<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the quarterly period ended January 2, 1999
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _____
Commission file numbers 333-50305 and 333-50305-01
----------------------
Eagle Family Foods Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3983598
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
Eagle Family Foods, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3982757
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
220 White Plains Road 10591
Tarrytown, NY (Zip Code)
(Address of principal executive office)
Registrants' telephone number, including area code: (914) 631-3100
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
As of February 2, 1999, there were 970,880 shares of Common Stock, par value
$.01 per share, of Eagle Family Foods Holdings, Inc. and 10,000 shares of Common
Stock, par value $.01 per share, of Eagle Family Foods, Inc. outstanding,
respectively.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Financial Statements Page
----
<S> <C>
Eagle Family Foods, Inc.
Eagle Family Foods, Inc. Statements of Operations for the fourteen and twenty-seven week periods
ended January 2, 1999 and the three and six month periods ended December 31, 1997 (Predecessor)............. 2
Eagle Family Foods, Inc. Balance Sheets, as of January 2, 1999 and June 27, 1998.............................. 3
Eagle Family Foods, Inc. Statements of Cash Flows for the twenty-seven week period ended
January 2, 1999 and the six month period ended December 31, 1997 (Predecessor).............................. 4
Eagle Family Foods Holdings, Inc.
Eagle Family Foods Holdings, Inc. Consolidated Statements of Operations for the fourteen and twenty-seven
week periods ended January 2, 1999 and the three and six month periods ended December 31,
1997 (Predecessor).......................................................................................... 5
Eagle Family Foods Holdings, Inc. Consolidated Balance Sheets, as of January 2, 1999 and
June 27, 1998............................................................................................... 6
Eagle Family Foods Holdings, Inc. Consolidated Statements of Cash Flows for the twenty-seven week
period ended January 2, 1999 and the six month period ended December 31, 1997 (Predecessor)................. 7
Notes to the Financial Statements............................................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................. 14
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.................................................... 16
Item 6. Exhibits and Reports on Form 8-K....................................................................... 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EAGLE FAMILY FOODS, INC.
Statements of Operations
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Fourteen Three Twenty-Seven Six
Weeks Months Weeks Months
Ended Ended Ended Ended
January 2, December 31, January 2, December 31,
1999 1997 1999 1997
------------ ------------ ------------ ------------
(Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Net sales.................................................... $103,819 $101,036 $154,776 $153,869
Cost of goods sold........................................... 48,804 45,350 71,362 70,640
-------- -------- -------- --------
Gross profit................................................. 55,015 55,686 83,414 83,229
Distribution expense......................................... 3,740 3,954 6,718 8,185
Marketing expense............................................ 23,904 24,798 36,491 37,444
General and administrative expense........................... 3,526 1,573 6,122 5,217
Amortization of intangibles.................................. 7,116 732 14,229 1,463
-------- -------- -------- --------
Operating income............................................. 16,729 24,629 19,854 30,920
Interest expense, net........................................ 7,243 - 14,219 -
-------- -------- -------- --------
Income before income taxes................................... 9,486 24,629 5,635 30,920
Income tax expense........................................... 3,317 9,741 1,967 12,356
-------- -------- -------- --------
Net income................................................... $ 6,169 $ 14,888 $ 3,668 $ 18,564
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
EAGLE FAMILY FOODS, INC.
Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
January 2, June 27,
1999 1998
------------ ------------
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................................... $ 172 $ 1,812
Accounts receivable, net............................................................ 20,416 12,368
Inventories (Note 3)............................................................... 14,658 32,001
Other current assets................................................................ 3,645 261
--------- ---------
Total Current Assets............................................................. 38,891 46,442
Property and Equipment, Net (Note 4)..................................................... 30,699 24,791
Notes Receivable from Related Parties (Note 7)........................................... 825 825
Intangibles, Net (Note 5)............................................................... 289,863 303,950
Deferred Income Taxes.................................................................... 12,315 14,246
Other Noncurrent Assets.................................................................. 8,521 8,986
--------- ---------
Total Assets............................................................................. $381,114 $399,240
========= =========
Liabilities and Stockholder's Equity
Current Liabilities:
Current portion of long-term debt (Note 6).......................................... $ 1,000 $ 1,250
Accounts payable.................................................................... 9,756 9,665
Other accrued liabilities........................................................... 16,456 8,122
Accrued interest.................................................................... 4,756 7,209
--------- ---------
Total Current Liabilities................................................................ 31,968 26,246
--------- ---------
Long-Term Debt (Note 6).................................................................. 289,700 317,000
--------- ---------
Commitments and Contingencies
Stockholder's Equity:
Common stock, $0.01 par value, 250,000 shares authorized, 10,000 shares
issued and outstanding........................................................... 1 1
Additional paid-in capital.......................................................... 82,500 82,500
Accumulated deficit................................................................. (22,776) (26,444)
Accumulated translation adjustment.................................................. (279) (63)
--------- ---------
Total Stockholder's Equity....................................................... 59,446 55,994
--------- ---------
Total Liabilities and Stockholder's Equity............................................... $381,114 $399,240
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
EAGLE FAMILY FOODS, INC.
Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Seven Six
Weeks Months
Ended Ended
January 2, December 31,
1999 1997
------------ ------------
(Predecessor)
<S> <C> <C>
Cash Flows From (Used In) Operating Activities:
Net income......................................................................................... $ 3,668 $ 18,564
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities
Depreciation and amortization................................................................... 16,311 3,148
Gain on sale of fixed assets.................................................................... - 312
Deferred taxes.................................................................................. 1,931 -
Net change in current assets and liabilities
Accounts receivable........................................................................... (8,048) (2,164)
Inventories................................................................................... 17,343 24,329
Accounts payable.............................................................................. 91 680
Other assets.................................................................................. (3,384) (260)
Other liabilities............................................................................. 5,772 4,697
--------- ---------
Cash from operating activities..................................................................... 33,684 49,306
--------- ---------
Cash Used In Investing Activities:
Capital expenditures............................................................................... (7,639) (1,789)
Acquisition costs.................................................................................. (135) -
--------- ---------
Cash used in investing activities.................................................................. (7,774) (1,789)
--------- ---------
Cash From (Used In) Financing Activities:
Payment under term loan facility................................................................... (750) -
Borrowings under revolving credit facility......................................................... 20,500 -
Payments under revolving credit facility........................................................... (47,300) -
Net decrease in intercompany investment............................................................ - (47,515)
--------- ---------
Cash used in financing activities.................................................................. (27,550) (47,515)
--------- ---------
Increase (decrease) in cash and cash equivalents..................................................... (1,640) 2
Cash and cash equivalents at beginning of period..................................................... 1,812 4
--------- ---------
Cash and cash equivalents at end of period........................................................... $ 172 $ 6
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Statements of Operations
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Fourteen Three Twenty-Seven Six
Weeks Months Weeks Months
Ended Ended Ended Ended
January 2, December 31, January 2, December 31,
1999 1997 1999 1997
-------------- ------------ ------------ ------------
(Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Net sales.......................................... $103,819 $101,036 $154,776 $153,869
Cost of goods sold................................. 48,804 45,350 71,362 70,640
-------- -------- -------- --------
Gross profit....................................... 55,015 55,686 83,414 83,229
Distribution expense............................... 3,740 3,954 6,718 8,185
Marketing expense.................................. 23,904 24,798 36,491 37,444
General and administrative expense................. 3,534 1,573 6,137 5,217
Amortization of intangibles........................ 7,116 732 14,229 1,463
-------- -------- -------- --------
Operating income................................... 16,721 24,629 19,839 30,920
Interest expense, net.............................. 7,243 - 14,219 -
-------- -------- -------- --------
Income before income taxes......................... 9,478 24,629 5,620 30,920
Income tax expense................................. 3,317 9,741 1,967 12,356
-------- -------- -------- --------
Net income......................................... $ 6,161 $ 14,888 $ 3,653 $ 18,564
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
January 2, June 27,
1999 1998
-------------- --------------
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................................................... $ 172 $ 1,812
Accounts receivable, net........................................................... 20,416 12,368
Inventories (Note 3).............................................................. 14,658 32,001
Other current assets............................................................... 3,645 261
-------- --------
Total Current Assets.......................................................... 38,891 46,442
Property and Equipment, Net (Note 4).................................................... 30,699 24,791
Intangibles, Net (Note 5).............................................................. 289,863 303,950
Deferred Income Taxes................................................................... 12,315 14,246
Other Noncurrent Assets................................................................. 8,521 8,986
-------- --------
Total Assets ........................................................................... $380,289 $398,415
======== ========
Liabilities and Stockholders' Deficit
Current Liabilities:
Current portion of long-term debt (Note 6)......................................... $ 1,000 $ 1,250
Accounts payable................................................................... 9,757 9,666
Other accrued liabilities.......................................................... 16,456 8,122
Accrued interest................................................................... 4,756 7,209
-------- --------
Total Current Liabilities..................................................... 31,969 26,247
-------- --------
Long-Term Debt (Note 6)................................................................. 289,700 317,000
-------- --------
Commitments and Contingencies
Redeemable Preferred Stock:
Series A preferred stock, $100 stated value, 1,000,000 shares authorized,
816,750 shares issued and outstanding, at redemption value...................... 89,328 85,144
Subscription receivable (Note 7)................................................... (817) (817)
-------- --------
88,511 84,327
-------- --------
Stockholders' Deficit:
Common stock $0.01 par value, 1,200,000 shares authorized, 970,880
shares issued and outstanding................................................... 10 10
Additional paid-in capital......................................................... 962 962
Unearned compensation.............................................................. (120) (135)
Accumulated deficit................................................................ (30,456) (29,925)
Subscription receivable (Note 7)................................................... (8) (8)
Accumulated translation adjustment................................................. (279) (63)
-------- --------
Total Stockholders' Deficit................................................... (29,891) (29,159)
-------- --------
Total Liabilities and Stockholders' Deficit............................................. $ 380,289 $398,415
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
EAGLE FAMILY FOODS HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Seven Six
Weeks Months
Ended Ended
January 2, December 31,
1999 1997
-------------- ---------------
(Predecessor)
<S> <C> <C>
Cash Flows From (Used In) Operating Activities:
Net income ................................................................................ $ 3,653 $ 18,564
Adjustments to reconcile net income to net cash from (used in) operating activities
Depreciation and amortization......................................................... 16,326 3,148
Gain on sale of fixed assets.......................................................... - 312
Deferred taxes........................................................................ 1,931 -
Net change in current assets and liabilities
Accounts receivable................................................................ (8,048) (2,164)
Inventories........................................................................ 17,343 24,329
Accounts payable................................................................... 91 680
Other assets....................................................................... (3,384) (260)
Other liabilities.................................................................. 5,772 4,697
-------- --------
Cash from operating activities............................................................. 33,684 49,306
-------- --------
Cash Used In Investing Activities:
Capital expenditures....................................................................... (7,639) (1,789)
Acquisition costs.......................................................................... (135) -
-------- --------
Cash used in investing activities.......................................................... (7,774) (1,789)
-------- --------
Cash From (Used In) Financing Activities:
Payments under term loan facility.......................................................... (750) -
Borrowings under revolving credit facility................................................. 20,500 -
Payments under revolving credit facility................................................... (47,300) -
Net increase in intercompany investment ................................................... - (47,515)
-------- --------
Cash used in financing activities.......................................................... (27,550) (47,515)
-------- --------
Increase (decrease) in cash and cash equivalents................................................ (1,640) 2
Cash and cash equivalents at beginning of period................................................ 1,812 4
-------- --------
Cash and cash equivalents at end of period...................................................... $ 172 $ 6
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements
(Unaudited)
1. Basis of Presentation:
The accompanying financial statements as of January 2, 1999, June 27, 1998
and for the fourteen and twenty-seven week periods ended January 2, 1999 present
the financial position, results of operations and cash flows of Eagle Family
Foods, Inc. ("EFFI" or the "Company") and the consolidated financial position,
results of operations and cash flows of Eagle Family Foods Holdings, Inc.
("Holdings") and its wholly owned subsidiary, EFFI. EFFI and Holdings are
collectively referred to as the "Company," unless the context indicates
otherwise. All significant intercompany balances and transactions have been
eliminated in consolidation. The accompanying financial statements for the three
and six month periods ended December 31, 1997 present the results of operations
and cash flows for the business of the Eagle Brand, ReaLemon, Cremora, NoneSuch,
Borden Egg Nog and Kava brands prior to its acquisition by the Company from
Borden Foods Corporation, BFC Investments, L.P. and certain of their affiliates
for an aggregate purchase price of $376.8 million in January 1998.
The financial statements as of January 2, 1999 and December 31, 1997 and
for the fourteen and twenty-seven week periods ended January 2, 1999 and the
three and six month periods ended December 31, 1997 are unaudited and are
presented pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Annual Report on Form 10-K of Holdings and EFFI for the year ended June 27,
1998. In the opinion of management, the accompanying financial statements
reflect all adjustments (which are of a normal recurring nature) necessary to
present fairly the financial position and results of operations and cash flows
for the interim periods, but are not necessarily indicative of the results of
operations for a full fiscal year.
2. Summary of Significant Accounting Policies:
Comprehensive Income
A reconciliation of comprehensive income for the fourteen and twenty-seven
week periods ended January 2, 1999 consists of (in thousands):
<TABLE>
<CAPTION>
Fourteen Weeks Ended Twenty-Seven Weeks Ended
January 2,1999 January 2, 1999
----------------------------------- -------------------------------
Eagle Family Eagle Family
Foods Holdings, Eagle Family Foods Holdings, Eagle Family
Inc. Foods, Inc. Inc. Foods, Inc.
---------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net income................................................ $ 6,161 $ 6,169 $ 3,653 $ 3,668
Foreign currency translation.............................. 47 47 (216) (216)
------- ------- ------- -------
Comprehensive Income................................... $ 6,208 $ 6,216 $ 3,437 $ 3,452
======= ======= ======= =======
</TABLE>
As the effect of the other comprehensive income item was not material, a
separate statement of comprehensive income has not been presented.
Slotting Allowances
The costs of obtaining shelf space (slotting) are expensed over a period not
to exceed twelve months.
3. Inventories:
Inventories are stated at lower of cost or market at January 2, 1999 and at
June 27, 1998 and consisted of the following (in thousands):
January 2, June 27,
1999 1998
--------------- --------------
Finished goods.......................... $12,343 $29,717
Raw material............................ 2,315 2,284
------- -------
Total inventories.................... $14,658 $32,001
======= =======
8
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements - continued
(Unaudited)
4. Property and Equipment:
Property and equipment is recorded at cost on January 2, 1999 and June 27,
1998, and consisted of the following (in thousands):
January 2, June 27,
1999 1998
------------- -------------
Land.................................. $ 470 $ 470
Buildings and improvements............ 6,275 6,185
Machinery and equipment............... 18,970 18,159
Construction in progress.............. 8,129 1,505
-------- --------
Total property and equipment....... 33,844 26,319
Accumulated depreciation.............. (3,145) (1,528)
-------- --------
Net property and equipment......... $ 30,699 $ 24,791
======== ========
5. Intangible Assets:
Intangible assets are amortized on a straight-line basis over their
estimated useful lives and consisted of the following (in thousands):
<TABLE>
<CAPTION>
January 2, June 27, Estimated Useful
1999 1998 Lives
--------------- --------------- ------------------
<S> <C> <C> <C>
Tradenames...................................................... $ 141,000 $ 141,000 40 years
Goodwill........................................................ 136,634 136,505 40 years
Covenant not to compete......................................... 21,000 21,000 5 years
Master customer services agreement.............................. 17,300 17,300 1 year
--------- ---------
Total intangible assets.................................... 315,934 315,805
Accumulated amortization........................................ (26,071) (11,855)
--------- ---------
Net intangible assets...................................... $ 289,863 $ 303,950
========= =========
</TABLE>
6. Debt Obligations:
Debt obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
January 2, June 27,
1999 1998
------------- ----------------
<S> <C> <C>
7.875% term loan facility due December 31, 2005............................................ $174,000 $174,750
8.750% senior subordinated notes due January 15, 2008...................................... 115,000 115,000
7.625% revolving credit facility due December 31, 2004..................................... - 28,500
8.750% revolving credit facility swingline loan due December 31, 2004...................... 1,700 -
-------- --------
Total debt obligations................................................................ 290,700 318,250
Less current portion of long-term debt............................................. (1,000) (1,250)
-------- --------
Long-term debt obligations............................................................ $289,700 $317,000
======== ========
</TABLE>
9
<PAGE>
EAGLE FAMILY FOODS, INC.
EAGLE FAMILY FOODS HOLDINGS, INC.
Notes to the Financial Statements - continued
(Unaudited)
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 including a $10.0 million swingline loan
(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.
The obligations of EFFI under the Senior Credit Facilities are
collateralized by (i) 100% of the capital stock of EFFI and each of its
subsidiaries and (ii) a first priority collateral interest in substantially all
assets and properties of EFFI and its future domestic subsidiaries. The fair
market value of the Senior Credit Facilities at January 2, 1999 approximates the
carrying value.
On April 22, 1998, the Company entered into interest rate swap agreements
in order to fix the interest rate on a portion of the Term Loan Facility. The
Term Loan Facility bears interest at LIBOR plus 2.250%. These swap agreements
commenced on July 23, 1998 and fixed the LIBOR rate at 5.955% on $75.0 million
and 5.905% on $25.0 million of the $175.0 million Term Loan Facility. These swap
agreements expire on December 29, 2000 and December 31, 2002, respectively. The
estimated cost to cancel the interest rate swap agreements at January 2, 1999
was approximately $2.7 million based on current interest rates for similar
instruments.
Senior Subordinated Notes
EFFI issued $115.0 million of senior subordinated notes (the "Notes") and
received cash proceeds of approximately $112.0 million net of underwriting
discount. The Notes are due January 15, 2008 and bear interest of 8.75% per
annum payable on January 15 and July 15, which commenced July 15, 1998. The fair
market value of the senior subordinated notes was approximately $108.0 million
at January 2, 1999.
Annual principal payments for the next five calendar years and thereafter
consist of the following (in thousands):
1999..................................................... $ 1,000
2000..................................................... 1,000
2001..................................................... 1,000
2002..................................................... 1,000
2003..................................................... 10,000
Thereafter............................................... 276,700
--------
$290,700
========
7. Stock Subscription Agreement
On January 23, 1998, GE Investment Private Placement Partners II, a
Limited Partnership, Warburg, Pincus Ventures, L.P., 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. The notes have been assigned
between common and preferred stock in accordance with the management
subscription agreements. Accordingly, notes related to common stock have been
presented in the consolidated balance sheet as a reduction of Stockholders'
Equity while notes related to the preferred stock have been presented as a
reduction of redeemable preferred stock.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The discussion set forth below of the financial condition and results
of operations for the three months and six months ended December 31, 1997 is
related to the business of the Eagle Brand, ReaLemon, Cremora, None Such, Borden
EggNog and Kava brands prior to its acquisition by the Company from Borden Foods
Corporation, BFC Investments, L.P. and certain of their affiliates for an
aggregate purchase price of $376.8 million in January 1998 (the "Acquisition").
The following discussion should be read in conjunction with the
Financial Statements of the Company and the notes thereto included elsewhere in
this Quarterly Report on Form 10-Q. Certain statements under this caption
constitute forward-looking statements which involve known and unknown risks and
uncertainties. The Company's actual results, performance or achievements in the
future could differ significantly from the results, performance or achievements
discussed or implied in such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, the
effect on financial performance of increased competition in the dry-grocery food
industry, potential future competition, competitive pricing for products,
general economic and business conditions, industry trends, raw material costs,
dependence on the Company's labor force, the success of new product innovations
and changes in, or the failure or inability to comply with, government rules and
regulations, including, without limitation, Food and Drug Administration and
environmental rules and regulations.
Results of Operations
Fourteen Week Period Ended January 2, 1999 and Three Months Ended December 31,
1997 (Unaudited)
Net Sales. The Company's net sales for the fourteen week period ended
January 2, 1999 were $103.8 million as compared to $101.0 million for the three
months ended December 31, 1997, an increase of $2.8 million, or 2.8%. The
increase reflected $2.7 million in higher net sales of sweetened condensed milk,
primarily Eagle Brand, due to increased volume and a price increase. The price
increase was instituted to offset higher milk costs. There were also net sales
increases of $0.8 million in ReaLemon and an increase of $0.2 million in net
sales of Borden EggNog and NoneSuch pie fillings during the period. These
increases were partially offset by $0.9 million in lower net sales of non-dairy
creamer primarily due to the loss of two private label customers at the end of
calendar year 1997. Lower private label non-dairy creamer net sales were
partially offset by increased branded non-dairy creamer net sales of $0.3
million resulting from the launch of Cremora Royale.
Cost of Goods Sold. Cost of goods sold was $48.8 million for the
fourteen week period ended January 2, 1999 as compared to $45.4 million for the
three months ended December 31, 1997, an increase of $3.4 million, or 7.5%.
Expressed as a percentage of net sales, cost of goods sold for the fourteen week
period ended January 2, 1999 increased to 47.1% from 45.0% for the three months
ended December 31, 1997. The increase is primarily driven by milk costs which
have increased 29.5% compared to the three months ended December 31, 1997
partially offset by lower lemon concentrate costs and other production
efficiencies.
Distribution Expense. Distribution expense was $3.7 million for the
fourteen week period ended January 2, 1999 as compared to $4.0 million for the
three months ended December 31, 1997, a decrease of $0.3 million, or 7.5%.
Expressed as a percentage of net sales, distribution expense for the fourteen
week period ended January 2, 1999 decreased to 3.6% from 4.0% for the three
months ended December 31, 1997. The decrease is primarily driven by a change in
the distribution network for U.S foodservice sales and Canadian sales as the
cost of distribution shifts away from higher cost third-party warehouse
distribution costs paid by the Company to a more efficient lower cost
distributor based system with the cost of distribution included in distributor
trade marketing expenses and net sales.
Marketing Expense. Marketing expense was $23.9 million for the fourteen
week period ended January 2, 1999 as compared to $24.8 million for the three
months ended December 31, 1997, a decrease of $0.9 million. The decrease is
primarily driven by lower sales administration costs partially offset by
increased consumer marketing.
General and Administrative ("G&A") Expense. Total G&A expense was $3.6
million for the fourteen week period ended January 2, 1999, as compared to $1.6
million for the three months ended December 31, 1997, an increase of $2.0
million, or 125.0%. Expressed as a percentage of net sales, G&A expense for the
fourteen week period ended January 2, 1999 increased to 3.5% from 1.6% for the
three months ended December 31, 1997. The Company's G&A expenses were based on
actual costs compared to the predecessor's G&A expenses which were based on an
allocation methodology. The predecessor allocated its G&A costs to its various
business units.
Amortization of Intangibles. Amortization of intangibles was $7.1
million for the fourteen week period ended January 2, 1999, as compared to $0.7
million for the three months ended December 31, 1997, an increase of $6.4
million. The increase is due to amortization of intangibles attributable to the
Acquisition.
11
<PAGE>
Interest Expense. Interest expense net of interest income was $7.2
million for the fourteen week period ended January 2, 1999. The Company's
interest expense resulted from the new debt structure established in connection
with the Acquisition. There was no interest expense in the three months ended
December 31, 1997.
On April 22, 1998, the Company entered into interest rate swap
agreements in order to fix the interest rate on a portion of the Term Loan
Facility. The Term Loan Facility bears interest at LIBOR plus 2.250% . These
swap agreements commenced on July 23, 1998 and fixed the LIBOR rate at 5.955% on
$75.0 million and 5.905% on $25.0 million of the $175.0 million Term Loan
Facility. These swap agreements expire on December 29, 2000 and December 31,
2002, respectively. The estimated cost to cancel the interest rate swap
agreements at January 2, 1999 was approximately $2.7 million based on current
interest rates for similar instruments.
Income Taxes. The Company recorded an income tax provision of $3.3
million for the fourteen week period January 2, 1999 as compared to a $9.7
million income tax provision for the three months ended December 31, 1997.
Twenty-Seven Week Period Ended January 2, 1999 and Six Months Ended December 31,
1997 (Unaudited)
Net Sales. The Company's net sales for the twenty-seven week period
ended January 2, 1999 were $154.8 million as compared to $153.8 million for the
six months ended December 31, 1997, an increase of $1.0 million, or 0.7%. The
increase reflected $2.9 million in higher net sales of sweetened condensed milk,
primarily Eagle Brand, due to increased volume and a price increase. The price
increase was instituted to offset higher milk costs. There were also net sales
increases of $0.1 million in None Such pie fillings and an increase of $0.7
million in net sales of Borden Egg Nog during the twenty-seven week period ended
January 2, 1999. These increases were partially offset by $2.4 million in lower
net sales of non-dairy creamer primarily due to the loss of two private label
customers at the end of calendar year 1997. Lower private label non-dairy
creamer net sales were partially offset by increased branded non-dairy creamer
net sales of $0.9 million resulting from the launch of Cremora Royale. Net sales
of ReaLemon were down $0.3 million.
Cost of Goods Sold. Cost of goods sold was $71.4 million for the
twenty-seven week period ended January 2, 1999 as compared to $70.7 million for
the six months ended December 31, 1997, an increase of $0.7 million, or 1.0%.
Expressed as a percentage of net sales, cost of goods sold for the twenty-seven
week period ended January 2, 1999 increased to 46.2% from 46.0% for the six
months ended December 31, 1997. The increase in cost of goods sold reflects a
28% increase in the cost of milk as compared to the six months ended December
31, 1997 partially offset by lower lemon concentrate costs and other production
efficiencies.
Distribution Expense. Distribution expense was $6.7 million for the
twenty-seven week period ended January 2, 1999 as compared to $8.2 million for
the six months ended December 31, 1997, a decrease of $1.5 million, or 18.3%.
Expressed as a percentage of net sales, distribution expense for the
twenty-seven week period ended January 2, 1999 decreased to 4.3% from 5.3% for
the six months ended December 31, 1997. The decrease is primarily driven by a
change in the distribution network for U.S foodservice sales and Canadian sales
as the cost of distribution shifts away from higher cost third-party warehouse
distribution costs paid by the Company to a more efficient lower cost
distributor based system with the cost of distribution included in distributor
trade marketing expenses and net sales.
Marketing Expense. Marketing expense was $36.5 million for the
twenty-seven week period ended January 2, 1999 as compared to $37.4 million for
the six months ended December 31, 1997, a decrease of $0.9 million. The
decrease is primarily driven by lower sales administration costs partially
offset by increased consumer marketing.
General and Administrative ("G&A") Expense. Total G&A expense was $6.1
million for the twenty-seven week period ended January 2, 1999, as compared to
$5.2 million for the six months ended December 31, 1997, an increase of $0.9
million, or 17.3%. Expressed as a percentage of net sales, G&A expense for the
twenty-seven week period ended January 2, 1999 increased to 3.9% from 3.4% for
the six months ended December 31, 1997. The Company's G&A expenses were based on
actual costs compared to the predecessor's G&A expenses which were based on an
allocation methodology. The predecessor allocated its G&A costs to its various
business units.
Amortization of Intangibles. Amortization of intangibles was $14.2
million for the twenty-seven week period ended January 2, 1999, as compared to
$1.4 million for the six months ended December 31, 1997, an increase of $12.8
million. The increase is due to amortization of intangibles attributable to the
Acquisition.
Interest Expense. Interest expense net of interest income was $14.2
million for the twenty-seven week period ended January 2, 1999. The Company's
interest expense resulted from the new debt structure established in connection
with the Acquisition. There was no interest expense in the six months ended
December 31, 1997.
On April 22, 1998, the Company entered into interest rate swap
agreements in order to fix the interest rate on a portion of the Term Loan
Facility. The Term Loan Facility bears interest at LIBOR plus 2.250% . These
swap agreements commenced on July 23, 1998 and fixed
12
<PAGE>
the LIBOR rate at 5.955% on $75.0 million and 5.905% on $25.0 million of the
$175.0 million Term Loan Facility. These swap agreements expire on December 29,
2000 and December 31, 2002, respectively. The estimated cost to cancel the
interest rate swap agreements at January 2, 1999 was approximately $2.7 million
based on current interest rates for similar instruments.
Income Taxes. The Company recorded an income tax provision of $1.9 million
for the twenty-seven week period ended January 2, 1999 as compared to a $12.3
million income tax provision for the six months ended December 31, 1997.
Liquidity and Capital Resources
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. However, on April 22, 1998
the Company entered into interest rate swap agreements in order to fix the
interest rate on $100.0 million of the Term Loan Facility. These swap agreements
commenced on July 23, 1998. Borrowings under the Senior Credit Facilities at
January 2, 1999 consist of the $174.0 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 a $1.7 million swingline
loan was outstanding at January 2, 1999. The Term Loan Facility amortizes $1.0
million in each of the calendar years 1999 through 2002, and $10.0 million,
$40.0 million and $120.0 million in the years 2003, 2004 and 2005, respectively.
The Company's remaining liquidity needs are for capital expenditures and
increases in working capital. The Company expects to spend a total of
approximately $14.0 million on capital projects in the fiscal year ending July
3, 1999 to fund management information systems initiatives, expenditures in
existing facilities and discretionary capital projects associated with new
products. The Company's primary sources of liquidity will be cash flows from
operations and borrowings under the Revolving Credit Facility.
Net cash provided by operating activities for the twenty-seven week period
ended January 2, 1999 was $33.7 million.
Net cash used in financing activities for the twenty-seven week period
ended January 2, 1999 was $27.6 million. This consisted of $28.5 million in net
payments under the Revolving Credit Facility partially offset by $1.7 million in
net borrowings under the Revolving Credit Facility Swingline Loan and $0.8
million in principal payments under the Term Loan Facility for the twenty-seven
week period.
Management believes that cash generated from operations and borrowings
under the Senior Credit Facilities will be sufficient to satisfy working capital
requirements and required capital expenditures. Further expansion of the
business through acquisitions may require the Company to incur additional
indebtedness.
Seasonality
The Company's net sales, net income and cash flows are affected by a
seasonal bias toward the fourth quarter of the calendar 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. Currently and in recent years, approximately 45% of the
Company's sales have occurred in the last quarter of the calendar year.
Recently Issued Accounting Statements
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires costs of start-up activities and organization
costs to be expensed as incurred. The Company expects to adopt this standard in
the period ending October 2, 1999. The Company is evaluating this standard and
has not yet determined the ultimate impact of this standard on future financial
statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments and
hedging activities and requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Company expects to adopt this standard in the
quarter ended October 2, 1999. The Company is evaluating this pronouncement and
has not yet determined the ultimate impact of this pronouncement on future
financial 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 particular year. Computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could
13
<PAGE>
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.
The Company's efforts to address the 2000 issues are divided into three
areas that include: (1) installing the PeopleSoft enterprise-wide system for
business and accounting systems; (2) systems that will not be replaced by the
enterprise-wide system, including non-information technology systems such as
plant process controls; and (3) external suppliers and customers. A discussion
of each area of activity follows.
Enterprise-wide system
----------------------
Historically, the Company has relied upon affiliates of Borden, Inc. for
its management information system requirements. On January 25, 1999, the
Company, in conjunction with outside consultants, implemented a comprehensive
new PeopleSoft enterprise-wide system that replaces the Borden, Inc. business
and accounting systems. The Company's version of the PeopleSoft enterprise-wide
system software release was developed and warranted by the vendor to be year
2000 compliant.
Systems not replaced by the enterprise-wide system
--------------------------------------------------
For the systems not replaced by the PeopleSoft enterprise-wide
implementation, including plant process controls, other non-information
technology systems, brokerage reporting systems, telephone and communications
systems, the Company has engaged a consultant to assist in the assessment of
year 2000 issue vulnerability. Implementation of any recommendations and
contingency plan(s) and final system testing are planned to be complete by July
31, 1999. The Company's preliminary review did not identify any serious year
2000 issues. A preliminary budget of $150,000 has been established for
consulting and remediation costs in this area.
Suppliers and Customers
-----------------------
The Company has engaged a third party consulting firm to assess and address
the risks related to third party suppliers and customers. Efforts related to
suppliers and customers, including the assessment of the year 2000 readiness of
the Company's customers and suppliers and development of contingency plans where
appropriate, are targeted for completion by June 30, 1999. Although the
Company's systems do not rely significantly on systems of other companies, the
Company cannot provide assurance that failure of third parties to address the
year 2000 issue will not have an adverse impact on business operations and
results. The current estimate for the consultant fees and the development of
contingency plans is less than $30,000.
The Company's preliminary review of third party suppliers and customers did
not identify any year 2000 issues that could not be managed using alternate
contingency processes. For example, purchase orders to suppliers could be sent
manually and customer orders could be received by facsimile.
Risk
----
Due to the general uncertainty inherent in the year 2000 problem, including
the uncertainty associated with suppliers and customers, the potential effect on
the financial results and the condition of the Company has not been measured.
The Company intends the year 2000 program to be completed on a timely basis so
as to significantly reduce the level of uncertainty and the impact on business
operations and financial results.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
This table presents descriptions of the financial instruments and
derivative instruments that are held by the Company at January 2, 1999 and which
are sensitive to changes in interest rates. In the ordinary course of business,
the Company enters into derivative financial instrument transactions in order to
manage or reduce market risk. Under interest rate swaps, the Company agrees with
other parties to exchange, at specified intervals, the difference between
fixed-rate and floating rate interest amounts calculated by reference to an
agreed notional principal amount. The Company does not enter into derivative
financial instrument transactions for speculative purposes.
For the liabilities, the table represents principal calendar year cash
flows that exist by maturity date and the related average interest rate. For the
interest rate derivatives, the table presents the notional amounts and expected
interest rates that exist by contractual dates; the notional amount is used to
calculate the contractual payments to be exchanged under the contract. The
variable rates are estimated based upon the six month forward LIBOR rate.
14
<PAGE>
All amounts are reflected in U.S. Dollars (thousands).
<TABLE>
<CAPTION>
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Fixed rate.............. $ 115,000 $ 115,000 $ 108,000
Average interest rate... 8.750% 8.750%
Variable rate........... $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 10,000 $ 161,700 $ 175,700 $ 175,700
Average interest rate... 7.348% 7.348% 7.348% 7.348% 7.348% 7.363% 7.362%
Interest-Rate Derivatives
Variable to fixed:
Notional amount......... $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ (2,709)
Average pay rate........ 5.943% 5.943% 5.943% 5.955% 5.955% 5.947%
Average receive rate.... 5.281% 5.281% 5.281% 5.281% 5.281% 5.281%
</TABLE>
On April 22, 1998, the Company entered into interest rate swap agreements
in order to fix the interest rate on a portion of the Term Loan Facility. The
Term Loan Facility bears interest at LIBOR plus 2.25% . These swap agreements
commenced on July 23, 1998 and fixed the LIBOR rate at 5.955% on $75.0 million
and 5.905% on $25.0 million of the $175.0 million Term Loan Facility. These swap
agreements expire on December 29, 2000 and December 31, 2002, respectively and
have been reflected in the table above.
15
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Eagle Family Foods Holdings, Inc.
The Annual Meeting of the stockholders of Holdings was held on December
15, 1998. The matters submitted to the stockholders for a vote included (a) the
election of seven directors to the Board of Directors; (b) the ratification of
the appointment of PricewaterhouseCoopers LLP as independent accountants for the
fiscal year ending July 3, 1999; and (c) the ratification of the amendment of
the By-Laws to reflect the change of Holdings' fiscal year to a 52 or 53 week
period ending on the Saturday falling nearest to the last day of June.
The following table sets forth the results of voting on these matters.
Number of Number of
--------- ---------
Number of Votes Abstentions
--------- ----- -----------
Votes AGAINST/ /Broker
----- -------- -------
Matter FOR WITHHELD Non-Votes
------ --- -------- ---------
Election of Directors:
Andreas T. Hildebrand ................ 967,690 - -
Kewsong Lee .......................... 967,690 - -
William A. Lynch ..................... 967,690 - -
Howard H. Newman ..................... 967,690 - -
John O'C. Nugent ..................... 967,690 - -
Donald W. Torey ...................... 967,690 - -
Paul W. Van Orden ................... 967,690 - -
Ratification of Appointment of
PricewaterhouseCoopers LLP ........... 967,690 - -
Ratification of Amendment of By-
Laws to Change Fiscal Year ........... 967,690 - -
Eagle Family Foods, Inc.
The Annual Meeting of the stockholders of EFFI was held on December 15,
1998. The matters submitted to the stockholders for a vote included (a) the
election of seven directors to the Board of Directors; (b) the ratification of
the appointment of PricewaterhouseCoopers LLP as independent accountants for the
fiscal year ending July 3, 1999; and (c) the ratification of the amendment of
the By-Laws to reflect the change of EFFI's fiscal year to a 52 or 53 week
period ending on the Saturday falling nearest to the last day of June.
16
<PAGE>
The following table sets forth the results of voting on these matters.
Number of Number of
--------- ---------
Number of Votes Abstentions
--------- ----- -----------
Votes AGAINST/ /Broker
----- -------- -------
Matter FOR WITHHELD Non-Votes
------ --- -------- ---------
Election of Directors:
Andreas T. Hildebrand ................ 10,000 - -
Kewsong Lee .......................... 10,000 - -
William A. Lynch ..................... 10,000 - -
Howard H. Newman ..................... 10,000 - -
John O'C. Nugent ..................... 10,000 - -
Donald W. Torey ...................... 10,000 - -
Paul W. Van Orden .................... 10,000 - -
Ratification of Appointment of
PricewaterhouseCoopers LLP ........... 10,000 - -
Ratification of Amendment of By-
Laws to Change Fiscal Year ........... 10,000 - -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Credit Agreement, dated January 23, 1998, by and among EFFI,
Holdings, The Chase Manhattan Bank, Merrill Lynch Capital Corporation,
Chase Securities, Inc., and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as amended by Amendment No. 1, dated August 12, 1998 and
as amended by Amendment No. 2, dated November 30, 1998.
27.1 Financial Data Schedule of Eagle Family Foods Holdings, Inc.
27.2 Financial Data Schedule of Eagle Family Foods, Inc.
(b) Reports on Form 8-K
None
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
EAGLE FAMILY FOODS HOLDINGS, INC.
EAGLE FAMILY FOODS, INC.
By: /s/ John O'C Nugent
-------------------------------------------
John O'C Nugent
President and Chief Executive Officer
By: /s/ Craig A. Steinke
------------------------------------------
Craig A. Steinke
Vice President and Chief Financial Officer
Date: February 2, 1999
18
<PAGE>
EXHIBIT INDEX
4.1 Credit Agreement, dated January 23, 1998, by and among EFFI, Holdings, The
Chase Manhattan Bank, Merrill Lynch Capital Corporation, Chase Securities,
Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as amended
by Amendment No. 1, dated August 12, 1998 and as amended by Amendment No.
2, dated November 30, 1998.
27.1 Financial Data Schedule of Eagle Family Foods Holdings, Inc.
27.2 Financial Data Schedule of Eagle Family Foods, Inc.
<PAGE>
Exhibit 4.1
================================================================================
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>
CONFORMED COPY
AMENDMENT No. 1, dated as of August 12, 1998 (this
"Amendment"), to the Credit Agreement dated as of January
23, 1998 (the "Credit Agreement"), among Eagle Family Foods,
Inc. (the "Borrower"), Eagle Family Foods Holdings, Inc.
("Holdings"), the Lenders (as defined in the Credit
Agreement), The Chase Manhattan Bank, as administrative
agent (in such capacity, the "Administrative Agent") and
collateral agent (in such capacity, the "Collateral Agent")
for the Lenders, as swingline lender (in such capacity, the
"Swingline Lender"), and as Issuing Bank (as defined in the
Credit Agreement) and Merrill Lynch Capital Corporation, as
documentation agent.
A. Pursuant to the Credit Agreement, the Lenders, the Swingline
Lender and the Issuing Bank have extended credit to the Borrower, and have
agreed to extend credit to the Borrower, in each case pursuant to the terms and
subject to the conditions set forth therein.
B. The Borrower and Holdings have requested that certain provisions
of the Credit Agreement be amended as set forth herein.
C. The Required Lenders are willing to amend the Credit Agreement,
pursuant to the terms and subject to the conditions set forth herein.
D. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 6.13 of the Credit Agreement.
--------------------------------------------------
Section 6.13 of the Credit Agreement is hereby amended by (a) inserting the
phrase "(i) the amount determined pursuant to clause (a) 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
and (ii)" after the phrase "1998," in the fifth line of such Section, (b)
deleting the phrase "clause (a) and" in the sixth line of such Section and (c)
deleting the phrase "Consolidated EBITDA or" and the phrase ", as applicable,"
in the seventh line of such Section.
SECTION 2. Representations and Warranties. Each of the Borrower and
-------------------------------
Holdings represents and warrants to each other party hereto that, after giving
effect to this Amendment, (a) the representations and warranties set forth in
Article III of the Credit Agreement are true and correct in all material
respects on and as of the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date and (b) no Default or Event of Default has
occurred and is continuing.
SECTION 3. Conditions to Effectiveness. This Amendment shall become
----------------------------
effective as of the date first written above on the date that the Administrative
Agent shall have received counterparts of this Amendment which, when taken
together, bear the signatures of the Borrower, Holdings and the Required
Lenders.
<PAGE>
SECTION 4. Effect of Amendment. Except as expressly set forth
--------------------
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders, the Swingline Lender, the Issuing Bank, the Collateral Agent or the
Administrative Agent under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing herein shall
be deemed to entitle the Borrower or Holdings to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any
other Loan Document in similar or different circumstances. This Amendment shall
apply and be effective only with respect to the provisions of the Credit
Agreement specifically referred to herein.
SECTION 5. Counterparts. This Amendment may be executed in any
-------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
Delivery of any executed counterpart of a signature page of this Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
---------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Headings. The headings of this Amendment are for purposes
---------
of reference only and shall not limit or otherwise affect the meaning hereof.
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/ Craig Steinke
----------------------
Name: Craig Steinke
Title: CFO
EAGLE FAMILY FOODS HOLDINGS, INC.,
by
/s/ Craig Steinke
----------------------
Name: Craig Steinke
Title: CFO
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent, Collateral Agent, Issuing
Bank and Swingline Lender,
<PAGE>
by
/s/ Laurie B. Perper
----------------------
Name: Laurie B. Perper
Title: Vice President
MERRILL LYNCH CAPITAL
CORPORATION, individually and as
Documentation Agent,
by
/s/ Michael Zupon
----------------------
Name: Michael T. Zupon
Title: Managing Director
<PAGE>
BANKBOSTON, N.A.,
by
/s/ Gregory R. D. Clark
-------------------------------
Name: Gregory D. Clark
Title: Managing Director
THE BANK OF NOVA SCOTIA,
by
/s/ Stephen E. Lockhart
-------------------------------
Name: Stephen Lockhart
Title: Vice President
FIRST UNION NATIONAL BANK,
by
/s/ Mark B. Felker
-------------------------------
Name: Mark B. Felker
Title: Senior Vice President
FLEET NATIONAL BANK,
by
/s/ Thomas J. Flanagan
------------------------------
Name: Thomas J. Flanagan
Title: Senior Vice President
SOCIETE GENERALE,
by
/s/ Catherine Scailler-Loosean
--------------------------------
Name: Catherine Scailler-Loosean
Title: Director
BANK OF HAWAII,
by
/s/ Mark C. Joseph
--------------------------------
Name: Mark C. Joseph
Title: Vice President
<PAGE>
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, NEW YORK BRANCH,
by
/s/ Peter Stearn
-------------------------------
Name: Peter Stearn
Title: Assistant Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
by
/s/ Teiji Teramoto
------------------------------
Name: Teiji Teramoto
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH,
by
/s/ Koji Sasayama
------------------------------
Name: Koji Sasayama
Title: Deputy General Manager
SUMMIT BANK,
by
/s/ Wayne R. Trotman
------------------------------
Name: Wayne R. Trotman
Title: Senior Vice President
PRIME INCOME TRUST,
by
/s/ Peter Gewirtz
------------------------------
Name: Peter Gewirtz
Title: Authorized Signatory
KZH-ING-2 CORPORATION,
by
/s/ Virginia Conway
------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE>
KZH-SOLEIL CORPORATION
by
/s/ Virginia Conway
---------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-PAMCO CORPORATION,
by
/s/ Virginia Conway
---------------------------------
Name: Virginia Conway
Title: Authorized Agent
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
/s/ Jeffrey Maillet
---------------------------------
Name: Jeffrey Maillet
Title: Sr. Vice Pres. & Director
VAN KAMPEN AMERICAN CAPITAL
SENIOR INCOME TRUST,
by
/s/ Jeffrey Maillet
---------------------------------
Name: Jeffrey Maillet
Title: Sr. Vice Pres. & Director
VAN KAMPEN CLO I, LIMITED,
by VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC., as Collateral
Manager,
by
/s/ Jeffrey Maillet
--------------------------------
Name: Jeffrey Maillet
Title: Sr. Vice Pres. & Director
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.,
as Manager on behalf of ALLIANCE
CAPITAL FUNDING, L.L.C.,
by ALLIANCE CAPITAL
MANAGEMENT CORPORATION,
General partner of Alliance
Capital Management L.P.,
by
/s/ Joel Serebransky
-----------------------------
Name: Joel Serebransky
Title: Vice President
<PAGE>
BALANCED HIGH-YIELD FUND I
LIMITED,
by BHF-Bank Aktiengesellschaft, New
York Branch, as Attorney-in-Fact,
by
/s/ Anthony Heyman
----------------------------------
Name: Anthony Heyman
Title: Assistant Vice President
by
/s/ Linda Pace
-----------------------------------
Name: Linda Pace
Title: Vice President
MELLON BANK, N.A., solely in its
capacity as trustee (as directed by
Shenkman Capital Management Inc.),
and not in its individual capacity,
for GENERAL MOTORS CASH MANAGEMENT
MASTER TRUST,
by
/s/ Bernadette Rist
-----------------------------------
Name: Berandette Rist
Title: Authorized Signatory
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC,
by ING Capital Advisors, Inc., as
Investment Advisor,
by
/s/ Jane M. Nelson
----------------------------------
Name: Jane M. Nelson
Title: Senior Vice President
INDOSUEZ CAPITAL FUNDING IV, LP,
by Indosuez Capital, as Portfolio
Advisor,
by
/s/ Daniel H. Smith
----------------------------------
Name: Daniel H. Smith
Title: First Vice President
<PAGE>
CONFORMED COPY
AMENDMENT No. 2 and WAIVER, dated as of November 30,
1998 (this "Amendment"), to the Credit Agreement dated as of
January 23, 1998, as amended by Amendment No. 1 dated as of
August 12, 1998 (the "Credit Agreement"), among EAGLE FAMILY
FOODS, INC. (the "Borrower"), EAGLE FAMILY FOODS HOLDINGS,
INC. ("Holdings"), the Lenders (as defined in the Credit
Agreement), THE CHASE MANHATTAN BANK, as administrative
agent (in such capacity, the "Administrative Agent") and
collateral agent (in such capacity, the "Collateral Agent")
for the Lenders, as swingline lender (in such capacity, the
"Swingline Lender"), and as Issuing Bank (as defined in the
Credit Agreement) and MERRILL LYNCH CAPITAL CORPORATION, as
documentation agent.
A. Pursuant to the Credit Agreement, the Lenders, the Swingline
Lender and the Issuing Bank have extended credit to the Borrower, and have
agreed to extend credit to the Borrower, in each case pursuant to the terms and
subject to the conditions set forth therein.
B. The Borrower and Holdings have informed the Administrative Agent
that the Borrower has changed its fiscal year from one ending on December 31 of
each year to one ending on the Saturday nearest to the end of June of each year.
C. The Borrower and Holdings have requested that the Required Lenders
agree to (a) amend certain provisions of the Credit Agreement, as set forth
herein, to reflect the change in the Borrower's fiscal year and (b) waive
certain past defaults that may have occurred as a result of such change in the
Borrower's fiscal year.
D. The Required Lenders are willing to so amend the Credit Agreement
and grant such waivers, in each case, pursuant to the terms and subject to the
conditions set forth herein.
E. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments. (a) Section 1.01 of the Credit Agreement is
-----------
hereby amended as follows:
(i) by substituting the words "January 2, 1999" for the words
"December 31, 1998" in the definition of the term "Applicable Rate";
(ii) by deleting after the words "provided that" in the definition of
--------
the term "Average Working Capital Adjustment" the remaining text for such
definition and substituting in its place the following:
<PAGE>
2
"(i) for purposes of calculating the Average Working Capital
Adjustment as of March 28, 1998, June 27, 1998 and September 26,
1998, the amount determined pursuant to clause (b) shall be (A)
in the case of March 28, 1998, the difference between (1) Net
Working Capital as of March 28, 1998, and (2) the quotient of the
sum of (y) Net Working Capital as of March 28, 1998, plus (z) Net
Working Capital as of the Closing Date divided by two, (B) in the
case of June 27, 1998, the difference between (1) Net Working
Capital as of June 27, 1998, and (2) the quotient of the sum of
(x) Net Working Capital as of June 27, 1998, plus (y) Net Working
Capital as of March 28, 1998, plus (z) Net Working Capital as of
the Closing Date divided by three, and (C) in the case of
September 26, 1998, the difference between (1) Net Working
Capital as of September 26, 1998, and (2) the quotient of the sum
of (w) Net Working Capital as of September 26, 1998, plus (x) Net
Working Capital as of June 27, 1998, plus (y) Net Working Capital
as of March 28, 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.";
(iii) by substituting the word "period" for the words "fiscal
year" in the definition of the term "Excess Cash Flow" in each
instance that such words appear in such definition; and
(iv) by substituting the words "March 28, 1998, June 27, 1998
and September 26, 1998" for the words "the last day of each of the
first, second and third fiscal quarters of 1998" in the definition of
the term "Leverage Ratio".
(b) Section 2.11(c) of the Credit Agreement is hereby amended
by substituting the following new Section 2.11(c) for the existing Section
2.11(c):
"(c) Following the end of the second fiscal quarter of each
fiscal year of the Borrower, commencing with the fiscal quarter ended
January 2, 1999, the Borrower shall prepay Term Borrowings in an
aggregate amount equal to 50% of Excess Cash Flow for the four-fiscal-
quarter period that includes the second fiscal quarter of such fiscal
year and the three immediately preceding fiscal quarters. Each
prepayment pursuant to this paragraph shall be made on or before the
date which is 90 days after the end of the second fiscal quarter of
such fiscal year.".
(c) Section 5.01 of the Credit Agreement is hereby amended as
follows:
(i) by substituting the words "July 3, 1999" for the words
"December 31, 1999" in Section 5.01(a); and
(ii) by substituting the words "April 3" for the words "March 31"
in Section 5.01(b).
(d) Section 6.04 of the Credit Agreement is hereby amended as
follows:
(i) by substituting the words "prior to January 2, 1999" for the
words "following the end of the first, second and third fiscal
quarters of 1998 but prior to the end of the next succeeding fiscal
quarter" in Section 6.04(d);
<PAGE>
3
(ii) by substituting the words "prior to January 2, 1999" for
the words "following the end of the first, second and third fiscal
quarters of 1998 but prior to the end of the next succeeding fiscal
quarter" in Section 6.04(e); and
(iii) by substituting the words "prior to January 2, 1999" for
the words "following the end of the first, second and third fiscal
quarters of 1998 but prior to the end of the next succeeding fiscal
quarter" in Section 6.04(i).
(e) Section 6.07(a) of the Credit Agreement is hereby amended
by inserting the words ", beginning with the fiscal year ended July 3,
1999," after the words "(without giving effect to this proviso)" in the
proviso to exception (iv) of such Section.
(f) Section 6.11 of the Credit Agreement is hereby amended as
follows:
(i) by substituting the following new table for the existing
table contained therein:
"Fiscal Year Ended Amount
----------------- ------
June 27, 1998 $ 2,600,000
July 3, 1999 $ 14,400,000
July 1, 2000 $ 9,000,000
June 30, 2001 $ 5,000,000
June 29, 2002 $ 5,000,000
June 28, 2003 $ 5,000,000";
(ii) by deleting the words "(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)" from the proviso of
such Section; and
(iii) by substituting the words "the fiscal year ended July 3,
1999" for the words "fiscal year 1999" in the proviso of such Section.
(g) Section 6.12 of the Credit Agreement is hereby amended by
substituting the following new table for the existing table contained
therein:
"Period Ratio
------ -----
Effective Date- 6.9 to 1.0
October 2, 1999
October 3, 1999- 6.5 to 1.0
September 30, 2000
<PAGE>
4
October 1, 2000- 6.0 to 1.0
September 29, 2001
September 30, 2001- 5.5 to 1.0
September 28, 2002
Thereafter 5.0 to 1.0".
(h) Section 6.13 of the Credit Agreement is hereby amended as
follows:
(i) by substituting the following new table for the existing
table contained therein:
"Period Ratio
------ ------
Effective Date- 1.50 to 1.00
January 1, 2000
January 2, 2000- 1.75 to 1.00
December 30, 2000
December 31, 2000- 2.00 to 1.00
December 29, 2001
Thereafter 2.25 to 1.00"; and
(ii) by deleting after the words "provided that" the remaining
--------
text for such Section and substituting in its place the following:
"for purposes of calculating such ratio as of March 28,
1998, June 27, 1998 and September 26, 1998, (i) the amounts
determined pursuant to clause (a) 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 and (ii) the amounts determined pursuant to clause (b)
above shall be determined by multiplying Consolidated Cash
Interest Expense for the period commencing on the first day of
the fiscal quarter ended March 28, 1998 and ending as of the end
of such fiscal period by (i) 4, in the case of the fiscal quarter
ended March 28, 1998, (ii) 2, in the case of the fiscal quarter
ended June 27, 1998 and (iii) 4/3, in the case of the fiscal
quarter ended September 26, 1998:".
SECTION 2. Waiver of Past Defaults. The Required Lenders hereby
------------------------
waive any and all Defaults or Events of Default arising solely as a result
of the Borrower's failure to deliver a budget for the fiscal year ended
July 3, 1999 within the time prescribed by Section 5.01(e) of the Credit
Agreement; provided, however, that such budget shall be delivered to the
-----------------
Administrative Agent prior to January 1, 1999 and failure to deliver such
budget prior to such date shall constitute an Event of Default under the
Credit Agreement.
SECTION 3. Representations and Warranties. Each of the Borrower and
-------------------------------
Holdings represents and warrants to each other party hereto that, after
giving effect to this Amendment, (a) the representations and warranties set
forth in Article III of the Credit Agreement are true and correct in
<PAGE>
all material respects on and as of the date hereof with the same effect as
though made on and as of the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date, and (b)
no Default or Event of Default has occurred and is continuing.
SECTION 4. Conditions to Effectiveness. This Amendment shall become
----------------------------
effective as of the date first written above on the date that the
Administrative Agent shall have received counterparts of this Amendment
which, when taken together, bear the signatures of the Borrower, Holdings
and the Required Lenders.
SECTION 5. Effect of Amendment. Except as expressly set forth
--------------------
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders, the Swingline Lender, the Issuing Bank, the Collateral Agent or
the Administrative Agent under the Credit Agreement or any other Loan
Document, and shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement or any other Loan Document, all of which are ratified
and affirmed in all respects and shall continue in full force and effect.
Nothing herein shall be deemed to entitle the Borrower or Holdings to a
consent to, or a waiver, amendment, modification or other change of, any of
the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement or any other Loan Document in similar or different
circumstances. This Amendment shall apply and be effective only with
respect to the provisions of the Credit Agreement specifically referred to
herein.
SECTION 6. Counterparts. This Amendment may be executed in any
-------------
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one
and the same instrument. Delivery of any executed counterpart of a
signature page of this Amendment by facsimile transmission shall be as
effective as delivery of a manually executed counterpart hereof.
SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
---------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. Headings. The headings of this Amendment are for purposes
---------
of reference only and shall not limit or otherwise affect the meaning
hereof.
<PAGE>
6
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/ Craig Steinke
--------------------------------
Name: Craig Steinke
Title: Vice President
EAGLE FAMILY FOODS HOLDINGS, INC.,
by
/s/ Craig Steinke
--------------------------------
Name: Craig Steinke
Title: Vice President
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent, Collateral Agent,
Issuing Bank and Swingline Lender,
by
/s/ Neil R. Boylan
-------------------------------
Name: Neil R. Boylan
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION, individually and as
Documentation Agent,
by
/s/ Michael J. Zupon
----------------------------------------
Name: Michael J Zupon
Title: Managing Director
<PAGE>
ALLIANCE CAPITAL FUNDING LLC,
by ALLIANCE CAPITAL MANAGEMENT CORP,
as Investment Advisor,
by
/s/ Joel Serebransky
------------------------------
Name: Joel Serebransky
Title: Vice President
BALANCED HIGH-YIELD FUND I LTD.,
by BHF-BANK AKTIENGESELLSCHAFT,
acting through its New York Branch,
as Attorney-in-Fact,
by
/s/ Anthony Heyman
---------------------------
Name: Anthony Heyman
Title: Assistant Vice President
by
/s/ Hans J. Scholz
-------------------------------
Name: Hans J. Scholz
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ Stephen E. Lockhart
----------------------------
Name: Stephen E. Lockhart
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY,
by
/s/ Peter Stearn
----------------------------
Name: Peter Stearn
Title: Assistant Vice President
FLEET NATIONAL BANK,
by
<PAGE>
/s/ George Jarvuga
------------------------------
Name: George Jarvuga
Title: Vice President
<PAGE>
THE FUJI BANK, LIMITED, NEW YORK BRANCH,
by
/s/ Teiji Teramoto
---------------------------------
Name: Teiji Teramoto
Title: Vice President
INDOSUEZ CAPITAL FUNDING IV, LP,
by INDOSUEZ CAPITAL, as Portfolio Advisor,
by
/s/ Francoise Berthelot
---------------------------------
Name: Francoise Berthelot
Title: Vice President
KZH-ING-2 CORPORATION,
by
/s/ James Westerhaus
---------------------------------
Name: James Westerhaus
Title: Authorized Agent
KZH-SOLEIL CORPORATION,
by
/s/ James Westerhaus
---------------------------------
Name: James Westerhaus
Title: Authorized Agent
KZH-PAMCO CORPORATION,
by
/s/ James Westerhaus
---------------------------------
Name: James Westerhaus
Title: Authorized Agent
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH,
by
/s/ Koji Sasayama
---------------------------------
<PAGE>
Name: Koji Sasayama
Title: Deputy General Manager
<PAGE>
MERRILL LYNCH GLOBAL INVESTMENT SERIES:
INCOME STRATEGIES PORTFOLIO,
by MERRILL LYNCH ASSET MANAGEMENT, L.P.,
as Investment Advisor,
by
/s/ Paul Travers
-------------------------------
Name: Paul Travers
Title: Authorized Signatory
MERRILL LYNCH DEBT STRATEGIES PORTFOLIO,
by MERRILL LYNCH ASSET MANAGEMENT, L.P.,
as Investment Advisor,
by
/s/ Paul Travers
-------------------------------
Name: Paul Travers
Title: Authorized Signatory
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST,
by
/s/ Peter Gewirtz
-------------------------------
Name: Peter Gewirtz
Title: Authorized Signatory
SOCIETE GENERALE,
by
/s/ Dalia Lagoa
--------------------------------------
Name: Dalia Lagoa
Title: Managing Director
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
/s/ Jeffrey W. Maillet
-------------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Director
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
SENIOR INCOME TRUST,
by
/s/ Jeffrey W. Maillet
-----------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Director
<PAGE>
VAN KAMPEN CLO I, LIMITED,
by VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.,
as Collateral Manager,
by
/s/ Jeffrey W. Maillet
----------------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements of Eagle Family Foods Holdings, Inc. for the twenty-seven
week period ended January 2, 1999 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> 6-MOS
<FISCAL-YEAR-END> JUL-3-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> JAN-2-1999
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 20,572
<ALLOWANCES> 156
<INVENTORY> 14,658
<CURRENT-ASSETS> 38,891
<PP&E> 33,844
<DEPRECIATION> 3,145
<TOTAL-ASSETS> 380,289
<CURRENT-LIABILITIES> 31,969
<BONDS> 289,700
88,511
0
<COMMON> 10
<OTHER-SE> (29,901)
<TOTAL-LIABILITY-AND-EQUITY> 380,289
<SALES> 154,776
<TOTAL-REVENUES> 154,776
<CGS> 71,362
<TOTAL-COSTS> 71,362
<OTHER-EXPENSES> 63,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,219
<INCOME-PRETAX> 5,620
<INCOME-TAX> 1,967
<INCOME-CONTINUING> 3,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,653
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements of Eagle Family Foods, Inc. for the twenty-seven week
period ended January 2, 1999 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> 6-MOS
<FISCAL-YEAR-END> JUL-3-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> JAN-2-1999
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 20,572
<ALLOWANCES> 156
<INVENTORY> 14,658
<CURRENT-ASSETS> 38,891
<PP&E> 33,844
<DEPRECIATION> 3,145
<TOTAL-ASSETS> 381,114
<CURRENT-LIABILITIES> 31,968
<BONDS> 289,700
0
0
<COMMON> 1
<OTHER-SE> 59,445
<TOTAL-LIABILITY-AND-EQUITY> 381,114
<SALES> 154,776
<TOTAL-REVENUES> 154,776
<CGS> 71,362
<TOTAL-COSTS> 71,362
<OTHER-EXPENSES> 63,560
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,219
<INCOME-PRETAX> 5,635
<INCOME-TAX> 1,967
<INCOME-CONTINUING> 3,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,668
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
