization; Enforceability................................ 35
-----------------------------
</TABLE>
<PAGE>
Contents, p.2
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.03. Governmental Approvals; No Conflicts........................ 35
------------------------------------
SECTION 3.04. Financial Condition; No Material Adverse Change............. 36
-----------------------------------------------
SECTION 3.05. Properties.................................................. 36
----------
SECTION 3.06. Litigation and Environmental Matters........................ 37
------------------------------------
SECTION 3.07. Compliance with Laws and Agreements......................... 37
-----------------------------------
SECTION 3.08. Investment and Holding Company Status....................... 37
-------------------------------------
SECTION 3.09. Taxes....................................................... 37
-----
SECTION 3.10. ERISA....................................................... 37
-----
SECTION 3.11. Disclosure.................................................. 38
----------
SECTION 3.12. Subsidiaries................................................ 38
------------
SECTION 3.13. Insurance................................................... 38
---------
SECTION 3.14. Labor Matters............................................... 38
-------------
SECTION 3.15. Solvency.................................................... 38
--------
SECTION 3.16. Senior Indebtedness......................................... 38
-------------------
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date.............................................. 39
--------------
SECTION 4.02. Each Credit Event........................................... 41
-----------------
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other Information.................. 42
------------------------------------------
SECTION 5.02. Notices of Material Events.................................. 43
--------------------------
SECTION 5.03. Information Regarding Collateral............................ 43
--------------------------------
SECTION 5.04. Existence; Conduct of Business.............................. 44
------------------------------
SECTION 5.05. Payment of Obligations...................................... 44
----------------------
SECTION 5.06. Maintenance of Properties................................... 44
-------------------------
SECTION 5.07. Insurance................................................... 44
---------
SECTION 5.08. Casualty and Condemnation................................... 44
-------------------------
SECTION 5.09. Books and Records; Inspection and Audit Rights.............. 45
----------------------------------------------
SECTION 5.10. Compliance with Laws........................................ 45
--------------------
SECTION 5.11. Use of Proceeds and Letters of Credit....................... 45
-------------------------------------
SECTION 5.12. Additional Subsidiaries..................................... 45
-----------------------
SECTION 5.13. Further Assurances.......................................... 45
------------------
</TABLE>
ARTICLE VI
<PAGE>
Contents, p. 3
<TABLE>
<CAPTION>
Page
----
Negative Covenants
------------------
<S> <C>
SECTION 6.01. Indebtedness; Certain Equity Securities..................... 47
---------------------------------------
SECTION 6.02. Liens....................................................... 48
-----
SECTION 6.03. Fundamental Changes......................................... 49
-------------------
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions... 49
---------------------------------------------------------
SECTION 6.05. Asset Sales................................................. 51
-----------
SECTION 6.06. Hedging Agreements.......................................... 51
------------------
SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness....... 52
-----------------------------------------------------
SECTION 6.08. Transactions with Affiliates................................ 53
----------------------------
SECTION 6.09. Restrictive Agreements...................................... 53
----------------------
SECTION 6.10. Amendment of Material Documents............................. 53
-------------------------------
SECTION 6.11. Capital Expenditures........................................ 54
--------------------
SECTION 6.12. Leverage Ratio.............................................. 54
--------------
SECTION 6.13. Consolidated Cash Interest Expense Coverage Ratio........... 54
-------------------------------------------------
ARTICLE VII
Events of Default........................................... 55
ARTICLE VIII
The Administrative Agent and the Collateral Agent........... 57
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices..................................................... 59
-------
SECTION 9.02. Waivers; Amendments......................................... 59
-------------------
SECTION 9.03. Expenses; Indemnity; Damage Waiver.......................... 60
----------------------------------
SECTION 9.04. Successors and Assigns...................................... 61
----------------------
SECTION 9.05. Survival.................................................... 63
--------
SECTION 9.06. Counterparts; Integration; Effectiveness.................... 63
----------------------------------------
SECTION 9.07. Severability................................................ 64
------------
SECTION 9.08. Right of Setoff............................................. 64
---------------
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.. 64
----------------------------------------------------------
SECTION 9.10. WAIVER OF JURY TRIAL........................................ 65
--------------------
SECTION 9.11. Headings.................................................... 65
---------
SECTION 9.12. Confidentiality............................................. 65
---------------
SECTION 9.13. Interest Rate Limitation.................................... 65
------------------------
</TABLE>
<PAGE>
Contents, P.4
SCHEDULES:
Schedule 1.01(a) -- Mortgaged Properties
Schedule 1.01(b) -- Consolidated EBITDA
Schedule 2.01 -- Commitments
Schedule 3.05 -- Real Property
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Investments
Schedule 6.08 -- Affiliate Transactions
Schedule 6.09 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C -- Form of Opinion of Local Counsel
Exhibit D -- Form of Parent Guarantee Agreement
Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit G -- Form of Pledge Agreement
Exhibit H -- Form of Security Agreement
6Exhibit I -- Form of Mortgage
<PAGE>
Exhibit 4.5
EAGLE FAMILY FOODS HOLDINGS, INC.
STOCKHOLDERS AGREEMENT
Stockholders Agreement, dated as of this 23rd day of January, 1998, by
and among GE Investment Private Placement Partners II, a Limited Partnership
("GEI"), Warburg, Pincus Ventures, L.P., a Delaware limited partnership
("Warburg" and, together with GEI, the "Institutional Investors"); the
individuals whose names and addresses appear from time to time on Schedule I
hereto (the "Management Investors" and, together with the Institutional
Investors, the "Investors"); and Eagle Family Foods Holdings, Inc., a Delaware
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Section 6 hereof.
R E C I T A L S
---------------
WHEREAS, certain of the Investors, pursuant to the terms of certain
subscription agreements with the Company dated as of even date herewith
(collectively, the "Subscription Agreements"), have agreed to purchase shares of
the Common Stock, par value $0.01 per share, of the Company (the "Common Stock")
and the Series A Non-Voting Preferred Stock, par value $0.01 per share, of the
Company (the "Preferred Stock"); and
WHEREAS, the Company has granted the Investors certain registration
rights with respect to the Common Stock and Preferred Stock held by them
pursuant to a registration rights agreement, dated as of even date herewith (the
"Registration Rights Agreement"); and
WHEREAS, the Investors and the Company desire to promote their mutual
interests by agreeing to certain matters relating to the operations of the
Company and the disposition and voting of the shares of Common Stock and
Preferred Stock purchased by the Investors pursuant to the Subscription
Agreements, together with any other shares of Common Stock or Preferred Stock
acquired by them (other than shares of Common Stock issued under the Company's
1998 Stock Incentive Plan (as it may be amended from time, the "Stock Plan"))
(collectively, the "Shares").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. COVENANTS OF THE PARTIES
------------------------
(a) Legends. The certificates evidencing the Shares acquired by the
-------
Investors pursuant to the Subscription Agreements or their permitted transferees
will bear the legend provided for
<PAGE>
therein as well as following legend reflecting the restrictions on the
transfer of such securities contained in this Agreement:
"The securities evidenced hereby are subject to the terms of that
certain Stockholders Agreement, dated as of January 23, 1998, by and
among the Company and certain holders of the Company's Common Stock
and Preferred Stock, including certain preemptive rights, restrictions
on transfer and rights of co-sale. A copy of such Stockholders
Agreement has been filed with the Secretary of the Company and is
available upon request."
(b) Election of Directors.
---------------------
(i) As of the date hereof, the Board of Directors of the Company (the
"Board") will consist of William A. Lynch ("Lynch"), John O'C. Nugent
("Nugent"), Andreas T. Hildebrand, Kewsong Lee, Howard H. Newman and Donald W.
Torey. From and after the date hereof, the Investors and the Company shall take
all action within their respective power, including but not limited to, the
voting of all shares of capital stock of the Company owned by them, required to
cause the Board to consist of nine members or such other number as the Board may
from time to time establish, and at all times throughout the term of this
Agreement to include (A) as long as Warburg owns beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) (1) at least twenty percent (20%)
of the Common Stock, three representatives designated by Warburg, (2) at least
fifteen percent (15%) of the Common Stock, two representatives designated by
Warburg and (3) at least ten percent (10%) of the Common Stock, one
representative designated by Warburg (each, a "Warburg Director"), (B) as long
as GEI owns beneficially (within the meaning of Rule 13d-3 under the Exchange
Act) (1) at least twenty percent (20%) of the Common Stock, three
representatives designated by GEI, (2) at least fifteen percent (15%) of the
Common Stock, two representatives designated by GEI and (3) at least ten percent
(10%) of the Common Stock, one representative designated by GEI (each, a "GEI
Director" and, together with each Warburg Director, the "Institutional
Directors"), (C) as long as Warburg and GEI collectively own beneficially
(within the meaning of Rule 13d-3 under the Exchange Act) at least fifty percent
(50%) of the Common Stock, Warburg and GEI shall collectively have the right to
designate that number of representatives as shall constitute a majority of the
Board, (D) Lynch, who shall be entitled to be a member of the Board until
termination of his employment in accordance with the terms of the Lynch
Employment Agreement, (E) Nugent, who shall be entitled to be a member of the
Board until termination of his employment in accordance with the terms of the
Nugent Employment Agreement, and (F) at least one director who is neither an
officer or employee of the Company nor an officer, employee or Affiliate of GEI
or Warburg (the "Independent Director"). The Independent Director shall be
selected by the unanimous approval of the Board. The Board shall
2
<PAGE>
take such action as may be necessary from time to time to cause the board of
directors of Eagle Family Foods, Inc., a wholly owned subsidiary of the Company,
to be identical to that of the Board.
(ii) In the event that any Institutional Director is unable to
serve, or once having commenced to serve, is removed or withdraws from the Board
(a "Withdrawing Director"), such Withdrawing Director's replacement (the
"Substitute Director") will be designated by the Institutional Investor having
nominated such Institutional Director. An Institutional Director may be removed,
with or without cause, by the Institutional Investor having nominated such
Institutional Director, and such Institutional Investor shall thereafter have
the right to nominate a replacement for such Institutional Director. The
Investors and the Company agree to take all action within their respective
power, including but not limited to, the voting of all shares of capital stock
of the Company owned by them, to cause the election of such Substitute Director
promptly following his or her nomination pursuant to this Section 1(b)(ii).
(iii) Without the consent of a majority of the Board, which majority
shall include, as long as GEI is entitled to designate a director pursuant to
this Section 1, at least one GEI Director and, as long as Warburg is entitled to
designate a director pursuant to this Section 1, at least one Warburg Director,
the Company shall not, and shall cause Eagle Family Foods, Inc. and each of
their respective Subsidiaries not to:
(A) approve any annual budget (the "Budget") or any material
amendment or modification thereto;
(B) make or incur any capital expenditures or investments not
contemplated by the Budget in excess of $500,000;
(C) merge or consolidate with any other Person (other than a merger
or consolidation with a wholly owned subsidiary of the Company);
(D) sell or contribute, other than sales of inventory in the
ordinary course of business, assets in excess of $500,000;
(E) (1) liquidate or dissolve, (2) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (3) make an assignment for the benefit of its
creditors, or (4) consent to the appointment of a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any
substantial part of its property;
3
<PAGE>
(F) acquire any business (whether by acquisition of assets, stock or
otherwise);
(G) issue any equity securities other than Plan Stock (each, as
defined in Section 1(c)(i) hereof);
(H) incur any indebtedness for borrowed money, other than
indebtedness outstanding on the date hereof (including additional borrowings
permitted under the facilities in effect on the date hereof);
(I) enter into any new line of business;
(J) enter into any joint venture or strategic alliance with any
Person;
(K) enter into any agreement having a duration in excess of one (1)
year or cumulative obligations in excess of $1,000,000;
(L) pay or declare any dividend, or repurchase or redeem any shares
of capital stock;
(M) amend or modify the Company's Certificate of Incorporation or
bylaws;
(N) amend, modify or terminate any employment agreement between the
Company and any executive officer of the Company;
(O) grant any stock options or other equity-based awards, or
authorize any senior management compensation plans or arrangements;
(P) hire or fire any executive officer of the Company;
(Q) enter into any transaction with any officer, director or
Affiliate of the Company (including, without limitation, GEI or Warburg);
(R) make any loan or guarantee the indebtedness of any Person, except
in the ordinary course of business;
(S) enter into, amend, modify or terminate any agreement, including
any collective bargaining agreement, with any union;
(T) approve or adopt (other than the Stock Plan), amend, modify or
terminate any stock plan, 401(k) plan, defined benefit or defined contribution
plan or similar employee benefit plan; or
(U) enter into any agreement to do any of the foregoing.
4
<PAGE>
(c) Subscription Right.
------------------
(i) If at any time after the date hereof, the Company proposes to
sell in any non-public offering equity securities of any kind (the term "equity
securities" shall include for these purposes any warrants, options or other
rights to acquire equity securities and debt securities convertible into equity
securities, voting or other rights, and derivative securities of equity
securities) of the Company (except (A) for grants or issuances of equity
securities pursuant to the Stock Plan or any other incentive plan for the
Company's or any of its Subsidiaries' directors or employees (collectively,
"Plan Stock"), (B) to the public in a firm commitment underwriting pursuant to a
registration statement filed under the Securities Act, or (C) pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other form of reorganization), then, as to
each Initial Investor who then holds shares of capital stock of the Company, the
Company shall:
(1) give written notice setting forth in reasonable detail (I)
the designation and all of the terms and provisions of the equity
securities proposed to be issued (the "Proposed Securities"), including,
where applicable, the voting powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof and interest or dividend rate and
maturity; (II) the price and other terms of the proposed sale of such
Proposed Securities; (III) the amount of the Proposed Securities proposed
to be issued; and (IV) such other information as may be reasonably
required in order to evaluate the proposed issuance; and
(2) offer to sell to each such Initial Investor a portion of
the Proposed Securities equal to a percentage determined by dividing (I)
the number of shares of Preferred Stock then held by such Initial
Investor (and if no shares of Preferred Stock are outstanding, then the
number of shares of Common Stock (other than Plan Stock)) by (II) the
total number of shares of Preferred Stock held by all the Initial
Investors then outstanding (and if no shares of Preferred Stock are
outstanding, then the number of shares of Common Stock (other than Plan
Stock)).
(ii) Each such Initial Investor must exercise its purchase rights
hereunder within ten (10) days after receipt of such notice from the Company.
If all of the Proposed Securities offered to such Initial Investors are not
fully subscribed by such Initial Investors, such remaining Proposed Securities
will be reoffered to those Initial Investors purchasing their full allotment
upon the terms set forth in this Section 1(c) (with an allocation based on the
respective percentages of the aggregate number of shares of Preferred Stock held
by such Initial
5
<PAGE>
Investors and, if no shares of Preferred Stock are outstanding, then of the
aggregate number of shares of Common Stock (other than Plan Stock)), until all
such Proposed Securities are fully subscribed for or until all such Initial
Investors have subscribed for all such Proposed Securities which they desire to
purchase, except that such Initial Investors must exercise their purchase rights
within five days after receipt of all such reoffers. To the extent that the
Company offers two or more equity securities in units, Initial Investors must
purchase such units as a whole and will not be given the opportunity to purchase
only one of the equity securities making up such unit.
(iii) Upon the expiration of the offering periods described above,
the Company will be free to sell such Proposed Securities that the Initial
Investors have not elected to purchase during the ninety (90) days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such Initial Investors. Any Proposed Securities
offered or sold by the Company after such 90-day period must be reoffered to the
Initial Investors pursuant to this Section 1(c). The election by an Initial
Investor not to exercise its subscription rights under this Section 1(c) in any
one instance shall not affect its right (other than in respect of a reduction in
its percentage holdings) as to any subsequent proposed issuance. Any sale of
equity securities by the Company without first giving the Initial Investors the
rights described in this Section 1(c) shall be void and of no force and effect
and the Company shall cause any correction required to be fully effected.
(iv) Notwithstanding anything contained in this Section 1(c), in the
event that the issuance and sale of the Proposed Securities to any Initial
Investor would require either a registration under the Securities Act or the
preparation of a disclosure document pursuant to Regulation D under the
Securities Act (or any successor regulation) or a similar provision of any state
securities law, then, at the option of the Board, such Initial Investor or
Initial Investors may be excluded from the rights provided by this Section 1(c).
(d) No Inconsistent Agreements.
--------------------------
Each of the Investors and the Company agrees that it will not and will
not permit any Affiliate to grant any proxy or enter into or agree to be bound
by any voting trust with respect to its shares of capital stock of the Company
or enter into any stockholder agreements or arrangements of any kind with any
person with respect to its shares of capital stock of the Company, in any such
case in a manner that is inconsistent with the provisions of this Agreement.
2. TRANSFER OF STOCK BY MANAGEMENT INVESTORS. Without the approval
-----------------------------------------
of the Board, no Management Investor shall Transfer any Shares, or any
beneficial interest therein, other than in
6
<PAGE>
accordance with such Management Investor's employment agreement with the Company
or any restricted stock purchase agreement between such Management Investor and
the Company. Notwithstanding the foregoing, if, pursuant to the Registration
Rights Agreement, a Management Investor is prevented by the Company's
underwriter or underwriters from Transferring Shares in a public offering of
Shares by the Company in which the Institutional Investors Transferred Shares,
then following such public offering, and after the expiration of any applicable
restrictions on the Transfer of such Management Investor's Shares under
agreements not to sell, "lock-up" agreements or similar agreements to which the
Management Investor is bound, such Management Investor shall be entitled to
Transfer his pro rata portion of Shares (to be calculated pursuant to the
following sentence) that he would otherwise have been entitled to Transfer in
such public offering without the approval of the Board, provided that (a) such
Management Investor informs the Board in writing of his intention to Transfer
Shares at least seven days in advance of the proposed Transfer, such notice to
include the number of Shares he intends to Transfer and (b) such Management
Investor complies with all applicable securities laws, including, without
limitation, compliance with the volume and time limitations imposed by Rule 144
of the Securities Act of 1933, as amended. For purposes of the foregoing
sentence, such Management Investor's pro rata portion of Shares shall be equal
to (a) the product of (i) the aggregate number of Shares Transferred by the
Institutional Investors in such public offering and (ii) the aggregate number of
Shares beneficially owned by such Management Investor at the time of such public
offering divided by (b) the aggregate number of Shares held by the Institutional
Investors at the time of such public offering; provided, however, that the pro
rata portion as so calculated shall be adjusted downward to the extent the Board
shall have approved a Transfer of Shares by such Management Investor prior to
such Management Investor's notification to the Board of his intention to avail
himself of this provision. Any Transfer or purported Transfer made in violation
of this Section 2 shall be null and void and of no effect.
3. RIGHT OF CO-SALE. In the event that any Investor intends to
----------------
Transfer (i) shares of Common Stock which, together with any previous sales of
shares of Common Stock by such Investor, represent more than twenty percent
(20%) of its shares of Common Stock on a cumulative basis or (ii) shares of
Preferred Stock which, together with any previous sales of shares of Preferred
Stock by such Investor, represent more than twenty percent (20%) of its shares
of Preferred Stock on a cumulative basis (in each case other than to an
Affiliate of such Investor), such Investor (the "Co-Sale Triggering Investor")
shall notify each other Investor holding shares of such class of stock, in
writing, of such Transfer and its terms and conditions (the "Proposed Sale").
Within 10 days of the date of such notice, each Investor holding shares of such
class of stock that wishes to participate in the Proposed Sale (the "Co-Sale
Investors")
7
<PAGE>
shall so notify the Co-Sale Triggering Investor in writing (a "Transfer
Notice"). In the event the Co-Sale Triggering Investor fails to receive a
Transfer Notice from any Investor within such 10-day period, such Investor shall
be deemed to have declined to participate in the Proposed Sale. Each Co-Sale
Investor shall have the right to sell, at the same price and on the same terms
as the Co-Sale Triggering Investor, that number of shares of Common Stock or
Preferred Stock, as the case may be, equal to the number of shares of Common
Stock or Preferred Stock, as the case may be, the third party proposes to
purchase multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock or Preferred Stock (other than Plan Stock), as the case
may be, issued and owned by such Co-Sale Investor and the denominator of which
shall be the aggregate number of shares of Common Stock or Preferred Stock
(other than Plan Stock), as the case may be, issued and owned by the Co-Sale
Triggering Investor and each other Co-Sale Investor (including such Co-Sale
Investor) exercising its rights pursuant to this Section 3. Nothing contained
herein shall obligate the Co-Sale Triggering Investor to consummate the Proposed
Sale or limit the Co-Sale Triggering Investor's right to amend or modify the
terms of the Proposed Sale in any respect; provided that the Investors are
offered the opportunity to participate in the Proposed Sale on such amended or
modified terms.
4. INFORMATION AS TO COMPANY AND RELATED COVENANTS
-----------------------------------------------
(a) Investor Financial Information. From and after the date hereof,
------------------------------
the Company shall deliver to each Investor owning beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) more than five percent (5%) of the
issued and outstanding shares of Common Stock or Preferred Stock (except for the
annual reports referred to in (a)(ii) below, which shall be delivered to each
Investor as long as such Investor owns any shares of Common Stock or Preferred
Stock):
(i) Quarterly Statements. As soon as practicable, and in any event
--------------------
within 45 days after the close of each of the first three fiscal quarters of
each fiscal year of the Company, a consolidated balance sheet, statement of
income and statement of changes in cash flow of the Company and its Subsidiaries
as of the close of such quarter and the portion of the Company's fiscal year
ending on the last day of such quarter, all in reasonable detail and prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, subject to audit and year end adjustments, setting forth in each case
in comparative form the figures for the comparable period of the previous year;
(ii) Annual Statements. As soon as practicable after the end of each
-----------------
fiscal year of the Company, and in any event within 120 days thereafter, a copy
of the consolidated balance sheet, and consolidated statements of income,
stockholders' equity and changes in cash flow of the Company and its
Subsidiaries for such year, setting forth in each case in
8
<PAGE>
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that such financial statements fairly present the financial
position and results of operations of the Company and its Subsidiaries on a
consolidated basis and have been prepared in accordance with U.S. generally
accepted accounting principles consistently applied (except for changes in
application in which such accountants concur) and that the examination of such
accountants has been made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances.
(b) Director Materials. The Company shall prepare and deliver to
------------------
each director of the Company:
(i) Monthly Financial Statements. As soon as practicable, and in
----------------------------
any event within 30 days after the close of each of month of each fiscal year of
the Company, a consolidated balance sheet, statement of income and statement of
changes in cash flow of the Company and its Subsidiaries as of the close of each
month and the portion of the Company's fiscal year ending on the last day of
such month, all in reasonable detail and prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, subject to audit
and year end adjustments, setting forth in each case in comparative form the
figures for the comparable period of the previous year;
(ii) Business Plan; Projections. Prior to the commencement of each
--------------------------
fiscal year of the Company, an annual business plan of the Company and
projections of operating results, prepared on a monthly basis, and a three-year
business plan of the Company and projections of operating results. Within 45
days of the close of each fiscal quarter of the Company, the Company shall
provide its directors with a comparison of actual year-to-date results with the
corresponding budgeted figures;
(iii) Audit Reports. Promptly upon receipt thereof, one copy of each
-------------
other financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company and its Subsidiaries; and
(iv) Requested Information. With reasonable promptness, the Company
---------------------
shall furnish each director with such other data and information as from time to
time may be reasonably requested.
The Company acknowledges that its obligations under this Section 4(b)
shall not limit the rights of its directors under applicable law to obtain
information and other materials from the Company.
9
<PAGE>
(c) Inspection. From and after the date hereof, the Company will
----------
permit each Investor owning beneficially (within the meaning of Rule 13d-3 under
the Exchange Act) more than five percent (5%) of the issued and outstanding
shares of Common Stock or Preferred Stock, its nominee, assignee or its
representative to visit and inspect any of the properties of the Company, to
examine all its books of account, records, reports and other papers not
contractually required of the Company to be confidential or secret, to make
copies and extracts therefrom, and to discuss its affairs, finances and accounts
with its officers, directors, key employees and independent public accountants
or any of them (and by this provision the Company authorizes said accountants to
discuss with said Investor, its nominee, assign and representatives the finances
and affairs of the Company and its Subsidiaries), all at such reasonable times
and as often as may be reasonably requested.
(d) Confidentiality. As to so much of the information and other
---------------
material furnished under or in connection with this Agreement (whether furnished
before, on or after the date hereof) as constitutes or contains confidential
business, financial or other information of the Company or its Subsidiaries,
each Investor covenants for itself and its directors, officers, partners and
stockholders that it will use due care to prevent its respective officers,
directors, employees, counsel, accountants and other representatives from
disclosing such information to persons other than their respective authorized
employees, counsel, accountants, stockholders, partners, limited partners and
other authorized representatives; provided, however, that the Investor may
-------- -------
disclose or deliver any information or other material disclosed to or received
by the Investor should such disclosure or delivery be required by law.
5. TERMINATION. The Agreement shall terminate:
-----------
(a) upon the closing of the Initial Public Offering, except for the
provisions of Sections 1(b), 2 and 4(d), which shall remain in full force and
effect following the closing of the Initial Public Offering; or
(b) on the date on which (i) the Institutional Investors, and (ii) the
holders of a majority of the shares of Common Stock held by Management Investors
shall have agreed in writing to terminate this Agreement.
Notwithstanding anything in this Agreement to the contrary, if a
Management Investor's employment with the Company and its Subsidiaries is
terminated, whether by such Management Investor or by the Company, whether with
or without cause or whether due to the death or disability, all rights of such
Management Investor under this Agreement (but not the obligations) shall be
terminated.
10
<PAGE>
6. INTERPRETATION OF THIS AGREEMENT
--------------------------------
(a) Terms Defined. As used in this Agreement, the following terms
-------------
have the respective meaning set forth below:
Affiliate: any person or entity, directly or indirectly, controlling,
---------
controlled by or under common control with such person or entity.
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Initial Investors: the Institutional Investors and the individuals
-----------------
whose names appear on Schedule I hereto on the date hereof.
Initial Public Offering: the completion of an underwritten initial
-----------------------
public offering for shares of Common Stock pursuant to a registration statement
under the Securities Act resulting in net proceeds to the Company and/or any
selling stockholders of not less than $25,000,000.
Person: an individual, partnership, joint-stock company, corporation,
------
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
Security, Securities: as defined in Section 2(1) of the Securities
--------------------
Act.
Securities Act: the Securities Act of 1933, as amended.
--------------
Subsidiary: a Person of which the Company owns, directly or
----------
indirectly, more than fifty percent 50% of the Voting Stock.
Transfer: any sale, assignment, pledge, hypothecation, or other
--------
disposition or encumbrance, whether or not for consideration.
Voting Stock: securities of any class or classes of a Person the
------------
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the directors (or Persons performing similar functions).
(b) Accounting Principles. Where the character or amount of any
---------------------
asset or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, this shall be done in
accordance with U.S. generally accepted accounting principles at the time in
effect, to the extent applicable, except where such
11
<PAGE>
principles are inconsistent with the requirements of this Agreement.
(c) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(d) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(e) Section Headings. The headings of the sections and subsections
----------------
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
7. MISCELLANEOUS
-------------
(a) Notices.
-------
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or by facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(A) if to any of the Management Investors, at the address or
facsimile number of such Management Investor shown on Schedule I, or at such
other address or facsimile number as the Management Investor may have furnished
the other parties hereto in writing;
(B) if to GEI, at 3003 Summer Street, Stamford, CT 06905,
Attention: Andreas Hildebrand (Fax No.: (203) 326-2495), or at such other
address as GEI may have furnished the other parties hereto in writing;
(C) if to Warburg, at 466 Lexington Avenue, New York, New York
10017, Attention: Kewsong Lee (Fax No.: (212) 878-6162), or at such other
address or facsimile number as Warburg may have furnished the other parties
hereto in writing;
(D) if to the Company, to Eagle Family Foods Holdings, Inc., 220
White Plains Road Tarrytown, New York 10591, Attention: Jonathan Rich, Esq.
(Fax No.: (973) 263-3748), or at such other address or facsimile numbers as it
may have furnished the other parties hereto in writing; and
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery, if a business
day, otherwise the first business day thereafter; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered
12
<PAGE>
or certified mail, on the third business day after the date of such mailing.
(b) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (i) consents, waivers and
modifications relating hereto which may hereafter be executed, (ii) documents
received by each Investors pursuant hereto and (iii) financial statements,
certificates and other information previously or hereafter furnished to each
Investor, may be reproduced by each Investor by an photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and each
Investor may destroy any original document so reproduced. All parties hereto
agree and stipulate that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by each Investor in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
(c) Successors and Assigns; No Third Party Beneficiaries. This
----------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties. Nothing in this Agreement shall confer upon any
Person not a party to this Agreement any rights or remedies of any nature or
kind whatsoever under or by reason of this Agreement.
(d) Entire Agreement; Amendment and Waiver. This Agreement, the
--------------------------------------
Registration Rights Agreement, the Subscription Agreements and the Certificate
of Incorporation of the Company constitute the entire understanding of the
parties hereto relating to the subject matter hereof and supersede all prior
understandings among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of (i) both Institutional Investors and (ii) the holder or
holders of a majority of the shares of Common Stock (other than Plan Stock and
other than those shares held by the Institutional Investors or their respective
Affiliates), which shall include Management Investors holding a majority of such
shares held by Management Investors.
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(e) Injunctive Relief. It is acknowledged that it will be impossible
-----------------
to measure in money the damages that would be suffered if the parties fail to
comply with certain of the obligations imposed on them by this Agreement,
including, without limitation, those obligations set forth in Sections 1 and 2,
and that in the event of any such failure, an aggrieved person will
13
<PAGE>
be irreparably damaged and will not have an adequate remedy at law. Any such
person shall, therefore, be entitled to injunctive relief and/or specific
performance to enforce such obligations, and if any action should be brought in
equity to enforce any of such provisions of this Agreement, none of the parties
hereto shall raise the defense that there is an adequate remedy at law.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
-------------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer, President and
Director
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED
PARTNERSHIP
By: GE Investment Management
Incorporated, its General
Partner
By: /s/ Michael M. Pastore
-------------------------------
Name: Michael M. Pastore
Title: Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co., its
General Partner
By: /s/ Kewsong Lee
-------------------------------
Name: Kewsong Lee
Title: Partner
MANAGEMENT INVESTORS:
[Signatures on following pages]
15
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ William A. Lynch
-----------------------------------
William A. Lynch
16
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ John O'C. Nugent
-----------------------------------
John O'C. Nugent
17
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ Jonathan F. Rich
-----------------------------------
Jonathan F. Rich
18
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ Richard Lumpp
-----------------------------------
Richard Lumpp
19
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ James Byrne
-----------------------------------
James Byrne
20
<PAGE>
Signature Page to Stockholders Agreement, dated as of January 23, 1998, among
Eagle Family Foods Holdings, Inc., GE Investment Private Placement Partners II,
A Limited Partnership, Warburg, Pincus Ventures, L.P. and the Management
Investor set forth below.
/s/ Craig Steinke
-----------------------------------
Craig Steinke
21
<PAGE>
SCHEDULE I
Management Investors
--------------------
James A. Byrne
3 Berkeley Place
Cranford, NJ 07016
Tel: 908-276-7372
Richard Lumpp
100 Cedar Drive
Danbury, CT 06811
Tel: 203-791-8188
William A. Lynch
80 Ferry Boulevard
Stratford, CT 06497
Tel: 203-226-6155
John O'C. Nugent
63 Crescent Place
Short Hills, NJ 07078
Tel: 201-467-4520
Jonathan F. Rich
33 Briarcliff Road
Mountain Lakes, NJ 07046
Tel: 973.316.6870
Craig Steinke
124 Sleepy Holly Lane
Orinda California 94563
Tel: 510.254.3929
22
<PAGE>
Exhibit A
---------
JOINDER AGREEMENT
-----------------
Joinder Agreement, dated as of this ____ day of January, 1998, by and
among Eagle Family Foods Holdings, Inc., a Delaware corporation (the "Company"),
and the undersigned (the "Investor").
Reference is made to that certain Stockholders Agreement (the
"Stockholders Agreement"), dated as of January 23, 1998, by and among Eagle
Family Foods Holdings, Inc., GE Investment Private Placement Partners II, A
Limited Partnership, Warburg, Pincus Ventures, L.P. and the other holders of
Common Stock and Preferred Stock from time to time party thereto, as the same
may from time to time be amended.
By executing this Joinder Agreement, the Investor hereby agrees to be
bound by the terms of the Stockholders Agreement as if he were an original
signatory to such Agreement and shall be deemed to be a Management Investor
thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Joinder
Agreement as of the date first above written.
_____________________________
Name:
Agreed to and Accepted by:
EAGLE FAMILY FOODS HOLDINGS, INC.
_____________________________
Name:
Title:
<PAGE>
Exhibit 4.6
EAGLE FAMILY FOODS HOLDINGS, INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 23, 1998, among the
investors listed from time to time on Schedule I hereto (the "Investors") and
Eagle Family Foods Holdings, Inc., a Delaware corporation (the "Company").
R E C I T A L S
---------------
WHEREAS, the Investors have (a) pursuant to the terms of the
subscription agreements dated as of even date herewith, by and among the Company
and the Investors (collectively, the "Subscription Agreements"), agreed to
purchase shares of Common Stock, par value $0.01 per share, of the Company
("Common Stock") and shares of Series A Non-Voting Preferred Stock, par value
$0.01 per share, of the Company (the "Preferred Stock") and/or (b) pursuant to
the terms of the restricted stock agreement under the Company's 1998 Stock
Incentive Plan (the "Plan"), received grants of restricted Common Stock, subject
to certain vesting requirements and forfeiture provisions; and
WHEREAS, the Company has agreed, as a condition precedent to the
Investors' obligations under the Subscription Agreements and/or in conjunction
with the grants of restricted Common Stock pursuant to the Plan, to grant the
Investors certain registration rights; and
WHEREAS, the Company and the Investors desire to define the
registration rights of the Investors on the terms and subject to the conditions
herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms have the respective meaning
set forth below:
Commission: shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as
------------
amended;
GEI: shall mean GE Investment Private Placement Partners II, a
---
Limited Partnership;
Holder: shall mean any holder of Registrable Securities;
------
<PAGE>
Initial Public Offering: shall mean the initial public offering of
-----------------------
shares of Common Stock pursuant to a registration under the Securities Act;
Initiating Holder: shall mean either GEI or Warburg;
-----------------
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a government or agency or political subdivision thereof;
register, registered and registration: shall mean a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
Registrable Securities: (A) the shares of Common Stock issued to the
----------------------
Investors pursuant to the Subscription Agreements, (B) the shares of Preferred
Stock issued to the Investors pursuant to the Subscription Agreements, (C) any
additional shares of Common Stock or Preferred Stock acquired by the Investors
(other than pursuant to a stock option plan or any other incentive plan), (D)
the shares of Common Stock issued to the Investors on the date hereof under the
Plan, which have theretofore become vested and have not theretofore become
forfeited under the Plan, and (E) any capital stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (A), (B), (C)
or (D) above, provided that notwithstanding the provisions of clause (D) above
and this clause (E), "Registrable Securities" shall not include any shares
previously registered on a registration relating solely to the Plan;
Registration Expenses: shall mean (x) all expenses incurred by the
---------------------
Company in compliance with Sections 2(a) and (b) hereof, excluding Selling
Expenses, but including, without limitation, all registration and filing fees,
printing expenses, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company) and (y) all reasonable fees and disbursements of one
counsel retained by the Holders of a majority of Registrable Securities;
Security, Securities: shall have the meaning set forth in Section
--------------------
2(1) of the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended;
--------------
2
<PAGE>
Selling Expenses: shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale of Registrable Securities; and
Warburg: Warburg, Pincus Ventures, L.P., a Delaware limited
-------
partnership.
2. REGISTRATION RIGHTS
-------------------
(a) Requested Registration.
----------------------
(i) Request for Registration. If the Company shall receive from
------------------------
an Initiating Holder, at any time, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(A) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(B) as soon as practicable, use its diligent best efforts
to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request received by the Company within 10 business days after
written notice from the Company is given under Section 2(a)(i)(A)
above; provided that the Company shall not be obligated to effect,
--------
or take any action to effect, any such registration pursuant to this
Section 2(a):
(w) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act or applicable rules or
regulations thereunder;
(x) (i) With respect to a request for registration of
shares of Common Stock, after the Company has effected two (2) such
registrations pursuant to this Section 2(a) requested by the
3
<PAGE>
Initiating Holder (which shall not preclude the other Initiating
Holder from making such a request if the Company has not already
effected two (2) such registrations pursuant to this Section 2(a) for
such other Initiating Holder) and (ii) with respect to a request for
registration of shares of Preferred Stock, after the Company has
effected two (2) such registrations pursuant to this Section 2(a)
requested by the Initiating Holder (which shall not preclude the other
Initiating Holder from making such a request if the Company has not
already effected two (2) such registrations pursuant to this Section
2(a) for such other Initiating Holder), and, in each case, such
registrations have been declared or ordered effective and the sales of
such Registrable Securities shall have closed;
(y) If the Registrable Securities requested by all Holders
to be registered pursuant to such request do not have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than $15,000,000 (or $25,000,000 if such
requested registration is the Initial Public Offering); or
(z) If at the time of any request to register Registrable
Securities, the Company is engaged or has fixed plans to engage within
thirty (30) days of the time of the request in (1) a registered public
offering as to which the Holders may include Registrable Securities
pursuant to Section 2(b) or (2) an acquisition, financing or other
material transaction which, in the good faith determination of the
Board of Directors of the Company, would be adversely affected by the
requested registration to the material detriment of the Company. In
such event, the Company may, at its option, direct that such request
be delayed for a period not in excess of three months from the
effective date of such offering or the date of the determination by
the Board of Directors, as the case may be, such right to delay a
request to be exercised by the Company not more than once in any one-
year period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2(a)(ii) below,
include other securities, other than Registrable Securities, of the Company
which are held by the other stockholders ("Other Stockholders") of the Company.
The registration rights set forth in this Section 2 may be assigned,
in whole or in part, to any permitted transferee of Registrable Securities (who
shall be bound by all obligations of this Agreement).
4
<PAGE>
Holders holding a majority of the Registrable Securities requested to
be registered may, at any time prior to the effective date of the registration
statement relating to such registration, revoke such request, without liability
to the Company, such Holders, any of the other Holders or the Other
Stockholders, by providing a written notice to the Company revoking such
request.
(ii) Underwriting. If the Initiating Holders intend to
------------
distribute the Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2(a).
If shares held by Other Stockholders are requested by such Other
Stockholders to be included in any registration pursuant to this Section 2, the
Company shall condition such inclusion on their acceptance of the further
applicable provisions of this Section 2. The Initiating Holders whose shares
are to be included in such registration and the Company shall (together with all
Other Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by such Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 2(a), if the representative
advises the Holders in writing that marketing factors require a limitation on
the number of shares to be underwritten or a limitation on the inclusion of
shares held by directors and officers of the Company, the securities of the
Company held by Other Stockholders shall be excluded from such registration to
the extent so required by such limitation. If, after the exclusion of such
shares, further reductions are still required, the securities of the Company
held by each Holder other than the Initiating Holders shall be excluded from
such registration to the extent so required by such limitation. Thereafter, if
still further reductions are required, the number of shares included in the
registration by each Initiating Holder shall be reduced on a pro rata basis
(based on the number of shares held by such Initiating Holder), by such minimum
number of shares as is necessary to comply with such request. No Registrable
Securities or any other securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
If any Other Stockholder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company and officers and
directors of the Company may include its or their securities for its or their
own account in such registration if the representative so agrees and
5
<PAGE>
if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
(iii) Other Registration Rights. The Company shall not grant
-------------------------
any registration rights inconsistent with the provisions of this Section
2(a) and in granting any demand registration rights hereafter shall provide
that the Holders shall have the right to notice of the exercise of any such
demand registration right and to participate in such registration on a pro
rata basis.
(iv) Underwriter Selection. Notwithstanding anything to the
---------------------
contrary contained in this Agreement, so long as GEI is a holder of
Registrable Securities, no managing underwriter or representative of the
underwriters in any registration of the Company's securities effected
pursuant to this Agreement in which General Electric Company owns a direct
or indirect interest of five percent (5%) or more shall be selected absent
the prior written consent of GEI.
(b) Company Registration.
--------------------
(i) If the Company shall determine to register any of its equity
securities either for its own account or any Other Stockholders, other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on
any registration form which does not permit secondary sales or does not
include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(A) promptly give to each of the Holders a written notice
thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made by the Holders within fifteen (15)
days after receipt of the written notice from the Company described in
clause (A) above, except as set forth in Section 2(b)(ii) below. Such
written request may specify all or a part of the Holders' Registrable
Securities of the same class of equity securities being registered
under such registration statement.
6
<PAGE>
(ii) Underwriting. If the registration of which the Company
------------
gives notice is for a registered public offering involving an underwriting,
the Company shall so advise each of the Holders as a part of the written
notice given pursuant to Section 2(b)(i)(A). In such event, the right of
each of the Holders to registration pursuant to this Section 2(b) shall be
conditioned upon such Holders' participation in such underwriting and the
inclusion of such Holders' Registrable Securities in the underwriting to
the extent provided herein. The Holders whose shares are to be included in
such registration shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the representative of
the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2(b), if the
representative determines that marketing factors require a limitation on
the number of shares to be underwritten or a limitation on the inclusion of
shares held by directors and officers of the Company, and (x) if such
registration is the Initial Public Offering, the representative may
(subject to the allocation priority set forth below) exclude from such
registration and underwriting some or all of the Registrable Securities
which would otherwise be underwritten pursuant hereto to the extent so
required by such limitation, and (y) if such registration is other than the
Initial Public Offering, the representative may (subject to the allocation
priority set forth below) limit the number of Registrable Securities to be
included in the registration and underwriting to not less than twenty five
percent (25%) of the total number of shares to be included in such
underwritten offering. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities
that are entitled to be included in the registration and underwriting shall
be allocated in the following manner: The securities of the Company held
by officers, directors and Other Stockholders (other than Registrable
Securities and other than securities held by holders who by contractual
right demanded such registration ("Demanding Holders")) shall be excluded
from such registration and underwriting to the extent required by such
limitation, and, if a limitation on the number of shares is still required,
the number of shares that may be included in the registration and
underwriting by each of the Holders other than the Demanding Holders shall
be excluded from such registration to the extent so required by such
limitation. Thereafter, if still further reductions are required, the
number of shares included in the registration by each of the Demanding
Holders shall be reduced, on a pro rata basis (based on the number of
shares held by such Demanding Holders), by such minimum number of shares as
is necessary to comply with such limitation. If any of the Holders or any
officer, director or Other Stockholder
7
<PAGE>
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(iii) Number and Transferability. Each of the Holders shall be
--------------------------
entitled to have its shares included in an unlimited number of
registrations pursuant to this Section 2(b). The registration rights
granted pursuant to this Section 2(b) shall be assignable, in whole or in
part, to any permitted transferee of the Registrable Securities (who shall
be bound by all obligations of this Agreement).
(iv) Underwriter Selection. Notwithstanding anything to the
---------------------
contrary contained in this Agreement, so long as GEI is a holder of
Registrable Securities, no managing underwriter or representative of the
underwriters in any registration of the Company's securities effected
pursuant to this Agreement in which General Electric Company owns a direct
or indirect interest of five percent (5%) or more shall be selected absent
the prior written consent of GEI.
(c) Form S-3. Following the Initial Public Offering, the Company
--------
shall use its best efforts to qualify for registration on Form S-3 for secondary
sales. After the Company has qualified for the use of Form S-3, the Investors
shall have the right to request unlimited registrations on Form S-3 (such
requests shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of shares by
such holders), subject only to the following:
(i) The Company shall not be required to effect a registration
pursuant to this Section 2(c) unless the Holder or Holders requesting
registration propose to dispose of shares of Registrable Securities having
an aggregate price to the public (before deduction of underwriting
discounts and expenses of sale) of more than $5,000,000.
(ii) The Company shall not be required to effect a registration
pursuant to this Section 2(c) within 180 days of the effective date of the
most recent registration pursuant to this Section 2 in which securities
held by the requesting Holder could have been included for sale or
distribution.
(iii) The Company shall not be required to effect any
registration pursuant to this Section 2(c) in any particular jurisdiction
in which the Company would be required to execute a general consent to
service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such
8
<PAGE>
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
(iv) The Company shall not be required to effect a registration
pursuant to this Section 2(c) if at the time of any request to register
Registrable Securities, the Company is engaged or has fixed plans to engage
within thirty (30) days of the time of the request in (A) a registered
public offering as to which the Holders may include Registrable Securities
pursuant to Section 2(b) or (B) an acquisition, financing or other material
transaction which, in the good faith determination of the Board of
Directors of the Company, would be adversely affected by the requested
registration to the material detriment of the Company. The Company may, at
its option, direct that such request be delayed for a period not in excess
of three months from the effective date of such offering or the date of the
determination by the Board of Directors, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any
one-year period.
The Company shall give prompt written notice to all Holders of the receipt
of a request for registration pursuant to this Section 2(c) and shall provide a
reasonable opportunity for other Holders to participate in the registration,
provided that if the registration is for an underwritten offering, the terms of
Section 2(a)(ii) shall apply to all participants in such offering. Subject to
the foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
(d) Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Section 2 (whether or not such registration, qualification or compliance is
effectuated) shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered (or proposed to be
registered) pro rata on the basis of the number of their shares so registered
(or proposed to be registered).
(e) Registration Procedures. In the case of each registration
-----------------------
effected by the Company pursuant to this Section 2, the Company will keep the
Holders, as applicable, advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company
will:
(i) prior to filing a registration statement or prospectus or
any amendment or supplement thereto, furnish to each Holder with
Registrable Securities covered by such registration statement, one counsel
selected by the Holders of a majority of the Registrable Securities covered
by such registration statement or prospectus, and each underwriter,
9
<PAGE>
if any, of the Registrable Securities covered by such registration
statement or prospectus, copies of such document as proposed to be filed,
together with exhibits thereto, which documents will be subject to review
and approval by the foregoing within 5 days after delivery, and thereafter
furnish each such Holder, counsel, 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 such
other documents incident thereto as such Holder, counsel or underwriter, if
any, may from time to time reasonably request;
(ii) after the filing of the registration statement, the Company
will promptly notify each Holder with Registrable Securities covered by
such registration statement, one counsel selected as described in clause
(i) above, and each underwriter, if any, of the Registrable Securities
covered by such registration statement or prospectus, of any stop order
issued or threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered;
(iii) keep such registration effective for a period of one
hundred twenty (120) days or until the Holders, as applicable, have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that (A) such 120-day
-------- -------
period shall be extended for a period of time equal to the period during
which the Holders, as applicable, refrain from selling any securities
included in such registration in accordance with provisions in Section 2(i)
hereof; and (B) in the case of any registration of Registrable Securities
on Form S-3 which are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule under
the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment which (1) includes any prospectus
required by Section 10(a) of the Securities Act or (2) reflects facts or
events representing a material or fundamental change in the information set
forth in the registration statement, the incorporation by reference of
information required to be included in (1) and (2) above to be contained in
periodic reports filed pursuant to Section 12 or 15(d) of the Exchange Act
in the registration statement;
10
<PAGE>
(iv) use its best efforts to (A) register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any applicable Holder reasonably (in
light of such Holder's intended plan of distribution) requests and (B)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and 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
Registrable Securities owned by such Holder; provided that the Company will
not be required to (1) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph,
(2) subject itself to taxation in any such jurisdiction, or (3) consent to
general service of process in any such jurisdiction;
(v) immediately notify each Holder of Registrable Securities
covered by such registration at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of
any event requiring the preparation of a supplement or amendment to such
prospectus and promptly prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not include 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 not
misleading in the light of the circumstances then existing, and promptly
deliver to each such Holder, their counsel and underwriter, if any, any
such supplement or amendment;
(vi) furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective, (A) an opinion, dated as of such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders participating in such registration,
addressed to the underwriters, if any, and to the Holders participating in
such registration and (B) a letter, dated as of such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders
participating in such registration,
11
<PAGE>
addressed to the underwriters, if any, and if permitted by applicable
accounting standards, to the Holders participating in such registration.
(vii) use its best efforts to cause all such Registrable
Securities to be listed on a national securities exchange in the United
States or NASDAQ and on each securities exchange on which similar
securities issued by the Company may then be listed, and enter into such
customary agreements including a listing application and indemnification
agreement in customary form, and to provide a transfer agent and registrar
for such Registrable Securities covered by such registration statement no
later than the effective date of such registration statement;
(viii) enter into such customary agreements (including an
underwriting agreement or qualified independent underwriting agreement, in
each case in customary form) and take all such other actions as the Holders
of a majority of the Registrable Securities being covered by such
registration statement or the underwriters retained by such Holders, if
any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities, including customary representations,
warranties, indemnities and agreements;
(ix) make available for inspection, during business hours of
the Company, by an Holder of Registrable Securities covered by such
registration statement, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney accountant or
other agent retained by any such Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company
and its subsidiaries, if any, as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's officers directors and employees, and those of the Company's
affiliates, if any, to supply all information and respond to all inquiries
reasonably requested by any such registration statement;
(x) use all commercially reasonable efforts to obtain a "cold
comfort" letter from the Company's appointed auditors in customary form and
covering such matters of the type customarily covered by "cold comfort"
letters as the Holders of a majority in interest of the Registrable
Securities being sold reasonably request; and
(xi) otherwise use all commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and
make available to the Holders as soon as reasonably practicable, an
earnings statement covering a period of a least twelve months beginning
after the effective date of the registration statement (as the term
12
<PAGE>
"effective date" is defined in Rule 158(c) under the Securities Act) which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
(f) Indemnification.
---------------
(i) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each person
controlling each of the Holders (within the meaning of the Securities Act),
with respect to each registration which has been effected pursuant to this
Section 2, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
preliminary, final or summary prospectus, offering circular or other
document (including any related registration statement, notification or the
like, or any amendment or supplement to any of the foregoing) incident to
any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation (or alleged violation) by the Company of the
Securities Act or the Exchange Act or any rule or regulation thereunder or
of any applicable state or common law applicable to the Company and
relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each
of the Holders, each of its officers, directors and partners, and each
person controlling each of the Holders, each such underwriter and each
person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending
any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon and in conformity with written
information furnished to the Company by the Holders or underwriter and
stated to be specifically for use therein. The foregoing indemnification
shall remain in effect regardless of any investigation by any indemnified
party and shall survive any transfer or assignment by a Holder of its
Registrable Securities or of its rights pursuant to this Agreement.
(ii) Each of the Holders will, if Registrable Securities held by
it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify on a several, but
not joint basis, the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by
13
<PAGE>
such a registration statement, each person who controls the Company or such
underwriter, each Other Stockholder and each of their officers, directors,
and partners, and each person controlling such Other Stockholder against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) made by such Holder of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or
any omission (or alleged omission) made by such Holder to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
directors, officers, partners, persons, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of
-------- -------
each of the Holders hereunder shall be limited to an amount equal to the
net proceeds to such Holder of securities sold pursuant to such
registration statement or prospectus.
(iii) Each party entitled to indemnification under this Section
2(f) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld) and
the Indemnified Party may participate in such defense at such party's
expense (unless the Indemnified Party shall have reasonably concluded that
there may be a conflict of interest between the Indemnifying Party and the
Indemnified Party in such action, in which case the fees and expenses of
counsel shall be at the expense of the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2 except to the extent the Indemnifying Party is
materially prejudiced thereby. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving
14
<PAGE>
by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified
Party shall promptly furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and
as shall be reasonably required in connection with the defense of such
claim and litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 2(f) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of
the Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations, provided, however,
that 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 any such fraudulent
misrepresentation. The relative fault of the Indemnifying Party and of the
Indemnified Party 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 Indemnifying Party or by the Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, no Holder will be required to contribute any
amount pursuant to this paragraph (f) in excess of the total price at which
the Registrable Securities of such Holder were offered to the public (less
underwriting discounts and commissions, if any). Each Holder's obligations
to contribute pursuant to this paragraph are 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 the applicable Holders and not
joint.
(v) The foregoing indemnity agreement of the Company and Holders
is subject to the condition that, insofar as they relate to any loss,
claim, liability or damage made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the
time the registration statement in question becomes effective or the
amended prospectus filed with the Commission pursuant to Commission Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not
15
<PAGE>
inure to the benefit of (A) any underwriter if a copy of the Final
Prospectus was furnished to the underwriter and was not furnished to the
person asserting the loss, liability, claim or damage at or prior to the
time such action is required by the Securities Act or (B) in circumstances
where no underwriter is acting as such in the offer and sale in question,
any Holder who (1) either directly or through its agent provided the
preliminary prospectus to the Person asserting the loss, liability, claim
or damage, (2) was furnished with a copy of the Final Prospectus, and (3)
did not furnish or cause to be furnished the Final Prospectus to the Person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.
(vi) Any indemnification payments required to be made to an
Indemnified Party under this Section 2(f) shall be made as the related
claims, losses, damages, liabilities or expenses are incurred.
(g) Information by the Holders. Each of the Holders holding
--------------------------
securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 2. No Investor shall be required, in connection
with any underwriting agreements entered into in connection with any
registration, to provide any information, representations or warranties, or
covenants with respect to the Company, its business or its operations, and such
Investors shall not be required to provide any indemnification with respect to
any registration statement except as specifically provided for in Section
2(f)(ii) hereof.
(h) Rule 144 Reporting.
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act ("Rule
144"), at all times from and after the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at any time after it has become
subject to such reporting requirements; and
16
<PAGE>
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
from and after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing the Holder to sell any
such securities without registration.
(i) "Market Stand-off" Agreement. Each of the Holders agrees, if
----------------------------
requested by the Company and an underwriter of equity securities of the Company,
not to sell or otherwise transfer or dispose of any Registrable Securities held
by such Holder during the 90-day period (or such longer period if requested by
such underwriter, up to 180 days) following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
(i) such agreement only applies to the Initial Public Offering;
and
(ii) all officers and directors of the Company enter into similar
agreements.
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said 90-day period (or such longer period if
requested by such underwriter, up to 180 days). The provisions of this Section
2(i) shall be binding upon any transferee who acquires Registrable Securities,
whether or not such transferee is entitled to the registration rights provided
hereunder.
(j) Termination. The registration rights set forth in this Section 2
-----------
shall not be available to any Holder if, in the opinion of counsel to the
Company, all of the Registrable Securities then owned by such Holder could be
sold in any 90-day period pursuant to Rule 144 (without giving effect to the
provisions of Rule 144(k)). The Company will arrange for a provision to the
transfer agent for such shares of an opinion of counsel in connection with any
such sale under Rule 144.
3. MISCELLANEOUS
-------------
17
<PAGE>
(a) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and subsections
----------------
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(d) Notices.
-------
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or by facsimile or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(A) if to the Company, to Eagle Family Foods Holdings,
Inc., 220 White Plains Road, Tarrytown, New York 10591, Attention:
Jonathan Rich, Esq. (Fax. No.: (973) 263 3748), or at such other
address or facsimile number as it may have furnished in writing to the
Investors;
(B) if to the Investors, at the address or facsimile number
listed on Schedule I hereto, or at such other address or facsimile
number as may have been furnished in writing to the Company.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and
if mailed by registered or certified mail, on the third business day after
the date of such mailing.
(e) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the Investor
by any photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further
18
<PAGE>
reproduction of such reproduction shall likewise be admissible in evidence.
(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.
(g) Entire Agreement; Amendment and Waiver. This Agreement
--------------------------------------
constitutes the entire understanding of the parties hereto and supersedes all
prior understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Investors holding a 66-2/3% majority of
the then outstanding Registrable Securities.
(h) Severability. In the event that any part or parts of this
------------
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
EAGLE FAMILY FOODS HOLDINGS, INC.
By:/s/ John O'C. Nugent
-------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer,
President and Director
INSTITUTIONAL INVESTORS:
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: GE Investment Management
Incorporated, its General
Partner
By:/s/ Michael M. Pastore
-------------------------
Name: Michael M. Pastore
Title: Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Kewsong Lee
-------------------------
Name: Kewsong Lee
Title: Partner
ADDITIONAL INVESTORS:
[SIGNATURE PAGES FOLLOW]
20
<PAGE>
By:/s/ William Lynch
----------------------
William Lynch
By:/s/ John O'C. Nugent
----------------------
John O'C. Nugent
By:/s/ Richard Lumpp
----------------------
Richard Lumpp
By:/s/ Jonathan F. Rich
----------------------
Jonathan F. Rich
By:/s/ James Byrne
----------------------
James Byrne
21
<PAGE>
By:/s/ Tamar Bernbaum
----------------------
Tamar Bernbaum
By:/s/ A.L. Bill Stanley
----------------------
A.L. Bill Stanley
By:/s/ Fred Dale
----------------------
Fred Dale
By:/s/ Paul F. Keida
----------------------
Paul F. Keida
By:/s/ Virginia Cappello
----------------------
Virginia Cappello
By:/s/ Marcus L. Currey
----------------------
Marcus L. Currey
22
<PAGE>
By:/s/ William J. Awad
----------------------
William J. Awad
By:/s/ Amy L. Palazzo
----------------------
Amy L. Palazzo
23
<PAGE>
By:/s/ Craig Steinke
----------------------
Craig Steinke
24
<PAGE>
SCHEDULE I
NAME AND ADDRESS OF INVESTOR:
- - - - -----------------------------
INSTITUTIONAL INVESTORS:
GE Investment Private Placement Partners II,
a Limited Partnership
3003 Summer Street
Stamford, CT 06905
Attention: Andreas T. Hildebrand
(Fax No.: (203) 326-2495)
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: Kewsong Lee
(Fax No.: (212) 878-6162)
<PAGE>
ADDITIONAL INVESTORS:
Tamar Bernbaum
5 Acker Drive
Ryebrook, NY 10573
Tel: 914-939-0099
James A. Byrne
3 Berkeley Place
Cranford, NJ 07016
Tel: 908-276-7372
Virginia Cappello
68 Dorethy Road
West Redding, CT 06896
Tel: 203-938-2024
Marcus L. Currey
1060 Cannonade Court
Gahanna, OH 43230
Tel: 614-855-8203
Fred Dale
Rural Route 3
P.O.Box 18
Wellsboro, PA 06901
Tel: 717-724-6818
Paul F. Keida
6318 Westbrook Place
Worthington, OH 43085
Tel: 614-846-1320
Richard Lumpp
100 Cedar Drive
Danbury, CT 06811
Tel: 203-791-8188
26
<PAGE>
William A. Lynch
80 Ferry Boulevard
Stratford, CT 06497
Tel: 203-226-6155
John O'C. Nugent
63 Crescent Place
Short Hills, NJ 07078
Tel: 201-467-4520
Jonathan F. Rich
33 Briarcliff Road
Mountain Lakes, NJ 07046
Tel: 973.316.6870
A.L. Bill Stanley
5506 Stillwater Avenue
Westerville, OH 43082
Tel: 614-895-1913
Craig Steinke
124 Sleepy Holly Lane
Orinda California 94563
Tel: 510.254.3929
27
<PAGE>
William J. Awad
1 Broad Street
Westport, CT 06880
Tel: 203-226-5382
Amy L. Palazzo
125 Lordship Road
Stratford, CT 06497
Tel: 203-377-2121
28
<PAGE>
Exhibit 4.7
EAGLE FAMILY FOODS HOLDINGS, INC.
SUBSCRIPTION AGREEMENT
January 23, 1998
GE PRIVATE PLACEMENT PARTNERS II,
A LIMITED PARTNERSHIP
3003 Summer Street
Stamford, CT 06905
Attention: Andreas Hildebrand
WARBURG, PINCUS VENTURES, L.P.
466 Lexington Avenue
17th Floor
New York, NY 10017
Attention: Kewsong Lee
Gentlemen:
This letter is being written for the purpose of setting forth the
basic terms of the understandings between Eagle Family Foods Holdings, Inc., a
Delaware corporation (the "Company"), and you in connection with the purchase by
you and sale by the Company of shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock") and Series A Non-Voting Preferred
Stock, par value $0.01 per share ("Preferred Stock") as set forth below.
If you are in agreement with the terms and conditions set forth
herein, please sign the last page of one copy of this letter and return it to
us, whereupon this letter shall represent a legally binding agreement between us
and shall supersede any prior agreement between you and the Company or any third
party as regards the sale and purchase of stock of the Company. Please keep the
other copy of this letter for your files.
1. AUTHORIZATION OF CAPITAL STOCK. The Company has authorized the
------------------------------
creation of (i) 1,200,000 shares of Common Stock and (ii) 1,000,000 shares of
Preferred Stock. The terms, limitations and relative rights and preferences of
the Common Stock and Preferred Stock are set forth in the Amended and Restated
Certificate of Incorporation of the Company (the "Certificate of
Incorporation").
<PAGE>
2. PURCHASE AND SALE OF SHARES.
---------------------------
(a) Subject to the terms and conditions hereof, on the Closing Date,
as defined herein, the Company shall issue to you and you shall purchase from
the Company, the number of shares of Common Stock and Preferred Stock
(collectively, the "Shares") set forth opposite your name on Schedule I hereto
for the amount per share in cash set forth on Schedule I hereto (the "Purchase
Price").
(b) Such issuance and purchase shall be effected by the Company
executing and delivering to you duly executed certificates evidencing the Shares
to be subscribed by you, duly registered in your name against delivery by you to
the Company of the amounts set forth opposite your name on Schedule I. Such
payment shall be made by wire transfer.
(c) The closing of the sale shall take place concurrently with the
closing of the acquisition of the Borden Brands North America business by the
Company's wholly-owned subsidiary, Eagle Family Foods, Inc., pursuant to the
Asset Purchase Agreement dated as of November 24, 1997, as amended as of
December 9, 1997 and January 15, 1998 (as so amended, the "Asset Purchase
Agreement"), among Borden Foods Corporation, BFC Investments, L.P. and the
Company (the "Closing Date").
(d) On the Closing Date, the Company shall deliver to you such
officers' certificates, good standing certificates, instruments and opinions as
you shall reasonably request relating to the transactions contemplated hereby.
3. RESTRICTIONS ON STOCK. None of the Shares (including any shares
---------------------
received as a result of dividends, splits or any other forms of recapitalization
in respect of such Shares) shall be Transferred (as hereinafter defined), either
voluntarily or involuntarily, directly or indirectly, except (i) pursuant to an
effective registration under the Securities Act (as hereinafter defined), or in
a transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Securities Act and the
rules and regulations promulgated thereunder and (ii) in accordance with the
terms of the Stockholders Agreement, dated as of the Closing Date, by and among
the Company, each of you and the Management Investors (as defined therein) (as
the same may be amended from time to time, the "Stockholders Agreement").
2
<PAGE>
4. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
---------------------------------------------
The Company represents and warrants that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Annexed hereto as
Exhibits A and B, respectively, are true and complete copies of the Certificate
of Incorporation and the Bylaws as in effect on the date hereof.
(b) The Company has been recently formed to enter into the Asset
Purchase Agreement and to consummate the transactions contemplated thereby and
has not conducted any business other than in connection therewith and certain
start-up activities. As of the Closing Date, the Company will have no assets or
liabilities other than those incurred in connection with the Company's
incorporation and the Company's start-up activities, and those acquired or
assumed pursuant to the Asset Purchase Agreement and those acquired or incurred
in connection with the transactions contemplated thereby.
(c) The Board of Directors of the Company (the "Board") has
authorized the execution, delivery, and performance of this Agreement, and each
of the transactions contemplated hereby. No other corporate action is necessary
to authorize such execution, delivery and performance, and upon such execution
and delivery, this Agreement shall constitute a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms. The
Board has authorized the issuance and delivery of the Shares in accordance with
this Agreement.
(d) The Shares to be issued and sold by the Company pursuant to this
Agreement, when issued in accordance with the provisions hereof, will be validly
issued by the Company, fully paid and nonassessable shares of the Company, and
no stockholder of the Company has any preemptive rights to subscribe for any
such Shares.
(e) The creation, authorization, issuance, offer and sale of the
Shares do not require any consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
the Company or the vote, consent or approval in any manner of the holders of any
Security (as hereinafter defined) of the Company as a condition to the execution
and delivery of this Agreement or the creation, authorization, issuance, offer
and sale of the Shares. The execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations hereunder will
not violate (i) the terms and conditions of the Certificate of Incorporation or
the Bylaws of the Company, or any agreement or instrument to which the Company
is a party or by which it is
3
<PAGE>
bound or (ii) subject to the accuracy of your representations and warranties
contained in Section 5 hereof, any federal or state law.
5. INVESTOR REPRESENTATIONS
------------------------
You represent and warrant that:
(a) Offering Exemption. You understand that the Shares have not been
------------------
registered under the Securities Act, nor qualified under any state securities
laws, and that they are being offered and sold pursuant to an exemption from
such registration and qualification based in part upon your representations
contained herein.
(b) Knowledge of Offer. You are familiar with the business and
------------------
operations of the Company and have been given the opportunity to obtain from the
Company all information that you have requested regarding its business plans and
prospects.
(c) Knowledge and Experience; Ability to Bear Economic Risks. You
--------------------------------------------------------
have such knowledge and experience in financial and business matters that you
are capable of evaluating the merits and risks of the investment contemplated by
this Agreement; and you are able to bear the economic risk of this investment in
the Company (including a complete loss of this investment).
(d) Limitations on Disposition. You recognize that no public market
--------------------------
exists for the Shares, and none will exist in the future (other than as set
forth in the Registration Rights Agreement). You understand that you must bear
the economic risk of this investment indefinitely unless your Shares are
registered pursuant to the Securities Act or an exemption from such registration
is available, and unless the disposition of such Shares is qualified under
applicable state securities laws or an exemption from such qualification is
available, and that the Company has no obligation or present intention of so
registering the Shares (other than as set forth in the Registration Rights
Agreement). You further understand that there is no assurance that any exemption
from the Securities Act will be available, or, if available, that such exemption
will allow you to Transfer any or all the Shares, in the amounts, or at the
times you might propose. You understand at the present time Rule 144 promulgated
under the Securities Act by the Securities and Exchange Commission ("Rule 144")
is not applicable to sales of the Shares because they are not registered under
Section 12 of the Exchange Act (as hereinafter defined) and there is not
publicly available the information concerning the Company specified in Rule 144.
You further acknowledge that the Company is not presently under any obligation
to register under Section 12 of the Exchange Act
4
<PAGE>
or to make publicly available the information specified in Rule 144 and that it
may never be required to do so. You further acknowledge the restrictions on
disposition and other terms set forth in the Stockholders Agreement.
(e) Investment Purpose. You are acquiring the Shares solely for your
------------------
own account for investment and not with a view toward the resale, Transfer, or
distribution thereof, nor with any present intention of distributing the Shares.
No other Person (as hereinafter defined) has any right with respect to or
interest in the Shares to be purchased by you, nor have you agreed to give any
Person any such interest or right in the future.
(f) Capacity. You have full power and legal right to execute and
--------
deliver this Agreement and to perform your obligations hereunder.
SECTION 6. COVENANTS
---------
(a) Conduct of Business and Maintenance of Existence. The Company
------------------------------------------------
will continue to engage in business of the same general type as will be
conducted by it on the Closing Date, and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business.
(b) Compliance with Laws. The Company will comply in all material
--------------------
respects with all applicable laws, rules, regulations and orders except where
the failure to comply would not have a material adverse effect on the business,
properties, operations, prospects or financial condition of the Company.
(c) Insurance. The Company will maintain insurance with responsible
---------
and reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies of similar size and credit
standing engaged in similar business and owning similar properties, provided
that such insurance is and remains available to the Company at commercially
reasonable rates.
(d) Keeping of Books. The Company will keep proper books of record
----------------
and account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Company in accordance with
generally accepted accounting principles.
(e) Lost, etc. Certificates Evidencing Shares (or Shares of Common
--------------------------------------------------------------
Stock); Exchange. Upon receipt by the Company of evidence reasonably
- - - - ----------------
satisfactory to it of the loss, theft,
5
<PAGE>
destruction or mutilation of any certificate evidencing any Shares owned by you,
and (in the case of loss, theft or destruction) of an unsecured indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such
certificate, if mutilated, the Company will make and deliver in lieu of such
certificate a new certificate of like tenor and for the number of shares
evidenced by such certificate which remain outstanding. Your agreement of
indemnity shall constitute an indemnity satisfactory to the Company for purposes
of this Section 6. Upon surrender of any certificate representing any Shares for
exchange at the office of the Company, the Company at its expense will cause to
be issued in exchange therefor new certificates in such denomination or
denominations as may be requested for the same aggregate number of Shares
represented by the certificate so surrendered and registered as such holder may
request. The Company will also pay the cost of all deliveries of certificates
for such shares to you (including the cost of insurance against loss or theft in
an amount satisfactory to the holders) upon any exchange provided for in this
Section 6.
(f) Termination. The provisions of this Section 6 (other than
-----------
Section 6(e), which shall survive) shall remain in effect until the closing of
an Initial Public Offering (as defined in the Stockholders Agreement).
7. SECURITIES ACT RESTRICTIONS. In addition to the legend required by
---------------------------
Section 1(a) of the Stockholders Agreement, the certificates evidencing the
Shares will bear the following legend reflecting the restrictions on the
transfer of such securities contained in this Agreement:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred
except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder."
8. OTHER AGREEMENTS. On the Closing Date, the Company and each of you
----------------
shall execute and mutually deliver a counterpart of the Stockholders Agreement
and the Registration Rights Agreement.
6
<PAGE>
9. INTERPRETATION OF THIS AGREEMENT
--------------------------------
(a) Terms Defined. As used in this Agreement, the following terms
-------------
have the respective meaning set forth below:
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Person: an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a government or agency or political subdivision thereof.
Registration Rights Agreement: that certain registration rights
-----------------------------
agreement, dated as of the Closing Date, by and among the Company, each of you,
the Management Investors and the other Investors identified therein.
Securities Act: the Securities Act of 1933, as amended.
--------------
Security, Securities: as defined in Section 2(1) of the
--------------------
Securities Act.
Transfer: any sale, assignment, pledge, hypothecation, or other
--------
disposition or encumbrance.
(b) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(d) Section Headings. The headings of the sections and subsections of
----------------
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
SECTION 10 MISCELLANEOUS
-------------
(a) Notices. All communications under this Agreement shall be in
-------
writing and shall be delivered by hand or facsimile or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(i) if to GEI, at 3003 Summer Street, Stamford, CT 06905, Attention:
Andreas T. Hildebrand (Fax No.:
7
<PAGE>
(203) 326-2495, or at such other address or facsimile number as GEI
may have furnished the other parties hereto in writing;
(ii) if to Warburg, at 466 Lexington Avenue, New York, New York 10017,
Attention: Kewsong Lee (Fax No.: (212) 878-6162, or at such other
address or facsimile number as Warburg may have furnished the other
parties hereto in writing;
(iii) if to the Company, to Eagle Family Foods Holdings, Inc., 220
White Plains Road, Tarrytown, New York 10591, Attention: Jonathan
Rich, Esq. (Fax No.: (973) 263-3748), or at such other address or
facsimile number as the Company may have furnished the other parties
hereto in writing.
(b) Any notice so addressed shall be deemed to be given: if delivered
by hand or facsimile, on the date of such delivery, if a business day, otherwise
the first business day thereafter; if mailed by courier, on the first business
day following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
(c) Advances; Expenses and Taxes. (i) The Company agrees to (A) pay
----------------------------
the reasonable fees and disbursements of Coopers & Lybrand LLP, Willkie Farr &
Gallagher and Dewey Ballantine LLP, and such other counsel, consultant or
advisor as shall have been engaged by you, incurred in connection with the
negotiation, preparation, execution and delivery of the Asset Purchase
Agreement, the debt and equity financing and offering documents related thereto,
this Agreement, the Stockholders Agreement, the Registration Rights Agreement,
the Certificate of Incorporation and the other instruments and agreements
entered into pursuant to this Agreement or such other agreements, and any
amendments to the same and the due diligence activities related to the Asset
Purchase Agreement and (B) reimburse each of you for all the out of pocket
expenses incurred or advanced by you or by your respective counsel, consultants,
advisors or agents on behalf of the Company in connection with the start-up
activities of the Company, said payment or reimbursement to be made no later
than thirty (30) days after a bill for such advances, fees and/or disbursements
has been sent to the Company.
(ii) The Company will pay, and save and hold each of you harmless
from any and all liabilities (including interest and penalties) with respect to,
or resulting from any delay or failure in paying, stamp and other taxes (other
than income taxes), if any, which may be payable or determined to be payable on
the execution and delivery or acquisition of the Shares.
8
<PAGE>
(d) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (i) consents, waivers and
modifications relating hereto which may hereafter be executed, (ii) documents
received by you on the Closing Date (except for certificates evidencing the
Shares themselves), and (iii) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by you
by any photographic, photostatic, microfilm, micro-card, miniature photographic
or other similar process and you may destroy any original document so
reproduced. All parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by you in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(e) Survival. All warranties, representations, and covenants made by
--------
you and the Company herein or in any certificate or other instrument delivered
by one of you or the Company under this Agreement shall be considered to have
been relied upon by the Company or you, as the case may be, and shall survive
all deliveries to you of the Shares, or payment to the Company for such Shares,
regardless of any investigation made by the Company or one of you, as the case
may be, or on the Company's or your behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company hereunder.
(f) Successors and Assigns; No Third Party Beneficiaries. This
----------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties. Nothing in this Agreement shall confer upon any
Person not a party to this Agreement any rights or remedies of any nature or
kind whatsoever under or by reason of this Agreement.
(g) Entire Agreement; Amendment and Waiver. This Agreement, the
--------------------------------------
Registration Rights Agreement, the Stockholders Agreement and the Certificate of
Incorporation constitute the entire understandings of the parties hereto and
supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and each of you.
(h) Severability. In the event that any part or parts of this
------------
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such
9
<PAGE>
determination shall not effect the remaining provisions of this Agreement which
shall remain in full force and effect.
(i) Obligations Several. Notwithstanding anything to the contrary
-------------------
contained in this Agreement, each of your representations and warranties,
covenants and other agreements under this Agreement shall be several, but not
joint.
(j) Limitation on Enforcement of Remedies. The Company hereby agrees
-------------------------------------
that it will not assert against the limited partners of either of you any claim
it may have under this Agreement by reason of any failure or alleged failure by
either of you to meet its obligations hereunder.
(k) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10
<PAGE>
Please indicate your acceptance and approval of the foregoing in
the space provided below.
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
---------------------------
ACCEPTED AND APPROVED
AS OF THE 23RD DAY OF
JANUARY, 1998
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: GE Investment Management
Incorporated, its General
Partner
By: /s/ Michael M. Pastore
-------------------------------
Name: Michael M. Pastore
Title: Vice President
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co., its
General Partner
By: /s/ Kewsong Lee
-------------------------------
Name: Kewsong Lee
Title: Partner
11
<PAGE>
SCHEDULE I
PURCHASES OF SHARES
<TABLE>
<CAPTION>
Number of Price Per Number of Price Per
Shares of Share of Shares of Share of
Preferred Preferred Common Common
Name of Subscriber Stock Stock Stock Stock
- - - - ----------------------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
GE INVESTMENT PRIVATE
PLACEMENT PARTNERS II, A 404,075 $100.00 400,034.25 $1.00
LIMITED PARTNERSHIP
WARBURG, PINCUS VENTURES, 404,075 $100.00 400,034.25 $1.00
L.P.
</TABLE>
12
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
13
<PAGE>
EXHIBIT B
BY-LAWS
14
<PAGE>
Exhibit 10.1
MASTER CUSTOMER SERVICES AGREEMENT
This Master Customer Services Agreement (the "Agreement") is made and
entered into as of January 23, 1998 by and between Borden Foods Corporation, a
Delaware corporation ("BFC"), and Eagle Family Foods, Inc, a Delaware
corporation ("Customer").
This Agreement is entered into in connection with the Asset Purchase
Agreement, dated as of November 24, 1997, by and among BFC, BFC Investments,
L.P., a Delaware limited partnership, and Customer (the "Purchase Agreement").
Capitalized terms not defined herein have the meaning ascribed to them in the
Purchase Agreement.
1. Customer Services. Commencing as of the closing of the transactions
-----------------
described in the Purchase Agreement (the "Effective Date"), BFC shall provide or
cause to be provided, subject to Section 2(b), the services set forth on Exhibit
A hereto (the "Exhibit A Services"), Exhibit B hereto (the "Exhibit B Services")
and Exhibit C hereto (the "Exhibit C Services" and, together with the Exhibit A
Services and the Exhibit B Services, the "Customer Services"), provided,
however, that Customer Services shall not include any brand marketing, field
sales, financial analysis, any legal services or any services to be provided
under the Canadian Agreements. Customer Services shall be in all material
respects the same type, quality and level of service as provided to the Business
by BFC or its affiliates at comparable times and periods during the one-year
period prior to the Effective Date. Customer understands and agrees that BFC
may cause any of such services to be provided through any of BFC's affiliates.
In addition, BFC and Customer agree to act in accordance with the general
principles set forth on Exhibit D hereto.
2. Customer Services.
-----------------
(a) Fee. In exchange for the Customer Services provided hereunder,
---
Customer shall pay to BFC the monthly or unit fee for each of the services set
forth on Exhibit A, Exhibit B or Exhibit C, as applicable (the "Services Fees"),
provided, however, that (i) with respect to the Exhibit B Services, Customer
- - - - -------- -------
shall not be required to pay any Services Fees for Exhibit B Services which are
provided during the 90-day period commencing on the Closing Date and (ii) with
respect to Exhibit C Services, Customer shall pay the percentage of Services
Fees set forth below for Exhibit C Services which are provided during the
applicable period set forth below.
<PAGE>
2
Time Period % of Services Fees
----------- ------------------
135-day period commencing
on the Closing Date 0%
next 60 days 25%
Time Period % of Services Fees
----------- ------------------
next 60 days 50%
next 60 days 75%
thereafter 100%
Changes to services or fees mutually agreed to by the parties shall be
commemorated in writing from time to time, during the term hereof. In respect
of each calendar quarter, Customer shall pay the Services Fees quarterly in
arrears within thirty (30) days of its receipt of a reasonably detailed invoice
for the Services Fees during such quarter. Monthly fees for any Customer
Services shall be prorated on a per diem basis to the extent such Customer
Services shall have been provided for a partial month as of the end of any
calendar quarter. Unpaid amounts will bear interest at the rate of one and one-
half percent (1 1/2%) per month after thirty (30) days.
(b) Term; Discontinuation and Termination of Customer Services. The
----------------------------------------------------------
term of this Agreement shall commence as of the Effective Date and end on the
date that is 18 months after the Effective Date (the "Term"). In any event,
either party hereto may terminate this Agreement as provided in Section 8 below.
Notwithstanding anything contained herein to the contrary and subject to the
following sentences of this Section 2(b), Customer shall not be obligated to
purchase or accept any customer services. Customer will give to BFC at least
thirty (30) days prior written notice of its intent (i) not to take any Customer
Service as of the Effective Date or (ii) not to continue any Customer Service.
In the event of such termination, Customer will pay the Services Fees with
respect to such terminated Customer Services for the thirty (30) day period
following such notice at the higher of (i) the average of the rates charged for
such Customer Services during the prior sixty (60) days or (ii) the hourly or
other unit based charge for such Customer Services actually used.
(c) Rights to New Ideas. The parties acknowledge that performance of
-------------------
this Agreement by BFC may result in the development of new proprietary and
secret concepts, methods, techniques, processes, adaptations or ideas
("Proprietary Rights"). In such event, the parties agree to negotiate in good
faith an agreement with respect to the ownership and/or use of such Propriety
Rights which shall fairly recognize the
<PAGE>
3
contributions of each party, both financial and non-financial, to the
development thereof. If the parties are unable to reach agreement, the dispute
will be submitted to binding arbitration in accordance with American Arbitration
Association Rules.
3. Independent Contractor. Unless otherwise agreed in an exhibit for a
----------------------
particular project, BFC represents and warrants that it is an independent
contractor under this Agreement and that its employees performing services
hereunder shall be deemed to remain its employees subject to its direction and
control. BFC shall have sole responsibility for compliance with all laws
relating to the employer/employee relationship between BFC and such employees,
including, but not limited to, federal, state, and/or local laws on hours of
labor, wages, worker's compensation, unemployment compensation, insurance and
social security benefits.
4. Insurance. BFC shall provide the following insurance coverage during
---------
the term of this Agreement and shall obtain such insurance from companies
selected by BFC:
(a) Worker's Compensation Insurance as required by the laws of the
State of Ohio;
(b) Employees Liability Insurance in such customary amounts carried by
employers in a like business; and
(c) Comprehensive General Liability and Property Damage Insurance
including Contractual Liability coverage with Bodily Injury Limits of Five
Hundred Thousand Dollars ($500,000) each person, One Million Dollars
($1,000,000) each occurrence, One Million Dollars ($1,000,000) aggregate
operations and One Million Dollars ($1,000,000) aggregate contractual.
5. Litigation and Other Proceedings. In the event that Customer (or any
--------------------------------
of its officers or directors) at any time after the date hereof initiates or
becomes subject to any litigation or other proceedings before any governmental
authority or arbitration panel with respect to which the parties have no prior
agreement (as to indemnification or otherwise), BFC (and its employees, officers
and directors) shall (i) comply with any reasonable requests by Customer for
assistance in connection with such litigation or other proceedings (including
the provision of information and making available employees as witnesses) and
(ii) coordinate strategies and actions with respect to such litigation or other
proceedings to the extent such coordination would not be detrimental to BFC's
interests. In connection with the assistance provided by BFC under this
paragraph, BFC shall be reimbursed for its reasonable out-of-pocket expenses
including, but not limited to travel, temporary lodging and photocopying.
However, BFC shall not be entitled under this paragraph to any reimbursement of
salaries, wages or benefits paid to its employees.
<PAGE>
4
6. Cooperation; No Agency. Customer and BFC shall cooperate with each
----------------------
other with respect to all provisions of this Agreement and the Customer Services
provided hereunder. However, this Agreement creates no agency relationship
between Customer and BFC except as may be otherwise required for purposes of
this Agreement.
7. Limitation of Liability. Customer, its controlling persons, if any,
-----------------------
directors, officers, affiliates, employees, agents and permitted assigns (each,
a "Customer Party") shall not be liable to BFC, its directors, officers,
affiliates, employees, agents or permitted assigns (each, a "BFC Party") and
each BFC Party shall not be liable to any Customer Party, in each case, for any
special, indirect, incidental or consequential damages, arising in connection
with this Agreement or the Customer Services provided hereunder.
8. Default and Termination.
-----------------------
8.1 Any of the following shall constitute an event of default:
(a) Customer fails to cure any non-payment of a Services Fee or other
amount due and owing hereunder within thirty (30) days of receipt of written
notice of the existence of an event of default; or
(b) Either party fails to perform any other material obligation under
this Agreement and such failure remains uncured for more than thirty (30) days
after receipt of written notice thereof.
8.2 If any event of default occurs, the non-defaulting party, in addition
to any other rights available to it under law or equity, may terminate this
Agreement by giving written notice to the defaulting party. Remedies shall be
cumulative and there shall be no obligation to exercise a particular remedy.
8.3 The failure by a party to exercise any right hereunder shall not
operate as a waiver of such party's right to exercise such right or any other
right in the future.
8.4 Upon the termination of any Customer Service with respect to which BFC
holds books, records, files or any other documents owned by Buyer, BFC will
return all of such books, records, files and any other documents to Buyer as
soon as reasonably practicable. In addition, upon the termination of any
Customer Service which involved the compilation of data on BFC's computer
systems, BFC shall as soon as reasonably practicable deliver to Buyer on
magnetic media in readable format mutually acceptable to the parties, which
format shall be capable of being read by a computer mutually acceptable to the
parties, all data files maintained by BFC to the extent such files contain
information which is the property of Buyer, together with printed
<PAGE>
5
file descriptions sufficient to identify such data files and their contents and
structure.
9. Indemnification.
---------------
(a) Subject to Section 7 and Section 17 hereof, BFC shall protect,
indemnify, defend and hold Customer harmless from and against all liabilities,
claims, damages, losses and expenses (including, but not limited to, court costs
and reasonable attorneys' fees) (collectively referred to as "Damages"), caused
by or arising in connection with the non-performance of its obligation to
provide Customer Services or the negligence or willful misconduct of any
employee or agent of BFC in connection therewith, except to the extent that
Damages were caused directly or indirectly by acts or omissions of any Customer
employee or agent. In the event that Customer knows of a claim that may be the
subject of indemnification under this paragraph, it shall promptly notify BFC of
such claim and BFC, in its sole discretion, may defend, settle, or otherwise
litigate such claim.
(b) Subject to Section 7 and Section 17 hereof, Customer shall
protect, indemnify, defend and hold BFC harmless from and against all Damages of
any kind or nature, caused by or arising in connection with the negligence or
willful misconduct of any employee or agent of Customer in connection with this
Agreement, except to the extent that Damages were caused directly or indirectly
by acts or omissions of any BFC employee or agent. In the event that BFC knows
of a claim that may be the subject of indemnification under this paragraph, it
shall promptly notify Customer of such claim and Customer, in its sole
discretion, may defend, settle, or otherwise litigate such claim.
10. Indemnity For Infringement. BFC represents, guarantees and warrants
--------------------------
to Customer that the systems, programs and services covered by this Agreement
shall not violate or infringe any license agreement to which BFC or any of its
affiliates is a party, or any patent, trademark, trade name or copyright,
provided same are used by Customer in accordance with the terms of this
Agreement.
BFC shall protect, defend, indemnify and hold harmless Customer and
its employees, subsidiaries and affiliates against any Damages resulting from or
arising out of any breach or alleged breach of the warranties stated in this
Section 10, unless such breach or alleged breach was caused by the misuse,
negligence or willful misconduct of Customer.
In the event that a final injunction shall be obtained against the
Customer's use of the systems, software or programs by reason of such violation
or infringement, or if in BFC's opinion the systems, software or programs are
likely to become the subject of a claim of infringement, BFC will, at its option
and at its expense, either procure for Customer the right to continue using the
systems, software or programs, replace or
<PAGE>
6
modify the same so that they become non-infringing at no additional cost to
Customer.
11. Information. Subject to applicable law and privileges, each party
-----------
hereto covenants and agrees to provide the other party with all information
regarding itself and transactions under this Agreement that the other party
reasonably believes are required for its compliance with all applicable federal,
state, county and local laws, ordinances, regulations and codes, including, but
not limited to, securities laws and regulations.
12. Confidential Information. (a) BFC agrees that all records, data,
------------------------
files, input materials, reports, forms and other data received, computed,
developed, used and/or stored pursuant to this Agreement which are related to
the Business are the exclusive property of Buyer and that all such records and
data shall be furnished to Buyer in available machine readable form as soon as
reasonably practicable upon termination of this Agreement for any reason
whatsoever. Moreover, upon Buyer's request, at any time or times while this
Agreement is in effect, BFC shall as soon as reasonably practicable deliver to
Buyer any or all of the data and records held by BFC pursuant to this Agreement,
in the form routinely available to BFC. BFC shall not possess any interest,
title, lien or right to any such data or records. In addition, BFC agrees, upon
Buyer's request, to permit Buyer and its auditors to have access, at all times
while this Agreement is in effect, to any of Buyer's records or data which are
in possession of BFC during BFC's regular business hours, upon reasonable prior
notice and in a manner which does not interfere with BFC's business or its
performance under this Agreement.
(b) BFC shall deliver to Buyer upon its request a backup tape of
Buyer's data in the form and with the content routinely available to BFC.
(c) Without limiting the rights or obligation of the parties under the
Purchase Agreement, BFC and Customer hereby covenant and agree to hold in trust
and maintain confidential all Confidential Information relating to the other
party. "Confidential Information" shall mean all information disclosed by either
party to the other in connection with this Agreement, whether orally, visually,
in writing or in any other tangible form, and includes, but is not limited to
the prices, terms and conditions for any service performed pursuant to this
Agreement, economic and business and financial data, business plans, and the
like, but shall not include: (i) information which becomes generally available
to the public other than by release in violation of the provisions of this
Section 12; (ii) information which becomes available on a nonconfidential basis
to a party from a source other than the other party to this Agreement, provided
such source is not and was not bound to hold such information confidential;
(iii) information acquired or developed independently by a party without
violating this Section 12 or any other confidentiality agreement with the other
party: and (iv)
<PAGE>
7
information that any party hereto reasonably believes it is required to disclose
by law, provided that it first notifies the other party hereto of such
requirement and allows such party a reasonable opportunity to seek a protective
order or other appropriate remedy to prevent such disclosure. Without prejudice
to the rights and remedies of either party to this Agreement, a party disclosing
any Confidential Information to the other party in accordance with the
provisions of this Agreement shall be entitled to equitable relief by way of any
injunction if the other party hereto breaches or threatens to breach any
provision of this Section 12. The obligations hereunder shall survive for a
period of two (2) years beyond any termination of this Agreement.
13. Assignment. Except as otherwise provided herein, neither party may
----------
assign or transfer any of its rights or duties under this Agreement to any third
person or entity without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed; provided, however (i)
that at or following the Effective Date hereof, Customer may assign its rights
or delegate its duties to any affiliate of Customer, provided that no such
delegation will relieve Customer of its obligations hereunder, and (ii) Customer
(or any such assignee) may assign its rights hereunder (or any portion thereof)
to any lender or other person or entity in connection with any financing,
provided that no such delegation will relieve Customer of its obligations
hereunder.
14. Notices. Any notice, instruction, direction or demand under the terms
-------
of this Agreement required to be in writing will be duly given upon delivery, if
delivered by hand, facsimile transmission, overnight delivery or intercompany
mail, or five (5) days after posting if sent by U.S. mail, to the addresses
specified below or to such other address as either party may have furnished to
the other in writing in accordance with this Section 14:
If to Customer: Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, New York 10591
Attn: Jonathan Rich, Esq.
If to BFC Borden Foods Corporation
Customer Services Administration
180 East Broad Street, 27th Floor
Columbus, Ohio 43215-3799
Attn.: James A. King
FAX No.: (614) 225-7133
Borden Foods Corporation
180 East Broad Street, 27th Floor
Columbus, Ohio 43215-3799
Attn.: Nancy G. Brown
<PAGE>
8
Vice President,
Legal and Corporate Affairs
FAX No.: (614) 225-4420
15. Governing Law. This Agreement shall be construed us accordance with
-------------
and governed by the substantive internal laws of the State of Delaware.
16. Taxes. Customer agrees that it will pay or promptly reimburse BFC for
-----
any and all sales, use or proper taxes, assessments and other governmental
charges levied which result from the performance of services by BFC under this
Agreement, excluding payroll taxes with respect to BFC's employees, taxes based
on BFC's income generally or corporate franchise taxes.
17. Suspension. Except for Customer's obligation to pay BFC, neither
----------
party shall be liable for any failure to perform due to causes beyond its
reasonable control. In such event, the party's obligations hereunder shall be
postponed for such time as its performance is suspended or delayed on account of
such causes. The party suffering such causes shall promptly notify the other
party upon learning of the occurrence of such event, and will use its reasonable
best efforts to resume its performance with the least possible delay.
Furthermore, in the event of any failure, interruption or delay in performance
of any Customer Service, whether excused or unexcused, BFC shall use its
reasonable best efforts to restore such Customer Service as soon as may be
reasonably possible in accordance with its existing contingency plans for such
Customer Service.
18. Severability. If any provisions of this Agreement shall be invalid or
------------
unenforceable, such invalidity or un-enforceability shall not render the entire
Agreement invalid. Rather, the Agreement shall be construed as if not
containing the particular invalid or unenforceable provisions, and the rights
and obligations of each party shall be construed and enforced accordingly.
19. Rights Upon Orderly Termination; Survival. Upon termination or
-----------------------------------------
expiration of this Agreement or any of the Customer Services, each party shall,
upon request, forthwith return to the other party all reports, papers, materials
and other information ("Information") required to be provided to the other party
by this Agreement except that Customer shall in no event be required to return
to BFC Information that was transferred or otherwise acquired by Customer
pursuant to the Purchase Agreement. In addition, each party shall assist the
other in the orderly termination or discontinuation of this Agreement or any of
the Customer Services, described herein. Notwithstanding any termination of
this Agreement, the obligations of the parties hereto to make payments hereunder
and the provisions of Sections 7, 9, 10 and 12 and this Section 19 shall
survive.
<PAGE>
9
20. Amendment. This Agreement may only be amended by a written agreement
---------
executed by both parties hereto. No purchase order or other ordering document
that purports to modify or supplement the printed text of this Agreement or any
exhibit hereto shall add to or vary the terms of this Agreement. All such
proposed variations or additions (whether submitted by BFC or Customer) are
objected to and deemed immaterial unless agreed to in writing. To expedite
order processing, facsimile copies are considered documents equivalent to
original documents; however, Customer agrees to provide BFC with one fully-
executed original Agreement.
21. Entire Agreement. This Agreement, including the exhibits hereto,
----------------
constitutes the entire agreement between the parties, and supersedes all prior
agreement, representations, negotiations, statements or proposals related to the
subject matter hereof.
22. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives.
BORDEN FOODS CORPORATION
By: /s/ Nancy G. Brown
---------------------------------------------------
Name: Nancy G. Brown
------------------------------------------------
Title: Vice President, General Counsel and Secretary
------------------------------------------------
EAGLE FAMILY FOODS, INC.
By: /s/ John O'C. Nugent
--------------------------------------------------
Name: John O'C. Nugent
------------------------------------------------
Title: Chief Executive Officer, President and Director
-----------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Exhibit A: Transition Services & Charges
============================================================================================================================
Function Description Charge Units
============================================================================================================================
<S> <C> <C> <C>
Payroll Agreement should be with rSP - reconcile taxes 2,000 per month
to payment request and to ledger
- - - - ----------------------------------------------------------------------------------------------------------------------------
Payroll Administration Service will be provided by rSP 14.17 per assoc per mo
- - - - ----------------------------------------------------------------------------------------------------------------------------
*Medical & Dental Benefit Service will be provided by rSP 28.75 per assoc per mo
Administration
- - - - ----------------------------------------------------------------------------------------------------------------------------
*Flexible Spending Service Fees Service will be provided by rSP 6.00 per assoc per mo
- - - - ----------------------------------------------------------------------------------------------------------------------------
*Patient Advocacy Nurse Line Service will be provided by rSP 1.50 per assoc per mo
- - - - ----------------------------------------------------------------------------------------------------------------------------
Workmans Compensation Claims processing over cost of claim 6.25 per claim
- - - - ----------------------------------------------------------------------------------------------------------------------------
Market Research Project by request cost determined on project basis
- - - - ----------------------------------------------------------------------------------------------------------------------------
Syndicated Data Includes monthly refresh of syndicated data, 67,600 per month
and access to the data by associates through
data server
- - - - ----------------------------------------------------------------------------------------------------------------------------
Syndicated Data - Tapes Tapes for PPM (run semi annually) 13,500 per month
- - - - ----------------------------------------------------------------------------------------------------------------------------
Consumer Response Answer all consumer letter and phone contacts, 8.95 per contact
Provide detailed analysis (e.g. graphs, trends)
of contacts on a monthly basis or as needed, 8.95/
contact
- - - - ----------------------------------------------------------------------------------------------------------------------------
Note: Pension, 401K service fee, LTD, STD and life insurance support will need to be
established by buyer. These services cannot be provided by Borden because buyer would not be
participating in Borden plans.
- - - - ----------------------------------------------------------------------------------------------------------------------------
* Buyer will need to establish outside service provider within 60 to 90 days of closing because
of Borden's plan status as a non-multi-employer plan.
============================================================================================================================
</TABLE>
<PAGE>
2
Exhibit A: Canada Transition Services Charges Amounts in $Cdn.
<TABLE>
====================================================================================================================================
<S> <C> <C> <C>
Note: All costs are Canadian dollars
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Function Description Charge Units
====================================================================================================================================
Market Research Projects by request
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Syndicated Data Includes monthly reporting of syndicated data 8,506 mo
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Consumer Response $8.00 per contact
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Advertising and Marketing Buyer's Responsibility
====================================================================================================================================
</TABLE>
<PAGE>
3
EXHIBIT B: TRANSITION SERVICES & CHARGES
<TABLE>
<CAPTION>
=========================================================================================================
Function Description Charge Units
=========================================================================================================
<S> <C> <C> <C>
Commission Payments Process commission reports, calculate & arrange $ 2,250 per month
payments. Does not include cutting checks.
- - - - ---------------------------------------------------------------------------------------------------------
Coupon Redemption Buyer will need to establish own arrangement 1,150 per month plus
with clearing house. copuon clearing
house charges
- - - - ---------------------------------------------------------------------------------------------------------
Trade Marketing TIPS Trade Funding Management Services- 4,755 per month
Additionally, the following annual fees will
apply. Annual fee = $4,665
- - - - ---------------------------------------------------------------------------------------------------------
General Ledger Includes: Balance Sheet Income Statement, 5,000 per month
Department Expense & Trends
- - - - ---------------------------------------------------------------------------------------------------------
Accounts Payable Process invoices for payment process. Invoice/ 3,000 per month
check $6.50; print check only $1.50; manual
check $20
- - - - ---------------------------------------------------------------------------------------------------------
Cash Management Record & Reconcile bank activity 2,000 per month
- - - - ---------------------------------------------------------------------------------------------------------
Capital Accounting Includes payment of capital invoices, establishing 5,833 per month
depreciable lives for each asset and reporting
asset cost in FAST system
- - - - ---------------------------------------------------------------------------------------------------------
Staffing Staffing, compensation administration, 15,625 per month
AAP/EEOC/OFCCP
=========================================================================================================
</TABLE>
<PAGE>
4
Exhibit B: Canada Transition Services Charges Amounts in $Cdn.
<TABLE>
<CAPTION>
==============================================================================================
Note: All costs are Canadian dollars
- - - - ----------------------------------------------------------------------------------------------
Function Description Charge Units
- - - - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - - - ----------------------------------------------------------------------------------------------
Coupon Redemption Buyer Responsibility. Must establish cut-over
procedure re: liability for coupons dropped
prior to sale.
- - - - ----------------------------------------------------------------------------------------------
- - - - - General Ledger Includes: Balance Sheet Income Statement, 3,362 mo
Department Expense & Trends
- - - - ----------------------------------------------------------------------------------------------
- - - - - Accounts Payable Process invoices for payment, print and mail 5,044 mo
checks
- - - - ----------------------------------------------------------------------------------------------
- - - - - Cash Management Record & reconcile bank activity 841 mo
- - - - ----------------------------------------------------------------------------------------------
- - - - - Trade Marketing Trade Spending Reporting 4,203 mo
==============================================================================================
</TABLE>
<PAGE>
5
Exhibit C: Transition Services & Charges
<TABLE>
<CAPTION>
===================================================================================================================================
Function Description Charge Units
===================================================================================================================================
<S> <C> <C> <C>
Order Management Order Receipt - EDI/FAX; Order Edit/Validation; Order Problem Resolution- 25,660 per month
Pricing/Inventory; Order Monitoring/Expediting; Military EDI Processing;
Invoicing/EDI Transmission; Invoice Adjustment Process
- - - - -----------------------------------------------------------------------------------------------------------------------------------
VMI Includes: Agreement of performance criteria with customers, analysis of 2,487 per month
inventory & placing orders on behalf of selected customers
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Master File Maintenance Includes: Customer Master File, Product File, Price File, Promotion Deal 8,273 per month
File, EDI Control Tables, Invoice Allowance tables
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Distribution Operations - Includes: Negotiation of rates, setup of accounts with 3rd party providers, 10,234 per month
Warehousing & Distribution monitoring performance of 3rd parties from cost & services standpoint
Functions
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Forecasting/Production Includes: Production Scheduling & Product Control -- Identification of Aged 30,000 per month
Planning/Finished Goods Product. Sale of aged product not included in cost
Inventory Management/
Inventory-Forecasting Management
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Total Credit Function 41,449 per month
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - A/R Cash Application, A/R Control, Database
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - Credit Review of credit applications, maintenance of customer credit lines, timely
resolution of past due items
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - - Customer Financial Services Deduction Resolution - Assignment of proper accountability for Trade
Spending programs, unsaleables, invoices corrections
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Inventory Accounting Includes FG inventory accountability from production to customer delivery 9,128 per month
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Freight Accounting Includes payment and recording of freight from shipment confirmation to 9,924 per month
Payment of line hauls and accessorials to carrier
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Includes: Orders and invoices, Case sales information collected in SDW, 4,000 per month
Sales Reporting maintenance of SDW & reporting tools
- - - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
=========================================================================================================
Function Description Charge Units
=========================================================================================================
<S> <C> <C> <C>
Systems Operating & support costs for 180,100 per month
BFC systems assuming BFC users
running systems prior to
partitioning systems
- - - - ---------------------------------------------------------------------------------------------------------
Export Export sales & expediting overseas 18% of transfer cost
shipments - est. $30,000/mo
- - - - ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
7
Exhibit C: Canada Transition Services Charges Amounts in $Cdn.
<TABLE>
<CAPTION>
====================================================================================================================================
Note: All costs are Canadian dollars
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Function Description Charge Units
====================================================================================================================================
<S> <C> <C> <C>
Order Management Order Receipt - EDI/FAX; Order Edit/Valuation; Order Problem 4,338 mo
Resolution-Pricing/Inventory; Order Monitoring/Expediting;
Invoicing/EDI Transmission; Invoice Adjustment Process
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Master File Maintenance Includes: Customer Master File, Product File, Price File, 414 mo
Promotion Deal File, Ed. Control Tables, Invoice Allowance
Tables
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Forecasting/Production Planning/Finished Includes: Production Scheduling & Product Control -- 1,520 mo
Goods Inventory Management/Inventory- Identification of Aged Product. Sale of aged product not
Forecasting Management included in cost
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Total Credit, Accounting Function, & 22,696 mo
Local MIS
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- A/R Cash Application, A/R Control, Database 1,681 mo
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- Credit Review of credit applications, maintenance of customer 1,681 mo
credit lines, timely resolution of past due items. Bad
debts are buyer's responsibility.
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- Customer Financial Services Deduction Resolution - Assignment of proper accountability 4,203 mo
for Trade Spending programs, unsaleables, invoice
corrections
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- Sales Reporting Includes: Orders and invoices, Case sales information, 1,681 mo
maintenance of reporting tools
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Systems Includes all systems currently supporting BBNA businesses. Under separate mo
Excludes any cost for separation of businesses. cover
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Export N/A for these businesses
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT D
GENERAL PRINCIPLES REGARDING INFORMATION SERVICES, PROCUREMENT, RESEARCH AND
DEVELOPMENT, SALES AND MARKETING TRANSITION ISSUES
Information Services "IS" Overview: One Borden IS individual will be identified
- - - - ----------------------------------
to represent Borden in all IS transition activities.
PHASE I: Initial Transition Activity
Planning: Borden IS individuals will cooperate with Buyer to help finalize a
- - - - --------
workable and timely IS Transition Plan (the "Plan") from set-up through
decoupling completion. The Plan will include comprehensive inventory of base
systems,, processes, reports, technologies and data files. Borden IS individuals
will support the planning process but will not be responsible for developing the
Plan.
Systems Establishment: Within one month of Closing, there should be an
- - - - ---------------------
independent identity for the Buyer in each aspect of distribution, including but
not limited to inventory management through order entry and invoicing, and
finance, including but not limited to accounts receivable through general ledger
and bank reconciliation information. This will not require partitioning of
Borden systems. Borden IS individuals will run Borden systems on the Buyer's
behalf.
Initial System Transfer: Borden IS personnel will cooperate to accomplish the
- - - - -----------------------
Information transfer process in the order agreed to in the Plan.
PHASE 2: Decoupling Transition Activity
System Transfer: Borden IS personnel will cooperate and support the effort to
- - - - ---------------
separate data and information flow for set up into the Buyer's stand alone
system in accordance with the agreed to Plan. Additionally, Borden IS will
provide copies of existing documentation of all programs supporting Signature
Flavor Brands, developed by the Borden staff to the extent it can do so without
cost or undue inconvenience.
System Testing: Borden IS personnel will not be responsible for testing Buyer's
- - - - --------------
stand alone systems but Borden IS personnel will provide support in the
validation and testing of the data during the transfer process to the Buyer's
stand alone systems.
System Transfer Completion: Borden will maintain its current level of service,
- - - - --------------------------
control and responsiveness for all outsourced services provided to the Buyer
throughout the Transition Period.
PROCUREMENT
Borden will provide information with respect to (i) raw materials used and (ii)
historical suppliers of the raw materials. Borden will provide information or
manuals on its historical procurement policy and procedures. The foregoing is
intended to be only copies of existing documents.
<PAGE>
RESEARCH AND DEVELOPMENT
To the extent Borden's and development capacity will accommodate same, Borden
will perform research and development, quality assurance and recipe development
activities at Buyer's request and Buyer's cost.
SALES TRANSITION ACTIVITIES
At the earliest appropriate date, expected to be very early in December, Borden
and Buyer shall have an agreed upon joint letter/statement to the trade, brokers
and other relevant parties announcing the acquisition, transition plan and other
details necessary to address their anticipated concerns.
MARKETING
Borden will provide reasonable access to current senior product managers for
Signature Flavor Brands for a maximum of 120 days.
Borden will cooperate where feasible to achieve mutually beneficial joint
corporate marketing benefits including but not limited to discounts on media
purchases during the Transition Period.
<PAGE>
Exhibit 10.2
TRADEMARK LICENSE AGREEMENT
---------------------------
AGREEMENT made this 23rd day of January, 1998, by and among BDH TWO,
INC., a Delaware corporation ("BDH"), BORDEN, INC., a New Jersey corporation
("Borden, Inc." and together with BDH, "Licensor"), and EAGLE FAMILY FOODS,
INC., a Delaware corporation ("Licensee").
W I T N E S S E T H :
WHEREAS, BDH and its affiliates own or have exclusive rights to the
use of (including exclusive rights to license to others the right to the use
of), the BORDEN and ELSIE trademarks and certain stylized versions thereof, and
any future versions thereof, for use in connection with a broad variety of
products in the United States;
WHEREAS, Borden, Inc. and its affiliates own or have exclusive rights
to the use of (including exclusive rights to license to others the right to the
use of), the BORDEN and ELSIE trademarks and certain stylized versions thereof,
and any future versions thereof, for use in connection with a broad variety of
products in certain other countries, including, but not limited to, the
countries which comprise the Territory as defined herein;
WHEREAS, pursuant to the Asset Purchase Agreement dated as of November
24, 1997 among Borden Foods Corporation, a Delaware corporation ("BFC"), BFC
---
Investments, L.P., a Delaware limited partnership ("BFC Investments") and
---------------
Licensee (the "Purchase Agreement"), Licensee has acquired the Business (as
------------------
defined in the Purchase Agreement) from BFC and BFC Investments,
<PAGE>
2
and desires to process, sell and distribute the Products (each as hereinafter
defined) under the trademarks developed by Licensor and seeks to have Licensor
grant it the right to do so, all on the terms and conditions hereinafter set
out;
WHEREAS, Borden, Inc. has licensed to BFC Investments, among other
things, the right to use the Licensed Trademarks, pursuant to a Trademark
License Agreement between Borden, Inc. and BFC Investments (the "BFC Investments
---------------
License Agreement");
- - - - -----------------
WHEREAS, BFC Investments has licensed to BFC, among other things, the
right to use the Licensed Trademarks in certain jurisdictions, pursuant to a
Trademark License Agreement between BFC Investments and BFC (the "BFC License
-----------
Agreement");
- - - - ---------
WHEREAS, immediately prior to the execution and delivery hereof, each
of BFC Investments and BFC has assigned to Licensee all of their respective
rights under the BFC Investments License Agreement and the BFC License Agreement
relating to the use of the Licensed Trademarks in connection with the Products
(as defined herein) and have terminated such assignment immediately thereafter;
WHEREAS, subsequent to the termination of such portion of the BFC
Investments License Agreement and the BFC License Agreement assigned to
Licensee, Licensor desires to grant to Licensee a new license pursuant to the
Purchase Agreement (as defined below);
NOW, THEREFORE, the parties agree that the new license from Licensor
to Licensee shall read as follows:
<PAGE>
3
ARTICLE I
DEFINITIONS
-----------
Section 1.1. The following terms shall have the meanings set forth
-----------
below:
(a) "Agreement" shall mean this Trademark License Agreement.
---------
(b) "Elsie Trademarks" shall mean the Licensed Trademarks to which an
----------------
asterisk has been noted on Appendix A and any future versions thereof.
----------
(c) "Excluded Products" shall mean the products listed under the
-----------------
designation "Excluded Products" in Appendices B, C and D.
(d) "Licensed Trademarks" shall mean the trademarks listed and
-------------------
described in Appendix A attached hereto and any future versions thereof.
----------
(e) "Product Group" shall mean the business as a whole that comprises
-------------
the manufacture and sale of all Products (1) bearing trademarks in one of the
following groups: (i) ReaLemon, ReaLime, RealFig and RealPrune; (ii) Eagle;
(iii) Cremora; (iv) NoneSuch; (v) Magnolia; or (vi) Kava or (2) listed in Part
III of Appendix C and bearing the Licensed Trademarks (other than the Elsie
Trademarks).
(f) "Products" shall mean only those products specifically listed and
--------
described in Appendices B, C and D.
---------------------
(g) "Purchase Agreement" shall mean the Asset Purchase Agreement
------------------
dated as of November 24, 1997, by and among BFC, BFC
<PAGE>
4
Investments and Licensee, as the same may be amended from time to time.
(h) "Red Oval Trademark" shall mean the BORDEN trademark consisting
------------------
of both a red oval logo and the word "Borden" as displayed in U.S. Trademark
Registration No. 921,370.
(i) "Term" shall have the meaning set forth in Section 9.1.
----
(j) "Territory" shall mean worldwide other than the Excluded
---------
Territories as defined pursuant to Sections 1 and 2 of Appendix E or referenced
----------
within the Excluded Products listed on Appendices B, C, and D, but expressly
----------------------
including any U.S. possessions and territories and Puerto Rico.
(k) "United States" shall mean only the 50 states comprising the
-------------
United States of America, and the District of Columbia, excluding without
limitation (i) any U.S. possessions and territories, and (ii) Puerto Rico.
ARTICLE II
GRANT OF LICENSE
----------------
Section 2.1. (a) Subject to the terms and conditions herein
-----------
(including without limitation, Article IX hereof), Licensor hereby grants to
Licensee, subject to the existing license agreements listed in Appendix F
----------
attached hereto, a royalty-free, paid-up exclusive license to use the Red Oval
Trademark solely on or in connection with Products listed on Appendix B that are
----------
manufactured or processed by the Business for sale to customers in, or through
channels of trade terminating in the Territory, and not on or in connection with
any non-Products,
<PAGE>
5
including without limitation any of the Excluded Products listed on Appendix B;
----------
provided, however, that Licensee hereby agrees that the trademark licensed
- - - - --------
pursuant to this Section 2.1(a) shall be used:
(i) only in the same manner, size and placement as currently being
used by Licensor or its exclusive licensees on packaging for the
Products existing as of the date hereof or pursuant to the terms
of Section 4.5 hereof;
(ii) only on packaging containing a clear indication that such Product
is being manufactured or processed by Licensee under license
(except in the case of existing inventory (including returns) and
packaging materials);
(iii) in the case of the products listed on Part I of Appendix B, only
----------
in conjunction with the ReaLemon or ReaLime trademark;
(iv) in the case of the products listed on Part II of Appendix B, only
----------
in conjunction with the RealFig trademark; and
(v) in the case of products listed in Part III of Appendix B, only in
----------
conjunction with the RealPrune trademark.
(b) Subject to the terms and conditions herein (including without
limitation Article IX hereof), Licensor hereby grants to Licensee, subject to
the existing license agreements listed in Appendix F attached hereto, a royalty-
----------
free, paid-up exclusive license to use the Licensed Trademarks solely on or in
connection with Products listed on Appendix C that are manufactured or processed
----------
by the Business for sale to customers in, or through channels of trade
terminating in the Territory, and not on or in connection with any non-Products,
including without limitation any of the Excluded Products listed on Appendix C;
----------
provided, however, that Licensee hereby agrees that
- - - - --------
<PAGE>
6
the trademarks licensed pursuant to this Section 2.1(b) shall be used:
(i) only in the same manner, size and placement as currently being
used by Licensor or its exclusive licensees on packaging for the
Products existing as of the date hereof or pursuant to the terms
of Section 4.5 hereof;
(ii) only on packaging containing a clear indication that such Product
is being manufactured or processed by Licensee under license
(except in the case of existing inventory (including returns) and
packaging materials);
(iii) in the case of the products listed on Part I of Appendix C, only
----------
in conjunction with the Eagle Brand trademark;
(iv) in the case of the products listed on Part II of Appendix C, only
----------
in conjunction with the Cremora trademark; and
(v) in the case of the products listed on Part III of Appendix C, in
----------
conjunction with no other trademarks.
(c) Subject to the terms and conditions herein (including without
limitation Article IX hereof), Licensor hereby grants to Licensee, subject to
the existing license agreements listed in Appendix F attached hereto, a royalty-
----------
free, paid-up exclusive license to use the Licensed Trademarks (other than the
Elsie Trademarks) solely on or in connection with Products listed on Appendix D
----------
that are manufactured or processed by the Business for sale to customers in, or
through channels of trade terminating in the Territory, and not on or in
connection with any non-Products, including without limitation any of the
Excluded Products listed on Appendix D; provided, however, that Licensee hereby
---------- --------
agrees that the trademarks licensed pursuant to this Section 2.1(c) shall be
used:
<PAGE>
7
(i) only in the same manner, size and placement as currently being
used by Licensor or its exclusive licensees on packaging for the
Products existing as of the date hereof or pursuant to the terms
of Section 4.5 hereof, provided that if Licensee ceases to use
the Red Oval Trademark on applicable products, Licensee may use
the word "Borden" in lieu thereof in a manner as near as
practicable in manner, size and placement to the places on the
Product packaging where the Red Oval Trademark currently appears;
(ii) only on packaging containing a clear indication that such Product
is being manufactured or processed by Licensee under license
(except in the case of existing inventory (including returns) and
packaging materials);
(iii) in the case of the products listed on Part I of Appendix D, only
----------
in conjunction with the NoneSuch trademark;
(iv) in the case of the products listed on Part II of Appendix D, only
----------
in conjunction with the Magnolia trademark; and
(v) in the case of the products listed on Part III of Appendix D,
----------
only in conjunction with the Kava trademark.
Section 2.2. Licensee shall not have any right to export, purchase,
-----------
distribute, receive, take on consignment or sell the Products bearing the
Licensed Trademarks in areas outside of the Territory. Moreover, Licensee shall
require each of its customers, Manufacturing Agents (as defined in Section 5.5
below), co-packers and permitted sublicensees selling over $500,000 a year of
Products to agree in writing not to directly or indirectly export, distribute,
resell or ship any Products bearing the Licensed Trademarks to any customer or
wholesale or retail outlet located outside the Territory.
Section 2.3. Other than as expressly stated herein, Licensee shall
-----------
have no other right to use or interest in the
<PAGE>
8
Licensed Trademarks. Specifically, Licensee may not use any of the Licensed
Trademarks in its trade name or as its business name or in connection with any
products, goods or services of any kind or nature whatsoever (including without
limitation the Excluded Products), whether or not the same as or similar to the
Products, other than the Products as specifically defined herein.
Section 2.4. Nothing contained in this Article or any other provision
-----------
of this Agreement shall restrict Licensor from (a) the sale of other products
different from the Products bearing the Licensed Trademarks anywhere in the
world, including in the Territory; or (b) the sale of the Products bearing the
Licensed Trademarks anywhere in the world other than the Territory.
ARTICLE III
OWNERSHIP OF TRADEMARKS
-----------------------
Section 3.1. Licensee acknowledges that, as between Licensee and
-----------
Licensor, Licensor is the sole owner and/or exclusive licensee of the Licensed
Trademarks. Licensee shall not directly or indirectly question, attack,
contest, or in any other manner impugn the validity, Licensor's ownership of, or
Licensor's exclusive right to use the Licensed Trademarks, nor shall Licensee
willingly become an adverse party to Licensor in litigation contesting same.
Section 3.2. Without limiting the generality of Section 3.1, Licensee
-----------
and its Affiliates and Subsidiaries (as defined in the Purchase Agreement) agree
not to attempt to, and not to help unauthorized parties to, register anywhere in
the
<PAGE>
9
world any of the Licensed Trademarks or any trademarks confusingly similar
thereto and, in any contracts between Licensee and its Manufacturing Agents and
permitted sublicensees, Licensee will include language binding such other party
to same.
Section 3.3. Licensee shall be deemed a "related company" under the
-----------
U.S. Lanham Act, 15 U.S.C. (S) 1127, and Licensor and Licensee intend under the
equivalent provision of the law of any other jurisdiction, that any use of the
Licensed Trademarks by Licensee, and any goodwill generated thereby, shall inure
to the sole benefit of Licensor.
Section 3.4. Licensee shall not take any action to cause an
-----------
abandonment or forfeiture of any of Licensor's rights in the Licensed Trademarks
and shall not take any action to cancel any registration in the Territory or
elsewhere of any Licensed Trademark in the name of Licensor or to interfere with
any renewal of any such registration. Licensee shall reasonably cooperate with
and shall not oppose any application by or on behalf of Licensor to register or
renew any registration of any Licensed Trademark in the Territory or elsewhere.
Section 3.5. If Licensee wishes to (a) manufacture, process or sell
-----------
new products comprising Products pursuant to Section 4.5 hereof, and determines
in its business judgment that a new trademark registration for the Licensed
Trademarks is necessary or desirable for use in connection with such new Product
or (b) register a domain name in the Territory containing the Licensed
Trademarks, Licensee shall notify Licensor of same in writing. Licensor shall
be the sole final arbiter of whether
<PAGE>
10
to register any new Licensed Trademarks or domain names, but shall use good
faith in considering any such request by Licensee. Any registration of new
Licensed Trademarks or domain names pursuant to this Section 3.5 shall be made
at Licensee's expense, and Licensor shall be the sole owner and registrant of
same.
ARTICLE IV
FORM OF USE
-----------
Section 4.1. Licensee hereby acknowledges and agrees that its use of
-----------
the Licensed Trademarks shall be subject at all times during the Term to the
control of Licensor (subject to guidelines submitted by Licensor to Licensee) in
order for Licensor to maintain the consistent standard of quality associated
with the Licensed Trademarks. Licensee will preserve the good appearance of the
Licensed Trademarks wherever and whenever they are used and shall not use any
Licensed Trademark in a manner which is likely to derogate from the integrity,
distinctiveness, goodwill, value or strength of such Licensed Trademark.
Section 4.2. From time to time, Licensor may determine that a
-----------
previously published use of the Licensed Trademarks by Licensee may threaten the
value of the Licensed Trademarks, or is otherwise inconsistent with Licensor's
quality standards. Upon written notice from Licensor, Licensee shall implement
Licensor's directions regarding the proper use of the Licensed Trademarks as
promptly as practicable using its best efforts and, in any event, within sixty
(60) days.
<PAGE>
11
Section 4.3. Except as required by law, Licensee agrees not to use
-----------
the Licensed Trademarks in connection or combination with any other third-party
trademarks, names or logotypes, without Licensor's prior written approval.
Licensee shall at no time adopt or use any variation of the Licensed Trademarks
or any word or marks confusingly similar thereto without Licensor's prior
written approval.
Section 4.4. Licensee shall sufficiently use the Licensed Trademarks
-----------
in each jurisdiction in the Territory so as to protect their current validity
and/or Licensor's rights therein in each applicable jurisdiction. From time to
time, upon Licensor's reasonable request, Licensee shall provide Licensor with
evidence of such use. Licensee shall immediately notify Licensor if it has not
used the Licensed Trademarks in any applicable jurisdiction for a period of time
such that the non-use might jeopardize the validity of any Licensed Trademark
and/or Licensor's rights therein. After receipt of such notice, Licensor and
Licensee shall confer promptly in good faith to discuss the best course of
action. If Licensee is unable to cure its non-use sufficiently promptly so as
to prevent jeopardizing the validity of the Licensed Trademark and/or Licensor's
rights therein, Licensor shall be allowed itself to use the applicable Licensed
Trademarks in the Territory, but only to the extent necessary to preserve and
safeguard the validity of the Licensed Trademark and/or Licensor's rights
therein until Licensee is able to resume its own use of the applicable Licensed
Trademarks.
<PAGE>
12
Section 4.5. If Licensee desires to (i) adopt new cartons, packaging
-----------
or labels in which the placement or use of the Licensed Trademarks, package
design or trade dress is materially different from that used by Licensor on the
Products existing as of the date hereof, or (ii) manufacture, process and/or
sell new food items included in the definition of Products bearing the Licensed
Trademarks, Licensee shall submit to Licensor or an individual designated by
Licensor for this purpose ("Licensor's License Coordinator") at least one (1)
representative sample of each such new carton, packaging or label for Licensor's
prior written approval, which approval shall not be unreasonably withheld. If
Licensee does not receive a response within thirty (30) days of submission to
Licensor, such placement, packaging and/or trade dress shall be deemed approved.
Licensee shall not use such new materials or manufacture, process or sell such
new food items in connection with the Licensed Trademarks unless Licensor has
granted its prior written approval or the above approval period has expired
without response.
ARTICLE V
QUALITY CONTROL
---------------
Section 5.1. Licensee agrees that all Products bearing a Licensed
-----------
Trademark pursuant to this Agreement shall be of a high standard and of such
quality as to protect and enhance the Licensed Trademarks and the goodwill and
value pertaining thereto and shall meet Licensor's quality standards and
specifications as set out specifically in the current formulae, ingredients and
manufacturing specifications ("FIMS") for such Products, a copy
<PAGE>
13
of which has been provided to Licensee, and/or such modified formulae as shall
be agreed in writing between Licensor and Licensee in the future, Licensor's
consent to such modifications not to be delayed or withheld unreasonably.
Licensee and its Manufacturing Agents (as defined in Section 5.5 below) shall
manufacture, sell, distribute and promote the Products in accordance with all
applicable federal, state and local laws.
Section 5.2. In order to assure that Licensee meets Licensor's
-----------
quality standards and specifications, upon the request of Licensor, once each
quarter during the Term (and at any other time, under justifiable
circumstances), Licensee shall submit comprehensive affidavits, in a form that
meets with Licensor's reasonable approval, from all of Licensee's quality
control department managers responsible for ensuring compliance with the quality
standards of the Products produced by that part of Licensee's or its
Manufacturing Agents' business for which they are responsible, attesting under
oath that Licensor's quality standards and Product specifications have been
fully complied with during the prior quarter. At the same time, Licensee shall
also submit representative Product samples, together with a listing of the
number and nature of customer complaints relating to Product quality during that
quarter and a summary of the actions taken by Licensee in response to such
complaints.
Section 5.3. Licensee also agrees that Licensor may submit the
-----------
quarterly Product samples provided for in Section 5.2 to an independent testing
laboratory designated by Licensor to determine if the FIMS are being complied
with, with the expense
<PAGE>
14
thereof to be borne by Licensee. Licensor also may periodically conduct, or
hire independent inspectors to conduct, quality control inspections, upon
reasonable notice and during normal business hours, at Licensee's plants to
determine if the Licensor's FIMS for the Products and the processing thereof are
being complied with.
Section 5.4. In the event that Licensor or its agents shall determine
-----------
that any Products sold or distributed by Licensee and/or its Manufacturing
Agents bearing or using Licensed Trademarks do not conform to Licensor's FIMS,
and/or otherwise violate the provisions of this Article V, Licensee agrees, at
its expense, to take such action as Licensor directs in writing, including, but
not limited to, withdrawal and/or recall of such Products from the market and to
refrain and cause its Manufacturing Agents to refrain from further sale and/or
distribution of such Products under the Licensed Trademarks unless and until
Licensee and/or its Manufacturing Agents shall have demonstrated to the
reasonable satisfaction of Licensor that said Products conform to said FIMS
and/or the provisions of this Article V, as the case may be.
Section 5.5. If Licensee enters into co-packing agreements with
-----------
suppliers or any other arrangement with respect to the processing or packaging
of final Products by any person who is not a wholly owned subsidiary of
Licensee, who will process or package final Products for the Licensee for sale
in the Territory ("Manufacturing Agents"), Licensee must submit such co-packing
agreements in draft form to Licensor or Licensor's
<PAGE>
15
License Coordinator for prior approval to ensure they include trademark
protection and quality control provisions that safeguard the rights of both the
Licensor and Licensee under this Agreement.
Section 5.6. On a quarterly basis (or more often if reasonably
-----------
requested by Licensor), Licensee shall review with Licensor's License
Coordinator and obtain prior approval for, all advertising, promotional and
point-of-purchase materials published or distributed by Licensee in connection
with Products bearing Licensed Trademarks, such approval not to be withheld or
delayed unreasonably. If Licensee does not receive a response within ten (10)
days of submission to Licensor, such advertising, promotional and point-of-
purchase materials shall be deemed approved.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Section 6.1. Subject to the limitations of Section 6.2, BDH
-----------
represents that BDH or an affiliate of BDH owns the United States trademark
registrations set forth in Appendix A, and Borden, Inc. represents that Borden,
-----------
Inc. or an affiliate of Borden, Inc. owns or has the exclusive license to use
the Licensed Trademarks. Licensor is not aware of any other party with
ownership rights in the United States trademark registrations set forth in
Appendix A and are not aware of any licensees to the Licensed Trademarks for use
- - - - ----------
on the Products in the Territory, except for those licensees listed on Appendix
--------
E.
- - - - -
<PAGE>
16
Section 6.2. Notwithstanding Section 6.1, Licensee acknowledges that
-----------
Licensor makes no representation or warranty whatsoever as to the ownership,
existence or validity of the state trademark registrations listed on Appendix A,
----------
or the related Licensed Trademarks for use in the Territory outside the United
States, (collectively, the "Non-U.S. Marks"). The Non-U.S. Marks are hereby
--------------
licensed to Licensee on an "as is" basis, and Licensee shall bear the economic
and legal risk that the Non-U.S. Marks are valid and that their ownership by
Borden, Inc. or an affiliate of Borden, Inc. is other than good and marketable
and free from encumbrances.
Section 6.3. Licensor represents that during the Term, it will not
-----------
license any other party to use the Licensed Trademarks on the Products in the
Territory and will not itself sell Products identified by the Licensed
Trademarks in the Territory. Such representation in no way limits Licensor's
rights pursuant to Section 2.4 hereof.
Section 6.4. Licensor shall take all steps necessary to maintain and
-----------
insure (i) the continuation of all current registrations and (ii) the maturation
of all pending applications into registration and all resulting registrations,
for all Licensed Trademarks being used in the Territory as of the date hereof,
including, but not limited to, filing all timely renewals of registrations for,
the United States and foreign trademarks listed or referenced on Appendix A.
----------
Licensee shall cooperate fully with Licensor in such efforts and shall execute
all documents necessary or desirable for the protection and
<PAGE>
17
maintenance of the Licensed Trademarks and shall provide Licensor with any
documentation, including without limitation, any evidence of use necessary or
desirable to support the maintenance of such registrations, according to the
terms of Section 4.4. Licensor shall have no obligation under this Section 6.4
with respect to the state trademark registrations listed on Appendix A.
----------
Section 6.5. Licensor agrees to use reasonable efforts to prevent any
-----------
future third-party licensees from trans-shipping or otherwise selling Products
bearing the Licensed Trademarks to accounts or customers located within the
Territory.
Section 6.6. Licensee shall cooperate with Licensor in the protection
-----------
of the Licensed Trademarks and in connection therewith shall:
(a) promptly inform Licensor of any third-party use of any
Licensed Trademarks or any infringement or encroachment upon or any misuse
whatsoever of any Licensed Trademarks which comes to Licensee's attention; and
(b) promptly inform Licensor of any claim against Licensee that
the use of any Licensed Trademark infringes the rights of others or of the
institution of any proceeding against Licensee predicated upon any such claimed
infringement.
Section 6.7. Licensor shall have the exclusive right to take action
-----------
in respect of any Products bearing the Licensed Trademarks for any alleged
infringements of, or other impairments to, such Products. Licensor shall bear
expenses, have complete control over, and recover all proceeds, settlements and
damages
<PAGE>
18
with respect to the action. Licensee agrees to cooperate fully with Licensor
(at Licensee's expense for any incremental out-of-pocket costs incurred due to
Licensee's participation) in connection with any such actions.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
-----------------------------
Section 7.1. Licensor hereby indemnifies and hold harmless Licensee,
-----------
its Subsidiaries and Affiliates and their respective directors, employees,
agents and representatives from and against any and all claims, suits, losses,
damages, fines, penalties, expenses (including, but not limited to, attorney's
fees) or actions by third parties against Licensee alleging trademark
infringement arising out of or based upon Licensee's authorized use of any of
the Licensed Trademarks in the Territory; provided, however, that Licensee gives
Licensor prompt written notice of such suit, claim or action and cooperates
fully with Licensor in defending the same.
Section 7.2. Licensee hereby indemnifies and holds harmless Licensor,
-----------
its Subsidiaries and Affiliates and their respective directors, employees,
agents and representatives from and against any and all claims, suits, losses,
damages, fines, penalties, expenses (including, but not limited to, attorney's
fees) or actions by third parties arising out of or based upon:
(a) Licensee's or its Manufacturing Agents' processing, distribution
or sale of Products bearing a Licensed Trademark; or
<PAGE>
19
(b) any breach by Licensee or its Manufacturing Agents of their
obligations hereunder; or
(c) any proceeding brought by any person, governmental agency or
consumer group in connection with the Products processed, sold or distributed by
Licensee or its Manufacturing Agents bearing or using a Licensed Trademark; or
(d) any violations of any applicable law or regulation or civil
claims relating to the manufacture, processing, sale, distribution, promotion or
advertising of Products bearing or using a Licensed Trademark, unless
attributable to Licensor's breach of its obligations under this Agreement.
Licensor may participate in the defense of any such litigation.
Section 7.3. Licensee shall be solely responsible for the acts and
-----------
omissions of those with whom it or its Manufacturing Agents contract for any
aspect of the processing, distribution or sale of Products bearing or using a
Licensed Trademark.
Section 7.4. In order to assure its ability to discharge its
-----------
obligations to Licensor, Licensee agrees that it will maintain throughout the
Term at its expense, comprehensive general liability insurance, including
product liability insurance and contractual liability coverage specifically
endorsed to cover the indemnity provisions in this Agreement, from a carrier
satisfactory to Licensor, in a minimum amount of Five Million Dollars
($5,000,000.00) combined single limit for each single occurrence, for bodily
injury and property damage, which shall designate Licensor as an additional
insured therein. The policy shall provide for thirty (30) days prior written
<PAGE>
20
notice to Licensor from the insurer in the event of any material modification,
cancellation or termination. Licensee shall deliver certificates of such
insurance coverage to Licensor prior to the sale and/or distribution of any
Products or bearing a Licensed Trademark.
ARTICLE VIII
RELATIONSHIP
------------
Section 8.1. The relationship between Licensor and the Licensee is
-----------
that of licensor and licensee; the Licensee, its contractors, agents and
employees shall under no circumstances be deemed agents, franchisees,
representatives, employees or partners of Licensor or Licensor.
ARTICLE IX
TERM AND TERMINATION
--------------------
Section 9.1. The term of this Agreement ("Term") shall be in effect
-----------
until all of the licenses in Section 2.1 have either expired or terminated.
(a) The license granted pursuant to Section 2.1(a) hereof shall
expire five years after the date of this Agreement, unless terminated earlier
pursuant to Section 9.2 or extended pursuant to mutual agreement of the parties,
in their sole discretion.
(b) The license granted pursuant to Section 2.1(b) hereof, (i) with
respect to the IF IT'S BORDEN, IT'S GOT TO BE GOOD trademarks and the Red Oval
Trademark, shall expire five years after the date of this Agreement, unless
terminated earlier pursuant to Section 9.2 or extended pursuant to mutual
agreement
<PAGE>
21
of the parties, in their sole discretion, (ii) with respect to the other
Licensed Trademarks shall be perpetual, unless terminated pursuant to Section
9.2.
(c) The license granted pursuant to Section 2.1(c) hereof shall be
perpetual, unless terminated pursuant to Section 9.2.
Section 9.2. Licensor shall have the right to terminate this
-----------
Agreement immediately by written notice to Licensee upon the occurrence of any
one (1) or more of the following events:
(a) Licensee fails to deliver to Licensor or to maintain in full
force and effect the insurance referred to in Section 7.4; or
(b) Licensee or its Manufacturing Agents fail to commence and pursue
diligently the cure of any breach by them of any provision of this Agreement,
except those described in Sections 9.2(c) or (d), within ten (10) days of
receipt of Licensor's written notice of such breach or to effect such cure
within thirty (30) days of receipt of such written notice; or
(c) The failure or refusal of Licensee or its Manufacturing Agents:
(1) to, within ten (10) days of receipt of Licensor's written
instructions issued regarding the quality standards of the Licensed Trademarks
and Products, respond to such instructions and commence a diligent attempt at
cure, or to effect such cure within thirty (30) days of receipt of such
instructions;
<PAGE>
22
(2) to perform, or comply with, any provision contained in
Article V which failure results in the production for sale of Products that are
unsafe or unfit for human consumption; or
(d) An involuntary recall of Products bearing the Licensed Trademarks
for reasons directly or indirectly related to the safety of such Products and
attributable to the acts or omissions of Licensee or its Manufacturing Agents;
or
(e) The insolvency of Licensee; an assignment by Licensee for the
benefit of its creditors; the failure of Licensee to obtain the dismissal of any
involuntary bankruptcy or reorganization petition filed against it within sixty
(60) days from the date of such filing; the failure of Licensee to vacate the
appointment of a receiver for all or any part of its business within sixty (60)
days from the date of such appointment; or the dissolution of Licensee.
Section 9.3. (a) If this Agreement is terminated pursuant to
-----------
Sections 9.2(a)-9.2(d), Licensee shall, and shall cause its Manufacturing Agents
to cease immediately all use of the Licensed Trademarks either by removing the
Licensed Trademarks from all such inventory or by destroying all such inventory.
If this Agreement is terminated pursuant to Section 9.2(e), Licensee shall, and
shall cause its Manufacturing Agents to cease immediately all use of the
Licensed Trademarks, provided that Licensee may dispose of inventory on hand of
Products in the ordinary course of business, which shall be no longer than 180
days, if Licensee complies with its obligations under this
<PAGE>
23
Agreement. After the 180-day period expires, Licensee may be able to sell any
remaining inventory to Licensor at a discounted price, at Licensor's sole
discretion. Upon termination for any reason, Licensee will, subject to the
terms of this subsection, immediately remove or obliterate any Licensed
Trademark from all signs, billboards, vehicles and from each and every other
place and medium in which it appears and destroy or surrender to Licensor all
other materials of whatever nature which bear or refer in any way to the
Licensed Trademarks.
(b) When each of the licenses granted in Section 2.1(a) and Section
2.1(b)(i) (as to the portion referenced in Section 9.1(b)(i)) expires, provided
that Licensor has not earlier terminated the Agreement pursuant to Section 9.2
(in which case Section 9.3(a) governs), Licensee shall, and shall cause its
Manufacturing Agents to, immediately cease all use of the Licensed Trademarks on
the Products listed on Appendix B or Appendix C, as the case may be, provided
---------- ----------
that Licensee may dispose of inventory on hand of the Products listed on
Appendix B or Appendix C, as the case may be, in the ordinary course of business
- - - - ---------- ----------
for a period no longer than ninety (90) days, if Licensee complies with its
obligations under this Agreement. In addition, Licensee will, subject to the
terms of this subsection, immediately remove or obliterate any Licensed
Trademark, with respect to the Products listed on Appendix B or Appendix C, as
---------- ----------
the case may be, from all signs, billboards, vehicles and from each and every
other place and medium in which it appears and destroy or surrender to Licensor
all other materials of whatever
<PAGE>
24
nature which bear or refer in any way to these Licensed Trademarks.
Section 9.4. Licensee hereby acknowledges and agrees that in the
-----------
event it breaches Articles IV, V or X of this Agreement or an event listed in
Section 9.2 occurs, Licensor shall suffer immediate and irreparable harm for
which there is not an adequate remedy at law. Licensee agrees that Licensor
shall be entitled to equitable relief by way of preliminary and permanent
injunctions, in addition to any other remedy available at law or in equity.
ARTICLE X
ASSIGNMENTS AND SUBLICENSES
---------------------------
This Agreement may not be assigned or sublicensed by Licensor or
Licensee, in whole or in part, without the prior written consent of the other
party, such consent not to be withheld or delayed unreasonably. Notwithstanding
the foregoing sentence:
(i) Licensee may assign this Agreement as a whole, without Licensor's
------
consent, in connection with the sale of the entire Business (as
defined in the Purchase Agreement);
(ii) Licensee may sublicense the portion of its rights under this
----------
Agreement relating to any whole Product Group, without Licensor's
consent, in connection with the sale of a Product Group as a
whole;
(iii) Licensee may assign the portion of its rights under this
------
Agreement relating to any whole Product Group, without Licensor's
consent, in connection with the sale of a Product Group as a
whole, provided that any such assignee shall agree in writing
with Licensor, as a condition to such assignment, to pay the
incremental costs (including allocated overhead and personnel
costs) incurred by Licensor (as determined by Licensor) as a
result of having such assignee replace
<PAGE>
25
Licensee as a party to this Agreement, and the failure by the
assignee to reimburse Licensor within 30 days of any request for
reimbursement by Licensor shall be considered a material breach
of this Agreement under Section 9.2(b); and
(iv) Licensee may sublicense the portion of its rights under this
----------
Agreement relating to any one or more Products within a Product
Group or any whole Product Group in any one country in the
Territory, without Licensor's consent, in connection with the
sale of the Business appertaining thereto;
provided that any such buyer, assignee or sublicensee shall be of such high
quality and reputation so as not to jeopardize the value of the Licensed
Trademarks or the goodwill symbolized thereby; and provided that each Licensee
delivers prior written notice to Licensor of the identity of such buyer,
assignee or sublicensee. Notwithstanding the foregoing, Licensor may assign
this Agreement as a whole or with respect to any one or more countries within
the Territory, without Licensee's consent, in connection with any sale involving
the Licensed Trademarks. In no event shall any sublicense under this Section
10.1 relieve Licensee of any of its obligations under this Agreement.
Notwithstanding anything to the contrary contained in this Article X,
either party shall have the right to grant a security interest in this Agreement
to its financing sources without the prior written consent of the other party,
provided, however, that this Agreement shall not be assigned or sublicensed (in
- - - - -------- -------
either case, whether in a foreclosure proceeding or otherwise) by any such
financing source except in accordance with the provisions of this Article X as
if such financing source were Licensor (in the case of any financing source of
Licensor) or Licensee (in the case of any financing source of Licensee), and
<PAGE>
26
provided, further, that such party shall not itself, or allow third parties to,
- - - - -------- -------
record this Agreement with the U.S. Patent and Trademark Office.
ARTICLE XI
NOTICE
------
All notices pursuant to this Agreement shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
return receipt requested, as follows:
If to Licensee: Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, New York 10591
Attn. Jonathan Rich, Esq.
With a Copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Steven J. Gartner, Esq.
Fax: 212-821-8111
If to Licensor: Phyllis R. Yeatman
Assistant Secretary
BDH Two, Inc.
Suite 202
One Little Falls Centre
Wilmington, Delaware 19808
Fax: 302-633-7808
With a copy
thereof to: William F. Stoll
Senior Vice President and
General Counsel
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Fax: 614-627-8374
Any notice delivered personally shall be deemed to have been given on the date
it is so delivered, and any notice delivered by
<PAGE>
27
registered or certified mail shall be deemed to have been given on the date it
is delivered. Either party by notice in writing delivered or mailed to the
other may change the name or address or both to which future notices to such
party shall be delivered.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1. This Agreement, and each of the Appendices thereto,
------------
constitutes the entire understanding of the parties with respect to the subject
matter hereof, and supersedes and merges all prior agreements and discussions
between the parties relating hereto. No changes in the terms of this Agreement
(including the Appendices hereto) shall be valid, except when and if reduced to
writing and signed by both Licensee and Licensor.
Section 12.2. All rights and remedies which Licensor or Licensee may
------------
have hereunder or by operation of law are cumulative, and the pursuit of one
right or remedy shall not be deemed an election to waive or renounce any other
right or remedy. Licensor or Licensee's failure to enforce any provision hereof
on any occasion shall not be deemed to waive any other breach of any provision
hereof. Any waiver of any provision of this Agreement must be in writing and
executed by the waiving party. No waiver of any breach or default under this
Agreement shall waive any other breach or default.
Section 12.3. The parties agree that each provision of this Agreement
------------
shall be construed as separable and divisible from every other provision.
Enforceability of any one provision shall
<PAGE>
28
not limit the enforceability, in whole or in part, of any other provision
hereof. If any term or provision of this Agreement (or the application thereof
to any party or set of circumstances) shall be held invalid or unenforceable in
any jurisdiction and to any extent, it shall be ineffective only to the extent
of such invalidity or unenforceability and shall not invalidate or render
unenforceable any other terms or provisions of this Agreement (or such
applicability thereof).
Section 12.4. Licensee and Licensor agree to execute such further
------------
documentation and perform such further actions as may be reasonably requested by
the other party hereto to evidence and effectuate further the purposes and
intents set forth in this Agreement. Without limiting the generality of the
foregoing, Licensee agrees and Licensor agrees, and agrees to cause all
applicable affiliates, to execute additional documents as necessary to
effectuate the grant of the licenses in Section 2.1, and the specific terms and
conditions thereto, in all relevant jurisdictions.
Section 12.5. All representations, warranties and indemnities
------------
contained in this Agreement shall survive any independent investigation made by
the benefiting party and the suspension, expiration or termination of this
Agreement.
Section 12.6. This Agreement shall be governed by, and construed in
------------
accordance with, the laws of the State of New York. Each of the parties hereto,
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York located in the borough of Manhattan
in the
<PAGE>
29
City of New York, or if such court does not have jurisdiction, the Supreme Court
of the State of New York, New York County, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto, further agrees that service of
any process, summons, notice or document by U.S. registered mail to such party's
respective address set forth in Article XI shall be effective service of process
for any action, suit or proceeding in New York with respect to any matters to
which it has submitted to jurisdiction as set forth above in the immediately
preceding sentence. Each of the parties hereto, irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (a) the
United States District Court for the Southern District of New York or (b) the
Supreme Court of the State of New York, New York County, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 12.7. Article and section headings and captions are for
------------
convenience only and shall not be used in the construction or interpretation of
this Agreement or any terms herein.
Section 12.8. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be a
<PAGE>
30
duplicate original, but all of which, when taken together, shall constitute a
single instrument.
<PAGE>
31
IN WITNESS WHEREOF, the parties, through their duly authorized
representatives, hereto have duly executed this Agreement, to be effective as of
the day and year first above written.
BDH TWO, INC. ("BDH")
By: /s/ Phyllis R. Yeatman
------------------------
Title: Assistant Secretary & Assistant Treasurer
-----------------------
BORDEN, INC. ("Borden, Inc.")
By: /s/ Nancy G. Brown
---------------------------
Title: Authorized signatory
------------------------
EAGLE FAMILY FOODS, INC. ("Licensee")
By: /s/ John O'C Nugent
---------------------------
Title: CEO, President
------------------------
<PAGE>
APPENDIX A -- U.S. TRADEMARKS
-----------------------------
<TABLE>
<CAPTION>
UNITED STATES TRADEMARK U.S. REG. NO.
- - - - ----------------------- -------------
<S> <C>
BORDEN 921,370
* BORDEN & Cow's Head (Elsie) Design 969,728
* BORDEN Logotype with Cow's Head 1,859,074
(Elsie)
* Design of Cow's Head (Elsie Head 1,860,207
with Flowers)
* Design of Cow's Head 529,468
* Elsie Design 810,861
GAIL BORDEN 52,243
IF IT'S BORDEN, IT'S GOT TO BE GOOD 1,385,315
IF IT'S BORDEN, IT'S GOT TO BE GOOD 1,504,138
</TABLE>
STATE TRADEMARKS
----------------
<TABLE>
<CAPTION>
STATE TRADEMARK STATE REG. NO.
- - - - --------------- --------------
<S> <C>
Borden (Alabama) 103,326
Borden (Arizona) 25,318
Borden (Arkansas) 124-87
Borden (California) 085,407
Borden (Colorado) T33167
Borden (Connecticut) 6,783
Borden (Delaware) 170-62
Borden (Florida) T07258
Borden (Georgia) T-7593
Borden (Idaho) 12016
Borden (Illinois) 60328
Borden (Indiana) 5009-8037
Borden (Iowa) 8189
Borden (Kansas) 10588
Borden (Kentucky) 07288
Borden (Louisiana) 45-0849
Borden (Maine) 19880138M
Borden (Maryland) 87-6805
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Borden (Massachusetts) 40263
Borden (Michigan) M74-057
Borden (Minnesota) 13121
Borden (Mississippi) N/A
Borden (Missouri) 9541
Borden (Montana) 14,965
Borden (Nebraska) 69,516
Borden (New Hampshire) N/A
Borden (New Jersey) 7522
Borden (New Mexico) TK87051105
Borden (New York) R-24433
Borden (North Carolina) 6993
Borden (North Dakota) 12,390
Borden (Oklahoma) 21,492
Borden (Oregon) 21,597
Borden (Pennsylvania) 976092
Borden (Rhode Island) 87-5-4
Borden (South Carolina) N/A
Borden (South Dakota) N/A
Borden (Tennessee) 686-2060
Borden (Texas) 47,355
Borden (Utah) 28,516
Borden (Vermont) 5615
Borden (Virginia) N/A
Borden (West Virginia) N/A
Borden (Wisconsin) N/A
</TABLE>
LICENSED TRADEMARKS IN THE TERRITORY OUTSIDE THE UNITED STATES
--------------------------------------------------------------
All trademarks using, based upon, derived or translated from the same words and
logos as the above United States Trademarks, to the extent such trademarks are
registered and/or used as of the date of this Agreement in the Territory outside
the United States.
<PAGE>
APPENDIX B -- PRODUCTS
----------------------
PART I
lemon and lime juice, and lemon and lime juice concentrate
PART II
fig juice and fig juice concentrate
PART III
prune juice and prune juice concentrate
EXCLUDED PRODUCTS
-----------------
1. Lemon, lime, prune and fig juice and juice concentrate and lemonade in
Europe, Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, the
Palestinian self-governing zone, Qatar, Saudi Arabia, Syria, Turkey, United
Arab Emirates and Yemen
2. Orange and apple juice from 100% concentrate, juice from 100% concentrate
in a variety of other flavors, and refrigerated fruit drinks
<PAGE>
APPENDIX C -- PRODUCTS
----------------------
PART I
------
condensed milk or evaporated milk products, however packaged
liquid or frozen pie filling (other than mincemeat), whether or not shelf-
stable, and whether canned or otherwise packaged
shelf-stable mixes for the preparation of
brownies, cakes, cookies and pies
PART II
liquid or powdered non-dairy coffee creamer products
(including flavored products)
PART III
shelf-stable eggnog, whether canned, in "brick pack" packages or in any other
aseptic form of packaging
EXCLUDED PRODUCTS
-----------------
1. The following products when sold in the United States or Canada:
All refrigerated dairy products that are not shelf-stable, including
---------
(or with respect to any shelf-stable products listed below, in
addition to) the following products:
MILKS
-----
Fluid fresh homogenized milk
Fluid fresh 1% and 2% low fat milk
Fluid fresh nonfat skimmed milk
Fluid fresh 1% and 2% chocolate milk
Fluid fresh whole chocolate milk
Fresh skim chocolate milk
Fresh buttermilk
Lactose reduced & lactose free fresh milk
Ultra-pasteurized, shelf stable, aseptically packaged fluid fresh milk
BUTTER
------
"Country Store" butter (in quarters)
Spreadable light butter
EGGNOGS
-------
<PAGE>
Regular fresh eggnog
Light fresh eggnog
Fat free fresh eggnog
CREAMS
------
Fresh heavy cream
Fresh light cream
Fresh half & half cream
Fresh fat free cream
ICE CREAMS, FROZEN YOGURTS AND SHERBETS
---------------------------------------
Frozen ice cream - full fat
Frozen ice cream - fat free
Frozen ice cream - low fat
Frozen confections - Juice pops on sticks
Frozen confections - Regular ice cream pops on sticks
Frozen confections - Reduced sugar ice cream pops
Frozen confections - No sugar-added ice cream pops
Frozen confections - ice cream bars
Frozen confections - ice cream sandwiches
Frozen confections - ice cream cups
Frozen confections - ice cream cones containing bulk
ice cream packed inside a foil
container
Frozen sherbets or sorbets in various flavors
Frozen yogurt in various flavors
COTTAGE CHEESES
---------------
Regular fresh cottage cheese
Low fat fresh cottage cheese
Fat free fresh cottage cheese
SOUR CREAMS
-----------
Regular fresh sour cream
Low fat fresh sour cream
Fat free fresh sour cream
FRESH YOGURTS
-------------
Regular yogurt
Low fat yogurt
Fat free yogurt
CREAM CHEESES
-------------
Regular cream cheese
Reduced fat cream cheese
<PAGE>
2. All refrigerated dairy products that are not shelf stable, other than
those listed immediately above, for sale in Mexico.
3. The following products for sale in the United States, Canada, Mexico,
the continent of Africa, Madagascar, Seychelles, Mauritius, Reunion,
Comoros, the Maldives, and the continent of Asia:
The following in all forms:
Processed cheese
Imitation cheese
Natural cheese
The following in liquid and solid forms:
Whey
Whey blends
Whey protein concentrates
Whey protein isolates
Delactose whey
Lactose
Lactic acid
Whey permeates
Demineralized whey
Fractionated whey protein
Whey minerals
Reduced minerals whey
Reduced lactose
4. Powdered milk, milk powder or any product derived from milk powder,
worldwide
5. Chocolates and truffles worldwide
6. Yogurt and yogurt-related products, sherbet, ice cream and ice cream-
related products, reduced fat and/or reduced milk-solid frozen
desserts, and other frozen desserts in Puerto Rico
7. Liquid or powdered non-dairy coffee creamer products (including
flavored products) in Bahrain, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, the Palestinian self-governing zone, Qatar, Saudi
Arabia, Syria, Turkey, United Arab Emirates and Yemen
8. Drinks, drink mixes and chocolate beverage products in Europe,
Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, the
Palestinian self-governing zone, Qatar, Saudi Arabia, Syria, Turkey,
United Arab Emirates and Yemen
<PAGE>
APPENDIX D -- PRODUCTS
----------------------
PART I
------
mincemeat
PART II
condensed milk or evaporated milk products,
however packaged
PART III
acid-neutralized instant coffee
EXCLUDED PRODUCTS
-----------------
1. The following products when sold in the United States or Canada:
All refrigerated dairy products that are not shelf-stable, including
---------
(or with respect to any shelf-stable products listed below, in
addition to) the following products:
MILKS
-----
Fluid fresh homogenized milk
Fluid fresh 1% and 2% low fat milk
Fluid fresh nonfat skimmed milk
Fluid fresh 1% and 2% chocolate milk
Fluid fresh whole chocolate milk
Fresh skim chocolate milk
Fresh buttermilk
Lactose reduced & lactose free fresh milk
Ultra-pasteurized, shelf stable, aseptically packaged fluid fresh milk
BUTTER
------
"Country Store" butter (in quarters)
Spreadable light butter
EGGNOGS
-------
Regular fresh eggnog
Light fresh eggnog
Fat free fresh eggnog
<PAGE>
CREAMS
------
Fresh heavy cream
Fresh light cream
Fresh half & half cream
Fresh fat free cream
ICE CREAMS, FROZEN YOGURTS AND SHERBETS
---------------------------------------
Frozen ice cream - full fat
Frozen ice cream - fat free
Frozen ice cream - low fat
Frozen confections - Juice pops on sticks
Frozen confections - Regular ice cream pops on sticks
Frozen confections - Reduced sugar ice cream pops
Frozen confections - No sugar-added ice cream pops
Frozen confections - ice cream bars
Frozen confections - ice cream sandwiches
Frozen confections - ice cream cups
Frozen confections - ice cream cones containing bulk
ice cream packed inside a foil
container
Frozen sherbets or sorbets in various flavors
Frozen yogurt in various flavors
COTTAGE CHEESES
---------------
Regular fresh cottage cheese
Low fat fresh cottage cheese
Fat free fresh cottage cheese
SOUR CREAMS
-----------
Regular fresh sour cream
Low fat fresh sour cream
Fat free fresh sour cream
FRESH YOGURTS
-------------
Regular yogurt
Low fat yogurt
Fat free yogurt
CREAM CHEESES
-------------
Regular cream cheese
Reduced fat cream cheese
2. All refrigerated dairy products that are not shelf stable, other than
those listed immediately above, for sale in Mexico.
3. The following products for sale in the United States, Canada, Mexico,
the continent of Africa, Madagascar,
<PAGE>
Seychelles, Mauritius, Reunion, Comoros, the Maldives, and the
continent of Asia:
The following in all forms:
Processed cheese
Imitation cheese
Natural cheese
The following in liquid and solid forms:
Whey
Whey blends
Whey protein concentrates
Whey protein isolates
Delactose whey
Lactose
Lactic acid
Whey permeates
Demineralized whey
Fractionated whey protein
Whey minerals
Reduced minerals whey
Reduced lactose
4. Powdered milk, milk powder or any product derived from milk powder,
worldwide
5. Chocolates and truffles worldwide
6. Yogurt and yogurt-related products, sherbet, ice cream and ice cream-
related products, reduced fat and/or reduced milk-solid frozen
desserts, and other frozen desserts in Puerto Rico
7. Liquid or powdered non-dairy coffee creamer products (including
flavored products) in Bahrain, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, the Palestinian self-governing zone, Qatar, Saudi
Arabia, Syria, Turkey, United Arab Emirates and Yemen
8. Drinks, drink mixes and chocolate beverage products in Europe,
Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, the
Palestinian self-governing zone, Qatar, Saudi Arabia, Syria, Turkey,
United Arab Emirates and Yemen
<PAGE>
APPENDIX E -- EXCLUDED TERRITORIES
----------------------------------
Section 1: Subject to the provisions of Section II below, the term "Excluded
- - - - ---------
Territory" shall mean the geographic areas presently known as:
The continent of Africa
(including Madagascar, Seychelles, Mauritius, Reunion, Comoros, and the
Maldives)
The continent of South America
Costa Rica
Panama
Guatemala
El Salvador
Honduras
Belize
All nations and islands in the Caribbean except Puerto Rico
(including without limitation Jamaica, Haiti, The Dominican Republic, The
Bahamas, Grenada, Trinidad and Tobago, Saint Lucia, Antigua and Barbuda,
Barbados, St. Vincent and the Grenadines, Cayman Islands, Martinique,
Guadeloupe, Dominica, St. Kitts, Anguilla, Curacao, Bonaire, Turks &
Caicos, Cuba and the Lesser Antilles)
Section 2:
- - - - ---------
(a) Upon consummation of BFC's sale of all of its international food business
in the Excluded Territories (other than Africa and included islands), those
territories set forth in Section I above other than Africa (and included
islands) in which the international buyer or buyers have not been granted a
license to the Borden or Elsie's trademarks shall no longer be included
within the definition of Excluded Territories.
(b) In those territories set forth in Section 1 above (other than Africa and
included islands) where the international buyer or buyers have been granted
a non-perpetual license to use the Borden or Elsie trademarks, upon
termination of such licenses the territories previously covered by such
licenses (other than Africa and included islands) shall no longer be
included within the definition of Excluded Territories.
(c) Geographic exclusions referenced in Appendices B, C and D.
<PAGE>
APPENDIX F -- EXISTING LICENSES
-------------------------------
Affiliated Funding, Inc. (d/b/a/ Plains Dairy Products),
May 1, 1997 through May 1, 2002 (with renewal for additional term of 5
years).
Barber Dairies, Inc., March 24, 1997 through March 24, 1998.
Country Fresh, Inc., January 1, 1991 through December 31, 1993 (with one year
renewals).
Dean Foods Co., April 5, 1997 through April 5, 1998.
Reiter Dairy, Inc. (Dean Foods Co.), October 30, 1995 through October 29, 2000.
H.P. Hood, Inc., September 1, 1996 through August 31, 1999
(with renewal for 2 consecutive periods of 3 years each).
Modern Dairy of Champaign, Inc., November 20, 1995 through November 19, 1998
(with renewal for 2 consecutive periods of 1 year each).
Rich Foods, Inc., June 1, 1996 through December 31, 1998
(renewable from year to year).
Southern Foods Group, L.P., September 4, 1997 through
September 4, 2002 (automatic 5-year renewals, except for certain marks
which expire on September 4, 2000, thereafter subject to 1 year notice of
termination).
Sunnydale Farms, Inc., July, 1996 through December 31, 2001
(subject to renewal for additional terms of one year).
Turner Dairies, Inc., June 14, 1996 through June 14, 1999.
United Dairy, Inc., June 30, 1995 through June 30, 1998
(with 1-year automatic renewal periods).
Mid-America Dairymen, Inc., December 31, 1997 for five years
(with five-year automatic renewal periods).
<PAGE>
Exhibit 10.4
TRADEMARK LICENSE AGREEMENT
---------------------------
AGREEMENT made this 23rd day of January, 1998, by and between EAGLE
FAMILY FOODS, INC., a Delaware corporation ("Licensor") and BORDEN FOODS
CORPORATION, a Delaware corporation ("Licensee").
W I T N E S S E T H :
WHEREAS, pursuant to the Purchase Agreement (as defined below),
Licensor has acquired certain rights to the trademarks REALEMON, REALIME,
REALFIG and REALPRUNE for use in the United States, Canada and other countries,
including, but not limited to, the countries which comprise the Territory as
defined herein;
WHEREAS, Licensee desires to process, sell and distribute lemon, lime,
fig and prune juice and concentrate products and desserts under such trademarks
in the Territory (as defined below) and seeks to have Licensor grant it the
right to do so, all on the terms and conditions hereinafter set out.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. The following terms shall have the meanings set forth
-----------
below:
(a) "Agreement" shall mean this Trademark License Agreement.
---------
(b) "Business" shall mean the shelf-stable juice business acquired by
--------
Licensor pursuant to the terms and provisions of the Purchase Agreement.
<PAGE>
2
(c) "Licensed Trademarks" shall mean the trademarks listed and
-------------------
described in Appendix A attached hereto.
----------
(d) "Products" shall mean only those products specifically listed in
--------
Appendix B.
- - - - ----------
(e) "Purchase Agreement" shall mean the Asset Purchase Agreement
------------------
dated November 24, 1997, by and among Licensee, BFC Investments, L.P. and
Licensor.
(f) "Term" shall have the meaning set forth in Section 9.1.
----
(g) "Territory" shall mean the geographic areas set forth on Appendix
---------
C.
ARTICLE II
GRANT OF LICENSE
----------------
Section 2.1. Subject to the terms and conditions herein, Licensor
-----------
hereby grants to Licensee during the Term of this Agreement, and subject to the
existing license agreements listed in Appendix D attached hereto, a royalty-
----------
free, paid-up exclusive license to use the Licensed Trademarks solely on or in
connection with the Products for sale to customers in, or through channels of
trade terminating in, the Territory, and not on or in connection with any other
products.
Section 2.2. Licensee shall not have any right to export, purchase,
-----------
distribute, receive, take on consignment or sell the Products bearing the
Licensed Trademarks in areas outside of the Territory. Moreover, Licensee shall
require each of its customers, Manufacturing Agents (as defined in Section 5.5
below), co-packers and permitted sublicensees selling over
<PAGE>
3
$500,000 a year of Products to agree in writing not to directly or indirectly
export, distribute, resell or ship any Products bearing the Licensed Trademarks
to any customer or wholesale or retail outlet located outside the Territory.
Section 2.3. Other than as expressly stated herein, Licensee shall
-----------
have no other right to use or interest in the Licensed Trademarks.
Specifically, Licensee may not use any of the Licensed Trademarks in its trade
name or as its business name or in connection with any products, goods or
services of any kind or nature whatsoever, whether or not the same as or similar
to the Products, other than the Products as specifically defined herein.
Section 2.4. Nothing contained in this Article or any other provision
-----------
of this Agreement shall restrict Licensor from (a) the sale of other products
different from the Products bearing the Licensed Trademarks anywhere in the
world, including in the Territory; or (b) the sale of the Products bearing the
Licensed Trademarks anywhere in the world other than the Territory.
ARTICLE III
OWNERSHIP OF TRADEMARKS
-----------------------
Section 3.1. Licensee acknowledges that, as between Licensee and
-----------
Licensor, Licensor is the sole owner of the Licensed Trademarks. Licensee shall
not directly or indirectly question, attack, contest, or in any other manner
impugn the validity or Licensor's ownership of the Licensed Trademarks, nor
shall
<PAGE>
4
Licensee willingly become an adverse party to Licensor in litigation contesting
the validity of Licensor's ownership and other rights in and to the Licensed
Trademarks.
Section 3.2. Without limiting the generality of Section 3.1, Licensee
-----------
and its Affiliates and Subsidiaries (as defined in the Purchase Agreement) agree
not to attempt to, and not to help unauthorized parties to, register anywhere in
the world any of the Licensed Trademarks or any trademarks confusingly similar
thereto and, in any contracts between Licensee and its Manufacturing Agents and
permitted sublicensees, Licensee will include language binding such other party
to same.
Section 3.3. Licensee shall be deemed a "related company" under the
-----------
U.S. Lanham Act, 15 U.S.C. (S) 1127, and Licensor and Licensee intend under the
equivalent provision of the law of any other jurisdiction, that any use of the
Licensed Trademarks by Licensee, and any goodwill generated thereby, shall inure
to the sole benefit of Licensor.
Section 3.4. Licensee shall not take any action to cause an
-----------
abandonment or forfeiture of any of Licensor's rights in the Licensed Trademarks
and shall not take any action to cancel any registration in the Territory or
elsewhere of any Licensed Trademark in the name of Licensor or to interfere with
any renewal of any such registration. Licensee shall reasonably cooperate with
and shall not oppose any application by or on behalf of Licensor to register or
renew any registration of any Licensed Trademark in the Territory or elsewhere.
<PAGE>
5
Section 3.5. If Licensee wishes to (a) manufacture, process or sell
new products comprising Products pursuant to Section 4.5 hereof, and determines
in its business judgment that a new trademark registration for the Licensed
Trademarks is necessary or desirable for use in connection with such new Product
or (b) register a domain name in the Territory containing the Licensed
Trademarks, Licensee shall notify Licensor of same in writing. Licensor shall
be the sole final arbiter of whether to register any new Licensed Trademarks or
domain names, but shall use good faith in considering any such request by
Licensee. Any registration of new Licensed Trademarks or domain names pursuant
to this Section 3.5 shall be made at Licensee's expense, and Licensor shall be
the sole owner and registrant of same.
ARTICLE IV
FORM OF USE
-----------
Section 4.1. Licensee hereby acknowledges and agrees that its use of
-----------
the Licensed Trademarks shall be subject at all times during the Term to the
control of Licensor (subject to guidelines submitted by Licensor to Licensee) in
order for Licensor to maintain the consistent standard of quality associated
with the Licensed Trademarks. Licensee will preserve the good appearance of the
Licensed Trademarks wherever and whenever they are used and shall not use any
Licensed Trademark in a manner which is likely to derogate from the integrity,
distinctiveness, goodwill, value or strength of such Licensed Trademark.
<PAGE>
6
Section 4.2. From time to time, Licensor may determine that a
-----------
previously published use of the Licensed Trademarks by Licensee may threaten the
value of the Licensed Trademarks, or is otherwise inconsistent with Licensor's
quality standards. Upon written notice from Licensor, Licensee shall implement
Licensor's directions regarding the proper use of the Licensed Trademarks as
promptly as practicable using its best efforts and, in any event, within sixty
(60) days.
Section 4.3. Except as required by law, Licensee agrees not to use
-----------
the Licensed Trademarks in connection or combination with any other third-party
trademarks, names or logotypes, or any of Licensee's trademarks other than the
permitted Licensee trademarks listed on Appendix E, without Licensor's prior
----------
written approval. Should Licensee assign this Agreement in connection with the
sale of the entire Business pursuant to Section 10.1, such assignee's trademarks
shall replace Licensee's permitted trademarks on Appendix E. Licensee shall at
----------
no time adopt or use any variation of the Licensed Trademarks or any word or
marks confusingly similar thereto without Licensor's prior written approval.
Section 4.4. Licensee shall sufficiently use the Licensed Trademarks
-----------
in each jurisdiction in the Territory so as to protect their current validity
and/or Licensor's rights therein in each applicable jurisdiction. From time to
time, upon Licensor's reasonable request, Licensee shall provide Licensor with
evidence of such use. Licensee shall immediately notify Licensor if it has not
used the Licensed Trademarks in any
<PAGE>
7
applicable jurisdiction for a period of time such that the non-use might
jeopardize the validity of any Licensed Trademark and/or Licensor's rights
therein. After receipt of such notice, Licensor and Licensee shall confer
promptly in good faith to discuss the best course of action. If Licensee is
unable to cure its non-use sufficiently promptly so as to prevent jeopardizing
the validity of the Licensed Trademark and/or Licensor's rights therein,
Licensor shall be allowed itself to use the applicable Licensed Trademarks in
the Territory, but only to the extent necessary to preserve and safeguard the
validity of the Licensed Trademark and/or Licensor's rights therein until
Licensee is able to resume its own use of the applicable Licensed Trademarks.
Section 4.5. If Licensee desires to (i) adopt new cartons, packaging
-----------
or labels in which the placement or use of the Licensed Trademarks, package
design or trade dress is materially different from that used by Licensor on the
Products existing as of the date hereof, or (ii) manufacture, process and/or
sell new food items included in the definition of Products bearing the Licensed
Trademarks, Licensee shall submit to Licensor or an individual designated by
Licensor for this purpose ("Licensor's License Coordinator") at least one (1)
representative sample of each such new carton, packaging or label for Licensor's
prior written approval, which approval shall not be unreasonably withheld. If
Licensee does not receive a response within thirty (30) days of submission to
Licensor, such placement, packaging and/or trade dress shall be deemed approved.
Licensee shall not use such new materials or manufacture, process or sell such
new
<PAGE>
8
food items in connection with the Licensed Trademarks unless Licensor has
granted its prior written approval or the above approval period has expired
without response.
ARTICLE V
QUALITY CONTROL
---------------
Section 5.1. Licensee agrees that all Products bearing a Licensed
-----------
Trademark pursuant to this Agreement shall be of a high standard and of such
quality as to protect and enhance the Licensed Trademarks and the goodwill and
value pertaining thereto and shall meet Licensor's quality standards and
specifications as set out specifically in the current formulae, ingredients and
manufacturing specifications ("FIMS") for such Products, a copy of which has
been provided to Licensee, and/or such modified formulae as shall be agreed in
writing between Licensor and Licensee in the future, Licensor's consent to such
modifications not to be delayed or withheld unreasonably. Licensee and its
Manufacturing Agents (as defined in Section 5.5 below) shall manufacture, sell,
distribute and promote the Products in accordance with all applicable federal,
state and local laws.
Section 5.2. In order to assure that Licensee meets Licensor's
-----------
quality standards and specifications, upon the request of Licensor, once each
quarter during the Term (and at any other time, under justifiable
circumstances), Licensee shall submit comprehensive affidavits, in a form that
meets with Licensor's reasonable approval, from all of Licensee's quality
control department managers responsible for ensuring compliance with the quality
standards of the Products produced by that part of
<PAGE>
9
Licensee's or its Manufacturing Agents' business for which they are responsible,
attesting under oath that Licensor's quality standards and Product
specifications have been fully complied with during the prior quarter. At the
same time, Licensee shall also submit representative Product samples, together
with a listing of the number and nature of customer complaints relating to
Product quality during that quarter and a summary of the actions taken by
Licensee in response to such complaints.
Section 5.3. Licensee also agrees that Licensor may submit the
-----------
quarterly Product samples provided for in Section 5.2 to an independent testing
laboratory designated by Licensor to determine if the FIMS are being complied
with, with the expense thereof to be borne by Licensee. Licensor also may
periodically conduct, or hire independent inspectors to conduct, quality control
inspections, upon reasonable notice and during normal business hours, at
Licensee's plants to determine if the Licensor's FIMS for the Products and the
processing thereof are being complied with.
Section 5.4. In the event that Licensor or its agents shall determine
-----------
that any Products sold or distributed by Licensee and/or its Manufacturing
Agents bearing or using Licensed Trademarks do not conform to Licensor's FIMS,
and/or otherwise violate the provisions of this Article V, Licensee agrees, at
its expense, to take such action as Licensor directs in writing, including, but
not limited to, withdrawal and/or recall of such Products from the market and to
refrain and cause its Manufacturing Agents to refrain from further sale and/or
<PAGE>
10
distribution of such Products under the Licensed Trademarks unless and until
Licensee and/or its Manufacturing Agents shall have demonstrated to the
reasonable satisfaction of Licensor that said Products conform to said FIMS
and/or the provisions of this Article V, as the case may be.
Section 5.5. If Licensee enters into co-packing agreements with
-----------
suppliers or any other arrangement with respect to the processing or packaging
of final Products by any person who is not a wholly owned subsidiary of
Licensee, who will process or package final Products for the Licensee for sale
in the Territory ("Manufacturing Agents"), Licensee must submit such co-packing
agreements in draft form to Licensor or Licensor's License Coordinator for prior
approval to ensure they include trademark protection and quality control
provisions that safeguard the rights of both the Licensor and Licensee under
this Agreement.
Section 5.6. On a quarterly basis (or more often if reasonably
-----------
requested by Licensor), Licensee shall review with Licensor's License
Coordinator and obtain prior approval for, all advertising, promotional and
point-of-purchase materials published or distributed by Licensee in connection
with Products bearing Licensed Trademarks, such approval not to be withheld or
delayed unreasonably. If Licensee does not receive a response within ten (10)
days of submission to Licensor, such advertising, promotional and point-of-
purchase materials shall be deemed approved.
<PAGE>
11
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Section 6.1. Licensor represents that the Purchase Agreement
-----------
purported to convey to Licensor exclusive ownership of the Licensed Trademarks
in the Territory, and that Licensor has taken no action and executed no document
to abrogate, limit, conflict with, contradict, or jeopardize such purported
exclusive ownership in the countries listed in the Territory. Licensor
represents that it is not aware of any threatened or actual challenge to its
rights to the Licensed Trademarks in the Territory. Licensor is not aware of
any licenses affecting the Licensed Trademarks in the Territory, except for
those licensees listed on Appendix D.
----------
Section 6.2. Licensor represents that during the Term, it will not
-----------
license any other party to use the Licensed Trademarks on the Products in the
Territory and it will not itself sell Products identified by the Licensed
Trademarks in the Territory. Such representation in no way limits Licensor's
rights pursuant to Section 2.4 hereof.
Section 6.3. Licensor shall take all steps necessary to maintain and
-----------
insure the continued registration of, including, but not limited to, filing all
timely renewals of registrations for, the Licensed Trademarks. Licensee shall
cooperate fully with Licensor in such efforts, execute all documents necessary
or desirable for the protection and maintenance of the Licensed Trademarks, and
provide Licensor with any documentation, including without limitation, any
evidence of use necessary or
<PAGE>
12
desirable to support the maintenance of such registrations, according to the
terms of Section 4.4.
Section 6.4. Licensor agrees to use reasonable efforts to prevent any
-----------
future third-party licensees from trans-shipping or otherwise selling Products
bearing the Licensed Trademarks to accounts or customers located within the
Territory.
Section 6.5. Licensee shall cooperate with Licensor in the protection
-----------
of the Licensed Trademarks and in connection therewith shall:
(a) promptly inform Licensor of any third-party use of any Licensed
Trademarks or any infringement or encroachment upon or any misuse whatsoever of
any Licensed Trademarks which comes to Licensee's attention; and
(b) promptly inform Licensor of any claim against Licensee that the
use of any Licensed Trademark infringes the rights of others or of the
institution of any proceeding against Licensee predicated upon any such claimed
infringement.
Section 6.6. Licensor shall have the exclusive right to take action
-----------
in respect of any Products bearing the Licensed Trademarks for any alleged
infringements of, or other impairments to, such Products. Licensor shall bear
expenses, have complete control over, and recover all proceeds, settlements and
damages with respect to the action. Licensee agrees to cooperate fully with
Licensor (at Licensee's expense for any incremental out-of-pocket costs incurred
due to Licensee's participation) in connection with any such actions.
<PAGE>
13
ARTICLE VII
INDEMNIFICATION AND INSURANCE
-----------------------------
Section 7.1. Licensor hereby indemnifies and holds harmless Licensee,
-----------
its Subsidiaries and Affiliates and their respective directors, employees,
agents and representatives from and against any and all claims, suits, losses,
damages, fines, penalties, expenses (including, but not limited to, attorney's
fees) or actions by third parties against Licensee alleging trademark
infringement arising out of or based upon Licensee's authorized use of any of
the Licensed Trademarks in the Territory; provided, however, that Licensee gives
Licensor prompt written notice of such suit, claim or action and cooperates
fully with Licensor in defending the same.
Section 7.2. Licensee hereby indemnifies and holds harmless Licensor,
-----------
its Subsidiaries and Affiliates and their respective directors, employees,
agents and representatives from and against any and all claims, suits, losses,
damages, fines, penalties, expenses (including, but not limited to, attorney's
fees) or actions by third parties arising out of or based upon:
(a) Licensee's or its Manufacturing Agents' processing, distribution
or sale of Products bearing a Licensed Trademark; or
(b) any breach by Licensee or its Manufacturing Agents of their
obligations hereunder; or
(c) any proceeding brought by any person, governmental agency or
consumer group in connection with the Products
<PAGE>
14
processed, sold or distributed by Licensee or its Manufacturing Agents bearing
or using a Licensed Trademark; or
(d) any violations of any applicable law or regulation or civil
claims relating to the manufacture, processing, sale, distribution, promotion or
advertising of Products bearing or using a Licensed Trademark, unless
attributable to Licensor's breach of its obligations under this Agreement.
Licensor may participate in the defense of any such litigation.
Section 7.3. Licensee shall be solely responsible for the acts and
-----------
omissions of those with whom it or its Manufacturing Agents contract for any
aspect of the processing, distribution or sale of Products bearing or using a
Licensed Trademark.
Section 7.4. In order to assure its ability to discharge its
-----------
obligations to Licensor, Licensee agrees that it will maintain throughout the
Term at its expense, comprehensive general liability insurance, including
product liability insurance and contractual liability coverage specifically
endorsed to cover the indemnity provisions in this Agreement, from a carrier
satisfactory to Licensor, in a minimum amount of Five Million Dollars
($5,000,000.00) combined single limit for each single occurrence, for bodily
injury and property damage, which shall designate Licensor as an additional
insured therein. The policy shall provide for thirty (30) days prior written
notice to Licensor from the insurer in the event of any material modification,
cancellation or termination. Licensee shall deliver certificates of such
insurance coverage to Licensor prior
<PAGE>
15
to the sale and/or distribution of any Products bearing a Licensed Trademark.
ARTICLE VIII
RELATIONSHIP
------------
Section 8.1. The relationship between Licensor and the Licensee is
-----------
that of licensor and licensee; the Licensee, its contractors, agents and
employees shall under no circumstances be deemed agents, franchisees,
representatives, employees or partners of Licensor.
ARTICLE IX
TERM AND TERMINATION
--------------------
Section 9.1. The term of this Agreement ("Term") shall be perpetual,
-----------
unless termination occurs pursuant to Section 9.2.
Section 9.2. Licensor shall have the right to terminate this
-----------
Agreement immediately by written notice to Licensee upon the occurrence of any
one (1) or more of the following events:
(a) Licensee fails to deliver to Licensor or to maintain in full
force and effect the insurance referred to in Section 7.4; or
(b) Licensee or its Manufacturing Agents fail to commence and
diligently pursue the cure of any breach by them of any provision of this
Agreement, except those described in Sections 9.2(c) and (d), within ten (10)
days of receipt of Licensor's written notice of such breach or to effect such
cure within thirty (30) days of receipt of such written notice; or
<PAGE>
16
(c) The failure or refusal of Licensee or its Manufacturing Agents:
(1) to, within ten (10) days of receipt of Licensor's written
instructions issued regarding the quality standards of the Licensed Trademarks
and Products, respond to such instructions and commence a diligent attempt at
cure, or to effect such cure within thirty (30) days of receipt of such
instructions;
(2) to perform, or comply with, any provision contained in
Article V which failure results in the production for sale of Products that are
unsafe or unfit for human consumption; or
(d) An involuntary recall of Products bearing the Licensed Trademarks
for reasons directly or indirectly related to the safety of such Products and
attributable to the acts or omissions of Licensee or its Manufacturing Agents;
or
(e) The insolvency of Licensee; an assignment by Licensee for the
benefit of its creditors; the failure of Licensee to obtain the dismissal of any
involuntary bankruptcy or reorganization petition filed against it within sixty
(60) days from the date of such filing; the failure of Licensee to vacate the
appointment of a receiver for all or any part of its business within sixty (60)
days from the date of such appointment; or the dissolution of Licensee.
Section 9.3. If this Agreement is terminated pursuant to Section
-----------
9.2(e), Licensee shall, and shall cause its Manufacturing Agents to, immediately
cease all use of the
<PAGE>
17
Licensed Trademarks, provided that Licensee may dispose of inventory on hand of
Products in the ordinary course of business, which shall be no longer than 180
days, if Licensee complies with its obligations under this Agreement. After the
180-day period expires, Licensee may be able to sell any remaining inventory to
Licensor at a discounted price, at Licensor's sole discretion. If this
Agreement is terminated pursuant to Sections 9.2(a)-(d), Licensee shall
immediately cease all use of the Licensed Trademarks either by removing the
Licensed Trademarks from all such inventory or by destroying all such inventory.
Upon expiration or termination of this Agreement for any reason, Licensee will,
subject to the terms of this Section 9.3, immediately remove or obliterate any
Licensed Trademark from all signs, billboards, vehicles and from each and every
other place and medium in which it appears and destroy or surrender to Licensor
all other materials of whatever nature which bear or refer in any way to the
Licensed Trademarks.
Section 9.4. Licensee hereby acknowledges and agrees that in the
-----------
event it breaches Articles IV, V or X of this Agreement or an event listed in
Section 9.2 occurs, Licensor shall suffer immediate and irreparable harm for
which there is not an adequate remedy at law. Licensee agrees that Licensor
shall be entitled to equitable relief by way of preliminary and permanent
injunctions, in addition to any other remedy available at law or in equity.
<PAGE>
18
ARTICLE X
ASSIGNMENTS AND SUBLICENSES
---------------------------
Section 10.1. This Agreement may not be assigned or sublicensed by
------------
Licensor or Licensee, in whole or in part, without the prior written consent of
the other party, such consent not to be withheld or delayed unreasonably.
Notwithstanding the foregoing sentence, Licensor or Licensee may assign this
Agreement as a whole, without consent, in connection with the sale of their
respective entire Businesses. After such sale, the buyer/assignee may further
assign this Agreement as a whole, without consent, in connection with the
subsequent sale of the entire Business, provided that such subsequent
buyer/assignee shall be of such high quality and reputation so as not to
jeopardize the value of the Licensed Trademarks or the goodwill symbolized
thereby.
Notwithstanding anything to the contrary contained in this Article X,
either party shall have the right to grant a security interest in this Agreement
to its financing sources without the prior written consent of the other party,
provided, however, that this Agreement shall not be assigned or sublicensed (in
- - - - -------- -------
either case, whether in a foreclosure proceeding or otherwise) by any such
financing source except in accordance with the provisions of this Article X as
if such financing source were Licensor (in the case of any financing source of
Licensor) or Licensee (in the case of any financing source of Licensee), and
provided, further, that such party shall not itself, or allow
- - - - -------- -------
<PAGE>
19
third parties to, record this Agreement with the U.S. Patent and Trademark
Office.
Section 10.2. From and after any permitted assignment pursuant to
------------
Section 10.1, the assignee shall be deemed to be a Licensee for all purposes
hereof. In no event shall any sublicense under Section 10.1 relieve Licensee of
any of its obligations under this Agreement.
ARTICLE XI
NOTICE
------
All notices pursuant to this Agreement shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
return receipt requested, as follows:
If to Licensor: Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, New york 10591
Attn: Jonathan Rich, Esq.
With a Copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Steven J. Gartner, Esq.
Fax: 212-821-8111
If to Licensee: Nancy G. Brown
Vice President,
Legal and Corporate Affairs
Borden Foods Corporation
180 East Broad Street
Columbus, Ohio 43215-3799
Fax: 614-225-4420
With a copy
thereof to: William F. Stoll
Senior Vice President and
General Counsel
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
<PAGE>
20
Fax: 614-627-8374
Any notice delivered personally shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
shall be deemed to have been given on the date it is delivered. Either party by
notice in writing delivered or mailed to the other may change the name or
address or both to which future notices to such party shall be delivered.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1. This Agreement, and each of the Appendices thereto,
------------
constitutes the entire understanding of the parties with respect to the subject
matter hereof, and supersedes and merges all prior agreements and discussions
between the parties relating hereto. No changes in the terms of this Agreement
shall be valid, except when and if reduced to writing and signed by both
Licensee and Licensor.
Section 12.2. All rights and remedies which Licensor or Licensee may
------------
have hereunder or by operation of law are cumulative, and the pursuit of one
right or remedy shall not be deemed an election to waive or renounce any other
right or remedy. Licensor or Licensee's failure to enforce any provision hereof
on any occasion shall not be deemed to waive any other breach of any provision
hereof. Any waiver of any provision of this Agreement must be in writing and
executed by the waiving party. No waiver of any breach or default under this
Agreement shall waive any other breach or default.
<PAGE>
21
Section 12.3. The parties agree that each provision of this Agreement
------------
shall be construed as separable and divisible from every other provision.
Enforceability of any one provision shall not limit the enforceability, in whole
or in part, of any other provision hereof. If any term or provision of this
Agreement (or the application thereof to any party or set of circumstances)
shall be held invalid or unenforceable in any jurisdiction and to any extent, it
shall be ineffective only to the extent of such invalidity or unenforceability
and shall not invalidate or render unenforceable any other terms or provisions
of this Agreement (or such applicability thereof).
Section 12.4. Licensee and Licensor agree to execute such further
------------
documentation and perform such further actions as may be reasonably requested by
the other party hereto to evidence and effectuate further the purposes and
intents set forth in this Agreement. Without limiting the generality of the
foregoing, Licensor and Licensee agree to execute additional documents as
necessary to effectuate the grant of the license in Section 2.1, and the
specific terms and conditions thereto, in all relevant jurisdictions.
Section 12.5. All representations, warranties and indemnities
------------
contained in this Agreement shall survive any independent investigation made by
the benefiting party and the suspension, expiration or termination of this
Agreement.
Section 12.6. This Agreement shall be governed by, and construed in
------------
accordance with, the laws of the State of New York. Each of the parties hereto,
irrevocably submits to the exclusive
<PAGE>
22
jurisdiction of the United States District Court for the Southern District of
New York located in the borough of Manhattan in the City of New York, or if such
court does not have jurisdiction, the Supreme Court of the State of New York,
New York County, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto, further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
in Article XI shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the parties hereto, irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) the United States District Court
for the Southern District of New York or (b) the Supreme Court of the State of
New York, New York County, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
Section 12.7. Article and section headings and captions are for
------------
convenience only and shall not be used in the construction or interpretation of
this Agreement or any terms herein.
<PAGE>
23
Section 12.8. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be a duplicate original, but all
of which, when taken together, shall constitute a single instrument.
<PAGE>
24
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, to be effective as of the day and year first above written.
EAGLE FAMILY FOODS ("Licensor")
By: /s/ Jonathan F. Rich
------------------------
Name: Jonathan F. Rich
----------------------
Title: Vice President
---------------------
BORDEN FOODS CORPORATION ("Licensee")
By: /s/ Nancy G. Brown
------------------------
Name: Nancy G. Brown
----------------------
Title: Vice President
---------------------
<PAGE>
APPENDIX A -- LICENSED TRADEMARKS
---------------------------------
REALEMON
REALIME
LEMONA
LEMON BURST
REALFIG
REALPRUNE
<PAGE>
APPENDIX B -- PRODUCTS
----------------------
lemon, lime, fig and prune juice (whether or not shelf-stable
and however packaged) and related products being sold under the Licensed
Trademarks as of the date of this Agreement
lemon, lime, fig and prune juice concentrate
desserts
<PAGE>
APPENDIX C -- TERRITORY
-----------------------
The geographic areas presently known as:
Bahrain
Belgium
Denmark
United Kingdom
Estonia
Finland
France
Germany
Greece
Hong Kong
Irish Republic
Israel
Italy (including San Marino and Vatican City)
Jordan
Kuwait
United Arab Emirates
Netherlands
Norway
Qatar
Saudi Arabia
Sweden
Iceland
Spain
Andorra
Portugal
Switzerland
Luxembourg
Liechtenstein
Austria
Hungary
Yugoslavia
Croatia
Bosnia and Herzegovina
Slovenia
Macedonia
Czech Republic
Slovakia
Romania
Albania
Bulgaria
Poland
Latvia
Lithuania
Malta
Cyprus
Oman
Yemen
Lebanon
Turkey Iran
Syria Iraq
Palestinian self-governing zone
<PAGE>
APPENDIX D--EXISTING LICENSE AGREEMENTS
---------------------------------------
Trademark Licensing Agreement with Delicious Frookie Company, Inc. dated
10/15/97.
Licensing Agreement between BDH Two, Inc. and Portion Pac Inc. dated 5/16/94.
Trademark Licensing Agreement between Borden Foods Corporation and Brach & Brock
Confections, Inc. dated 1/1/97.
Trademark License Agreement with Thomas J. Lipton as contemplated in the Asset
Purchase Agreement of 12/23/86 between Thomas J. Lipton, Inc. and The Borden
Company, Limited (to the extent such license agreement was executed) and the
Application for Registered User of 12/29/96 pertaining to Trademark
Application/Registration No. 105,794 ("REALEMON") filed by Borden, Inc. and
Thomas J. Lipton Inc. with the Canadian Registrar of Trade Marks.
<PAGE>
APPENDIX E -- PERMITTED LICENSEE TRADEMARKS
-------------------------------------------
BORDEN
BORDEN & Cow's Head (Elsie) Design
BORDEN Logotype with Cow's Head (Elsie)
Design of Cow's Head (Elsie Head with Flowers)
Design of Cow's Head
Elsie Design
GAIL BORDEN
IF IT'S BORDEN, IT'S GOT TO BE GOOD
<PAGE>
Exhibit 10.5
EAGLE FAMILY FOODS HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
-------
The Eagle Family Foods Holdings, Inc. 1998 Stock Incentive Plan (the
"Plan") is intended as an incentive to encourage stock ownership by officers and
certain other key employees of Eagle Family Foods Holdings, Inc., a Delaware
corporation (the "Company") and its subsidiaries in order to increase their
proprietary interest in the Company's success and to encourage them to remain in
the employ of the Company.
The term "Company," when used in the Plan or a related award agreement
with reference to eligibility, employment and termination of employment, shall
include the Company and its subsidiaries. The word "subsidiary" shall mean any
subsidiary of the Company within the meaning of Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
It is intended that certain options granted under this Plan will
qualify as "incentive stock options" under Section 422 of the Code.
ARTICLE II
ADMINISTRATION
--------------
The Plan shall be administered by a Committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board") which shall
consist of not less than two members. Subject to the provisions of the Plan,
the Committee shall have sole authority, in its absolute discretion: (a) to
determine which of the eligible employees of the Company shall be granted
restricted shares ("Restricted Shares") of the Company's common stock, par value
$0.01 per share (the "Stock"), and which shall be granted options to purchase
Stock ("Options"); (b) to make grants of Restricted Shares and Options; (c) to
determine the times when Restricted Shares and Options shall be granted and the
number of shares to be granted or optioned; (d) to determine the Option price of
the shares subject to each Option, which price shall be not less than the
minimum specified in ARTICLE VII; (e) to determine the nature of any rights and
restrictions to be imposed on Restricted Shares granted under the Plan; (f) to
determine the time or times when each Option becomes exercisable, the duration
of the exercise period and any other restrictions on the exercise of Options
issued hereunder; (g) to prescribe the form or forms of agreements for
Restricted Shares and Options granted under the Plan (which forms
<PAGE>
shall be consistent with the terms of the Plan but need not be identical); (h)
to adopt, amend and rescind such rules and regulations as, in its opinion, may
be advisable in the administration of the Plan; and (i) to construe and
interpret the Plan, the rules and regulations, the Restricted Share agreements
and the Option agreements under the Plan and to make all other determinations
deemed necessary or advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all grantees and optionees.
ARTICLE III
STOCK
-----
The Stock to be issued under the Plan shall be shares of authorized
but unissued Stock, or previously issued shares of Stock reacquired by the
Company. Under the Plan, the total number of shares of Stock which may be
granted or purchased pursuant to options granted hereunder shall not exceed, in
the aggregate 153,650 shares, except as such number of shares shall be adjusted
in accordance with the provisions of ARTICLE XII hereof.
The number of shares of Stock available for issuance under the Plan
shall be decreased by the sum of (i) the number of Restricted Shares which are
subject to restrictions (i.e., which have not vested), (ii) the number of
----
Restricted Shares as to which restrictions have lapsed (i.e., which have
----
vested), (iii) the number of shares with respect to which Options have been
issued and are then outstanding, and (iv) the number of shares issued upon
exercise of Options. In the event that any Restricted Shares are forfeited or
that any outstanding Option under the Plan for any reason expires, is terminated
or is canceled without exercise, the Restricted Shares so forfeited and the
shares of Stock covered by the unexercised portion of such Option shall again be
available for grant or issuance under the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS
---------------------------
Subject to ARTICLE IX in the case of incentive stock options, officers
and other employees of the Company and its subsidiaries shall be eligible to
receive Restricted Shares and Options under the Plan. In addition, Options
which are not incentive stock options may be granted to directors, consultants
or other key persons.
2
<PAGE>
As of any grant date which is prior to the occurrence of an initial
public offering of the Stock registered under the Securities Act of 1933, as
amended, resulting in net proceeds to the Company and/or any selling
stockholders of at least $25,000,000 million (an "IPO"), it shall be a condition
to the grant of Restricted Shares or Options under the Plan that the grantee or
optionee execute the Eagle Family Foods Holdings, Inc. Stockholders Agreement
(Common Stock under Stock Incentive Plan) dated as of January 23, 1998 (the
"Stockholders Agreement") agreeing to be bound by the terms thereof.
ARTICLE V
FAIR MARKET VALUE
-----------------
"Fair Market Value Per Share" means (1) prior to an IPO, the fair
market value per share of Stock, on a fully diluted basis, determined by the
Board in good faith, (2) at the time of an IPO, the per share price to the
public in such IPO less any per share underwriting discount, and (3) after an
IPO, as of any date when the Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market System
("NMS") or listed on one or more national securities exchanges, the closing
price reported on NASDAQ-NMS or the principal national securities exchange on
which such Stock is listed and traded on the last trading date immediately
preceding the date of determination. If, after an IPO, the Stock is not quoted
on NASDAQ-NMS or listed on an exchange, or representative quotes are not
otherwise available, the Fair Market Value Per Share shall mean the amount
determined by the Board in good faith to be the fair market value per share of
Stock, on a fully diluted basis.
ARTICLE VI
TERMS AND CONDITIONS OF RESTRICTED SHARES
-----------------------------------------
Restricted Shares will become unrestricted and vest only in accordance
with a vesting period set by the Committee with respect to each grant of
Restricted Shares (the "Restriction Period"). The Committee may provide in the
Restricted Share Agreement for acceleration of the Restriction Period and
accelerated vesting upon termination of the grantee's employment by reason of
death or disability, or by the Company without Cause, or upon any other event
for which the Committee determines, in its discretion, that such acceleration is
appropriate. With respect to each grant of Restricted Shares, "Cause" shall
have the meaning given such term in a grantee's Restricted Share Agreement.
3
<PAGE>
During the Restriction Period, Restricted Shares shall constitute
issued and outstanding shares of Stock for all corporate purposes but unless and
until such Restricted Shares shall have become vested (i.e., the date at which
----
such shares shall not be subject to forfeiture) (a) the Company shall retain
custody of the stock certificate or certificates representing such shares, and
(b) the Company will retain custody of all dividends and distributions
("Retained Distributions") made or declared thereon (and such Retained
Distributions shall be subject to the same restrictions, terms and vesting and
other conditions as are applicable to the Restricted Shares) until such time, if
ever, as the Restricted Shares with respect to which such Retained Distributions
shall have been made, paid or declared shall have become vested, at which time
such Retained Distributions shall be paid to the grantee. Retained
Distributions shall not bear interest or be segregated in a separate account.
In addition, during the Restricted Period, (i) the grantee of Restricted Shares
shall not be entitled to vote such shares, and (ii) except as otherwise
permitted by the Stockholders Agreement, the grantee of such Restricted Shares
may not, whether voluntarily or involuntarily, sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained
Distributions thereon or his interest in any of them (it being understood that,
except to the extent so permitted, any sale, assignment, transfer, pledge,
exchange, or disposition (A) before the shares shall have become vested shall be
null and void and of no effect and (B) after the shares shall have become vested
shall only be as permitted under the terms of the Stockholders Agreement). Any
Restricted Shares which have not vested as of, or by reason of, a grantee's
termination of employment shall be immediately forfeited to the Company, and the
grantee and any permitted transferee shall have no further rights in respect of
such forfeited shares.
With respect to Restricted Shares which have become vested, the
Company shall promptly deliver the Stock certificate or certificates
representing such shares to the grantee, registered in the name of the grantee.
The Company may endorse such legends on such certificates as may be required by
law or under the terms of this Agreement, the Restricted Share Agreement or the
Stockholders Agreement.
ARTICLE VII
OPTION EXERCISE PRICE
---------------------
Subject to ARTICLE IX in the case of incentive stock options, (i) in
the case of each Option granted under the Plan which is not an incentive stock
option, the Option exercise price
4
<PAGE>
shall not be less than the par value of the Stock, and (ii) in the case of each
Option granted under the Plan which is an incentive stock option, the Option
exercise price shall not be less than the Fair Market Value Per Share at the
time the Option is granted.
ARTICLE VIII
EXERCISE AND TERMS OF OPTIONS
-----------------------------
The Committee shall determine the dates after which Options may be
exercised, in whole or in part. If an Option is exercisable in installments,
portions thereof which are exercisable and not exercised shall remain
exercisable.
Any other provision of the Plan to the contrary notwithstanding, but
subject to ARTICLE IX in the case of incentive stock options, no Option shall be
exercised after the date ten years from the date of grant of such option (the
"Termination Date").
Options shall become exercisable only in accordance with the exercise
schedule set forth in the option agreement entered into with respect to each
grant of Options (the "Option Agreement"). The Committee may provide in the
Option Agreement for acceleration of exercisability upon termination of the
optionee's employment by reason of death, disability, or by the Company without
Cause, or upon any other event for which the Committee determines, in its
discretion, that such acceleration is appropriate. With respect to each grant
of Options, "Cause" shall have the meaning given such term in the optionee's
Option Agreement.
Notwithstanding the foregoing provisions of this ARTICLE VIII or the
terms of any Option Agreement, the Committee may in its sole discretion
accelerate the exercisability of any Option granted hereunder. Any such
acceleration shall not affect the terms and conditions of any such Option other
than with respect to exercisability.
ARTICLE IX
SPECIAL PROVISIONS APPLICABLE
TO INCENTIVE STOCK OPTIONS ONLY
-------------------------------
To the extent the aggregate Fair Market Value Per Share (determined as
of the time the option is granted in accordance with Article V) with respect to
which any Options granted hereunder which are intended to be incentive stock
options may be exercisable
5
<PAGE>
for the first time by the optionee in any calendar year (under this Plan or any
other stock option plan of the Company or any parent or subsidiary thereof)
exceeds $100,000, such Options shall not be considered incentive stock options.
No incentive stock option may be granted to an individual who, at the
time the Option is granted, owns directly, or indirectly within the meaning of
Section 424(d) of the Code, stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any parent or
subsidiary thereof, unless such Option (i) has an exercise price of at least 110
percent of the Fair Market Value Per Share on the date of the grant of such
Option; and (ii) cannot be exercised more than five years after the date it is
granted.
Each optionee who receives an incentive stock option must agree to
notify the Company in writing immediately after the optionee makes a
disqualifying disposition of any Stock acquired pursuant to the exercise of an
incentive stock option. A disqualifying disposition is any disposition
(including any sale) of such Stock made within the period which is (a) two years
after the date the optionee was granted the incentive stock option or (b) one
year after the date the optionee acquired Stock by exercising the incentive
stock option.
ARTICLE X
PAYMENT FOR SHARES
------------------
Payment for shares of Stock purchased under an Option granted
hereunder shall be made in full upon exercise of the Option, by certified or
bank cashier's check payable to the order of the Company or by any other means
authorized by the Committee. If the Committee, in its discretion, allows an
optionee to pay such exercise price by tendering shares of Stock having an
aggregate Fair Market Value equal to the amount of such exercise price, such
shares must have been held by the optionee for at least six months.
ARTICLE XI
NON-TRANSFERABILITY OF OPTION RIGHTS
------------------------------------
No Option shall be transferable except by will or the laws of descent
and distribution. During the lifetime of the optionee, the Option shall be
exercisable only by him. The Committee may, however, in its sole discretion,
allow for transfer of Options which are not incentive stock options to other
persons
6
<PAGE>
or entities, subject to such conditions or limitations as it may
establish.
ARTICLE XII
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
---------------------------------------------
The aggregate number of shares of Stock which may be granted or
purchased pursuant to Options granted hereunder, the number of shares of Stock
covered by each outstanding Option and the price per share thereof in each such
Option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Stock resulting from a stock split or other
subdivision or consolidation of shares of Stock or for other capital adjustments
or payments of stock dividends or distributions or other increases or decreases
in the outstanding shares of Stock without receipt of consideration by the
Company. Any adjustment shall be conclusively determined by the Committee.
In the event of any change in the outstanding shares of Stock by
reason of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than cash dividends, the Committee shall make such
substitution or adjustment, if any, as it deems to be equitable, as to the
number or kind of shares of Stock or other securities issued or reserved for
issuance pursuant to the Plan, and the number or kind of shares of Stock or
other securities covered by outstanding Options, and the exercise price thereof.
In instances where another corporation or other business entity is being
acquired by the Company, and the Company has assumed outstanding employee option
grants and/or the obligation to make future or potential grants under a prior
existing plan of the acquired entity, similar adjustments are permitted at the
discretion of the Committee. The Committee shall notify optionees of any
intended sale of all or substantially all of the Company's assets within a
reasonable time prior to such sale.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an option.
7
<PAGE>
ARTICLE XIII
NO OBLIGATION TO EXERCISE OPTION
--------------------------------
The granting of an option shall impose no obligation on the recipient
to exercise such option.
ARTICLE XIV
USE OF PROCEEDS
---------------
The proceeds received from the sale of Stock pursuant to the Plan
shall be used for general corporate purposes.
ARTICLE XV
RIGHTS AS A STOCKHOLDER
-----------------------
An optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any share covered by his Option until he shall have
become the holder of record of such share, and he shall not be entitled to any
dividends or distributions or other rights in respect of such share for which
the record date is prior to the date on which he shall have become the holder of
record thereof.
Notwithstanding anything herein to the contrary, the Committee, in its
sole discretion, may restrict the transferability of all or any number of shares
issued under the Plan upon the exercise of an Option by legending the stock
certificate as it deems appropriate.
ARTICLE XVI
EMPLOYMENT RIGHTS
-----------------
Nothing in the Plan or in any agreement related to Options or
Restricted Shares granted hereunder shall (1) confer on any optionee or grantee
any right to continue in the employ of the Company or any of its subsidiaries,
(2) create any agreement or understanding, express or implied, that the Company
or any of its subsidiaries will employ the optionee or grantee in any particular
position or at any particular rate of remuneration, or for any particular period
of time, or (3) interfere in any way with the right of the Company or any of its
subsidiaries to terminate the optionee's employment at any time.
8
<PAGE>
ARTICLE XVII
COMPLIANCE WITH THE LAW
-----------------------
The Company is relieved from any liability for the nonissuance or non-
transfer or any delay in issuance or transfer of any shares of Stock subject to
Options under the Plan which results from the inability of the Company to
obtain, or any delay in obtaining from any regulatory body having jurisdiction,
all requisite authority to issue or transfer shares of Stock of the Company
either upon exercise of the Options under the Plan or shares of Stock issued as
a result of such exercise, if counsel for the Company deems such authority
necessary for lawful issuance or transfer of any such shares. Appropriate
legends may be placed on the stock certificates evidencing shares issued upon
exercise of Options to reflect such transfer restrictions.
Each Option granted under the Plan is subject to the requirement that
if at any time the Committee determines, in its discretion, that the listing,
registration or qualification of shares of Stock issuable upon exercise of
Options is required by any securities exchange or under any state or Federal
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the grant of
Options or the issuance of shares of Stock, no shares of Stock shall be issued,
in whole or in part, unless such listing, registration, qualification, consent
or approval has been effected or obtained free of any conditions or with such
conditions as are acceptable to the Committee.
ARTICLE XVIII
CANCELLATION OF OPTIONS
-----------------------
The Committee, in its discretion, may, with the consent of any
optionee, cancel any outstanding Option hereunder.
9
<PAGE>
ARTICLE XIX
EFFECTIVE DATE AND EXPIRATION DATE OF PLAN
------------------------------------------
The Plan is effective as of January __, 1998, the date of adoption of
the Plan by the Company's Board, subject to approval by the stockholders of the
Company in a manner which complies with Section 422(b)(1) of the Code and the
Treasury Regulations thereunder. The expiration date of the Plan, after which
no option may be granted hereunder, shall be January 23, 2008.
ARTICLE XX
AMENDMENT OR DISCONTINUANCE OF PLAN
-----------------------------------
The Board may, without the consent of the Company's stockholders or
optionees under the Plan, at any time terminate the Plan entirely and at any
time or from time to time amend or modify the Plan, provided that no such action
shall adversely affect Restricted Shares or Options theretofore granted
hereunder without the grantee's or optionee's consent, and provided further that
no such action by the Board, without approval of the stockholders, may increase
the total number of shares of Stock which may be issued under the Plan, except
as contemplated in Article XII.
ARTICLE XXI
REPURCHASE OF OPTIONS
---------------------
In granting Restricted Shares and Options hereunder, the Committee may
in its discretion, and on terms it considers appropriate, require an optionee,
or the executors or administrators of an optionee's estate, to sell back to the
Company such Restricted Shares and Options in the event such optionee's
employment with the Company is terminated.
ARTICLE XXII
MISCELLANEOUS
-------------
(a) Grants of Options and Restricted Shares shall be evidenced by
agreements (which need not be identical) in such forms as the Committee may from
time to time approve. Such agreements shall conform to the terms and conditions
of the Plan and may provide that the grant of any Restricted Share or Option
under the Plan and Stock acquired upon the exercise of Options
10
<PAGE>
shall also be subject to such other conditions (whether or not applicable to any
other grantee or optionee) as the Committee determines appropriate, including,
without limitation, provisions to assist the optionee in financing the purchase
of Stock through the exercise of Options, provisions for the forfeiture of, or
restrictions on, resale or other disposition of shares under the Plan,
provisions giving the Company the right to repurchase shares acquired under the
Plan in the event the participant elects to dispose of such shares, and
provisions to comply with Federal and state securities laws and Federal and
state income tax withholding requirements.
(b) At such time that the delivery of shares of Stock to a grantee or
optionee becomes subject to tax withholding requirements, the Company may
require that the grantee or optionee pay to the Company such amount as the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes. The Committee, in its discretion, may allow the
grantee or optionee to pay such amount by having the Company withhold shares of
Stock which would otherwise be delivered to such grantee or optionee.
(c) If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or his
estate (unless a prior claim therefor has been made by a duly appointed legal
representative) may, if the Committee so directs the Company, be paid to his
spouse, child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper recipient on
behalf of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the Company therefor.
(d) No member of the Committee shall be personally liable by reason
of any contract or other instrument executed by such member or on his behalf in
his capacity as a member of the Committee, or for any mistake of judgment made
in good faith, and the Company shall indemnify and hold harmless each member of
the Committee and each other employee, officer or director of the Company to
whom any duty or power relating to the administration or interpretation of the
Plan may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith; provided, however, that
approval of the Company's Board shall be required for the payment of any amount
in settlement of a claim against any such
11
<PAGE>
person. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(e) The Plan shall be governed by and construed in accordance with
the internal laws of the State of New York without reference to the principles
of conflicts of laws thereof.
(f) No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Optionees shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
(g) Each member of the Committee and each member of the Company's
Board shall be fully justified in relying, acting or failing to act, and shall
not be liable for having so relied, acted or failed to act in good faith, upon
any report made by the independent public accountant of the Company and upon any
other information furnished in connection with the Plan by any person or
persons other than such member.
(h) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, profit-sharing, group insurance or
other benefit plan of the Company.
(i) The expenses of administering the Plan shall be borne by the
Company.
12
<PAGE>
(j) Masculine pronouns and other words of masculine gender shall
refer to both men and women.
* * *
As adopted by the Board of Directors of Eagle Family Foods Holdings, Inc. as of
January 14, 1998
13
<PAGE>
Exhibit 10.6
EAGLE FAMILY FOODS, INC.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of this 23rd day of January, 1998,
between Eagle Family Foods, Inc., a Delaware corporation (the "Company"), Eagle
Family Foods Holdings, Inc., a Delaware corporation ("Holdings"), and John O'C.
Nugent (the "Executive").
R E C I T A L S:
---------------
WHEREAS, the Company recognizes that the future growth, profitability
and success of the Company's business will be substantially and materially
enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the Executive
has indicated his willingness to provide his services, on the terms and
conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the
----------
Executive and the Executive hereby accepts employment with the Company on the
terms and subject to the conditions hereinafter set forth. Subject to the terms
and conditions contained herein, the Executive shall serve as President and
Chief Executive Officer of the Company and, in such capacity, shall report
directly to the Board of Directors of the Company (the "Board of Directors") and
shall have such duties as are typically performed by a President and Chief
Executive Officer of a corporation, together with such additional duties,
commensurate with the Executive's position, as may be assigned to him from time
to time by the Board of Directors. The principal location of the Executive's
employment shall be at the Company's principal executive office located at 220
White Plains Road, Tarrytown, New York 10591, although the Executive understands
and agrees that he may be required to travel from time to time for business
reasons.
Section 2. Term. Unless terminated pursuant to Section 6 hereof, the
----
Executive's employment hereunder shall commence on the date hereof and shall
continue during the period ending on the second anniversary of the date hereof
(the "Initial Term"). Beginning with such second anniversary date, the
Employment Term shall be extended automatically for consecutive periods of one
year on each anniversary date of this Agreement. The Initial Term, together
with any extension pursuant to this Section 2, is referred to herein as the
"Employment Term." The
<PAGE>
Employment Term shall terminate upon any termination of the Executive's
employment pursuant to Section 6.
Section 3. Compensation. During the Employment Term, the Executive
------------
shall be entitled to the following compensation and benefits:
(a) Salary. As compensation for the performance of the Executive's
------
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $300,000 per annum with increases, if any, as may be approved in
writing by the Board of Directors. The Salary shall be payable in accordance
with the payroll practices of the Company as the same shall exist from time to
time. In no event shall the Salary be decreased during the Employment Term.
(b) Bonus Plan. The Executive shall be eligible to receive an annual
----------
cash bonus ("Bonus") which shall be determined by the Board of Directors. For
the Company's 1998 fiscal year, the Bonus eligible to be earned shall be as
follows: (1) 25% of Salary if the Company achieves 85% of its 1998 target for
earnings before interest, taxes, depreciation and amortization, as set forth in
the annual business plan approved by the Board of Directors (the "EBITDA
Target"); (2) an additional 25% of Salary if the Company achieves 100% of the
1998 EBITDA Target; and (3) an additional 50% of Salary if the Company exceeds
125% of the 1998 EBITDA Target. In the event the Company achieves over 100% of
the 1998 EBITDA Target but 125% or less than the 1998 EBITDA Target, the Board
of Directors may, in its discretion, grant a Bonus reflecting such achievement,
provided that any such Bonus shall not exceed an additional 50% of Salary. For
fiscal years during the Employment Term subsequent to 1998, the relevant
performance targets shall be set by the Board of Directors in its sole
discretion, provided that the Executive's aggregate Bonus potential as a
percentage of Salary shall not decrease.
(c) Benefits. In addition to the Salary and Bonus, if any, the
--------
Executive shall be entitled to participate in health, insurance, pension,
automobile and other benefits provided to other senior executives of the Company
on terms no less favorable than those available to such senior executives of the
Company. The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of the Company in accordance with the Company policy in effect
from time to time.
(d) Awards; Purchase Rights. (1) The Executive shall be eligible to
-----------------------
receive awards of restricted stock and options under the Eagle Family Foods
Holdings, Inc. 1998 Stock Incentive Plan (the "Stock Plan"), as determined by
the Board of Directors of Holdings (the "Holdings Board") (or a designated
committee
-2-
<PAGE>
thereof) in its sole discretion. The terms of such awards including, without
limitation, those which apply upon termination of the Executive's employment,
shall be governed by the Stock Plan and any award agreements entered into
between the Executive and Holdings with respect thereto.
(2) In the event of a termination of employment of William A. Lynch
under circumstances which will give Holdings a right of first refusal to
purchase shares of Common Stock or Preferred Stock held by Lynch, the Executive
shall have the right to purchase 100%, but not less than 100%, of such shares.
(3) Any shares of Common Stock or Preferred Stock purchased by the
Executive shall be subject to the terms and conditions of the Eagle Family Foods
Holdings, Inc. Stockholders Agreement dated as of January 23, 1998
("Stockholders Agreement").
(4) The rights of first refusal granted pursuant to Section 3(d)(2)
above shall not apply to any unvested shares, which terminate by their terms.
Nothing in this Agreement shall restrict Holdings' ability to amend, modify or
waive any rights to repurchase shares of any employee.
Section 4. Exclusivity. During the Employment Term, the Executive
-----------
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board of
Directors in accordance with the terms of this Agreement, shall use his best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be engaged in
for pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and (ii) engage in personal investing activities, provided that
activities set forth in these clauses (i) and (ii), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized
--------------------------
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items in accordance with the Company's expense reimbursement policy, as the same
may be modified by the Board of Directors from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
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<PAGE>
Section 6. Termination and Default.
-----------------------
(a) Death. The Executive's employment shall automatically terminate
-----
upon his death and upon such event, the Executive's estate shall be entitled to
receive the amounts specified in Section 6(e) below.
(b) Disability. If the Executive is unable to perform the duties
----------
required of him under this Agreement because of illness, incapacity, or physical
or mental disability, the Employment Term shall continue and the Company shall
pay all compensation required to be paid to the Executive hereunder, unless the
Executive is unable to perform the duties required of him under this Agreement
for an aggregate of 180 days (whether or not consecutive) during any 12-month
period during the term of this Agreement, in which event the Company may
terminate the Executive's employment for "Disability".
(c) Cause. The Company may terminate the Executive's employment at
-----
any time, with or without Cause. In the event of termination pursuant to this
Section 6(c) for Cause, the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the reason for such
termination. Termination of the Executive's employment hereunder shall be
effective upon delivery of such notice of termination. For purposes of this
Agreement, "Cause" shall mean: (i) the Executive's failure (except where due to
a disability contemplated by subsection (b) hereof), neglect or refusal to
perform his duties hereunder which failure, neglect or refusal shall not have
been corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any willful or intentional misrepresentation made
by or at the behest of the Executive to the Board of Directors; (iv) any
continued or repeated absence from the Company, unless such absence is (A)
approved or excused by the Board of Directors or (B) is the result of the
Executive's illness, disability or incapacity (in which event the provisions of
Section 6(b) hereof shall control); (v) use of illegal drugs by the Executive or
repeated drunkenness while performing duties required under this Agreement or in
public; (vi) conviction of the Executive for the commission of a felony; (vii)
the commission by the Executive of an act of fraud or embezzlement against the
Company; or (viii) any breach or violation by the Executive of the terms of
Section 7 hereof.
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<PAGE>
(d) Resignation. The Executive shall have the right to terminate his
-----------
employment at any time by giving 60 days' prior written notice of his
resignation to the Company.
(e) Payments; Repurchase of Stock. (1) In the event that the
-----------------------------
Executive's employment terminates for any reason, the Company shall pay to the
Executive all amounts accrued but unpaid hereunder through the date of
termination in respect of Salary or unreimbursed expenses. In the event the
Executive's employment is terminated by the Company without Cause, in addition
to the amounts specified in the foregoing sentence, the Executive shall (A)
continue to receive the Salary (less any applicable withholding or similar
taxes) at the rate in effect hereunder on the date of such termination
periodically, in accordance with the Company's prevailing payroll practices, (B)
remain eligible to participate in benefits offered in accordance with Section
3(c) hereof, in each of sub-clauses (A) and (B) for a period of (i) twelve
months following the date of such termination, or (ii) the number of months
remaining in the Employment Term immediately prior to such termination,
whichever is longer (the "Severance Term") and (C) be entitled to receive
placement services from an outplacement assistance agency selected in good faith
by the Company for a period of up to six months following the date of such
termination, at the expense of the Company up to a maximum limit of $25,000.
Amounts owed by the Company in respect of the Salary or reimbursement for
expenses under the provisions of Section 5 hereof shall, except as otherwise set
forth in this Section 6(e), be paid promptly upon any termination.
(2) Upon termination of the Executive's employment by the Company for
Cause, or if the Executive resigns: (A) with respect to any shares of Common
Stock purchased by the Executive pursuant to the right of first refusal
described in Section 3(d)(2), Holdings shall have the right, but not the
obligation, to purchase from the Executive all such shares then owned by him at
a price equal to the lower of (i) the Executive's initial cost for such shares,
or (ii) the "Fair Value" of such shares (as hereinafter defined); and (B) with
respect to any shares of Preferred Stock then owned by the Executive, whether
such shares were acquired pursuant to the right of first refusal described in
Section 3(d)(2) or otherwise, Holdings shall have the right, but not the
obligation, to purchase from the Executive all such shares at a price equal to
the Executive's initial cost for such shares.
(3) In the event of a termination of Executive's employment by the
Company without Cause, or by reason of his death or Disability, Holdings shall
have the right and obligation to purchase from the Executive all shares of
Common Stock acquired by him pursuant to the right of first refusal described in
Section 3(d)(2), at a price equal to the Fair Value of such shares (as
hereinafter defined). In such event, Holdings shall
-5-
<PAGE>
also have the right and obligation to purchase all shares of Preferred Stock
then owned by the Executive (or his estate), whether acquired pursuant to the
right of first refusal described in Section 3(d)(2) or otherwise, at a price
equal to the Executive's initial cost for such shares plus all accrued and
unpaid dividends.
(4) With respect to the repurchase rights described in paragraphs
(e)(2) and (e)(3) of this Section 6, Holdings, at its option, may pay the
purchase price for such shares (A) in cash, or (B) with a promissory note
bearing a market rate of interest and with a maximum term of five years.
(5) For purposes of this Agreement, "Fair Value" means the fair
market value of the shares being purchased, as determined in good faith in
writing by a majority of the directors of the Holdings Board.
(6) In addition to the rights and obligations described herein, all
shares of Common Stock and Preferred Stock owned by the Executive shall be
subject to the terms and conditions of the Stockholders Agreement.
(f) Survival of Operative Sections. Upon any termination of the
------------------------------
Executive's employment, the provisions of Sections 6(e) and 7 through 19 of this
Agreement shall survive to the extent necessary to give effect to the provisions
thereof.
Section 7. Secrecy and Non-Competition.
---------------------------
(a) No Competing Employment. The Executive acknowledges that the
-----------------------
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that for the period commencing on the date of this Agreement and ending
on the first anniversary of the termination of the Executive's employment
hereunder (such period is hereinafter referred to as the "Restricted Period")
with respect to any State in which the Company is engaged in business during the
Employment Term, the Executive shall not participate or engage, directly or
indirectly, for himself or on behalf of or in conjunction with any person,
partnership, corporation or other entity, whether as an employee, agent,
officer, director, shareholder, partner, joint venturer, investor or otherwise,
in any business activities if such activity consists of any activity undertaken
or expressly contemplated to be undertaken by the
-6-
<PAGE>
Company or any of its subsidiaries or by the Executive at any time during the
Employment Term.
(b) Nondisclosure of Confidential Information. The Executive, except
-----------------------------------------
in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter, any
information not in the public domain nor generally known in the industry, in any
form, acquired by the Executive while employed by the Company or any predecessor
to the Company's business or, if acquired following the Employment Term, such
information which, to the Executive's knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of confidentiality to the
Company or any of its subsidiaries or affiliates, relating to the Company, its
subsidiaries or affiliates, including but not limited to information regarding
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, price lists, financial or other data
(including the revenues, costs or profits associated with any of the Company's
products or services), business plans, code books, invoices and other financial
statements, computer programs, software systems, data bases, discs and
printouts, plans (business, technical or otherwise), customer and industry
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any subsidiaries or affiliates thereof. The Executive agrees and
acknowledges that all of such information, in any form, and copies and extracts
thereof, are and shall remain the sole and exclusive property of the Company,
and upon termination of his employment with the Company, the Executive shall
return to the Company the originals and all copies of any such information
provided to or acquired by the Executive in connection with the performance of
his duties for the Company, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
---------------
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly solicit, endeavor to entice away from
the Company or its subsidiaries, or otherwise directly interfere with the
relationship of the Company or its subsidiaries with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client,
-7-
<PAGE>
of the Company, its predecessors or any of its subsidiaries. The placement of
any general classified or "help wanted" advertisements and/or general
solicitations to the public at large shall not constitute a violation of this
Section 7(c) unless the Executive's name is contained in such advertisements or
solicitations.
(d) Inventions, etc. The Executive hereby sells, transfers and
---------------
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Executive within
one year following the termination of his employment with the Company shall be
deemed to fall within the provisions of this paragraph unless proved to have
been first conceived and made following such termination.
Section 8. Injunctive Relief. Without intending to limit the
-----------------
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
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<PAGE>
Section 9. Extension of Restricted Period. In addition to the
------------------------------
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.
Section 10. Representations and Warranties of the Executive. The
-----------------------------------------------
Executive represents and warrants to the Company as follows:
(a) This Agreement, upon execution and delivery by the Executive,
will be duly executed and delivered by the Executive and (assuming due execution
and delivery hereof by the Company) will be the valid and binding obligation of
the Executive enforceable against the Executive in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby nor the performance of this
Agreement in accordance with its terms and conditions by the Executive (i)
requires the approval or consent of any governmental body or of any other person
or (ii) conflicts with or results in any breach or violation of, or constitutes
(or with notice or lapse of time or both would constitute) a default under, any
agreement, instrument, judgment, decree, order, statute, rule, permit or
governmental regulation applicable to the Executive. Without limiting the
generality of the foregoing, the Executive is not a party to any non-
competition, non-solicitation, no hire or similar agreement that restricts in
any way the Executive's ability to engage in any business or to solicit or hire
the employees of any person.
The representations and warranties of the Executive contained in this
Section 10 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Section 11. Key-Man Insurance. The Executive shall cooperate with
-----------------
the Company, at its request, in procuring "key-man" insurance on the Executive's
life, including submission to any medical exams required in connection
therewith.
Section 12. Successors and Assigns; No Third-Party Beneficiaries.
----------------------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
-------- -------
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the
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<PAGE>
foregoing, the Company shall have the unrestricted right to assign this
Agreement and to delegate all or any part of its obligations hereunder to any of
its subsidiaries or affiliates, but in such event such assignee shall expressly
assume all obligations of the Company hereunder and the Company shall remain
fully liable for the performance of all of such obligations in the manner
prescribed in this Agreement. Nothing in this Agreement shall confer upon any
person or entity not a party to this Agreement, or the legal representatives of
such person or entity, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement.
Section 13. Waiver and Amendments. Any waiver, alteration, amendment
---------------------
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
-------- -------
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the Board of Directors. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 14. Severability and Governing Law. The Executive
------------------------------
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 15. Notices.
-------
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or by facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(1) if to the Executive, at 63 Crescent Place, Short Hills, NJ 07078, or
at such other address as the Executive may have furnished the Company in
writing,
(2) if to the Company, at 220 White Plains Road, Tarrytown, New York
10591, marked for the attention of the Board of
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<PAGE>
Directors, or at such other address or facsimile number as it may have furnished
in writing to the Executive,
(3) if to Holdings, at 220 White Plains Road, Tarrytown, New York 10591,
marked for the attention of the Holdings Board, or at such other address or
facsimile number as it may have furnished in writing to the Executive.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile number, on the date of such delivery; if mailed
by courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the date
of such mailing.
Section 16. Section Headings. The headings of the sections and
----------------
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 17. Entire Agreement. This Agreement constitutes the entire
----------------
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.
Section 18. Severability. In the event that any part or parts of
------------
this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
affect the remaining provisions of this Agreement which shall remain in full
force and effect.
Section 19. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EAGLE FAMILY FOODS, INC.
By: /s/ William A. Lynch
----------------------
Name: William A. Lynch
Title: Chairman of the Board of
Directors and Chief
Operating Officer
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ William A. Lynch
----------------------
Name: William A. Lynch
Title: Chairman of the Board of
Directors and Chief
Operating Officer
/s/ John O'C. Nugent
----------------------------
John O'C. Nugent
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<PAGE>
Exhibit 10.7
EAGLE FAMILY FOODS, INC.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of this 23rd day of January, 1998,
between Eagle Family Foods, Inc., a Delaware corporation (the "Company"), Eagle
Family Foods Holdings, Inc., a Delaware corporation ("Holdings"), and William A.
Lynch (the "Executive").
R E C I T A L S:
---------------
WHEREAS, the Company recognizes that the future growth, profitability
and success of the Company's business will be substantially and materially
enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the Executive
has indicated his willingness to provide his services, on the terms and
conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the
----------
Executive and the Executive hereby accepts employment with the Company on the
terms and subject to the conditions hereinafter set forth. Subject to the terms
and conditions contained herein, the Executive shall serve as President and
Chief Executive Officer of the Company and, in such capacity, shall report
directly to the Board of Directors of the Company (the "Board of Directors") and
shall have such duties as are typically performed by a President and Chief
Executive Officer of a corporation, together with such additional duties,
commensurate with the Executive's position, as may be assigned to him from time
to time by the Board of Directors. The principal location of the Executive's
employment shall be at the Company's principal executive office located at 220
White Plains Road, Tarrytown, New York 10591, although the Executive understands
and agrees that he may be required to travel from time to time for business
reasons.
Section 2. Term. Unless terminated pursuant to Section 6 hereof, the
----
Executive's employment hereunder shall commence on the date hereof and shall
continue during the period ending on the second anniversary of the date hereof
(the "Initial Term"). Beginning with such second anniversary date, the
Employment Term shall be extended automatically for consecutive periods of one
year on each anniversary date of this Agreement. The Initial Term, together
with any extension pursuant to this Section 2, is referred to herein as the
"Employment Term." The
<PAGE>
Employment Term shall terminate upon any termination of the Executive's
employment pursuant to Section 6.
Section 3. Compensation. During the Employment Term, the Executive
------------
shall be entitled to the following compensation and benefits:
(a) Salary. As compensation for the performance of the Executive's
------
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $300,000 per annum with increases, if any, as may be approved in
writing by the Board of Directors. The Salary shall be payable in accordance
with the payroll practices of the Company as the same shall exist from time to
time. In no event shall the Salary be decreased during the Employment Term.
(b) Bonus Plan. The Executive shall be eligible to receive an annual
----------
cash bonus ("Bonus") which shall be determined by the Board of Directors. For
the Company's 1998 fiscal year, the Bonus eligible to be earned shall be as
follows: (1) 25% of Salary if the Company achieves 85% of its 1998 target for
earnings before interest, taxes, depreciation and amortization, as set forth in
the annual business plan approved by the Board of Directors (the "EBITDA
Target"); (2) an additional 25% of Salary if the Company achieves 100% of the
1998 EBITDA Target; and (3) an additional 50% of Salary if the Company exceeds
125% of the 1998 EBITDA Target. In the event the Company achieves over 100% of
the 1998 EBITDA Target but 125% or less than the 1998 EBITDA Target, the Board
of Directors may, in its discretion, grant a Bonus reflecting such achievement,
provided that any such Bonus shall not exceed an additional 50% of Salary. For
fiscal years during the Employment Term subsequent to 1998, the relevant
performance targets shall be set by the Board of Directors in its sole
discretion, provided that the Executive's aggregate Bonus potential as a
percentage of Salary shall not decrease.
(c) Benefits. In addition to the Salary and Bonus, if any, the
--------
Executive shall be entitled to participate in health, insurance, pension,
automobile and other benefits provided to other senior executives of the Company
on terms no less favorable than those available to such senior executives of the
Company. The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of the Company in accordance with the Company policy in effect
from time to time.
(d) Awards; Purchase Rights. (1) The Executive shall be eligible to
-----------------------
receive awards of restricted stock and options under the Eagle Family Foods
Holdings, Inc. 1998 Stock Incentive Plan (the "Stock Plan"), as determined by
the Board of Directors of Holdings (the "Holdings Board") (or a designated
committee thereof) in its sole discretion. The terms of such awards
-2-
<PAGE>
including, without limitation, those which apply upon termination of the
Executive's employment, shall be governed by the Stock Plan and any award
agreements entered into between the Executive and Holdings with respect thereto.
(2) In the event of a termination of employment of John O'C. Nugent
under circumstances which will give Holdings a right of first refusal to
purchase shares of Common Stock or Preferred Stock held by Nugent, the Executive
shall have the right to purchase 100%, but not less than 100%, of such shares.
(3) Any shares of Common Stock or Preferred Stock purchased by the
Executive shall be subject to the terms and conditions of the Eagle Family Foods
Holdings, Inc. Stockholders Agreement dated as of January 23, 1998
("Stockholders Agreement").
(4) The rights of first refusal granted pursuant to Section 3(d)(2)
above shall not apply to any unvested shares, which terminate by their terms.
Nothing in this Agreement shall restrict Holdings' ability to amend, modify or
waive any rights to repurchase shares of any employee.
Section 4. Exclusivity. During the Employment Term, the Executive
-----------
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board of
Directors in accordance with the terms of this Agreement, shall use his best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be engaged in
for pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and (ii) engage in personal investing activities, provided that
activities set forth in these clauses (i) and (ii), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized
--------------------------
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items in accordance with the Company's expense reimbursement policy, as the same
may be modified by the Board of Directors from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
Section 6. Termination and Default.
-----------------------
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<PAGE>
(a) Death. The Executive's employment shall automatically terminate
-----
upon his death and upon such event, the Executive's estate shall be entitled to
receive the amounts specified in Section 6(e) below.
(b) Disability. If the Executive is unable to perform the duties
----------
required of him under this Agreement because of illness, incapacity, or physical
or mental disability, the Employment Term shall continue and the Company shall
pay all compensation required to be paid to the Executive hereunder, unless the
Executive is unable to perform the duties required of him under this Agreement
for an aggregate of 180 days (whether or not consecutive) during any 12-month
period during the term of this Agreement, in which event the Company may
terminate the Executive's employment for "Disability".
(c) Cause. The Company may terminate the Executive's employment at
-----
any time, with or without Cause. In the event of termination pursuant to this
Section 6(c) for Cause, the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the reason for such
termination. Termination of the Executive's employment hereunder shall be
effective upon delivery of such notice of termination. For purposes of this
Agreement, "Cause" shall mean: (i) the Executive's failure (except where due to
a disability contemplated by subsection (b) hereof), neglect or refusal to
perform his duties hereunder which failure, neglect or refusal shall not have
been corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any willful or intentional misrepresentation made
by or at the behest of the Executive to the Board of Directors; (iv) any
continued or repeated absence from the Company, unless such absence is (A)
approved or excused by the Board of Directors or (B) is the result of the
Executive's illness, disability or incapacity (in which event the provisions of
Section 6(b) hereof shall control); (v) use of illegal drugs by the Executive or
repeated drunkenness while performing duties required under this Agreement or in
public; (vi) conviction of the Executive for the commission of a felony; (vii)
the commission by the Executive of an act of fraud or embezzlement against the
Company; or (viii) any breach or violation by the Executive of the terms of
Section 7 hereof.
(d) Resignation. The Executive shall have the right to terminate his
-----------
employment at any time by giving 60 days' prior written notice of his
resignation to the Company.
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<PAGE>
(e) Payments; Repurchase of Stock. (1) In the event that the
-----------------------------
Executive's employment terminates for any reason, the Company shall pay to the
Executive all amounts accrued but unpaid hereunder through the date of
termination in respect of Salary or unreimbursed expenses. In the event the
Executive's employment is terminated by the Company without Cause, in addition
to the amounts specified in the foregoing sentence, the Executive shall (A)
continue to receive the Salary (less any applicable withholding or similar
taxes) at the rate in effect hereunder on the date of such termination
periodically, in accordance with the Company's prevailing payroll practices, (B)
remain eligible to participate in benefits offered in accordance with Section
3(c) hereof, in each of sub-clauses (A) and (B) for a period of (i) twelve
months following the date of such termination, or (ii) the number of months
remaining in the Employment Term immediately prior to such termination,
whichever is longer (the "Severance Term") and (C) be entitled to receive
placement services from an outplacement assistance agency selected in good faith
by the Company for a period of up to six months following the date of such
termination, at the expense of the Company up to a maximum limit of $25,000.
Amounts owed by the Company in respect of the Salary or reimbursement for
expenses under the provisions of Section 5 hereof shall, except as otherwise set
forth in this Section 6(e), be paid promptly upon any termination.
(2) Upon termination of the Executive's employment by the Company for
Cause, or if the Executive resigns: (A) with respect to any shares of Common
Stock purchased by the Executive pursuant to the right of first refusal
described in Section 3(d)(2), Holdings shall have the right, but not the
obligation, to purchase from the Executive all such shares then owned by him at
a price equal to the lower of (i) the Executive's initial cost for such shares,
or (ii) the "Fair Value" of such shares (as hereinafter defined); and (B) with
respect to any shares of Preferred Stock then owned by the Executive, whether
such shares were acquired pursuant to the right of first refusal described in
Section 3(d)(2) or otherwise, Holdings shall have the right, but not the
obligation, to purchase from the Executive all such shares at a price equal to
the Executive's initial cost for such shares.
(3) In the event of a termination of Executive's employment by the
Company without Cause, or by reason of his death or Disability, Holdings shall
have the right and obligation to purchase from the Executive all shares of
Common Stock acquired by him pursuant to the right of first refusal described in
Section 3(d)(2), at a price equal to the Fair Value of such shares (as
hereinafter defined). In such event, Holdings shall also have the right and
obligation to purchase all shares of Preferred Stock then owned by the Executive
(or his estate), whether acquired pursuant to the right of first refusal
described in Section 3(d)(2) or otherwise, at a price equal to the
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<PAGE>
Executive's initial cost for such shares plus all accrued and unpaid dividends.
(4) With respect to the repurchase rights described in paragraphs
(e)(2) and (e)(3) of this Section 6, Holdings, at its option, may pay the
purchase price for such shares (A) in cash, or (B) with a promissory note
bearing a market rate of interest and with a maximum term of five years.
(5) For purposes of this Agreement, "Fair Value" means the fair market
value of the shares being purchased, as determined in good faith in writing by a
majority of the directors of the Holdings Board.
(6) In addition to the rights and obligations described herein, all
shares of Common Stock and Preferred Stock owned by the Executive shall be
subject to the terms and conditions of the Stockholders Agreement.
(f) Survival of Operative Sections. Upon any termination of the
------------------------------
Executive's employment, the provisions of Sections 6(e) and 7 through 19 of this
Agreement shall survive to the extent necessary to give effect to the provisions
thereof.
Section 7. Secrecy and Non-Competition.
---------------------------
(a) No Competing Employment. The Executive acknowledges that the
-----------------------
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that for the period commencing on the date of this Agreement and ending
on the first anniversary of the termination of the Executive's employment
hereunder (such period is hereinafter referred to as the "Restricted Period")
with respect to any State in which the Company is engaged in business during the
Employment Term, the Executive shall not participate or engage, directly or
indirectly, for himself or on behalf of or in conjunction with any person,
partnership, corporation or other entity, whether as an employee, agent,
officer, director, shareholder, partner, joint venturer, investor or otherwise,
in any business activities if such activity consists of any activity undertaken
or expressly contemplated to be undertaken by the Company or any of its
subsidiaries or by the Executive at any time during the Employment Term.
(b) Nondisclosure of Confidential Information. The Executive, except
-----------------------------------------
in connection with his employment hereunder,
-6-
<PAGE>
shall not disclose to any person or entity or use, either during the Employment
Term or at any time thereafter, any information not in the public domain nor
generally known in the industry, in any form, acquired by the Executive while
employed by the Company or any predecessor to the Company's business or, if
acquired following the Employment Term, such information which, to the
Executive's knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company or any of its
subsidiaries or affiliates, relating to the Company, its subsidiaries or
affiliates, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company's products or
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, data bases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists, correspondence,
internal reports, personnel files, sales and advertising material, telephone
numbers, names, addresses or any other compilation of information, written or
unwritten, which is or was used in the business of the Company or any
subsidiaries or affiliates thereof. The Executive agrees and acknowledges that
all of such information, in any form, and copies and extracts thereof, are and
shall remain the sole and exclusive property of the Company, and upon
termination of his employment with the Company, the Executive shall return to
the Company the originals and all copies of any such information provided to or
acquired by the Executive in connection with the performance of his duties for
the Company, and shall return to the Company all files, correspondence and/or
other communications received, maintained and/or originated by the Executive
during the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
---------------
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly solicit, endeavor to entice away from
the Company or its subsidiaries, or otherwise directly interfere with the
relationship of the Company or its subsidiaries with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client, of the Company, its
predecessors or any of its subsidiaries. The placement of any general
classified or "help wanted" advertisements and/or general solicitations to the
public at large shall not constitute a violation of this Section 7(c) unless the
Executive's name is contained in such advertisements or solicitations.
-7-
<PAGE>
(d) Inventions, etc. The Executive hereby sells, transfers and
---------------
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Executive within
one year following the termination of his employment with the Company shall be
deemed to fall within the provisions of this paragraph unless proved to have
been first conceived and made following such termination.
Section 8. Injunctive Relief. Without intending to limit the
-----------------
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Extension of Restricted Period. In addition to the
------------------------------
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.
-8-
<PAGE>
Section 10. Representations and Warranties of the Executive. The
-----------------------------------------------
Executive represents and warrants to the Company as follows:
(a) This Agreement, upon execution and delivery by the Executive, will
be duly executed and delivered by the Executive and (assuming due execution and
delivery hereof by the Company) will be the valid and binding obligation of the
Executive enforceable against the Executive in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby nor the performance of this
Agreement in accordance with its terms and conditions by the Executive (i)
requires the approval or consent of any governmental body or of any other person
or (ii) conflicts with or results in any breach or violation of, or constitutes
(or with notice or lapse of time or both would constitute) a default under, any
agreement, instrument, judgment, decree, order, statute, rule, permit or
governmental regulation applicable to the Executive. Without limiting the
generality of the foregoing, the Executive is not a party to any non-
competition, non-solicitation, no hire or similar agreement that restricts in
any way the Executive's ability to engage in any business or to solicit or hire
the employees of any person.
The representations and warranties of the Executive contained in this
Section 10 shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Section 11. Key-Man Insurance. The Executive shall cooperate with
-----------------
the Company, at its request, in procuring "key-man" insurance on the Executive's
life, including submission to any medical exams required in connection
therewith.
Section 12. Successors and Assigns; No Third-Party Beneficiaries.
----------------------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
-------- -------
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this
Agreement shall confer upon any person or entity not a party to
-9-
<PAGE>
this Agreement, or the legal representatives of such person or entity, any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement.
Section 13. Waiver and Amendments. Any waiver, alteration, amendment
---------------------
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
-------- -------
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the Board of Directors. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 14. Severability and Governing Law. The Executive
------------------------------
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 15. Notices.
-------
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or by facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(1) if to the Executive, at 80 Ferry Boulevard, Stratford, CT, or at such
other address as the Executive may have furnished the Company in writing,
(2) if to the Company, at 220 White Plains Road, Tarrytown, New York
10591, marked for the attention of the Board of Directors, or at such other
address or facsimile number as it may have furnished in writing to the
Executive,
(3) if to Holdings, at 220 White Plains Road, Tarrytown, New York 10591,
marked for the attention of the Holdings Board, or at such other address or
facsimile number as it may have furnished in writing to the Executive.
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<PAGE>
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile number, on the date of such delivery; if mailed
by courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the date
of such mailing.
Section 16. Section Headings. The headings of the sections and
----------------
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 17. Entire Agreement. This Agreement constitutes the entire
----------------
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.
Section 18. Severability. In the event that any part or parts of
------------
this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
affect the remaining provisions of this Agreement which shall remain in full
force and effect.
Section 19. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EAGLE FAMILY FOODS, INC.
By: /s/ John O'C. Nugent
------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer, President
and Director
EAGLE FAMILY FOODS HOLDINGS, INC.
By: /s/ John O'C. Nugent
------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer, President
and Director
/s/ William A. Lynch
--------------------------------
William A. Lynch
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<PAGE>
EXHIBIT 10.8
EAGLE FAMILY FOODS, INC.
Employment Agreement, dated as of the 16th day of February, 1998, between
Eagle Family Foods, Inc. (the "Company"), Eagle Family Foods Holdings, Inc.
("Holdings") and Craig A. Steinke (the "Employee").
Witnesseth:
Whereas, the Company recognizes that the growth, profitability
and success of the Company will be materially and substantially enhanced by the
employment of the Employee by the Company; and
Whereas, the Company desires to employ the Employee, and the
Employee has indicated his willingness to provide his services, on the terms and
conditions set forth herein;
Now, therefore, in consideration of the mutual covenants and
agreements contained herein, the Company and the Employee agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ the
Employee and the Employee hereby accepts employment with the Company on the
terms and subject to the conditions contained in this agreement. Subject to the
terms and conditions contained herein, the Employee shall serve as the Company's
Vice President, Chief Financial Officer and Treasurer and, in such capacity,
shall report to the Company's Chairman and Chief Operating Officer (the
"Chairman") and shall have such duties as are typically performed by the Vice
President, Chief Financial Officer and Treasurer of a food company, together
with such additional duties, commensurate with the Employees position, as may be
assigned to him from time to time by the Chairman. The principal location of the
Employee's employment will be at the offices of the Company in Tarrytown, New
York, although the Employee understands and agrees that he may be required to
travel from time to time for business reasons.
Section 2. TERM. Unless terminated pursuant to Section 6
hereof, the Employee's employment hereunder shall commence on the date hereof
and shall continue during the period ending on the first anniversary of the date
hereof (the "Initial Term"). Beginning with such anniversary date, the
Employment term shall be extended automatically for consecutive periods of one
year on each anniversary date of this agreement. The Initial Term, together with
any extension pursuant to this Section 2, is referred to herein as the
"Employment Term". The Employment Term shall terminate upon any termination of
the Employee's employment pursuant to Section 6.
Section 3. COMPENSATION. During the Employment Term, the Employee shall be
entitled to the following compensation and benefits:
(a) Salary: As compensation for the performance of the
Employee's services hereunder, the Company shall pay to the Employee a salary
(the "Salary") of $210,000 per annum, subject to required tax withholding and
deductions for benefits, with increases, if any,
<PAGE>
as may be approved by the Chairman. The salary shall be payable in accordance
with the payroll practices of the Company as the same shall exist from time to
time. In no event shall the Salary be decreased during the Employment Term.
(b) Annual Bonus Plan: The Employee shall be eligible to
receive an annual cash bonus (the "Bonus") which shall be determined by the
Board of Directors of the Company ("the Board"). For the Company's 1998 fiscal
year, the Employee's Bonus eligibility shall be as follows: (1) 25% of Salary if
the Company achieves 85% of 1998 Target EBITDA; or (2) 50% of Salary if the
Company achieves 100% of 1998 Target EBITDA; and (3) 2% of Salary for each
percentage point by which the Company exceeds 100% of 1998 Target EBITDA, up to
125% of 1998 Target EBITDA or up to an additional 50% of Salary. "1998 Target
EBITDA" is the Company's earnings for the year before interest, taxes,
depreciation and amortization as set forth in the Company's 1998 business plan
approved by the Board. For fiscal years during the Employment Term subsequent to
1998, the relevant performance targets shall be set by the Board in its sole
discretion, provided that the Employee's aggregate Bonus potential as a
percentage of Salary shall not decrease. That is performance criteria may change
and may no longer consist of achievement of Target EBITDA but, even so, the
Bonus, as a percent of Salary, realizable in any year for achievement of that
year's criteria will not be less than that provided above for achievement of
1998 Target EBITDA.
(c) Benefits: In addition to Salary and Bonus-eligibility, the
Employee shall be entitled to participate in health, insurance and other
benefits provided to other Company employees at an executive level similar to
that of the Employee and on terms no less favorable than the terms available to
those employees. The Employee shall be entitled to four weeks vacation, as well
as time off and other consideration in accordance with the Company's policies
applicable to employees of the Company at an executive level similar to that of
the Employee in effect from time to time.
(d) Awards; Purchases of shares of Holdings' stock:
(1) The Employee shall be eligible to receive awards of
restricted stock and options under the Eagle family Foods Holdings Inc. 1998
Stock Incentive Plan (the "Stock Plan"), as determined by the Board of Directors
of Holdings (the "Holdings Board") or a designated committee thereof ) in its
sole discretion. The terms of such awards including, without limitation, those
which apply upon the termination of the Employee's employment, shall be governed
by the Stock Plan and any award agreements entered into between the Employee and
Holdings.
(2) The Employee's initial award of restricted stock pursuant
to the Stock Plan is described in Schedule A attached hereto. The terms of this
award including, without limitation, those which apply upon the termination of
the Employee's employment, shall be governed by the Stock Plan and the award
agreement entered into between the Employee and Holdings.
-2-
<PAGE>
(3) The Employee has elected to purchase additional shares of
Holdings' stock and the terms and conditions of such purchase are those which
will be specified in the subscription agreement between the Employee and
Holdings.
(4) Any shares of Holdings' stock, of any class, purchased by
or awarded to the Employee shall be subject to the terms and conditions of the
proposed Eagle Family Foods Holdings, Inc. Stockholders Agreement in the form
attached hereto as Exhibit 1 (the "Stockholders Agreement").
Section 4. EXCLUSIVITY: During the Employment Term the
Employee shall devote his full time to the business of the Company, shall
faithfully serve the Company, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the
Chairman in accordance with the terms of this agreement, shall use his best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be pursued
for financial gain, except that the Employee may (a) participate in the
activities of professional trade organizations related to the business of the
Company and (b) engage in personal investing activities, provided that these
permitted activities do not interfere in any material way with the Employee's
effective service to the Company pursuant to this agreement.
Section 5. REIMBURSEMENT FOR EXPENSES. The Employee is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items, in accordance with the Company's travel and entertainment
policies and requirements for prior approval in certain cases, as the same may
be modified from time to time. The Company shall reimburse the Employee for all
such proper expenses upon presentation by the Employee of itemized accounts of
such expenditures, supported by appropriate documentation.
Section 6. TERMINATION AND DEFAULT.
(a) Death. The Employee's employment shall terminate upon his
death and, in such event, the Employee's estate shall be entitled to receive the
amounts specified in Section 6(e), below.
(b) Disability. If the Employee is unable to perform his
duties under this agreement because of illness, injury or other change in the
Employee's condition that results in a lack of adequate physical or mental
capacity, the Employment Term shall continue and the Company shall pay all
compensation required to be paid to the Employee hereunder, unless the Employee
is unable to perform the duties required of him under this agreement for an
aggregate of 180 days, consecutive or not, during any 12 month period during the
term of this agreement, in which event the Company may terminate the Employee's
employment for "Disability".
(c) Cause: The Company may terminate the Employee's employment
at any time, with or without Cause. In the event of termination pursuant to this
Section 6(c) for Cause, the Company shall deliver written notice to the Employee
setting forth the basis for
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<PAGE>
such termination, which notice shall specify the nature of the Cause for
termination. Termination shall be effective upon the delivery of such notice.
"Cause" shall mean (i) the Employee's failure (except when caused by disability
as contemplated by Section 6(b), above), neglect or refusal to perform his
duties hereunder for a period in excess of thirty days following receipt of a
written notice specifying such failure, neglect or refusal, (ii) any willful or
intentional act of the Employee that has the effect of injuring the reputation
or business of the Company, (iii) any willful or intentional misrepresentation
made by or at the instigation of the Employee to the Chairman or any other
member of the Board, iv) any continued or repeated absence from his duties
unless such absence is approved or excused by the Chairman or is the result of
disability as contemplated by Section 6(b), above, (v) use of illegal drugs or
repeated drunkenness while engaged in his responsibilities hereunder or in
public, (vi) conviction for the commission of a felony, (vii) the commission of
any fraud upon the Company or the theft, by embezzlement or otherwise, of any of
the Company's assets or (viii) any breach of the obligations of the Employee
under Section 7 hereof.
(d) Resignation: The Employee shall have the right to
terminate his employment at any time by the giving of 30 days prior written
notice to the Company.
(e) Payments; Repurchase of Stock:
(1) In the event that the Employee's employment terminates for
any reason, the Company shall pay to the Employee all amounts accrued but unpaid
hereunder through the date of termination in respect of Salary and reimbursable
expenses. In the event the Employee's employment is terminated by the Company
without cause, in addition to the amounts specified in the previous sentence,
the Employee shall (A) continue to receive Salary (less any applicable
withholding or similar taxes) at the rate in effect on the date of termination
for a period of 12 months following the termination (the Severance Term") and
(B) remain eligible to participate in benefits offered in accordance with
section 3(c) hereof during the Severance Term. Upon termination the Employee
shall be entitled to a full program of outplacement assistance and upon
completion of the Severance Term the Employee shall be entitled to COBRA
coverage.
(2) Upon termination of the Employee's employment for Cause,
or if the Employee resigns, Holdings shall have the right, but not the
obligation, to purchase any preferred stock of Holdings owned by the Employee at
a price equal to the Employee's initial cost and any common stock of Holdings
owned by the Employee and not subject to the Stock Plan's provisions at the
lower of the Employee's initial cost or the Fair Value of the shares.
(3) In the event of a termination of the Employee's employment
by the Company without Cause, or by reason of his death or Disability, Holdings
shall have the right and obligation to purchase from the Employee any preferred
stock of Holdings owned by the Employee or his estate at a price equal to the
Employee's initial cost plus all accrued and unpaid dividends and any common
stock of Holdings owned by the Employee or his estate and not subject to the
Stock Plan's provisions at the Fair Value of the shares.
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<PAGE>
(4) For the purposes of this agreement, "Fair Value" means the
fair market value of the shares being purchased, as determined in good faith by
a majority of the directors of the Holdings Board.
(5) In addition to the right and obligations described herein,
all shares of the stock of the Company, of any class, owned by the Employee
shall be subject, without implying any limitation of the application of the
Stock Plan, to the terms and conditions of the Stockholder's Agreement.
(f) Survival of Operative Sections: Upon any termination of the Employee's
employment, the provisions of Section 6(e) and the Sections of this agreement
following Section 6(e) shall survive to the extent necessary to give effect to
the provisions thereof.
Section 7. SECRECY AND NON-COMPETITION.
(a) No Competing Employment: The Employee acknowledges that
the agreements and covenants contained in this Section 7 are essential to
protect the value of the Company's business and assets and that by his
employment with the Company the Employee will obtain knowledge and experience
which could be used to the substantial advantage of a competitor of the Company
and to the Company's substantial detriment. Therefore the Employee agrees that,
for the period commencing on the date of this agreement and ending on the first
anniversary of the termination of the Employee's employment hereunder (the
"Restricted Period"), the Employee shall not participate or engage, directly or
indirectly, in any business activity if such activity competes with any activity
undertaken or expressly contemplated to be undertaken by the Company.
(b) Nondisclosure of Confidential Information: The Employee
shall not disclose to any person or entity or use, either during the Employment
Term or after, any information not in the public domain nor generally known in
the industry acquired during the Employment Term relating to the Company
including, but not limited to, business plans, customers, suppliers, know-how,
trade secrets, formulas, manufacturing and other processes, computer programs,
research of every kind and new product initiatives, in all cases whether or not
written and however embodied, which is, or has been or may be used in the
business of the Company. Upon termination of his employment the Employee shall
return to the Company all files, correspondence and other records and
communications received or originated or maintained by the Employee during the
course and term of his employment.
(c) No Interference: During the Restricted Period the Employee
shall not, for his own account or the account of any other person or entity,
directly or indirectly solicit, endeavor to entice away from the Company or
otherwise interfere with the relationship of the Company with any of its
officers, directors, employees, any individual performing services for the
Company as an independent contractor, any supplier to the Company or any
customer of the Company.
(d) Inventions, etc.: The Employee hereby sells, transfers and
assigns to the Company all of the entire right, title and interest of the
Employee in and to all inventions,
-5-
<PAGE>
ideas, disclosures and improvements made or conceived by the Employee, whether
or not they be copyrighted, patented or patentable, during his employment by the
Company which in any way relate to the business, functions or operations of the
Company, present or prospective, or to the industries in which the Company now
or hereafter competes. The Employee shall cooperate fully to give full effect to
the provisions hereof and shall provide the Company with all information and
execute all document which the Company deems necessary or convenient to secure,
protect and exploit its right acquired hereunder.
Section 8. INJUNCTIVE RELIEF. Without limiting the remedies
available to the Company, the Employee acknowledges that any breach of any of
his covenants and undertakings expressed in Section 7, above, may result in
material and irreparable harm to the Company for which there is no adequate
remedy at law, that it will not be possible to measure damages for such harm
with precision and that, in the event of such a breach or threat or same, the
Company shall be entitled obtain a temporary restraining order and/or
preliminary or permanent injunction, without the necessity of proving
irreparable harm or injury as a result of such breach or threatened breach,
restraining the Employee from engaging in any activity prohibited by Section 7,
above, or such other relief as may be required specifically to enforce any of
the covenants or undertakings expressed in Section 7, above.
Section 9. EXTENSION OF RESTRICTED PERIOD. In addition to the
remedies the Company may seek and obtain pursuant to Section 8, above, the
Restricted Period shall be extended by any and all periods during which the
Employee shall have been found by a court to have been in violation of any of
the covenants and undertakings expressed in section 7, above.
Section 10. REPRESENTATIONS AND WARRANTIES. The Employee
represents and warrants to the Company that (a) this agreement constitutes a
valid and binding obligation of the Employee, enforceable against him in
accordance with its terms and (b) the Employee is not a party to any agreement,
including without limitation, any employment or non-competition agreement, nor
is he subject to any order, judgment or under any legal disability which would
restrict or in any way purport to affect or prevent his employment and the
performance of his duties hereunder.
Section 11. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES. This agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of each of the parties, including, but not
limited to, The Employee's heirs and the personal representatives of the
Employee's estate; provided, however, that neither party shall assign or
delegate any of the obligations created by this agreement without the prior
written consent of the other party. Notwithstanding the foregoing, the Company
shall have the unrestricted right to assign its rights and obligations hereunder
to any subsidiary or affiliate of the Company. Nothing in this agreement shall
confer upon any person or entity not a party any rights or remedies of any kind
or nature whatsoever.
Section 12. WAIVER AND AMENDMENTS. Any waiver, alteration or
amendment of this agreement shall be valid only if in writing and signed by both
parties. No waiver by
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<PAGE>
either party of a right hereunder shall be deemed to constitute a waiver with
respect to any subsequent event.
Section 13. GOVERNING LAW. This agreement shall be governed by
and construed in accordance the laws of the State of New York applicable to
contracts made and to be performed entirely within said State.
Section 14. NOTICES. All notices and other communications
under this agreement shall be in writing and delivered by hand, facsimile
transmission or first class mail, postage prepaid and shall be effective on the
date of actual receipt by the addressee.
Section 15. ENTIRE AGREEMENT. This agreement constitutes the entire
understanding and agreement of the parties regarding the employment of the
Employee. It supersedes and replaces all prior communications by and
understandings of the parties relating to such employment.
Section 16. SEVERABILITY. In the event that any part or parts
of this agreement shall be held illegal or unenforceable, such determination
shall not effect the remaining provisions of this agreement, all of which shall
remain in full force and effect.
In witness whereof the parties hereto have executed this agreement as of
the date first written above.
EAGLE FAMILY FOODS, INC.
by /s/ William A. Lynch
---------------------
Chairman
EAGLE FAMILY FOODS HOLDINGS, INC.
by /s/ William A. Lynch
--------------------
Chairman
by /s/ Craig A. Steinke
--------------------
Craig A. Steinke
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<PAGE>
SCHEDULE A
to Employment Agreement between
Eagle Family Foods, Inc. and Craig A. Steinke
Initial Award of Restricted Stock:
0.494% (four hundred ninety four thousandths of one percent)
of the Common Stock of Holdings issued and outstanding on the date of the
closing of the purchase of certain assets of Borden Foods Corporation by the
Company, subject to the terms and limitations, including vesting requirements,
restrictions on transfer and mandatory sale or forfeiture applicable thereto. On
the assumption that there will be 1,000,000 shares of the Common Stock of
Holdings outstanding on that date, the initial award will be 4,940 shares.
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<PAGE>
EXHIBIT 10.9
EAGLE FAMILY FOODS, INC.
Employment Agreement, dated as of the 19th day of January, 1998, between
Eagle Family Foods, Inc. (the "Company"), Eagle Family Foods Holdings, Inc.
("Holdings") and Tamar Bernbaum (the "Employee").
Witnesseth:
Whereas, the Company recognizes that the growth,
profitability and success of the Company will be materially and substantially
enhanced by the employment of the Employee by the Company; and
Whereas, the Company desires to employ the Employee, and the
Employee has indicated her willingness to provide her services, on the terms
and conditions set forth herein;
Now, therefore, in consideration of the mutual covenants and
agreements contained herein, the Company and the Employee agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ the
Employee and the Employee hereby accepts employment with the Company on the
terms and subject to the conditions contained in this agreement. Subject to the
terms and conditions contained herein, the Employee shall serve as the Company's
Vice President - Marketing and, in such capacity, shall report to the Company's
President and Chief Executive Officer (the "President") and shall have such
duties as are typically performed by the Vice President - Marketing of a food
company, together with such additional duties, commensurate with the Employees
position, as may be assigned to her from time to time by the President. The
principal location of the Employee's employment will be at the offices of the
Company in Tarrytown, New York, although the Employee understands and agrees
that she may be required to travel from time to time for business reasons.
Section 2. TERM. Unless terminated pursuant to Section 6
hereof, the Employee's employment hereunder shall commence on the date hereof
and shall continue during the period ending on the first anniversary of the date
hereof (the "Initial Term"). Beginning with such anniversary date, the
Employment term shall be extended automatically for consecutive periods of one
year on each anniversary date of this agreement. The Initial Tenn, together with
any extension pursuant to this Section 2, is referred to herein as the
"Employment Term". The Employment Term shall terminate upon any termination of
the Employee's employment pursuant to Section 6.
Section 3. COMPENSATION. During the Employment Term, the Employee shall be
entitled to the following compensation and benefits:
<PAGE>
(a) Salary: As compensation for the performance of the
Employee's services hereunder, the Company shall pay to the Employee a salary
(the "Salary") of $155,000 per annum, subject to required tax withholding and
deductions for benefits, with increases, if any, as may be approved by the
President. The salary shall be payable in accordance with the payroll practices
of the Company as the same shall exist from time to time. In no event shall the
Salary be decreased during the Employment Term.
(b) Annual Bonus Plan: The Employee shall be eligible to
receive an annual cash bonus (the "Bonus") which shall be determined by the
Board of Directors of the Company ("the Board"). For the Company's 1998 fiscal
year, the Employee's Bonus eligibility shall be as follows: (1) 25% of Salary if
the Company achieves 85% of 1998 Target EBITDA; or (2) 50% of Salary if the
Company achieves 100% of 1998 Target EBITDA; and (3) 2% of Salary for each
percentage point by which the Company exceeds 100% of 1998 Target EBITDA, up to
125% of 1998 Target EBITDA or up to an additional 50% of Salary. "1998 Target
EBITDA" is the Company's earnings for the year before interest, taxes,
depreciation and amortization as set forth in the Company's 1998 business plan
approved by the Board. For fiscal years during the Employment Term subsequent to
1998, the relevant performance targets shall be set by the Board in its sole
discretion, provided that the Employee's aggregate Bonus potential as a
percentage of Salary shall not decrease. That is, performance criteria may
change and may no longer consist of achievement of Target EBITDA but, even so,
the Bonus, as a percent of salary, realizable in any year for achievement of
that year's criteria will not be less than that provided above for achievement
of 1998 Target EBITDA.
(c) Benefits: In addition to Salary and Bonus-eligibility, the
Employee shall be entitled to participate in health, insurance and other
benefits provided to other Company employees at an executive level similar to
that of the Employee and on terms no less favorable than the terms available to
those employees. The Employee shall be entitled to four weeks vacation, as well
as time off and other consideration in accordance with the Company's policies
applicable to employees of the Company at an executive level similar to that of
the Employee in effect from time to time.
(d) Awards; Purchases of shares of the Company's stock:
(1) The Employee shall be eligible to receive awards of
restricted stock and options under the Eagle Family Foods Holdings Inc. 1998
Stock Incentive Plan (the "Stock Plan"), as determined by the Board of Directors
of Holdings (the "Holdings Board") (or designated committee thereof) in its sole
discretion. The terms of such awards including, without limitation, those which
apply upon the termination of the Employee's employment,
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<PAGE>
shall be governed by the Stock Plan and any award agreements entered into
between the Employee and Holdings.
(2) The Employee's initial award of restricted stock pursuant
to the Stock Plan is described in Schedule A attached hereto. The terms of this
award including, without limitation, those which apply upon the termination of
the Employee's employment, shall be governed by the Stock Plan and the award
agreement entered into between the Employee and Holdings.
(3) Should the Employee have elected to purchase additional
shares of Holdings' stock, the terms and conditions of such purchase are those
which will be specified in the subscription agreement between the Employee and
Holdings.
(4) Any shares of Holdings' stock, of any class, purchased by
or awarded to the Employee shall be subject to the terms and conditions of the
proposed Eagle Family Foods Holdings, Inc. Stockholders Agreement in the form
attached hereto as Exhibit 1 (the "Stockholders Agreement").
Section 4. EXCLUSIVITY. During the Employment Term the
Employee shall devote her full time to the business of the Company, shall
faithfully serve the Company, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to her by the
President in accordance with the terms of this agreement, shall use her best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be pursued
for financial gain, except that the Employee may (a) participate in the
activities of professional trade organizations related to the business of the
Company, (b) engage in personal investing activities and (c) serve as a board
member or other volunteer capacity in not-for-profit organizations, provided
that these permitted activities do not interfere in any material way with the
Employee's effective service to the Company pursuant to this agreement.
Section 5. REIMBURSEMENT FOR EXPENSES. The Employee is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items, in accordance with the Company's travel and entertainment
policies and requirements for prior approval in certain cases, as the same may
be modified from time to time. The Company shall reimburse the Employee for all
such proper expenses upon presentation by the Employee of itemized accounts of
such expenditures, supported by appropriate documentation.
Section 6. TERMINATION AND DEFAULT.
(a) Death. The Employee's employment shall terminate upon her
death and, in such event, the Employee's estate shall be entitled to receive the
amounts specified in Section 6(e), below.
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<PAGE>
(b) Disability. If the Employee is unable to perform her
duties under this agreement because of illness, injury or other change in the
Employee's condition that results in a lack of adequate physical or mental
capacity, the Employment Term shall continue and the Company shall pay all
compensation required to be paid to the Employee hereunder, unless the Employee
is unable to perform the duties required of her under this agreement for an
aggregate of 180 days, consecutive or not, during any 12 month period during the
term of this agreement, in which event the Company may terminate the Employee's
employment for "Disability".
(c) Cause: The Company may terminate the Employee's employment
at any time, with or without Cause. In the event of termination pursuant to this
Section 6(c) for Cause, the Company shall deliver written notice to the Employee
setting forth the basis for such termination, which notice shall specify the
nature of the Cause for termination. Termination shall be effective upon the
delivery of such notice. "Cause" shall mean (i) the Employee's failure (except
when caused by disability as contemplated by Section 6(b), above), neglect or
refusal to perform her duties hereunder for a period in excess of thirty days
following receipt of a written notice specifying such failure, neglect or
refusal, (ii) any willful or intentional act of the Employee that has the effect
of injuring the reputation or business of the Company, (iii) any willful or
intentional material misrepresentation made by or at the instigation of the
Employee to the President or any other member of the Board, (iv) any continued
or repeated absence from her duties which has been objected to in writing by the
Company and the Employee has not corrected her attendance performance despite an
opportunity to do so unless such absence is approved or excused by the President
or is the result of disability as contemplated by Section 6(b), above, (v) use
of illegal drugs or repeated drunkenness while engaged in her responsibilities
hereunder or in public, (vi) conviction for the commission of a felony, (vii)
the commission of any fraud upon the Company or the theft, by embezzlement or
otherwise, of any of the Company's assets or (viii) any breach of the
obligations of the Employee under Section 7 hereof.
(d) Resignation: The Employee shall have the right to
terminate her employment at any time by the giving of 30 days prior written
notice to the Company.
(e) Payments; Repurchase of Stock:
(1) In the event that the Employee's employment terminates for
any reason, the Company shall pay to the Employee all amounts accrued but unpaid
hereunder through the date of termination in respect of Salary and reimbursable
expenses. In the event the Employee's employment is terminated by the Company
without cause, in addition to the amounts specified in the previous sentence,
the Employee shall (A) continue to receive Salary (less any applicable
withholding or similar taxes) at the
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<PAGE>
rate in effect on the date of termination for a period of 12 months following
the termination (the Severance Term") and (B) remain eligible to participate in
benefits offered in accordance with Section 3(c) hereof during the severance
term. Upon termination the Employee shall be entitled to a full program of
outplacement assistance and upon completion of the Severance Term the Employee
shall be entitled to COBRA coverage.
(2) Upon termination of the Employee's employment for Cause,
or if the Employee resigns, Holdings shall have the right, but not the
obligation, to purchase any preferred stock of Holdings owned by the Employee at
a price equal to the Employee's initial cost and any common stock of Holdings
owned by the Employee and not subject to the Stock Plan's provisions at the
lower of the Employee's initial cost or the Fair Value of the shares.
(3) In the event of a termination of the Employee's employment
by the Company without Cause, or by reason of her death or Disability, Holdings
shall have the right and obligation to purchase from the Employee any preferred
stock of Holdings owned by the Employee or her estate at a price equal to the
Employee's initial cost plus all accrued and unpaid dividends and any common
stock of Holdings owned by the Employee or her estate and not subject to the
Stock Plan's provisions at the Fair Value of the shares.
(4) For the purposes of this agreement, "Fair Value" means the
fair market value of the shares being purchased, as determined in good faith by
a majority of the directors of the Holdings Board.
(5) In addition to the right and obligations described herein,
all shares of the stock of the Company, of any class, owned by the Employee
shall be subject, without implying any limitation of the application of the
Stock Plan, to the terms and conditions of the Stockholder's Agreement.
(6) Notwithstanding any language to the contrary herein, the
Employee shall be entitled to all the benefits with respect to termination
without Cause described in Section 6(e)(1) if her employment is terminated (i)
for Cause based upon any subjective judgment regarding the quality or adequacy
of her performance of her duties under this agreement, (ii) because of a sale,
consolidation, restructuring or merger of the Company or (iii) because of the
elimination of her position.
(f) Survival of Operative Sections: Upon any termination of the Employee's
employment, the provisions of Section 6(e) and the Sections of this agreement
following Section 6(e) shall survive to the extent necessary to give effect to
the provisions thereof.
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<PAGE>
Section 7. SECRECY AND NON-COMPETITION.
(a) No Competing Employment: The Employee acknowledges that
the agreements and covenants contained in this Section 7 are essential to
protect the value of the Company's business and assets and that by her
employment with the Company the Employee will obtain knowledge and experience
which could be used to the substantial advantage of a competitor of the Company
and to the Company's substantial detriment. Therefore the Employee agrees that,
for the period commencing on the date of this agreement and ending on the first
anniversary of the termination of the Employee's employment hereunder (the
"Restricted Period"), the Employee shall not participate or engage, directly or
indirectly, in any business activity if such activity competes with any activity
undertaken or expressly contemplated to be undertaken by the Company.
(b) Nondisclosure of Confidential Information: The Employee
shall not disclose to any person or entity or use, either during the Employment
Term or after, any information not in the public domain nor generally known in
the industry acquired during the Employment Term relating to the Company
including, but not limited to, business plans, customers, suppliers, know-how,
trade secrets, formulas, manufacturing and other processes, computer programs,
research of every kind and new product initiatives, in all cases whether or not
written and however embodied, which is, or has been or may be used in the
business of the Company. Upon termination of her employment the Employee shall
return to the Company all files, correspondence and other records and
communications received or originated or maintained by the Employee during the
course and term of her employment.
(c) No Interference: During the Restricted Period the Employee
shall not, for her own account or the account of any other person or entity,
directly or indirectly solicit, endeavor to entice away from the Company or
otherwise interfere with the relationship of the Company with any of its
officers, directors, employees, any individual performing services for the
Company as an independent contractor, any supplier to the Company or any
customer of the Company.
(d) Inventions, etc.: The Employee hereby sells, transfers and
assigns to the Company all of the entire right, title and interest of the
Employee in and to all inventions, ideas, disclosures and improvements made or
conceived by the Employee, whether or not they be copyrighted, patented or
patentable, during her employment by the Company which in any way relate to the
business, functions or operations of the Company, present or prospective, or to
the industries in which the Company now or hereafter competes. The Employee
shall cooperate fully to give full effect to the provisions hereof and shall
provide the Company with all information and execute all document which the
Company deems necessary or convenient to secure, protect and exploit its right
acquired hereunder.
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<PAGE>
Section 8. INJUNCTIVE RELIEF. Without limiting the remedies
available to the Company, the Employee acknowledges that any breach of any of
her covenants and undertakings expressed in Section 7, above, may result in
material and irreparable harm to the Company for which there is no adequate
remedy at law, that it will not be possible to measure damages for such harm
with precision and that, in the event of such a breach or threat or same, the
Company shall be entitled obtain a temporary restraining order and/or
preliminary or permanent injunction, without the necessity of proving
irreparable harm or injury as a result of such breach or threatened breach,
restraining the Employee from engaging in any activity prohibited by Section 7,
above, or such other relief as may be required specifically to enforce any of
the covenants or undertakings expressed in Section 7, above.
Section 9. EXTENSION OF RESTRICTED PERIOD. In addition to the
remedies the Company may seek and obtain pursuant to Section 8, above, the
Restricted Period shall be extended by any and all periods during which the
Employee shall have been found by a court to have been in violation of any of
the covenants and undertakings expressed in section 7, above.
Section 10. REPRESENTATIONS AND WARRANTIES. The Employee
represents and warrants to the Company that (a) this agreement constitutes a
valid and binding obligation of the Employee, enforceable against her in
accordance with its terms and (b) the Employee is not a party to any agreement,
including without limitation, any employment or non-competition agreement, nor
is she subject to any order, judgment or under any legal disability which would
restrict or in any way purport to affect or prevent her employment and the
performance of her duties hereunder.
Section 11. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES. This agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of each of the parties, including, but not
limited to, The Employee's heirs and the personal representatives of the
Employee's estate; provided, however, that neither party shall assign or
delegate any of the obligations created by this agreement without the prior
written consent of the other party. Notwithstanding the foregoing, the Company
shall have the unrestricted right to assign its rights and obligations hereunder
to any subsidiary or affiliate of the Company. Nothing in this agreement shall
confer upon any person or entity not a party any rights or remedies of any kind
or nature whatsoever.
Section 12. WAIVER AND AMENDMENTS. Any waiver, alteration or
amendment of this agreement shall be valid only if in writing and signed by both
parties. No waiver by either party of a right hereunder shall be deemed to
constitute a waiver with respect to any subsequent event.
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<PAGE>
Section 13. GOVERNING LAW. This agreement shall be governed by
and construed in accordance the laws of the State of New York applicable to
contracts made and to be performed entirely within said State.
Section 14. NOTICES. All notices and other communications
under this agreement shall be in writing and delivered by hand, facsimile
transmission or first class mail, postage prepaid and shall be effective on the
date of actual receipt by the addressee.
Section 15. ENTIRE AGREEMENT. This agreement constitutes the entire
understanding and agreement of the parties regarding the employment of the
Employee. It supersedes and replaces all prior communications by and
understandings of the parties relating to such employment.
Section 16. SEVERABILITY. In the event that any part or parts
of this agreement shall be held illegal or unenforceable, such determination
shall not effect the remaining provisions of this agreement, all of which shall
remain in full force and effect.
Section 17. ADDITIONAL COMPENSATION. The Employee shall be
entitled to an additional payment to reflect any loss of 1997 bonus normally
payable in 1998 with respect to her prior employment if such loss or
reimbursement results from or is required by reason of the Employee's
resignation to accept employment hereunder. Any such payments will not be
considered Salary and the amounts will be decided by the President.
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<PAGE>
In witness whereof the parties hereto have executed this
agreement as of the date first written above.
EAGLE FAMILY FOODS, INC.
by /s/ John O'C. Nugent
------------------------
President
EAGLE FAMILY FOODS HOLDINGS, INC.
by /s/ John O'C. Nugent
-----------------------
President
/s/ Tamar Bernbaum
------------------
Tamar Bernbaum
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<PAGE>
SCHEDULE A
TO EMPLOYMENT AGREEMENT BETWEEN
EAGLE FAMILY FOODS, INC. AND TAMAR BERNBAUM
Initial Award of Restricted Stock:
0.494% (four hundred and ninety four thousandths of one
percent) of the Common Stock of Holdings issued and outstanding on the date of
the closing of the purchase of certain assets of Borden Foods Corporation by the
Company, subject to the terms and limitations, including vesting requirements,
restrictions on transfer and mandatory sale or forfeiture applicable thereto. On
the assumption that there will be 200,000 shares of the Common Stock of Holdings
outstanding on that date, the initial award will be 988 shares.
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<PAGE>
EXHIBIT 10.10
EAGLE FAMILY FOODS, INC.
EMPLOYMENT AGREEMENT, dated as of the 12th day of January, 1998, between
Eagle Family Foods, Inc.(the "Company"), Eagle Family Foods Holdings, Inc.
("Holdings") and Richard A. Lumpp (the "Employee").
Witnesseth:
Whereas, the Company recognizes that the growth, profitability
and success of the Company will be materially and substantially enhanced by the
employment of the Employee by the Company; and
Whereas, the Company desires to employ the Employee, and the
Employee has indicated his willingness to provide his services, on the terms and
conditions set forth herein;
Now, therefore, in consideration of the mutual covenants and
agreements contained herein, the Company and the Employee agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ the Employee and
the Employee hereby accepts employment with the Company on the terms and subject
to the conditions contained in this agreement. Subject to the terms and
conditions contained herein, the Employee shall serve as the Company's Vice
President - Sales and, in such capacity, shall report to the Company's President
and Chief Executive Officer (the "President") and shall have such duties as are
typically performed by the Vice President - Sales of a food company, together
with such additional duties, commensurate with the Employees position, as may be
assigned to him from time to time by the President. The responsibilities of the
position will require extensive travel and will not, therefore, require the
frequent presence of the Employee at the offices of the Company in Tarrytown,
New York.
Section 2. TERM. Unless terminated pursuant to Section 6 hereof, the
Employee's employment hereunder shall commence on the date hereof and shall
continue during the period ending on the first anniversary of the date hereof
(the "Initial Term"). Beginning with such anniversary date, the Employment term
shall be extended automatically for consecutive periods of one year on each
anniversary date of this agreement. The Initial Term, together with any
extension pursuant to this Section 2, is referred to herein as the "Employment
Term". The Employment Term shall terminate upon any termination of the
Employee's employment pursuant to Section 6.
Section 3. COMPENSATION. During the Employment Term, the Employee shall be
entitled to the following compensation and benefits:
<PAGE>
(a) Salary: As compensation for the performance of the Employee's services
hereunder, the Company shall pay to the Employee a salary (the "Salary") of
$170,000 per annum, subject to required tax withholding and deductions for
benefits, with increases, if any, as may be approved by the President. The
salary shall be payable in accordance with the payroll practices of the Company
as the same shall exist from time to time. In no event shall the Salary be
decreased during the Employment Term.
(b) Annual Bonus Plan: The Employee shall be eligible to receive an annual
cash bonus (the "Bonus") which shall be determined by the Board of Directors of
the Company ("the Board"). For the Company's 1998 fiscal year, the Employee's
Bonus eligibility shall be as follows: (1) 25% of Salary if the Company achieves
85% of 1998 Target EBITDA; or (2) 50% of Salary if the Company achieves 100% of
1998 Target EBITDA; and (3) 2% of Salary for each percentage point by which the
Company exceeds 100% of 1998 Target EBITDA, up to 125% of 1998 Target EBITDA or
up to an additional 50% of Salary. "1998 Target EBITDA" is the Company's
earnings for the year before interest, taxes, depreciation and amortization as
set forth in the Company's 1998 business plan approved by the Board. For fiscal
years during the Employment Term subsequent to 1998, the relevant performance
targets shall be set by the Board in its sole discretion, provided that the
Employee's aggregate Bonus potential as a percentage of Salary shall not
decrease. That is performance criteria may change and may no longer consist of
achievement of Target EBITDA but, even so, the Bonus, as a percent of Salary,
realizable in any year for achievement of that year's criteria will not be less
than that provided above for achievement of 1998 Target EBITDA.
(c) Benefits: In addition to Salary and Bonus-eligibility, the Employee
shall be entitled to participate in health, insurance and other benefits
provided to other Company employees at an executive level similar to that of the
Employee and on terms no less favorable than the terms available to those
employees. The Employee shall be entitled to four weeks vacation, as well as
time off and other consideration in accordance with the Company's policies
applicable to employees of the Company at an executive level similar to that of
the Employee in effect from time to time.
(d) Awards; Purchases of shares of Holdings' stock:
(1) The Employee shall be eligible to receive awards of restricted stock
and options under the Eagle family Foods Holdings Inc. 1998 Stock Incentive Plan
(the "Stock Plan"), as determined by the Board of Directors of Holdings (the
"Holdings Board") or a designated committee thereof ) in its sole discretion.
The terms of such awards including, without limitation, those which apply upon
the termination of the Employee's employment, shall be governed by the Stock
Plan and
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<PAGE>
any award agreements entered into between the Employee and Holdings.
(2) The Employee's initial award of restricted stock pursuant to the Stock
Plan is described in Schedule A attached hereto. The terms of this award
including, without limitation, those which apply upon the termination of the
Employee's employment, shall be governed by the Stock Plan and the award
agreement entered into between the Employee and Holdings.
(3) The Employee has elected to purchase additional shares of Holdings'
stock and the terms and conditions of such purchase are those which will be
specified in the subscription agreement between the Employee and Holdings.
(4) Any shares of Holdings' stock, of any class, purchased by or awarded to
the Employee shall be subject to the terms and conditions of the proposed Eagle
Family Foods Holdings, Inc. Stockholders Agreement in the form attached hereto
as Exhibit 1 (the "Stockholders Agreement").
Section 4. EXCLUSIVITY: During the Employment Term the Employee shall
devote his full time to the business of the Company, shall faithfully serve the
Company, shall in all respects conform to and comply with the lawful and
reasonable directions and instructions given to him by the President in
accordance with the terms of this agreement, shall use his best efforts to
promote and serve the interests of the Company and shall not engage in any other
business activity, whether or not such activity shall be pursued for financial
gain, except that the Employee may (a) participate in the activities of
professional trade organizations related to the business of the Company and (b)
engage in personal investing activities, provided that these permitted
activities do not interfere in any material way with the Employee's effective
service to the Company pursuant to this agreement.
Section 5. REIMBURSEMENT FOR EXPENSES. The Employee is authorized to incur
reasonable expenses in the discharge of the services to be performed hereunder,
including expenses for travel, entertainment, lodging and similar items, in
accordance with the Company's travel and entertainment policies and requirements
for prior approval in certain cases, as the same may be modified from time to
time. The Company shall reimburse the Employee for all such proper expenses upon
presentation by the Employee of itemized accounts of such expenditures,
supported by appropriate documentation.
Section 6. TERMINATION AND DEFAULT.
(a) Death. The Employee's employment shall terminate upon his death and, in such
event, the Employee's estate shall be entitled to receive the amounts specified
in Section 6(e), below.
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<PAGE>
(b) Disability. If the Employee is unable to perform his duties under
this agreement because of illness, injury or other change in the Employee's
condition that results in a lack of adequate physical or mental capacity, the
Employment Term shall continue and the Company shall pay all compensation
required to be paid to the Employee hereunder, unless the Employee is unable to
perform the duties required of him under this agreement for an aggregate of 180
days, consecutive or not, during any 12 month period during the term of this
agreement, in which event the Company may terminate the Employee's employment
for "Disability".
(c) Cause: The Company may terminate the Employee's employment at any time,
with or without Cause. In the event of termination pursuant to this Section 6(c)
for Cause, the Company shall deliver written notice to the Employee setting
forth the basis for such termination, which notice shall specify the nature of
the Cause for termination. Termination shall be effective upon the delivery of
such notice. "Cause" shall mean (i) the Employee's failure (except when caused
by disability as contemplated by Section 6(b), above), neglect or refusal to
perform his duties hereunder for a period in excess of thirty days following
receipt of a written notice specifying such failure, neglect or refusal, (ii)
any willful or intentional act of the Employee that has the effect of injuring
the reputation or business of the Company, (iii) any willful or intentional
misrepresentation made by or at the instigation of the Employee to the President
or any other member of the Board, iv) any continued or repeated absence from his
duties unless such absence is approved or excused by the President or is the
result of disability as contemplated by Section 6(b), above, (v) use of illegal
drugs or repeated drunkenness while engaged in his responsibilities hereunder or
in public, (vi) conviction for the commission of a felony, (vii) the commission
of any fraud upon the Company or the theft, by embezzlement or otherwise, of any
of the Company's assets or (viii) any breach of the obligations of the Employee
under Section 7 hereof.
(d) Resignation: The Employee shall have the right to terminate his
employment at any time by the giving of 30 days prior written notice to the
Company.
(e) Payments; Repurchase of Stock:
(1) In the event that the Employee's employment terminates for any
reason, the Company shall pay to the Employee all amounts accrued but unpaid
hereunder through the date of termination in respect of Salary and reimbursable
expenses. In the event the Employee's employment is terminated by the Company
without cause, in addition to the amounts specified in the previous sentence,
the Employee shall (A) continue to receive Salary (less any applicable
withholding or similar taxes) at the rate in effect on the date of termination
for a period of 12 months following the termination (the Severance Term") and
(B)
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<PAGE>
remain eligible to participate in benefits offered in accordance with section
3(c) hereof during the Severance Term. Upon termination the Employee shall be
entitled to a full program of outplacement assistance and upon completion of the
Severance Term the Employee shall be entitled to COBRA coverage.
(2) Upon termination of the Employee's employment for Cause, or if the
Employee resigns, Holdings shall have the right, but not the obligation, to
purchase any preferred stock of Holdings owned by the Employee at a price equal
to the Employee's initial cost and any common stock of Holdings owned by the
Employee and not subject to the Stock Plan's provisions at the lower of the
Employee's initial cost or the Fair Value of the shares.
(3) In the event of a termination of the Employee's employment by the
Company without Cause, or by reason of his death or Disability, Holdings shall
have the right and obligation to purchase from the Employee any preferred stock
of Holdings owned by the Employee or his estate at a price equal to the
Employee's initial cost plus all accrued and unpaid dividends and any common
stock of Holdings owned by the Employee or his estate and not subject to the
Stock Plan's provisions at the Fair Value of the shares.
(4) For the purposes of this agreement, "Fair Value" means the fair market
value of the shares being purchased, as determined in good faith by a majority
of the directors of the Holdings Board.
(5) In addition to the right and obligations described herein, all shares
of the stock of the Company, of any class, owned by the Employee shall be
subject, without implying any limitation of the application of the Stock Plan,
to the terms and conditions of the Stockholder's Agreement.
(6) Survival of Operative Sections: Upon any termination of the Employee's
employment, the provisions of Section 6(e) and the Sections of this agreement
following Section 6(e) shall survive to the extent necessary to give effect to
the provisions thereof.
Section 7. Secrecy and Non-Competition.
(a) No Competing Employment: The Employee acknowledges that the agreements
and covenants contained in this Section 7 are essential to protect the value of
the Company's business and assets and that by his employment with the Company
the Employee will obtain knowledge and experience which could be used to the
substantial advantage of a competitor of the Company and to the Company's
substantial detriment. Therefore the Employee agrees that, for the period
commencing on the date of this agreement and ending on the first anniversary of
the termination of the Employee's employment hereunder (the
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<PAGE>
"Restricted Period"), the Employee shall not participate or engage, directly or
indirectly, in any business activity if such activity competes with any activity
undertaken or expressly contemplated to be undertaken by the Company.
(b) Nondisclosure of Confidential Information: The Employee shall not
disclose to any person or entity or use, either during the Employment Term or
after, any information not in the public domain nor generally known in the
industry acquired during the Employment Term relating to the Company including,
but not limited to, business plans, customers, suppliers, know-how, trade
secrets, formulas, manufacturing and other processes, computer programs,
research of every kind and new product initiatives, in all cases whether or not
written and however embodied, which is, or has been or may be used in the
business of the Company. Upon termination of his employment the Employee shall
return to the Company all files, correspondence and other records and
communications received or originated or maintained by the Employee during the
course and term of his employment.
(c) No Interference: During the Restricted Period the Employee shall not,
for his own account or the account of any other person or entity, directly or
indirectly solicit, endeavor to entice away from the Company or otherwise
interfere with the relationship of the Company with any of its officers,
directors, employees, any individual performing services for the Company as an
independent contractor, any supplier to the Company or any customer of the
Company.
(d) Inventions, etc.: The Employee hereby sells, transfers and assigns to
the Company all of the entire right, title and interest of the Employee in and
to all inventions, ideas, disclosures and improvements made or conceived by the
Employee, whether or not they be copyrighted, patented or patentable, during his
employment by the Company which in any way relate to the business, functions or
operations of the Company, present or prospective, or to the industries in which
the Company now or hereafter competes. The Employee shall cooperate fully to
give full effect to the provisions hereof and shall provide the Company with all
information and execute all document which the Company deems necessary or
convenient to secure, protect and exploit its right acquired hereunder.
Section 8. INJUNCTIVE RELIEF. Without limiting the remedies available to
the Company, the Employee acknowledges that any breach of any of his covenants
and undertakings expressed in Section 7, above, may result in material and
irreparable harm to the Company for which there is no adequate remedy at law,
that it will not be possible to measure damages for such harm with precision and
that, in the event of such a breach or threat or same, the Company shall be
entitled obtain a temporary restraining order and/or preliminary or permanent
injunction, without the necessity of proving irreparable harm or injury as a
result of such breach or threatened breach, restraining the
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<PAGE>
Employee from engaging in any activity prohibited by Section 7, above, or such
other relief as may be required specifically to enforce any of the covenants or
undertakings expressed in Section 7, above.
Section 9. EXTENSION OF RESTRICTED PERIOD. In addition to the remedies the
Company may seek and obtain pursuant to Section 8, above, the Restricted Period
shall be extended by any and all periods during which the Employee shall have
been found by a court to have been in violation of any of the covenants and
undertakings expressed in section 7, above.
Section 10. REPRESENTATIONS AND WARRANTIES. The Employee represents and
warrants to the Company that (a) this agreement constitutes a valid and binding
obligation of the Employee, enforceable against him in accordance with its terms
and (b) the Employee is not a party to any agreement, including without
limitation, any employment or non-competition agreement, nor is he subject to
any order, judgment or under any legal disability which would restrict or in any
way purport to affect or prevent his employment and the performance of his
duties hereunder.
Section 11. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This
agreement shall inure to the benefit of, and be binding upon, the successors and
assigns of each of the parties, including, but not limited to, The Employee's
heirs and the personal representatives of the Employee's estate; provided,
however, that neither party shall assign or delegate any of the obligations
created by this agreement without the prior written consent of the other party.
Notwithstanding the foregoing, the Company shall have the unrestricted right to
assign its rights and obligations hereunder to any subsidiary or affiliate of
the Company. Nothing in this agreement shall confer upon any person or entity
not a party any rights or remedies of any kind or nature whatsoever.
Section 12. WAIVER AND AMENDMENTS. Any waiver, alteration or amendment of
this agreement shall be valid only if in writing and signed by both parties. No
waiver by either party of a right hereunder shall be deemed to constitute a
waiver with respect to any subsequent event.
Section 13. GOVERNING LAW. This agreement shall be governed by and
construed in accordance the laws of the State of New York applicable to
contracts made and to be performed entirely within said State.
Section 14. NOTICES. All notices and other communications under this
agreement shall be in writing and delivered by hand, facsimile transmission or
first class mail, postage prepaid and shall be effective on the date of actual
receipt by the addressee.
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<PAGE>
Section 15. ENTIRE AGREEMENT. This agreement constitutes the entire
understanding and agreement of the parties regarding the employment of the
Employee. It supersedes and replaces all prior communications by and
understandings of the parties relating to such employment.
Section 16. SEVERABILITY. In the event that any part or parts of this
agreement shall be held illegal or unenforceable, such determination shall not
effect the remaining provisions of this agreement, all of which shall remain in
full force and effect.
In witness whereof the parties hereto have executed this agreement as of
the date first written above.
EAGLE FAMILY FOODS, INC.
by /s/ John O'C. Nugent
-----------------------
President
EAGLE FAMILY FOODS HOLDINGS, INC.
by /s/ John O'C. Nugent
-----------------------
President
/s/ Richard A. Lumpp
--------------------
Richard A. Lumpp
-8-
<PAGE>
SCHEDULE A
to Employment Agreement between
Eagle Family Foods, Inc. and Richard A. Lumpp
Initial Award of Restricted Stock:
0.494% (four hundred ninety four thousandths of one percent)
of the Common Stock of Holdings issued and outstanding on the date of the
closing of the purchase of certain assets of Borden Foods Corporation by the
Company, subject to the terms and limitations, including vesting requirements,
restrictions on transfer and mandatory sale or forfeiture applicable thereto. On
the assumption that there will be 200,000 shares of the Common Stock of Holdings
outstanding on that date, the initial award will be 988 shares.
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<PAGE>
Exhibit 10.11
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of January 23, 1998, made by William A. Lynch
(the "Individual Investor"), in favor of Eagle Family Foods, Inc., a Delaware
-------------------
corporation ("Eagle").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Eagle has agreed to loan the Individual Investor the amount set
forth on Schedule I hereto (the "Loan"), to be evidenced by a promissory note
delivered by the Individual Investor to Eagle (the "Note"), in order to enable
the Individual Investor to purchase the shares set forth on Schedule I hereto of
Common Stock, par value $0.01 per share, and Series A Non-Voting Preferred
Stock, par value $0.01 per share (collectively, the "Shares"), of Eagle (in its
capacity as issuer of the Shares, Eagle is referred to herein as the "Company").
Such Shares are to be purchased by the Individual Investor pursuant to the
Subscription Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Subscription Agreement"), between
Eagle and the Individual Investor;
WHEREAS, it is a condition to the obligation of Eagle to make the Loan that
the Individual Investor pledge the Pledged Stock as security for his obligations
under the Note.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Subscription Agreement and used herein are so used as so defined,
and the following terms shall have the following meanings:
"Closing Date" means the date upon which the transactions contemplated
------------
under the Subscription Agreement are consummated.
"Code" means the Uniform Commercial Code from time to time in effect in the
----
State of New York.
"Collateral" means the Pledged Stock, together with all stock certificates,
----------
securities or other property, options or rights of any nature whatsoever that
may be issued or granted in respect of the Pledged Stock by the Company to the
Individual Investor while this Pledge Agreement is in effect and all Proceeds.
<PAGE>
"Obligations" means the unpaid principal of and interest on the Note and
-----------
all other obligations and liabilities of the Individual Investor to Eagle which
may arise under, out of, or in connection with, the Note or this Pledge
Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended, supplemented or
----------------
otherwise modified from time to time.
"Pledged Stock" means the Shares listed on Schedule II hereto.
-------------
"Proceeds" means all "proceeds" as such term is defined in Section 9-306(1)
--------
of the Code and, in any event, shall include, without limitation, all dividends
or other income from the Pledged Stock or other Collateral, collections thereon
or distributions with respect thereto.
2. Pledge; Grant of Security Interest; Return of Collateral. Concurrently
--------------------------------------------------------
with his execution and delivery of this Pledge Agreement, and from time to time
as applicable, the Individual Investor shall deliver the Pledged Stock to Eagle.
The Individual Investor hereby grants to Eagle a first priority security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration, upon required prepayment or otherwise) of the Obligations.
Promptly following the receipt of payment in respect of all Obligations
hereunder, Eagle shall return to the Individual Investor the Collateral then
held by it.
3. Stock Powers. Concurrently with the delivery to Eagle of each
------------
certificate representing one or more shares of Pledged Stock, the Individual
Investor shall deliver an undated stock power covering such certificate, duly
executed in blank by the Individual Investor.
4. Representations and Warranties. The Individual Investor represents and
------------------------------
warrants that:
(a) the Individual Investor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all liens or
options in favor of, or claims of, any other Person, except the liens created
hereunder; and
(b) the lien granted pursuant to this Pledge Agreement constitutes a
valid, perfected first priority lien on the Collateral.
5. Covenants. The Individual Investor covenants and agrees with Eagle
---------
that, from and after the Closing Date until the Obligations are paid in full:
2
<PAGE>
(a) If the Individual Investor shall, as a result of his ownership of the
Pledged Stock or any other Collateral, become entitled to receive or shall
receive any non-cash dividend or distribution (whether in shares of Common Stock
or additional shares of Preferred Stock, other securities or other property and
whether in connection with any reclassification, increase or reduction of
capital or any reorganization or otherwise), or any option or right, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock or any of the other Collateral, or otherwise in
respect thereof, the Individual Investor shall accept the same as the agent of
Eagle, hold the same in trust for Eagle, and deliver the same forthwith to Eagle
in the exact form received, duly endorsed by the Individual Investor to Eagle,
if required, together with an undated stock power covering any certificate
received by the Individual Investor duly executed in blank by the Individual
Investor, to be held by Eagle, subject to the terms hereof, as additional
collateral security for the Obligations under the Note.
(b) Without the prior written consent of Eagle, the Individual Investor
will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral, except, with respect to the Pledged
Stock, as permitted by the Subscription Agreement or the Stockholders'
Agreement, dated as of the date hereof, among Eagle, the Company, the other
Stockholders named therein and the Individual Investor (the "Stockholders'
Agreement"), or (ii) create, incur or permit to exist any lien or option in
favor of, or any claim of any person with respect to, any of the Collateral, or
any interest therein, except for the lien created by this Pledge Agreement.
(c) At any time and from time to time, upon the written request of Eagle,
and at the sole expense of the Individual Investor, the Individual Investor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as Eagle may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and of the
rights and powers herein granted.
(d) The Individual Investor agrees to pay, and to save Eagle harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Pledge Agreement.
6. Voting Rights. Unless the Individual Investor fails to pay or perform
-------------
any of the Obligations of the
3
<PAGE>
Individual Investor under the Note, the Individual Investor shall be permitted
to exercise all voting and consensual rights with respect to the Pledged Stock,
provided, however, that no vote shall be cast or consensual right exercised or
- - - - -------- -------
other action taken which, in Eagle's reasonable judgment, would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Subscription Agreement, the Stockholders' Agreement, the Note
or this Pledge Agreement.
7. Rights of Eagle. (a) If the Individual Investor fails to pay or
---------------
perform any of the Obligations in accordance with their respective terms, all
shares of the Pledged Stock shall be registered in the name of Eagle or its
nominee and Eagle or its nominee may thereafter exercise (i) all voting,
corporate and other rights pertaining to such shares of the Pledged Stock at any
meeting of shareholders of the Company or otherwise and (ii) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by the Individual Investor or
Eagle of any right, privilege or option pertaining to such shares of the Pledged
Stock, and in connection therewith, the right to deposit and deliver any and all
of the Pledged Stock with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms and conditions as it may determine),
all without liability except to account for property actually received by it,
but Eagle shall have no duty to the Individual Investor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of Eagle hereunder shall not be conditioned or contingent
upon the pursuit by Eagle of any right or remedy against the Individual Investor
or against any other Person which may be or become liable in respect of all or
any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Eagle shall not be
liable for any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall Eagle be under any obligation
to sell or otherwise dispose of any Collateral upon the request of the
Individual Investor or any other Person or to take any other action whatsoever
with regard to the Collateral or any part thereof.
4
<PAGE>
8. Remedies. Notwithstanding any provision to the contrary contained in
--------
the Employment Agreement, dated as of January 23, 1998 (the "Nugent Employment
Agreement"), by and among Eagle, Eagle Family Foods Holdings, Inc. and John O'C.
Nugent ("Nugent"), if the Individual Investor fails to perform any of his
Obligations in accordance with their respective terms and such failure is
continuing, Eagle may exercise, in addition to all other rights and remedies
granted in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing, Eagle, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Individual Investor or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of Eagle or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Eagle shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Individual Investor, which right or
equity is hereby waived or released. Eagle shall apply any Proceeds from time
to time held by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of Eagle hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to Eagle, to the payment
in whole or in part of the Obligations, in such order as Eagle may elect, and
only after such application and after the payment by Eagle of any other amount
required by any provision of law, including, without limitation, Section 9-
504(1)(c) of the Code, need Eagle account for the surplus, if any, to the
Individual Investor. To the extent permitted by applicable law, the Individual
Investor waives all claims, damages and demands he may acquire against Eagle
arising out of the exercise by him of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and
5
<PAGE>
proper if given at least 10 days before such sale or other disposition. The
Individual Investor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by Eagle to
collect such deficiency.
9. Private Sales.
-------------
(a) The Individual Investor recognizes that, in the absence of
registration under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, Eagle may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Individual Investor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. Eagle
shall be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to register such securities for public sale under the
Securities Act, or under applicable state securities laws.
(b) The Individual Investor further agrees to use his best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this paragraph 9
valid and binding and in compliance with any and all other applicable
requirements of law. The Individual Investor further agrees that a breach of
any of the covenants contained in this paragraph 9 will cause irreparable injury
to Eagle, that Eagle has no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this paragraph
9 shall be specifically enforceable against the Individual Investor, and the
Individual Investor hereby waives and agrees not to assert any defenses against
an action for specific performance of such covenants.
10. Limitation on Duties Regarding Collateral. From and after the Closing
-----------------------------------------
Date, Eagle's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as Eagle deals
with similar
6
<PAGE>
securities and property for its own account. Neither Eagle nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Individual Investor or otherwise; provided, however,
that Eagle shall cooperate with the Individual Investor in order to transfer any
or all of the Collateral in accordance with the terms of the Subscription
Agreement or the Stockholders' Agreement.
11. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
12. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Paragraph Headings. The paragraph headings used in this Pledge
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies. Eagle shall not by any act (except by
------------------------------
a written instrument pursuant to paragraph 15 hereof) be deemed to have waived
any right or remedy hereunder or to have acquiesced in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of Eagle, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by Eagle of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Eagle would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law. None
-------------------------------------------------------------
of the terms or provisions of this Pledge Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Individual
Investor and Eagle, provided that any provision of this Pledge Agreement
--------
enforceable by Eagle may
7
<PAGE>
be waived by Eagle in a letter or agreement executed by Eagle or by telex or
facsimile transmission from Eagle. This Pledge Agreement shall be binding upon
the successors and assigns of the Individual Investor and shall inure to the
benefit of Eagle and its successors and assigns. This Pledge Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
16. Notices. (a) Notices may be given by the parties hereto and shall
-------
be considered effective in the manner and at the time provided in the Agreement,
addressed or transmitted to the parties or their permitted assigns at the
following addresses (or at such other address as shall be given in writing by
either party to the other).
To Eagle:
Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, New York 10591
Attention: Jonathan F. Rich, Esq.
To the Individual Investor:
William A. Lynch
80 Ferry Boulevard
Stratford, CT 06497
(b) Eagle hereby agrees to promptly notify the Individual Investor in the
event that Nugent's employment is terminated pursuant to the Nugent Employment
Agreement.
17. Counterparts. This Pledge Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Pledge Agreement
to produce or account for more than one such counterpart.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.
By: /s/ William A. Lynch
--------------------------------
William A. Lynch
Eagle Family Foods, Inc.
By: /s/ John O'C. Nugent
--------------------------------
Name: John O'C. Nugent
Title: Chief Executive Officer,
President, Director
9
<PAGE>
SCHEDULE I
To Pledge
Agreement
---------
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Amount Loaned Preferred Stock Common Stock
- - - - ------------- --------------- ------------
<S> <C> <C>
$575,000 8,167.50 66,480*
</TABLE>
* 58,230 shares of Common Stock are Restricted Shares issued to the pledgor
pursuant to the Eagle Family Foods Holdings, Inc. 1998 Stock Incentive Plan, and
are subject to the terms and conditions of such Plan as well as the terms and
conditions of a Restricted Stock Agreement dated as of January 23, 1998 between
the Pledgor and Eagle Family Foods Holdings, Inc.
<PAGE>
SCHEDULE II
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
Common Stock
<TABLE>
<CAPTION>
Stock
Certificate No. of
Issuer No. Shares
- - - - ------ ----------- ------
<S> <C> <C>
Eagle Family Foods Holdings, Inc. C-3 8,250
Eagle Family Foods Holdings, Inc. C-9 58,230
</TABLE>
Series A Non-Voting Preferred Stock
<TABLE>
<CAPTION>
Stock
Certificate No. of
Issuer No. Shares
- - - - ------ ----------- ------
<S> <C> <C>
Eagle Family Foods Holdings, Inc. P-3 8,167.50
</TABLE>
<PAGE>
Exhibit 10.12
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of January 23, 1998, made by John O'C.
Nugent(the "Individual Investor"), in favor of Eagle Family Foods, Inc., a
-------------------
Delaware corporation ("Eagle").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Eagle has agreed to loan the Individual Investor the amount set
forth on Schedule I hereto (the "Loan"), to be evidenced by a promissory note
delivered by the Individual Investor to Eagle (the "Note"), in order to enable
the Individual Investor to purchase the shares set forth on Schedule I hereto of
Common Stock, par value $0.01 per share, and Series A Non-Voting Preferred
Stock, par value $0.01 per share (collectively, the "Shares"), of Eagle (in its
capacity as issuer of the Shares, Eagle is referred to herein as the "Company").
Such Shares are to be purchased by the Individual Investor pursuant to the
Subscription Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Subscription Agreement"), between
Eagle and the Individual Investor;
WHEREAS, it is a condition to the obligation of Eagle to make the Loan that
the Individual Investor pledge the Pledged Stock as security for his obligations
under the Note.
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Subscription Agreement and used herein are so used as so defined,
and the following terms shall have the following meanings:
"Closing Date" means the date upon which the transactions contemplated
------------
under the Subscription Agreement are consummated.
"Code" means the Uniform Commercial Code from time to time in effect in the
----
State of New York.
"Collateral" means the Pledged Stock, together with all stock certificates,
----------
securities or other property, options or rights of any nature whatsoever that
may be issued or granted in respect of the Pledged Stock by the Company to the
Individual Investor while this Pledge Agreement is in effect and all Proceeds.
<PAGE>
"Obligations" means the unpaid principal of and interest on the Note and
-----------
all other obligations and liabilities of the Individual Investor to Eagle which
may arise under, out of, or in connection with, the Note or this Pledge
Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended, supplemented or
----------------
otherwise modified from time to time.
"Pledged Stock" means the Shares listed on Schedule II hereto.
-------------
"Proceeds" means all "proceeds" as such term is defined in Section 9-306(1)
--------
of the Code and, in any event, shall include, without limitation, all dividends
or other income from the Pledged Stock or other Collateral, collections thereon
or distributions with respect thereto.
2. Pledge; Grant of Security Interest; Return of Collateral. Concurrently
--------------------------------------------------------
with his execution and delivery of this Pledge Agreement, and from time to time
as applicable, the Individual Investor shall deliver the Pledged Stock to Eagle.
The Individual Investor hereby grants to Eagle a first priority security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration, upon required prepayment or otherwise) of the Obligations.
Promptly following the receipt of payment in respect of all Obligations
hereunder, Eagle shall return to the Individual Investor the Collateral then
held by it.
3. Stock Powers. Concurrently with the delivery to Eagle of each
------------
certificate representing one or more shares of Pledged Stock, the Individual
Investor shall deliver an undated stock power covering such certificate, duly
executed in blank by the Individual Investor.
4. Representations and Warranties. The Individual Investor represents and
------------------------------
warrants that:
(a) the Individual Investor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all liens or
options in favor of, or claims of, any other Person, except the liens created
hereunder; and
(b) the lien granted pursuant to this Pledge Agreement constitutes a
valid, perfected first priority lien on the Collateral.
5. Covenants. The Individual Investor covenants and agrees with Eagle
---------
that, from and after the Closing Date until the Obligations are paid in full:
2
<PAGE>
(a) If the Individual Investor shall, as a result of his ownership of the
Pledged Stock or any other Collateral, become entitled to receive or shall
receive any non-cash dividend or distribution (whether in shares of Common Stock
or additional shares of Preferred Stock, other securities or other property and
whether in connection with any reclassification, increase or reduction of
capital or any reorganization or otherwise), or any option or right, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock or any of the other Collateral, or otherwise in
respect thereof, the Individual Investor shall accept the same as the agent of
Eagle, hold the same in trust for Eagle, and deliver the same forthwith to Eagle
in the exact form received, duly endorsed by the Individual Investor to Eagle,
if required, together with an undated stock power covering any certificate
received by the Individual Investor duly executed in blank by the Individual
Investor, to be held by Eagle, subject to the terms hereof, as additional
collateral security for the Obligations under the Note.
(b) Without the prior written consent of Eagle, the Individual Investor
will not (i) sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral, except, with respect to the Pledged
Stock, as permitted by the Subscription Agreement or the Stockholders'
Agreement, dated as of the date hereof, among Eagle, the Company, the other
Stockholders named therein and the Individual Investor (the "Stockholders'
Agreement"), or (ii) create, incur or permit to exist any lien or option in
favor of, or any claim of any person with respect to, any of the Collateral, or
any interest therein, except for the lien created by this Pledge Agreement.
(c) At any time and from time to time, upon the written request of Eagle,
and at the sole expense of the Individual Investor, the Individual Investor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as Eagle may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and of the
rights and powers herein granted.
(d) The Individual Investor agrees to pay, and to save Eagle harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Pledge Agreement.
6. Voting Rights. Unless the Individual Investor fails to pay or perform
-------------
any of the Obligations of the
3
<PAGE>
Individual Investor under the Note, the Individual Investor shall be permitted
to exercise all voting and consensual rights with respect to the Pledged Stock,
provided, however, that no vote shall be cast or consensual right exercised or
- - - - -------- -------
other action taken which, in Eagle's reasonable judgment, would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Subscription Agreement, the Stockholders' Agreement, the Note
or this Pledge Agreement.
7. Rights of Eagle. (a) If the Individual Investor fails to pay or
---------------
perform any of the Obligations in accordance with their respective terms, all
shares of the Pledged Stock shall be registered in the name of Eagle or its
nominee and Eagle or its nominee may thereafter exercise (i) all voting,
corporate and other rights pertaining to such shares of the Pledged Stock at any
meeting of shareholders of the Company or otherwise and (ii) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by the Individual Investor or
Eagle of any right, privilege or option pertaining to such shares of the Pledged
Stock, and in connection therewith, the right to deposit and deliver any and all
of the Pledged Stock with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms and conditions as it may determine),
all without liability except to account for property actually received by it,
but Eagle shall have no duty to the Individual Investor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of Eagle hereunder shall not be conditioned or contingent
upon the pursuit by Eagle of any right or remedy against the Individual Investor
or against any other Person which may be or become liable in respect of all or
any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Eagle shall not be
liable for any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall Eagle be under any obligation
to sell or otherwise dispose of any Collateral upon the request of the
Individual Investor or any other Person or to take any other action whatsoever
with regard to the Collateral or any part thereof.
4
<PAGE>
8. Remedies. Notwithstanding any provision to the contrary contained in
--------
the Employment Agreement, dated as of January 23, 1998 (the "Lynch Employment
Agreement"), by and among Eagle, Eagle Family Foods Holdings, Inc. and William
A. Lynch ("Lynch"), if the Individual Investor fails to perform any of his
Obligations in accordance with their respective terms and such failure is
continuing, Eagle may exercise, in addition to all other rights and remedies
granted in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing, Eagle, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Individual Investor or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of Eagle or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Eagle shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Individual Investor, which right or
equity is hereby waived or released. Eagle shall apply any Proceeds from time
to time held by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of Eagle hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to Eagle, to the payment
in whole or in part of the Obligations, in such order as Eagle may elect, and
only after such application and after the payment by Eagle of any other amount
required by any provision of law, including, without limitation, Section 9-
504(1)(c) of the Code, need Eagle account for the surplus, if any, to the
Individual Investor. To the extent permitted by applicable law, the Individual
Investor waives all claims, damages and demands he may acquire against Eagle
arising out of the exercise by him of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and
5
<PAGE>
proper if given at least 10 days before such sale or other disposition. The
Individual Investor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by Eagle to
collect such deficiency.
9. Private Sales.
-------------
(a) The Individual Investor recognizes that, in the absence of
registration under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, Eagle may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Individual Investor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. Eagle
shall be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to register such securities for public sale under the
Securities Act, or under applicable state securities laws.
(b) The Individual Investor further agrees to use his best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this paragraph 9
valid and binding and in compliance with any and all other applicable
requirements of law. The Individual Investor further agrees that a breach of
any of the covenants contained in this paragraph 9 will cause irreparable injury
to Eagle, that Eagle has no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this paragraph
9 shall be specifically enforceable against the Individual Investor, and the
Individual Investor hereby waives and agrees not to assert any defenses against
an action for specific performance of such covenants.
10. Limitation on Duties Regarding Collateral. From and after the Closing
-----------------------------------------
Date, Eagle's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as Eagle deals
with similar
6
<PAGE>
securities and property for its own account. Neither Eagle nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Individual Investor or otherwise; provided, however,
that Eagle shall cooperate with the Individual Investor in order to transfer any
or all of the Collateral in accordance with the terms of the Subscription
Agreement or the Stockholders' Agreement.
11. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
12. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Paragraph Headings. The paragraph headings used in this Pledge
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies. Eagle shall not by any act (except by
------------------------------
a written instrument pursuant to paragraph 15 hereof) be deemed to have waived
any right or remedy hereunder or to have acquiesced in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of Eagle, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by Eagle of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Eagle would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law. None
-------------------------------------------------------------
of the terms or provisions of this Pledge Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Individual
Investor and Eagle, provided that any provision of this Pledge Agreement
--------
enforceable by Eagle may
7
<PAGE>
be waived by Eagle in a letter or agreement executed by Eagle or by telex or
facsimile transmission from Eagle. This Pledge Agreement shall be binding upon
the successors and assigns of the Individual Investor and shall inure to the
benefit of Eagle and its successors and assigns. This Pledge Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
16. Notices. (a) Notices may be given by the parties hereto and
-------
shall be considered effective in the manner and at the time provided in the
Agreement, addressed or transmitted to the parties or their permitted assigns at
the following addresses (or at such other address as shall be given in writing
by either party to the other).
To Eagle:
Eagle Family Foods, Inc.
220 White Plains Road
Tarrytown, New York 10591
Attention: Jonathan F. Rich, Esq.
To the Individual Investor:
John O'C. Nugent
63 Crescent Place
Short Hills, NJ 07078
(b) Eagle hereby agrees to promptly notify the Individual Investor in the
event that Lynch's employment is terminated pursuant to the Lynch Employment
Agreement.
17. Counterparts. This Pledge Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Pledge Agreement
to produce or account for more than one such counterpart.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.
By: /s/ John O'C. Nugent
-------------------------------
John O'C. Nugent
Eagle Family Foods Holdings, Inc.
By: /s/ William A. Lynch
------------------------
Name: William A. Lynch
Title: Chairman of the Board of
Directors and Chief
Operating Officer
9
<PAGE>
SCHEDULE I
To Pledge
Agreement
---------
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Amount Loaned Preferred Stock Common Stock
- - - - ------------- --------------- ------------
<S> <C> <C>
$250,000 4,950 63,230*
</TABLE>
* 58,230 shares of Common Stock are Restricted Shares issued to the pledgor
pursuant to the Eagle Family Foods Holdings, Inc. 1998 Stock Incentive Plan, and
are subject to the terms and conditions of such Plan as well as the terms and
conditions of a Restricted Stock Agreement dated as of January 23, 1998 between
the Pledgor and Eagle Family Foods Holdings, Inc.
<PAGE>
SCHEDULE II
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
Common Stock
Stock
Certificate No. of
Issuer No. Shares
- - - - ------ ----------- ------
Eagle Family Foods Holdings, Inc. C-4 5,000
Eagle Family Foods Holdings, Inc. C-10 58,230
Series A Non-Voting Preferred Stock
Stock
Certificate No. of
Issuer No. Shares
- - - - ------ ----------- ------
Eagle Family Foods Holdings, Inc. P-4 4,950
<PAGE>
EXHIBIT 10.13
SECURED RECOURSE
PROMISSORY NOTE
$575,000
New York, New York January 23, 1998
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
William A. Lynch ("Maker") hereby unconditionally promises to pay to Eagle
Family Foods, Inc., a Delaware corporation ("Eagle"), having an address at 220
White Plains Road, Tarrytown, NY 10591, at such address or at such other place
as may be designated in writing by the holder of this Note, or its assigns, the
principal sum of five hundred seventy-five thousand dollars and no cents on
January 23, 2003 (the "Maturity Date"). The undersigned also agrees to pay
interest on the unpaid principal amount of this Note at said office in like
money on the Maturity Date. Interest shall accrue from the date hereof during
each semi-annual interest period ending on January 15 and July 15 of each year
up to and including the Maturity Date at a rate per annum (computed on the basis
of a 360-day year) equal to one-half of one percent (0.5%) above the Applicable
Rate for such interest period. In addition, all accrued but unpaid interest on
this Note shall compound on a semi-annual basis on each January 15 and July 15.
As used herein, the term "Applicable Rate" shall mean the rate of interest
publicly announced by The Chase Manhattan Bank as its "prime rate" on January 15
or in the case of the first semi-annual interest period on January 23 (or the
business day immediately preceding such date) of each year, for each semi-annual
interest period commencing on such date and on July 15 (or the business day
immediately preceding such date) of each year, for each semi-annual interest
period commencing on such date.
Optional prepayments, and mandatory prepayments pursuant to the third paragraph
hereof, received by Eagle on or prior to the Maturity Date shall be applied
first, to the payment of interest accrued and unpaid on this Note, and second to
reduce the principal balance hereunder.
Capitalized terms used herein that are not defined herein shall have the
meanings ascribed thereto in that certain Pledge Agreement between Maker and
Eagle dated as of even date herewith (the "Pledge Agreement").
Maker agrees to make mandatory prepayments as follows: an amount equal to one
hundred percent (100%) of (x) all proceeds received by Maker or members of
Maker's family, heirs, executors or legal representatives or trusts for the
benefit of Maker or Maker's family (a "Related Transferee") from any transfer by
Maker or any Related Transferee of any or all of the Shares and (y) cash
dividends or other cash distributions in respect of the Shares, whether payable
upon the liquidation or dissolution of the
<PAGE>
Company or otherwise upon receipt thereof by Maker or any Related Transferee, as
the case may be.
Maker may prepay this Note in whole or from time to time in part, without
premium or penalty.
Maker agrees that:
(i) upon the failure to pay when due the principal balance hereunder
and accrued interest thereon or any required prepayment of this Note;
(ii) if Maker or any Related Transferee which holds any of the Shares
(1) commences any voluntary proceeding under any provision of Title 11 of the
United States Code, as now or hereafter amended, or commences any other
proceeding, under any law, now or hereafter in force, relating to bankruptcy,
insolvency, reorganization, liquidation, or otherwise to the relief of debtors
or the readjustment of indebtedness; (2) makes any assignment for the benefit of
creditors or a composition or similar arrangement with such creditors; or (3)
appoints a receiver, trustee or similar judicial officer or agent to take charge
of or liquidate any of its property or assets; or
(iii) upon the commencement against Maker or any Related Transferee
which holds any of the Shares of any involuntary proceeding of the kind
described in paragraph (ii);
(iv) upon the termination of Maker's employment with Eagle, whether
such termination is voluntary or involuntary, or with or without cause;
all unpaid principal and accrued interest under this Note shall become
immediately due and payable without presentment, demand, protest or notice of
any kind.
This Note is binding on Maker and Maker hereby waives presentment, demand,
notice and protest and any defense by reason of an extension of time for payment
or other indulgences. Failure of the holder hereof to assert any right herein
shall not be deemed to be a waiver thereof.
Maker may not set off from any amounts due under this Note any amounts due Maker
from Eagle or its transferees.
The Obligations of Maker under this Note are secured by the pledge of the Shares
to Eagle in accordance with the terms of the Pledge Agreement. The Maker shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations and the fees
and disbursements of any attorneys employed by Eagle to collect such deficiency.
-2-
<PAGE>
This Note shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of law thereof.
By: /s/ William A. Lynch
-------------------------------
William A. Lynch
-3-
<PAGE>
EXHIBIT 10.14
SECURED RECOURSE
PROMISSORY NOTE
$250,000
New York, New York January 23, 1998
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, John
O'C. Nugent ("Maker") hereby unconditionally promises to pay to Eagle Family
Foods, Inc., a Delaware corporation ("Eagle"), having an address at 220 White
Plains Road, Tarrytown, NY 10591, at such address or at such other place as may
be designated in writing by the holder of this Note, or its assigns, the
principal sum of two hundred fifty thousand dollars and no cents on January 23,
2003 (the "Maturity Date"). The undersigned also agrees to pay interest on the
unpaid principal amount of this Note at said office in like money on the
Maturity Date. Interest shall accrue from the date hereof during each semi-
annual interest period ending on January 15 and July 15 of each year up to and
including the Maturity Date at a rate per annum (computed on the basis of a 360-
day year) equal to one-half of one percent (0.5%) above the Applicable Rate for
such interest period. In addition, all accrued but unpaid interest on this Note
shall compound on a semi-annual basis on each January 15 and July 15. As used
herein, the term "Applicable Rate" shall mean the rate of interest publicly
announced by The Chase Manhattan Bank as its "prime rate" on January 15 or in
the case of the first semi-annual interest period on January 23 (or the business
day immediately preceding such date) of each year, for each semi-annual interest
period commencing on such date and on July 15 (or the business day immediately
preceding such date) of each year, for each semi-annual interest period
commencing on such date.
Optional prepayments, and mandatory prepayments pursuant to the third paragraph
hereof, received by Eagle on or prior to the Maturity Date shall be applied
first, to the payment of interest accrued and unpaid on this Note, and second to
reduce the principal balance hereunder.
Capitalized terms used herein that are not defined herein shall have the
meanings ascribed thereto in that certain Pledge Agreement between Maker and
Eagle dated as of even date herewith (the "Pledge Agreement").
Maker agrees to make mandatory prepayments as follows: an amount equal to one
hundred percent (100%) of (x) all proceeds received by Maker or members of
Maker's family, heirs, executors or legal representatives or trusts for the
benefit of Maker or Maker's family (a "Related Transferee") from any transfer by
Maker or any Related Transferee of any or all of the Shares and (y) cash
dividends or other cash distributions in respect of the Shares, whether payable
upon the liquidation or dissolution of the Company or otherwise
<PAGE>
upon receipt thereof by Maker or any Related Transferee, as the case may be.
Maker may prepay this Note in whole or from time to time in part, without
premium or penalty.
Maker agrees that:
(i) upon the failure to pay when due the principal balance
hereunder and accrued interest thereon or any required prepayment of this Note;
(ii) if Maker or any Related Transferee which holds any of the
Shares (1) commences any voluntary proceeding under any provision of Title 11 of
the United States Code, as now or hereafter amended, or commences any other
proceeding, under any law, now or hereafter in force, relating to bankruptcy,
insolvency, reorganization, liquidation, or otherwise to the relief of debtors
or the readjustment of indebtedness; (2) makes any assignment for the benefit of
creditors or a composition or similar arrangement with such creditors; or (3)
appoints a receiver, trustee or similar judicial officer or agent to take charge
of or liquidate any of its property or assets; or
(iii) upon the commencement against Maker or any Related Transferee
which holds any of the Shares of any involuntary proceeding of the kind
described in paragraph (ii);
(iv) upon the termination of Maker's employment with Eagle, whether
such termination is voluntary or involuntary, or with or without cause;
all unpaid principal and accrued interest under this Note shall become
immediately due and payable without presentment, demand, protest or notice of
any kind.
This Note is binding on Maker and Maker hereby waives presentment, demand,
notice and protest and any defense by reason of an extension of time for payment
or other indulgences. Failure of the holder hereof to assert any right herein
shall not be deemed to be a waiver thereof.
Maker may not set off from any amounts due under this Note any amounts due Maker
from Eagle or its transferees.
The Obligations of Maker under this Note are secured by the pledge of the Shares
to Eagle in accordance with the terms of the Pledge Agreement. The Maker shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations and the fees
and disbursements of any attorneys employed by Eagle to collect such deficiency.
<PAGE>
This Note shall be governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of law thereof.
By: /s/ John O'C. Nugent
-----------------------------
John O'C. Nugent
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Form S-4 (File
No. 333- ) of our report dated April 15, 1998, on our audit of the balance
sheet of Eagle Family Foods, Inc. and the consolidated balance sheet of Eagle
Family Foods Holdings, Inc. as of January 23, 1998. We also consent to the
reference to our Firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Columbus, Ohio
April 16, 1998
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to use in this Registration Statement of Eagle Family Foods
Holdings, Inc. and Eagle Family Foods, Inc. on Form S-4 of our report
regarding Borden Brands North America ("BBNA") dated April 6, 1998, appearing
in the Prospectus, which is part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche llp
deloitte & touche llp
Columbus, Ohio
April 15, 1998
<PAGE>
EXHIBIT 25.0
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)__
-------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
EAGLE FAMILY FOODS, INC.
(Exact name of obligor as specified in its charter)
Delaware 13-3982757
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 White Plains Road
Tarrytown, New York 10591
(Address of principal executive offices) (Zip Code)
--------------------
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008
(Title of indenture securities)
-------------------------------------------------------------------
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities of the obligor are outstanding, furnish the following
information:
(a) Title of the securities outstanding under each such other
indenture.
None
(b) A brief statement of the facts relied upon as a claim that no
conflicting interest within the basis for the meaning of (b)
Section (310)(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a statement
as to how the indenture securities will rank as compared with the
securities issued under such other indentures.
Not applicable
<PAGE>
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
Not applicable
<PAGE>
Item 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable.
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which
relates to matters peculiarly within the knowledge of the obligor
and its directors or officers, the trustee has relied upon
information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by
the trustee of all facts on which to base responsive answers to
Item 2, the answer to said Item are based on incomplete
information.
Item 2, may, however, be considered as correct unless amended by
an amendment to this Form T-1.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, IBJ Schroder Bank & Trust Company, a corporation
organized and existing under the laws of the State of New York,
has duly caused this statement of to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of
New York, and State of New York, on the 13th day of April, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
---------------------------------
Stephen J. Giurlando
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the
issuance by Eagle Family Foods, Inc. Of its 8 3/4% Senior
Subordinated Notes due 2008, we hereby consent that reports of
examinations by Federal, State, Territorial, or District
authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
-------------------------------
Stephen J. Giurlando
Assistant Vice President
Dated: April 13, 1998
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
----------------
<S> <C>
ASSETS
------
1. Cash and balance due from depository institutions:
a. Noninterest-bearing balances and currency and coin..................... $ 45,276
b. Interest-bearing balances.............................................. $ 121,534
2. Securities:
a. Held-to-maturity securities............................................ $ 184,821
b. Available-for-sale securities.......................................... $ 74,043
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell $ 202,104
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income................ $1,797,414
b. LESS: Allowance for loan and lease losses............... $ 61,962
c. LESS: Allocated transfer risk reserve................... $ -0-
d. Loans and leases, net of unearned income, allowance, and reserve...... $1,735,452
5. Trading assets held in trading accounts.................................... $ 479
6. Premises and fixed assets (including capitalized leases)................... $ 2,952
7. Other real estate owned.................................................... $ -0-
8. Investments in unconsolidated subsidiaries and associated companies........ $ -0-
9. Customers' liability to this bank on acceptances outstanding............... $ 1,447
10. Intangible assets.......................................................... $ -0-
11. Other assets............................................................... $ 67,256
12. TOTAL ASSETS............................................................... $2,435,364
</TABLE>
<PAGE>
LIABILITIES
-----------
<TABLE>
<S> <C>
13. Deposits:
a. In domestic offices................................................ $ 791,520
(1) Noninterest-bearing............................. $ 247,397
(2) Interest-bearing................................ $ 544,123
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................................. $1,229,810
(1) Noninterest-bearing............................. $ 14,607
(2) Interest-bearing................................ $1,215,203
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal Funds purchased and Securities sold under agreements to
repurchase.............................................................. $ 10,000
15. a Demand notes issued to the U.S. Treasury........................... $ 5,000
b. Trading Liabilities................................................ $ 108
16. Other borrowed money:
a. With a remaining maturity of one year or less...................... $ 83,453
b. With a remaining maturity of more than one year.................... $ 1,763
c. With a remaining maturity of more than three years................. $ 2,242
17. Not applicable.
18. Bank's liability on acceptances executed and
outstanding............................................................ $ 1,447
19. Subordinated notes and debentures...................................... $ -0-
20. Other liabilities...................................................... $ 70,284
21. TOTAL LIABILITIES...................................................... $2,195,627
22. Limited-life preferred stock and related surplus....................... $ -0-
</TABLE>
EQUITY CAPITAL
<TABLE>
<S> <C>
23. Perpetual preferred stock and related surplus.......................... $ -0-
24. Common stock........................................................... $ 29,649
25. Surplus (exclude all surplus related to preferred stock)............... $ 217,008
26. a. Undivided profits and capital reserves............................ $ (7,130)
b. Net unrealized gains (losses) on available-for-sale securities $ 210
27. Cumulative foreign currency translation adjustments.................... $ -0-
28. TOTAL EQUITY CAPITAL................................................... $ 239,737
29. TOTAL LIABILITIES AND EQUITY CAPITAL................................... $2,435,364
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EAGLE FAMILY
FOODS HOLDINGS, INC. CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001054040
<NAME> EAGLE FAMILY FOODS HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-23-1998
<PERIOD-START> JAN-23-1998
<PERIOD-END> JAN-23-1998
<CASH> 3,798
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,100
<CURRENT-ASSETS> 23,948
<PP&E> 23,950
<DEPRECIATION> 0
<TOTAL-ASSETS> 379,221
<CURRENT-LIABILITIES> 6,744
<BONDS> 305,500
80,858
0
<COMMON> 10
<OTHER-SE> (13,891)
<TOTAL-LIABILITY-AND-EQUITY> 379,221
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EAGLE FAMILY
FOODS, INC. BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001059761
<NAME> EAGLE FAMILY FOODS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-23-1998
<PERIOD-START> JAN-23-1998
<PERIOD-END> JAN-23-1998
<CASH> 3,798
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,100
<CURRENT-ASSETS> 23,949
<PP&E> 23,950
<DEPRECIATION> 0
<TOTAL-ASSETS> 380,047
<CURRENT-LIABILITIES> 6,744
<BONDS> 305,500
0
0
<COMMON> 1
<OTHER-SE> 67,802
<TOTAL-LIABILITY-AND-EQUITY> 380,047
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
/ /1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
EAGLE FAMILY FOODS, INC.
200 White Plains Road
Tarrytown, New York 10591
LETTER OF TRANSMITTAL
For 8 3/4% Senior Subordinated Notes due 2008
EXCHANGE AGENT:
IBJ Schroder Bank & Trust Company
By Facsimile: By Registered or Certified Mail: By Hand:
P.O. Box 84 One State Street
(212) 858-2611 Bowling Green Station New York, NY 10004
New York, NY 10274-0084 Attention: Securities
Confirm by telephone: Attention: Reorganization Processing Window,
Operations Department Subcellar one, (SC-1)
(212) 858-2103
By Overnight Courier:
One State Street
New York, NY 10004
Attention: Securities
Processing Window,
Subcellar one, (SC-1)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1998 (the
"Prospectus") of Eagle Family Foods, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal for 8 3/4% Senior Subordinated
Notes due 2008 which may be amended from time to time (this "Letter"), which
together constitute the Company's offer (the "Exchange Offer") to exchange,
for each $1,000 in principal amount of its outstanding 8 3/4% Senior
Subordinated Notes due 2008 issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Original
Notes"), $1,000 in principal amount of 8 3/4% Series B Senior Subordinated
Notes due 2008 (the "Exchange Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Original Notes who wish to tender their Original Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Original Notes or, if a tender of
Original Notes is to be made by book-entry transfer to the account maintained
by the Exchange Agent at The Depository Trust Company (the "Book-Entry
Transfer Facility"), confirm such book-entry transfer (a "Book-Entry
Confirmation"), in each case in accordance with the procedures for tendering
described in the Instructions to this Letter. Holders of Original Notes whose
certificates are not immediately available, or who are unable to deliver their
certificates or Book-Entry Confirmation and all other documents required by
this Letter to be delivered to the Exchange Agent on or prior to the
Expiration Date, must tender their Original Notes according to the guaranteed
delivery procedures set forth under the caption "The Exchange Offer--How to
Tender" in the Prospectus. (See Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of
the Prospectus or this Letter may be directed to the Exchange Agent, at the
address listed above, or to Jonathan F. Rich, the Secretary of the Company,
220 White Plains Road, Tarrytown, New York 10591 (telephone (914) 631-3100).
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Original Notes on a separate SIGNED schedule and affix
that schedule to this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT ORIGINAL NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S)(1) OF ORIGINAL NOTES TENDERED(2)
- - - - ----------------------------------------------------------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
<S> <C> <C> <C>
TOTALS:
</TABLE>
- - - - -------------------------------------------------------------------------------
(1) Need not be completed if Original Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Original
Notes represented by a certificate or Book-Entry Confirmation delivered
to the Exchange Agent will be deemed to have been tendered.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Company the principal amount of Original Notes
indicated above. Subject to, and effective upon, the acceptance for exchange
of the Original Notes tendered with this Letter, the undersigned exchanges,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Original Notes,
with full power of substitution, to: (a) deliver certificates for such
Original Notes; (b) deliver Original Notes and all accompanying evidence of
transfer and authenticity to or upon the order of the Company upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which
the undersigned is entitled upon the acceptance by the Company of the Original
Notes tendered under the Exchange Offer; and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of the Original Notes,
all in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the assignment and transfer of the Original
Notes tendered.
<PAGE>
The undersigned agrees that acceptance of any tendered Original Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon
the issuance of the Exchange Notes, the Company will have no further
obligations or liabilities thereunder (except in certain limited
circumstances). If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that
will receive Exchange Notes for its own account in exchange for Original Notes
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Company may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Original Notes not tendered but represented by a certificate also
encompassing Original Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
[_]CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ______________________________________________________ ________________
X ______________________________________________________ ________________
SIGNATURE(S) OF OWNER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number: ___________________________________________
This box must be signed by registered holder(s) of Original Notes as their
name(s) appear(s) on certificate(s) for Original Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
Name(s) ___________________________________________________________________
___________________________________________________________________________
(PLEASE PRINT)
Capacity __________________________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
(INCLUDE ZIP CODE)
Signature(s) Guaranteed
by an Eligible Institution: _______________________________________________
(AUTHORIZED SIGNATURE)
(If required by Instruction 3) ____________________________________________
___________________________________________________________________________
(TITLE)
___________________________________________________________________________
(NAME OF FIRM)
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
- - - - --------------------------------------------------------------------------------
PAYOR'S NAME: [ ]
- - - - --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR ----------------------
TIN IN THE BOX AT RIGHT AND Social Security Number
CERTIFY BY SIGNING AND or Employer
DATING BELOW. Identification Number
SUBSTITUTE
FORM W-9
DEPARTMENT OF --------------------------------------------------------
THE TREASURY PART 2--Check the box if you are NOT subject to back-
INTERNAL up withholding under the provisions of Section
REVENUE 2406(a)(1)(C) of the Internal Revenue Code because
SERVICE (1) you have not been notified that you are subject
to back-up withholding as a result of failure to
report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to back-up withholding. [_]
--------------------------------------------------------
PAYER'S REQUEST FOR CERTIFICATION--UNDER THE PENALTIES OF PART 3
TAXPAYER IDENTIFICA- PERJURY, I CERTIFY THAT THE INFORMA-
TION NUMBER (TIN) TION PROVIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
Check if
Awaiting TIN
[_]
SIGNATURE ______________ DATE _______
- - - - --------------------------------------------------------------------------------
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Original Notes in a cates for Original Notes in a
principal amount not exchanged, principal amount not exchanged,
or Exchange Notes, are to be is- or Exchange Notes, are to be sent
sued in the name of someone other to someone other than the person
than the person whose signature whose signature appears in Box 2
appears in Box 2, or if Original or to an address other than that
Notes delivered by book-entry shown in Box 1.
transfer which are not accepted
for exchange are to be returned
by credit to an account main-
tained at the Book-Entry Transfer
Facility other than the account
indicated above.
Deliver:
(check appropriate boxes)
[_]Original Notes not tendered
Issue and deliver:
[_]Exchange Notes, to:
(check appropriate boxes)
Name _____________________________
[_]Original Notes not tendered (PLEASE PRINT)
Address __________________________
[_]Exchange Notes, to: __________________________________
Name _____________________________
(PLEASE PRINT)
Address __________________________
Please complete the Substitute
Form W-9 at Box 3 Tax I.D. or So-
cial Security Number: ____________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Original Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Original Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the Exchange
Agent. If delivery is by mail, the use of registered mail with return receipt
requested, properly insured, is suggested.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes or a Book-Entry Confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Original Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such
procedure: (i) tender must be made by or through an Eligible Institution (as
defined in the Prospectus under the caption "The Exchange Offer"); (ii) prior
to the Expiration Date, the Exchange Agent must have received from the
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by telegram, telex, facsimile transmission, mail or hand
delivery) (x) setting forth the name and address of the holder, the
description of the Original Notes and the principal amount of Original Notes
tendered, (y) stating that the tender is being made thereby and (z)
guaranteeing that, within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery, this Letter together
with the certificates representing the Original Notes or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent;
and (iii) the certificates for all tendered Original Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within three New York
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in the Prospectus under the caption "The
Exchange Offer--How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders that are not
in proper form or the acceptance of which, in the opinion of the Company's
counsel, would be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Original Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Original Notes.
Neither the Company, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Original Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Original Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Original Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Original Notes represented by a submitted certificate is tendered (or, in the
case of Original Notes tendered by book-entry transfer, such non-exchanged
Original Notes will be credited to an account maintained by the holder with
the Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Original Notes, a notice of withdrawal must: (i) be received by the
<PAGE>
Exchange Agent before the Company notifies the Exchange Agent that it has
accepted the tender of Original Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Original Notes; (iii) contain
a description of the Original Notes to be withdrawn, the certificate numbers
shown on the particular certificates evidencing such Original Notes and the
principal amount of Original Notes represented by such certificates; and (iv)
be signed by the holder in the same manner as the original signature on this
Letter (including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Original Notes, without alteration, enlargement or any
change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Original Notes are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Original Notes is tendered; and/or (ii)
untendered Original Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Original Notes, nor provide a separate bond power. If any other case, the
holder of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to
the Company of their authority to so act must be submitted, unless waived by
the Company.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Original Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter; or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The
Securities Transfer Agents Medallion Program (STAMP), The New York Stock
Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion
Program (SEMP) (collectively, "Eligible Institutions"). If Original Notes are
registered in the name of a person other than the signer of this Letter, the
Original Notes surrendered for exchange must be endorsed by, or be accompanied
by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company, in its sole discretion, duly
executed by the registered holder with the signature thereon guaranteed by an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Original Notes not exchanged are to be
issued or sent, if different from the name and address of the person signing
this Letter. In the case of issuance in a different name, the tax
identification number of the person named must also be indicated. Holders
tendering Original Notes by book-entry transfer may request that Original
Notes not exchanged be credited to such account maintained at the Book-Entry
Transfer Facility as such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Original Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to the holder of the Exchange
Notes pursuant to the Exchange Offer may be subject to back-up withholding.
(If withholding results in overpayment of taxes, a refund may be obtained.)
Exempt holders (including, among others, all corporations and certain foreign
<PAGE>
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal Revenue Service that he or
she is subject to back-up withholding as a result of failure to report all
interest or dividends; (ii) the Internal Revenue Service has notified the
holder that he or she is no longer subject to back-up withholding; or (iii)
certify in accordance with the Guidelines that such holder is exempt from
back-up withholding. If the Original Notes are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
information on which TIN to report.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Original Notes to it or its order pursuant to
the Exchange Offer. If, however, the Exchange Notes or certificates for
Original Notes not exchanged are to be delivered to, or are to be issued in
the name of, any person other than the record holder, or if tendered
certificates are recorded in the name of any person other than the person
signing this Letter, or if a transfer tax is imposed by any reason other than
the transfer of Original Notes to the Company or its order pursuant to the
Exchange Offer, then the amount of such transfer taxes (whether imposed on the
record holder or any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of taxes or exemption from taxes is not
submitted with this Letter, the amount of transfer taxes will be billed
directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Company reserve the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
Original Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Original Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Original Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
<PAGE>
EXHIBIT: 99.2
EAGLE FAMILY FOODS, INC.
EXCHANGE OFFER
TO HOLDERS OF ITS
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated , 1998 (the "Prospectus") of Eagle
Family Foods, Inc. (the "Company") under "The Exchange Offer--How to Tender"
and in the Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by the Company to exchange up to $115,000,000 in
principal amount of its 8 3/4% Series B Senior Subordinated Notes due 2008
(the "Exchange Notes") for $115,000,000 in principal amount of its 8 3/4%
Senior Subordinated Notes due 2008, issued and sold in a transaction exempt
from registration under the Securities Act of 1933, as amended (the "Original
Notes"), this form or one substantially equivalent hereto must be used to
accept the Exchange Offer of the Company if: (i) certificates for the Original
Notes are not immediately available; or (ii) time will not permit all required
documents to reach the Exchange Agent (as defined below) on or prior to the
Expiration Date (as defined in the Prospectus) of the Exchange Offer. Such
form may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Exchange Agent.
TO: IBJ Schroder Bank & Trust Company (the "Exchange Agent")
By Facsimile:
(212) 858-2611
Confirm by telephone:
(212) 858-2103
By Registered or Certified Mail:
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization
Operations Department
By Hand:
One State Street
New York, NY 10004
Attention: Securities
Processing Window,
Subcellar one,
(SC-1)
By Overnight Courier:
One State Street
New York, NY 10004
Attention: Securities
Processing Window,
Subcellar one,
(SC-1)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMITTAL OF THIS INSTRUMENT TO A FACSIMILE OR TELEX NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged,
the principal amount of Original Notes set forth below pursuant to the
guaranteed delivery procedure described in the Prospectus and the Letter of
Transmittal.
Sign Here
Signature(s) ________________________
_____________________________________
Principal Amount of Original Notes
Tendered ____________________________ Please Print the Following
Information
Certificate Nos.
(if available) ______________________ Name(s) _____________________________
_____________________________________
Total Principal Amount Address _____________________________
Represented by Original Notes _____________________________________
Certificate(s) ______________________ Area Code and Tel. No(s). ___________
_____________________________________
Account Number ______________________
Dated: , 1998
<PAGE>
GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17A(d)-15 under the Securities Exchange Act
of 1934, as amended, hereby guarantees (a) that the above-named person(s)
own(s) the above-described securities tendered hereby within the meaning of
under the Securities Exchange Act of 1934, (b) that such tender of the
above-described securities complies with Rule and (c) that delivery to the
Exchange Agent of certificates tendered hereby, in proper form for transfer,
or delivery of such certificates pursuant to the procedure for book-entry
transfer, in either case with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other required
documents, is being made within three trading days after the date of execution
of a Notice of Guaranteed Delivery of the above-named person.
_____________________________________
Name of Firm
_____________________________________
Authorized Signature
_____________________________________
Number and Street or P.O. Box
_____________________________________
City State Zip Code
_____________________________________
Area Code and Tel. No.
Dated: , 1998
<PAGE>
EXHIBIT: 99.3
EAGLE FAMILY FOODS, INC.
OFFER TO EXCHANGE
UP TO $115,000,000 IN PRINCIPAL AMOUNT OF
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR
$115,000,000 IN PRINCIPAL AMOUNT OF
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008 ISSUED AND
SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Eagle Family Foods, Inc. (the "Company") to
exchange up to $115,000,000 in principal amount of its 8 3/4% Series B Senior
Subordinated Notes due 2008 (the "Exchange Notes") for $115,000,000 in
principal amount of its 8 3/4% Senior Subordinated Notes due 2008, issued and
sold in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Original Notes").
The material is being forwarded to you as the beneficial owner of Original
Notes carried by us for your account or benefit but not registered in your
name. A tender of any Original Notes may be made only by us as the registered
holder and pursuant to your instructions. Therefore, the Company urges
beneficial owners of Original Notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee to contact such
registered holder promptly if they wish to tender Original Notes in the
Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Original Notes, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Original Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER
TO PERMIT US TO TENDER ORIGINAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE
PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00 p.m.,
Eastern Standard Time, on , , 1998, unless extended (the "Expiration
Date"). Original Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
If you wish to have us tender any or all of your Original Notes held by us
for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Original Notes held by us and registered in
our name for your account or benefit.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Eagle Family
Foods, Inc.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF ORIGINAL NOTES
INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED,
PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
Box 1 [_]
Please tender my Original Notes held by you for my account or
benefit. I have identified on a signed schedule attached hereto the
principal amount of Original Notes to be tendered if I wish to
tender less than all of my Original Notes.
Box 2 [_]
Please do not tender any Original Notes held by you for my account
or benefit.
Date: , 1998
_____________________________________
_____________________________________
Signature(s)
_____________________________________
_____________________________________
Please print name(s) here
- - - - --------
Unless a specific contrary instruction is given in a signed Schedule
attached hereto, your signature(s) hereon shall constitute an instruction to
us to tender all of your Original Notes.
<PAGE>
EXHIBIT 99.4
EAGLE FAMILY FOODS, INC.
OFFER TO EXCHANGE
UP TO $115,000,000 IN PRINCIPAL AMOUNT OF
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR
$115,000,000 IN PRINCIPAL AMOUNT OF
8 3/4% SENIOR SUBORDINATED NOTES DUE 2008 ISSUED
AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Eagle Family Foods, Inc. (the "Company") to
exchange up to $115,000,000 in principal amount of its 8 3/4% Series B Senior
Subordinated Notes due 2008 (the "Exchange Notes") for $115,000,000 in
principal amount of its 8 3/4% Senior Subordinated Notes due 2008, issued and
sold in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Original Notes").
We are asking you to contact your clients for whom you hold Original Notes
registered in your name or in the name of your nominee. In addition, we ask
you to contact your clients who, to your knowledge, hold Original Notes
registered in their own name. The Company will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by
the Company for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Company will pay
all transfer taxes, if any, applicable to the tender of Original Notes to it
or its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of
Original Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts you
hold Original Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard
to the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on , , 1998, unless extended (the
"Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may
be withdrawn, subject to the procedures described in the Prospectus, at any
time prior to the Expiration Date.
To tender Original Notes, certificates for Original Notes and a duly
executed and properly completed Letter of Transmittal or a facsimile thereof
or a Book-Entry Confirmation, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
<PAGE>
Additional copies of the enclosed material may be obtained from IBJ Schroder
Bank & Trust Company, the Exchange Agent, by calling (212) 858-2103.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH
RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
