<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
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 333-50681
AURORA FOODS INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
DELAWARE 94-3303521
--------- ----------
<S> <C>
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
</TABLE>
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
(Address of Principal Executive Office, Including Zip Code)
(415) 982-3019
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
Shares Outstanding
May 7, 1999
Common stock, $0.01 par value 67,016,173
- - --------------------------------------------------------------------------------
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<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
See pages 2 through 14.
1
<PAGE>
AURORA FOODS INC.
BALANCE SHEETS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ ------------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 253 $ 354
Accounts receivable (net of $717 and $670 allowance, respectively) 107,753 86,539
Inventories (Note 3) 75,078 76,674
Prepaid expenses and other assets 11,781 6,517
Asset held for sale 3,000 3,000
Current deferred tax assets 10,840 8,251
------------------ ------------------
Total current assets 208,705 181,335
Property, plant and equipment, net 160,370 153,167
Goodwill and other intangible assets, net 1,077,121 1,072,760
Other assets 27,535 26,620
------------------ ------------------
Total assets $ 1,473,731 $ 1,433,882
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of senior secured term debt $ 20,000 $ 20,000
Senior secured revolving debt facility 115,000 85,850
Accounts payable 60,329 59,078
Accrued liabilities 48,782 49,836
------------------ ------------------
Total current liabilities 244,111 214,764
Non-current deferred tax liabilities 8,350 649
Other liabilities 12,372 12,372
Senior secured term debt 195,000 200,000
Senior subordinated notes 402,196 402,242
------------------ ------------------
Total liabilities 862,029 830,027
------------------ ------------------
Stockholders' equity:
Preferred stock, $0.01 par value; 25,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $0.01 par value; 250,000,000
shares authorized; 67,016,173 shares
issued and outstanding 670 670
Paid-in capital 647,889 647,889
Promissory notes (545) (562)
Accumulated deficit (Note 4) (36,312) (44,142)
------------------ ------------------
Total stockholders' equity 611,702 603,855
------------------ ------------------
Total liabilities and stockholders' equity $ 1,473,731 $ 1,433,882
================== ==================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AURORA FOODS INC.
STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
March 31, March 28,
1999 1998
---------------- ---------------
<S> <C> <C>
Net sales $ 261,050 $ 89,385
Cost of goods sold 104,128 37,734
---------------- ---------------
Gross profit 156,922 51,651
---------------- ---------------
Brokerage, distribution and marketing expenses:
Brokerage and distribution 24,634 9,355
Trade promotions 61,373 15,568
Consumer marketing 22,558 7,997
---------------- ---------------
Total brokerage, distribution and marketing expenses 108,565 32,920
Amortization of goodwill and other intangibles 8,772 4,597
Selling, general and administrative expenses 7,342 2,346
Incentive plan expense (Note 4) - 60,000
Transition expenses (Note 5) 4,272 1,926
---------------- ---------------
Total operating expenses 128,951 101,789
---------------- ---------------
Operating income (loss) 27,971 (50,138)
Interest expense, net 14,579 12,614
Amortization of deferred financing expense 397 513
Other bank and financing expenses 53 51
---------------- ---------------
Income (loss) before income taxes and extraordinary item 12,942 (63,316)
Income tax expense (benefit) 5,112 (360)
---------------- ---------------
Net income (loss) before extraordinary item 7,830 (62,956)
Extraordinary loss on early extinguishment of debt,
net of tax of $1,184 - 1,876
---------------- ---------------
Net income (loss) $ 7,830 $ (64,832)
================ ===============
Basic and diluted earnings (loss) per share before
extraordinary item $ 0.12 $ (2.17)
Extraordinary item per share - 0.06
---------------- ---------------
Basic and diluted earnings (loss) per share $ 0.12 $ (2.23)
================ ===============
Weighted average number of shares outstanding 67,016 29,053
================ ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AURORA FOODS INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Promissory Accumulated
--------------------
Shares Amount Capital Notes Deficit Total
--------- ------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 67,016 $ 670 $ 647,889 $ (562) $ (44,142) $ 603,855
Payments on officer promissory
notes - - - 17 - 17
Net income - - - - 7,830 7,830
--------- ------- ---------- ---------- ----------- -------------
Balance at March 31, 1999 67,016 $ 670 $ 647,889 $ (545) $ (36,312) $ 611,702
========= ======= ========== ========== =========== =============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AURORA FOODS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
March 31, March 28,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,830 $ (64,832)
Early extinguishment of debt, net of tax of $1,184 - 1,876
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Depreciation and amortization 12,054 6,140
Deferred income taxes 5,112 (360)
Incentive plan expense (Note 4) - 60,000
Change in assets and liabilities, net of effects of businesses
acquired:
(Increase) decrease in accounts receivable (21,214) 989
Decrease (increase) in inventories 6,367 (17,949)
Increase in prepaid expenses and other assets (5,264) (3,018)
Increase in accounts payable 251 19,824
(Decrease) increase in accrued liabilities (3,005) 11,698
-------------- --------------
Net cash provided by operating activities 2,131 14,368
-------------- --------------
Cash flows from investing activities:
Additions to property, plant and equipment (6,545) (1,181)
Changes to other non-current assets and liabilities (1,785) (90)
Payment for acquisition of businesses (Note 2) (18,069) (448,121)
-------------- --------------
Net cash used in investing activities (26,399) (449,392)
-------------- --------------
Cash flows from financing activities:
Proceeds from senior secured revolving and term debt 73,150 450,000
Repayment of borrowings (49,000) (77,500)
Capital contributions, net of officer promissory notes 17 93,638
Debt issuance and equity raising costs - (12,501)
-------------- --------------
Net cash provided by financing activities 24,167 453,637
-------------- --------------
(Decrease) increase in cash and cash equivalents (101) 18,613
Cash and cash equivalents, beginning of period 354 4,717
-------------- --------------
Cash and cash equivalents, end of period $ 253 $ 23,330
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AURORA FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- - ------------------------------
INTERIM FINANCIAL STATEMENTS
The interim financial statements of Aurora Foods Inc. (the "Company"), included
herein, have not been audited by independent accountants. The statements include
all adjustments, such as normal recurring accruals, which management considers
necessary for a fair presentation of the financial position and operating
results of the Company for the periods presented. The statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The operating results for interim
periods are not necessarily indicative of results to be expected for an entire
year. Certain prior period amounts have been reclassified to conform to the
current period's presentation.
For further information, reference should be made to the financial statements of
the Company and notes thereto included in the annual report on Form 10-K of
Aurora Foods Inc. for the year ended December 31, 1998.
THE COMPANY, ITS BUSINESS AND OWNERSHIP
The Company was incorporated in Delaware on June 19, 1998, as the successor to
Aurora Foods Holdings Inc. ("Holdings") and its subsidiary, AurFoods Operating
Co., Inc. (formerly known as Aurora Foods Inc.) ("AurFoods"), both of which were
incorporated in Delaware in December 1996. AurFoods was wholly-owned by
Holdings, which in turn was wholly-owned by MBW Investors LLC ("MBW LLC").
AurFoods was formed for the purpose of acquiring the Mrs. Butterworth's(R) syrup
business from Conopco, Inc., a subsidiary of Unilever United States, Inc.
AurFoods subsequently acquired the Log Cabin(R) syrup business from Kraft Foods,
Inc. in July 1997 and the Duncan Hines(R) baking mix business ("DH") from The
Procter & Gamble Company ("P&G") in January 1998.
Van de Kamp's, Inc. ("VDK") was a wholly-owned subsidiary of VDK Holdings, Inc.,
a Delaware corporation ("VDK Holdings") and was incorporated in Delaware in July
1995 for the purpose of acquiring the Van de Kamp's(R) frozen seafood and frozen
dessert businesses from The Pillsbury Company in September 1995. VDK then
acquired the Mrs. Paul's(R) frozen seafood business from the Campbell Soup
Company in May 1996 and the Aunt Jemima(R) frozen breakfast and Celeste(R)
frozen pizza businesses from The Quaker Oats Company in July 1996. VDK Holdings
was wholly-owned by VDK Foods LLC ("VDK LLC").
The Company groups its brands into two general divisions: dry grocery division
and frozen food division. The dry grocery division includes Duncan Hines(R)
brand baking mix products and Mrs. Butterworth's(R) and Log Cabin(R) brand syrup
products. The frozen food division includes Van de Kamp's(R) and Mrs. Paul's(R)
frozen seafood products, Aunt Jemima(R) frozen breakfast products and Celeste(R)
frozen pizza products.
6
<PAGE>
On April 8, 1998, MBW LLC and VDK LLC formed Aurora/VDK LLC ("New LLC"). MBW LLC
contributed all of the capital stock of Holdings and VDK LLC contributed all of
the capital stock of VDK Holdings to New LLC (the "Contribution"). In return for
these contributions, MBW LLC was issued 55.5% of the interests in New LLC plus a
right to receive a special $8.5 million priority distribution from New LLC, and
VDK LLC was issued 44.5% of the interests in New LLC plus a right to receive a
special $42.4 million priority distribution from New LLC. The amount and source
of consideration used by MBW LLC and VDK LLC for their acquisition of interests
in New LLC was their equity in Holdings and VDK Holdings, respectively. New LLC
accounted for the contribution of the ownership of Holdings at MBW LLC's
historical cost and the contribution of the ownership of VDK Holdings was
accounted for as an acquisition using the purchase method of accounting at New
LLC's cost. After giving effect to the Contribution, New LLC directly held 100%
of Holdings' capital stock and Holdings continued to hold directly 100% of
AurFoods capital stock and New LLC directly held 100% of VDK Holdings' capital
stock and VDK Holdings continued to hold directly 100% of VDK's capital stock.
On June 25, 1998, New LLC contributed to the Company all the issued and
outstanding stock of Holdings and VDK Holdings. Therefore, the Company's
financial statements, as it is the successor to Holdings, includes the
historical financial information of Holdings from its inception. New LLC was
then dissolved in connection with the IPO (defined below).
On July 1, 1998, Holdings, AurFoods, VDK Holdings and VDK merged with and into
the Company and the initial public offering (the "IPO" or "Equity Offerings") of
12,909,372 shares of Common Stock of the Company and 1,590,628 shares of the
Company's Common Stock sold by New LLC was consummated at an initial public
offering price of $21.00 per share. Also, concurrently with the IPO, the Company
issued $200.0 million aggregate principal amount of 8.75% senior subordinated
notes due 2008 (the "Notes Offering" or "New Notes") and borrowed $225.0 million
of senior secured term debt and $99.0 million out of the total available of
$175.0 million of senior secured revolving debt under the Third Amended and
Restated Credit Agreement, dated as of July 1, 1998, among the Company, as
borrower, the lenders listed therein, The Chase Manhattan Bank, as
Administrative Agent, The National Westminster Bank PLC, as Syndication Agent
and Swiss Bank Corporation, as Documentation Agent (the "New Senior Bank
Facilities").
The Company used the net proceeds from the IPO, the Notes Offering and the New
Senior Bank Facilities to (i) repay $180.8 million of senior secured bank debt
under the Second Amended and Restated Credit and Guarantee Agreement, dated as
of July 9, 1996, among VDK Holdings, VDK, the banks and other financial
institutions parties thereto and the Chase Manhattan Bank, as agent, as amended
(the "VDK Senior Bank Facilities"), (ii) repay $467.0 million under the Aurora
Senior Bank Facilities (as defined in Note 2), (iii) redeem the 12% Senior
Subordinated Notes due 2005 issued under an Indenture dated as of September 15,
1995, between VDK and Harris Trust and Savings Bank, as Trustee (the "VDK
Notes") (redemption completed on July 31, 1998) in the principal amount of
$100.0 million and (iv) pay the $14.5 million redemption premium associated with
the VDK Notes. As a result of the early extinguishment of the Aurora Senior Bank
Facilities, the Company recorded in the year ended December 31, 1998 an
extraordinary charge of $7.3 million, net of income tax of $4.4 million, for the
write off of deferred financing charges.
As a consequence of the IPO, no additional incentive plan expense will be
recorded under the Aurora Plan (See Note 4 - Incentive Plan Expense). MBW LLC
satisfied its liability under the
7
<PAGE>
Aurora Plan by distributing shares of the Company's common stock in connection
with the liquidation of MBW LLC.
NOTE 2 - ACQUISITIONS
- - ---------------------
DUNCAN HINES
On January 16, 1998, the Company acquired all the assets of DH from P&G. The
assets acquired by the Company include (i) the Duncan Hines(R) brand and
associated trademarks, (ii) substantially all of the equipment for the
manufacture of Duncan Hines(R) products previously located in P&G's Jackson,
Tennessee facility, (iii) proprietary formulations for Duncan Hines(R) products,
(iv) other product specifications and customer lists and (v) rights under
certain contracts, licenses, purchase orders and other arrangements and permits.
The Company is using the acquired assets in its operations of DH. The purchase
price of approximately $445.0 million was based on arms length negotiations
between the Company and P&G. The acquisition was accounted for by using the
purchase method of accounting.
To finance the acquisition of DH and related costs, the Company refinanced its
previously existing senior bank facilities with $450.0 million of senior secured
term debt under the Second Amended and Restated Credit Agreement, dated as of
January 16, 1998 by and among Holdings, the Company, the lenders listed therein,
The Chase Manhattan Bank, The National Westminster Bank PLC, and Swiss Bank
Corporation (the "Aurora Senior Bank Facilities"), and received a capital
contribution from Holdings of $93.8 million. As a result of the new bank
borrowings under the Aurora Senior Bank Facilities, the Company incurred an
early extinguishment of its pre-DH senior secured bank debt and the write-off of
the associated deferred financing charges was recorded in the quarter ended
March 28, 1998 as an extraordinary charge of $1.9 million, net of income taxes
of $1.2 million.
The cost to acquire DH has been allocated to tangible and intangible assets
acquired as follows (in thousands):
<TABLE>
<S> <C>
Cash paid to acquire assets $ 445,000
Other acquisition costs 13,294
--------------
458,294
Cost assigned to tangible assets (40,672)
--------------
Cost attributable to intangible assets $ 417,622
==============
</TABLE>
8
<PAGE>
VDK HOLDINGS, INC.
On April 8, 1998, New LLC completed a stock purchase of VDK Holdings (See
Note 1 -Basis of Presentation). The Company acquired all the capital stock of
VDK Holdings in exchange for $183.5 million of the Company's equity. The
acquisition was accounted for using the purchase method of accounting. The
allocation of purchase price has not been finalized; however, any changes are
not expected to be material.
The cost to acquire VDK Holdings has been allocated to tangible and intangible
assets acquired as follows (in thousands):
<TABLE>
<S> <C>
Value of stock used to acquire VDK Holdings $ 183,469
Liabilities assumed 383,063
Other acquisition costs 8,431
--------------
574,963
Cost assigned to tangible assets (201,545)
--------------
Cost attributable to intangible assets $ 373,418
==============
</TABLE>
Had the VDK Holdings and DH acquisitions taken place January 1, 1998, the
unaudited pro forma results of operations for the three month period ended March
28, 1998 would have been as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, March 28,
1999 1998
------------- -------------
(actual) (pro forma)
<S> <C> <C>
Net sales $ 261,050 $ 240,337
============= =============
Gross profit $ 156,922 $ 145,226
============= =============
Operating income (loss) $ 27,971 $ (99,218)
============= =============
</TABLE>
9
<PAGE>
NOTE 3 - INVENTORIES
- - --------------------
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Raw materials $ 16,496 $ 17,982
Work in process 477 271
Finished goods 53,717 54,640
Packaging and other supplies 4,388 3,781
---------------- ----------------
$ 75,078 $ 76,674
================ ================
</TABLE>
NOTE 4 - INCENTIVE PLAN EXPENSE
- - -------------------------------
AURORA INCENTIVE PLAN
The Amended and Restated Limited Liability Company Agreement of MBW LLC
contained an incentive plan (the "Aurora Plan") as a means by which certain key
employees and other specifically designated persons ("Aurora Covered Employees")
of AurFoods and/or affiliated with AurFoods, were given an opportunity to
benefit from appreciation in the value of AurFoods. Under the Aurora Plan,
Aurora Covered Employees were issued a specific class of limited liability
company member units ("Management Units"), at a nominal value, as a means to
participate in the appreciation of the equity value of AurFoods. The Management
Units were subject to vesting requirements based on terms of employment or other
factors.
Prior to the closing of the Equity Offerings, the final value of all classes of
Management Units were determined based on the valuation of the Common Stock held
indirectly by MBW LLC, and upon the closing of the Equity Offerings all unvested
Management Units became fully vested. The aggregate value of all Management
Units was $58.9 million. Through December 27, 1997, the Company had recorded
estimated incentive plan expense of $2.3 million based on the estimated
valuation of the Company at that time. Additional incentive plan expense of
$56.6 million was recorded in the first and second quarters of 1998.
The incentive plan expense was recorded as a liability of MBW LLC as sponsor of
the Aurora Plan. However, because the Aurora Plan was for the benefit of Aurora
Covered Employees, expense recognized under the Aurora Plan was pushed down to
the Company as incentive plan expense and as additional paid-in capital from its
parent. No additional incentive plan expense will be recorded under the Aurora
Plan.
MBW LLC satisfied its liability under the Aurora Plan by distributing 4,152,417
shares of Common Stock of the Company based on the valuation of the Management
Units at the initial public offering price of the Company's Common Stock on the
dissolution of MBW Investors LLC.
10
<PAGE>
VDK INCENTIVE PLAN
VDK LLC provided a compensation arrangement (the "VDK Plan") as a means by which
certain key employees, and other specifically designated persons ("VDK Covered
Employees") of VDK and/or affiliated with VDK, were given an opportunity to
benefit from appreciation in the equity value of VDK. Under the VDK Plan, VDK
Covered Employees were issued a specific class of limited liability company
member units and/or performance-based units (collectively, "VDK Management
Units"), at a nominal value, as a means to participate in the appreciation of
the equity value of VDK. The VDK Management Units were subject to vesting
requirements based on terms of employment or other factors.
Prior to the closing of the Equity Offerings, the final value of all classes of
VDK Management Units were determined based on the valuation of the shares of the
Company held indirectly by VDK LLC, and upon the closing of the Equity Offerings
all unvested VDK Management Units became fully vested. The aggregate value of
all VDK Management Units was $66.7 million. Through December 31, 1997, no
incentive plan expense had been recorded by VDK based on the estimated valuation
of VDK at that time. Incentive plan expense of $66.7 million was recorded in the
first and second quarters of 1998. The incentive plan expense was recorded as a
liability of VDK LLC as sponsor of the VDK Plan. However, because the VDK Plan
was for the benefit of VDK Covered Employees, expense recognized under the VDK
Plan was pushed down to VDK as incentive plan expense and as additional paid-in
capital from its parent. No additional incentive plan expense will be recorded
under the VDK Plan.
VDK LLC (or the Company as described below) will distribute a fixed number of
shares of Common Stock of the Company upon the dissolution of VDK LLC, based on
the valuation of the VDK Management Units at the initial public offering price
of the Company's Common Stock.
The VDK Plan provides for tax gross-up payments on certain distributions.
Because the Company will receive the tax benefit of such distributions and
related tax gross-up payments, and because the tax benefit is expected to exceed
the amount of the tax gross-up payments, the Company will bear the $12.4 million
liability for any such tax gross-up payments due. The tax benefit of the tax
gross-up payment and related distributions of $19.6 million, which more than
offsets the gross-up payments, has been recorded to income tax expense and as a
deferred tax asset.
To facilitate payment of the tax gross-up obligation and recognition of related
tax benefits, VDK adopted a new incentive plan (the "New VDK Plan" and together
with the VDK Plan, the "VDK Plans"), which was assumed by the Company in
connection with the Contribution. Under the New VDK Plan, the Company is
obligated to distribute no later than July 1, 1999 1,801,769 shares of the
Company's Common Stock to VDK Covered Employees who were granted certain types
of VDK Management Units under the VDK Plan. The issuance of such shares (the "MC
Shares") will not increase the number of outstanding shares of Common Stock
because the Company's obligations to issue the MC Shares is contingent upon the
Company's receiving from VDK LLC, as a contribution, a number of shares of the
Company's Common Stock owned by VDK LLC equal to the number of MC Shares. The
Company will have no obligation to issue MC Shares unless it receives a
contribution of an equal number of shares from VDK LLC. VDK LLC is obligated to
contribute such shares to the Company after the closing of the Equity Offerings.
The Company's obligation to make the tax gross-up payments referred to above is
11
<PAGE>
subject to the Company being allowed a deduction for federal income tax purposes
with respect to the payment of the MC Shares and tax gross-up payment.
NOTE 5 - TRANSITION EXPENSES
- - ----------------------------
Transition expenses consist of one-time costs incurred to integrate the acquired
businesses, including relocation expenses, recruiting fees, sales support,
production transition and other unique transitional expenses.
NOTE 6 - EARNINGS PER SHARE
- - ---------------------------
Basic earnings per share represents the income available to common stockholders
divided by the weighted average number of common shares outstanding during the
measurement period. Diluted earnings per share represents the income available
to common stockholders divided by the weighted average number of common shares
outstanding during the measurement period while also giving effect to all
potentially dilutive common shares that were outstanding during the period.
Potentially dilutive common shares consist of stock options (the dilutive impact
is calculated by applying the "treasury stock method").
The table below summarizes the numerator and denominator for the basic and
diluted loss per share calculations (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, March 28,
1999 1998
-------------------------------
<S> <C> <C>
Numerator:
Income (loss) before extraordinary item $ 7,830 $ (62,956)
Extraordinary item, net of tax - 1,876
------------ -------------
Net income (loss) $ 7,830 $ (64,832)
============ =============
Denominator:
Weighted average number of basic shares 67,061 29,053
Effect of dilutive securities - -
------------ -------------
Weighted average number of diluted shares 67,061 29,053
============ =============
Basic and diluted earnings (loss) per share
before extraordinary item $ 0.12 $ (2.17)
Extraordinary item per share - 0.06
------------ -------------
Basic and diluted earnings (loss) per share $ 0.12 $ (2.23)
============ =============
</TABLE>
12
<PAGE>
NOTE 7 - SEGMENT INFORMATION
- - ----------------------------
The Company groups its businesses in two operating segments: dry grocery
division and frozen food division. The operating segments are managed as
strategic units due to their distinct manufacturing methodologies, distribution
channels and dedicated segment management teams. The dry grocery division
includes Duncan Hines(R) baking mix products, and Mrs. Butterworth's(R) and Log
Cabin(R) syrup products. The frozen food division includes Van de Kamp's(R) and
Mrs. Paul's(R) frozen seafood products, Aunt Jemima(R) frozen breakfast products
and Celeste(R) frozen pizza products.
The following table presents a summary of operations by segment (in thousands):
<TABLE>
<CAPTION>
March 31, March 28,
1999 1998
-------------------- --------------------
<S> <C> <C>
Net sales
Dry grocery $ 101,010 $ 89,385
Frozen food 160,040 -
-------------------- --------------------
Total $ 261,050 $ 89,385
==================== ====================
Operating income (loss)
Dry grocery $ 16,864 $ 11,788
Frozen food 15,379 -
Other (4,272) (61,926)
-------------------- --------------------
Total $ 27,971 $(50,138)
==================== ====================
Total assets
Dry grocery $ 974,737 $869,551
Frozen food 498,994 -
-------------------- --------------------
Total $1,473,731 $869,551
==================== ====================
Depreciation and amortization
Dry grocery $ 6,506 $ 6,140
Frozen food 5,548 -
-------------------- --------------------
Total $ 12,054 $ 6,140
==================== ====================
Capital expenditures
Dry grocery $ 3,542 $ 1,181
Frozen food 3,003 -
-------------------- --------------------
Total $ 6,545 $ 1,181
==================== ====================
</TABLE>
The Other line item in operating income (loss) is comprised of one-time expenses
related to incentive plan expense (See Note 4 - Incentive Plan Expense) and
transition expenses (See Note 5 - Transition Expenses) that were incurred in the
respective periods.
13
<PAGE>
NOTE 8 - SUBSEQUENT EVENT
- - -------------------------
ACQUISITION
On April 1, 1999, subsequent to the Company's quarter end, the Company acquired
100% of the stock in Sea Coast Foods, Inc. ("Seacoast") from Galando Investment
Limited Partnership, Carey-On Limited Partnership, Joseph A. Galando, Barbara J.
Galando, Stanley J. Carey and Mary K. Carey (collectively the "Sellers"). The
assets owned by Seacoast include (1) the Chef's Choice(R) brand and associated
trademarks, (2) assets located at its Seattle, WA administrative office, and (3)
$5.8 million of net working capital. The purchase price of approximately $50.0
million was based on an arms length negotiation between the Company and the
Sellers. The acquisition will be accounted for by using the purchase method of
accounting.
To finance the acquisition of Seacoast and related costs, the Company added
$100.0 million of senior secured term debt to its existing senior bank
facilities under the Company's Fourth Amended and Restated Credit Agreement,
dated as of March 31, 1999, among the Company, as borrower, the lenders listed
therein, The Chase Manhattan Bank, as Administrative Agent, The National
Westminster Bank PLC, as Syndication Agent and UBS AF, Stamford Branch, as
Documentation Agent ("Amended New Senior Bank Facilities"). The Company used
the remaining proceeds from the Amended New Senior Bank Facilities to repay
$46.5 million of its senior secured revolving debt facility.
14
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - -------------------------------------------------------------------------------
OF OPERATIONS
- - -------------
Reference is made to Notes to Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations presented in the
annual report on Form 10-K of Aurora Foods Inc. for the year ended December 31,
1998.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the historical
financial information included in the Financial Statements and notes to the
financial statements. Unless otherwise noted, years (1999 and 1998) in this
discussion refer to the Company's March-ending quarters.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. The Company and
its representatives may from time to time make written or oral statements that
are "forward-looking" including statements contained in this report and other
filings with the Securities and Exchange Commission and in reports to the
Company's stockholders. Certain statements, including, without limitation,
statements containing the words "believes," "anticipates," "intends," "expects,"
"estimates" and words of similar import and Year 2000 remediation efforts,
constitute "forward-looking statements" and involve known and unknown risk,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: the
actions of the Company's competitors; general economic and business conditions;
industry trends; demographics; raw material costs; the continued success of
management's strategy; integration of acquired businesses into the Company;
terms and development of capital; and changes in, or the failure or inability to
comply with, governmental rules and regulations, including, without limitation,
FDA and environmental rules and regulations. Given these uncertainties, undue
reliance should not be placed on such forward looking statements. The Company
disclaims an obligation to update any such factors or to publicly announce the
results of any revisions to any forward-looking statements contained herein to
reflect future events or developments.
The following table sets forth, for the periods indicated, the percentage, which
the items in the Statement of Operations bear to net sales. A summary of the
components of operations is shown on the page that follows.
15
<PAGE>
COMPARATIVE RESULTS: THREE MONTHS ENDED MARCH 31, 1999
AND MARCH 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except Actual Pro Forma
------------------------------------------------------------ ------------------------------
per share amounts) March 31, 1999 March 28, 1998 March 28, 1998
--------------------------- -------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $261,050 100.0 % $ 89,385 100.0 % $ 240,337 100.0 %
Cost of goods sold 104,128 39.9 37,734 42.2 95,111 39.6
---------------- ------- -------------- ------- ----------------- -------
Gross profit 156,922 60.1 51,651 57.8 145,226 60.4
---------------- ------- -------------- ------- ----------------- -------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 24,634 9.4 9,355 10.5 23,544 9.8
Trade promotions 61,373 23.5 15,568 17.4 57,736 24.0
Consumer marketing 22,558 8.7 7,997 8.9 21,059 8.8
---------------- ------- -------------- ------- ----------------- -------
Total brokerage, distribution
and marketing expenses 108,565 41.6 32,920 36.8 102,339 42.6
Amortization of goodwill
and other intangibles 8,772 3.4 4,597 5.2 8,356 3.5
Selling, general and
administrative expenses 7,342 2.8 2,346 2.6 7,083 2.9
Incentive plan expense - 0.0 60,000 67.1 124,740 51.9
Transition expenses 4,272 1.6 1,926 2.2 1,926 0.8
---------------- ------- -------------- ------- ----------------- -------
Total operating expenses 128,951 49.4 101,789 113.9 244,444 101.7
---------------- ------- -------------- ------- ----------------- -------
Operating income (loss) 27,971 10.7 (50,138) (56.1) (99,218) (41.3)
Interest expense, net 14,579 5.6 12,614 14.1 14,434 6.0
Amortization of deferred
financing expense 397 0.1 513 0.5 373 0.2
Other bank and financing
expenses 53 0.0 51 0.1 95 0.0
---------------- ------- -------------- ------- ----------------- -------
Income (loss) before income
taxes and
extraordinary item 12,942 5.0 (63,316) (70.8) (114,120) (47.5)
Income tax expense (benefit) 5,112 2.0 (360) (0.4) 4,195 1.7
---------------- ------- -------------- ------- ----------------- -------
Net income (loss)
before
extraordinary item 7,830 3.0 (62,956) (70.4) (118,315) (49.2)
Extraordinary loss on early
extinguishment of debt,
net of tax of $1,184 - 0.0 1,876 2.1 1,876 0.8
---------------- ------- -------------- ------- ----------------- -------
Net income (loss) $ 7,830 3.0 % $(64,832) (72.5) % $(120,191) (50.0)%
================ ======= ============== ======= ================= =======
Earnings per share $0.12 $(2.23) $(1.79)
================ ============== ================
Adjusted EBITDA /(1)/ $ 43,947 $ 17,760 $ 38,922
================ ============== ================
Adjusted EPS /(2)/ $0.16 $(0.03) $0.11
================ ============== ================
</TABLE>
(1) Adjusted EBITDA is defined as operating income before incentive plan
expense, transition expense, depreciation and amortization of goodwill and
other intangibles.
(2) Adjusted EPS is defined as earnings per share plus the per share after tax
effect of incentive plan expense, transition expense and extraordinary
item.
16
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE MONTHS ENDED MARCH 28, 1998
Net Sales. Net sales for the quarter ended March 31, 1999 were $261.0 million,
which was an increase of $171.6 million as compared to net sales in the prior
year quarter of $89.4 million. The prior year quarter included the results of
the Mrs. Butterworth's(R) and Log Cabin(R) brands, and the Duncan Hines(R) brand
from January 16, 1998. The Van de Kamp's, Inc. business was purchased on April
9, 1998 and is included in the pro forma results.
Pro Forma Net Sales. Net sales for the quarter ended March 31, 1999 increased
8.6% as compared to pro forma net sales of $240.3 million for the prior year
quarter (which reflect all the acquisitions noted previously as if they had
occurred on January 1, 1998). Sales growth in the quarter was led by unit
volume growth of 8.1% in the Company's frozen food division and 7.5% in Duncan
Hines(R) baking mix products and higher prices for the Company's Duncan
Hines(R) products.
Unit volumes increased 5.1% to 12.8 million cases from 12.2 million cases in
the prior year quarter. Frozen food division unit volumes increased 8.1%
versus the prior year quarter, including a 17.5% increase in Celeste(R) frozen
pizza, a 9.1% increase in frozen breakfast products, a 7.9% increase in
foodservice and a 4.0% increase in frozen seafood volumes. Unit volumes for
the dry grocery division increased by 1.4% versus the prior year quarter.
Unit volumes of the Company's Duncan Hines(R) baking mix products increased
7.5%, while unit volumes of syrup products decreased 9.7% compared to last
year. Overall, unit volume growth was driven by strong consumer marketing
programs, new television advertising campaigns and new product introductions.
In the first quarter, the Company began airing five new television advertising
campaigns and successfully launched several new products, both of which
contributed to the volume growth. The new product introductions included Aunt
Jemima(R) french toast sticks and mini-pancakes, and Van de Kamp's(R) and Mrs.
Paul's(R) Crisp & Healthy and Tenders frozen seafood products. The table
syrup category experienced a decline in the quarter, particularly in the lite
syrup segment, which caused the volume decline in the Company's syrup
products.
The Company's net sales growth included a 3.5% increase related to pricing,
which was primarily attributable to the competitive price equalization program
initiated on the Duncan Hines(R) brand in March 1998 whereby the Company
increased the list price on cake and frosting products to parity with the
competition. The price equalization program generated approximately $7.3
million in net sales for the quarter ended March 31, 1999. In addition,
product mix shifts in the frozen pizza and frozen seafood product lines have
caused dollar sales for those segments to increase at a higher rate than unit
sales. The dollar sales increase for the Celeste(R) business was 18.2% due to
increased sales of premium Mama Celeste Fresh-Baked Rising Crust frozen pizza
products, which sell at a higher list price per case than other Celeste(R)
frozen pizza products. Frozen seafood product sales increased 9.0% versus the
prior year quarter and exceeded the unit volume change due to a 3% price
increase instituted on both the Van de Kamp's(R) and Mrs. Paul's(R) brands
during October 1998 and a favorable mix shift to larger sizes and more premium
priced products.
17
<PAGE>
Gross Profit. Gross profit was 60.1% of net sales, which was greater than the
gross profit in the 1998 period of 57.8%. The increase was primarily due to
higher sales dollars generated from the pricing actions on Duncan Hines(R) and
syrup products in March 1998 and July 1998, respectively.
Pro Forma Gross Profit. Gross profit of 60.1% for the quarter ended March 31,
1999 was 0.3 percentage points lower than the pro forma gross profit of 60.4%
for the prior year quarter. The difference was primarily attributable to the
strong sales growth generated by the frozen food division, which generally has
a lower gross margin than the dry grocery division. In addition, lower
volumes of syrup products, which have a high gross margin, partially offset
the improvement in gross margins for Duncan Hines(R) baking mix products.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses for the quarter ended March 31, 1999 increased $75.6 million
as compared to the prior year quarter due to the inclusion of the acquired
businesses. As a percentage of net sales, brokerage, distribution and marketing
expenses were 41.6%, which was 4.8 percentage points higher than the prior year
quarter of 36.8%.
Pro Forma Brokerage, Distribution and Marketing Expenses. Brokerage,
distribution and marketing expenses for the quarter of 41.6% of net sales were
$6.2 million higher than such expenses for the pro forma prior year quarter,
which were 42.6% of net sales. Brokerage and distribution expenses increased
$1.1 million over last year and decreased as a percentage of net sales to 9.4%
from 9.8% in the prior year quarter. The decrease as a percent of net sales
was mainly the result of lower average brokerage commissions. Marketing
expenses increased $5.1 million and were 32.2% of net sales, which was 0.6
percentage points lower than the prior year quarter of 32.8%. A decrease in
trade promotions and slotting expenses as a percentage of net sales was
partially offset by increased consumer marketing expenses. Consumer marketing
programs were executed during the quarter to support frozen seafood sales
during the Lenten season and promote baking mix product sales in advance of
Easter.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill and
other intangibles increased to $8.8 million from $4.6 million in the 1998
period. The increase of $4.2 million was due to the additional amortization
expense generated by the goodwill recorded in connection with the brands
acquired by the Company in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $7.3 million were $5.0 million higher than the prior
year quarter expense of $2.3 million. The increase was due to the inclusion of
Van de Kamp's, Inc. and the additional infrastructure and staffing required by
the dry grocery division to operate the Duncan Hines(R) business, which was
newly integrated during 1998. Selling, general and administrative expenses were
2.8% of net sales, which was 0.2 percentage points higher than the 2.6%
experienced in the prior year.
Incentive Plan Expense. In the prior year quarter, the Company recorded non-
cash incentive plan expense of $60.0 million in accordance with the Aurora Plan
contained in the MBW LLC Agreement (See Notes to the Financial Statements Note 4
- - - Incentive Plan Expense).
Transition Expenses. Transition expenses were $4.3 million as compared to $1.9
million recorded in the prior year quarter and represent one-time costs incurred
to integrate the acquired businesses. The increase was due to the acquisition
of the Duncan Hines(R) brand.
18
<PAGE>
Operating Income (Loss). Operating income was $28.0 million as compared to an
operating loss in the prior year period of $50.1 million. Excluding the effects
of the incentive plan expense and transition expenses, the Company would have
achieved operating income of $32.3 million in the quarter versus operating
income of $11.8 million in the prior year quarter. The significant increase was
due to the inclusion of operating income generated by the acquired businesses.
Pro Forma Operating Income (Loss). On a pro forma basis, the operating loss
for the prior year quarter was $99.2 million. Excluding the effects of the
incentive plan expense and transition expenses, the Company's operating income
in the 1998 quarter would have been $27.4 million. The increase in operating
income during the current quarter was 17.9% and was the result of higher sales
and lower marketing expenses.
Interest Expense and Amortization of Deferred Financing Expense. The aggregate
of net interest expense and amortization of deferred financing expense of $15.0
million in the quarter ended March 31, 1999 was higher than the prior year
quarter amount of $13.1 million. The increase was due to the additional debt
associated with the acquisition of the Van de Kamp's, Inc. business in 1998.
Income Tax Expense (Benefit). The income tax expense recorded for the quarter
was $5.1 million, which was an effective tax rate of 39.5%. An income tax
benefit of $0.4 million was recorded in the prior year quarter.
Net Income (Loss). The Company recorded net income of $7.8 million as compared
to a net loss for the prior year quarter of $64.8 million. Excluding the
effects of transition expense in 1999 and 1998, and excluding the extraordinary
loss from early extinguishment of debt and incentive plan expense in 1998, net
income improved $11.2 million to $10.4 million in the current quarter versus the
prior year period net loss of $0.8 million.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended March 31, 1999, net income plus non-cash charges provided
$25.0 million of operating cash flow and an increase in net working capital used
$22.9 million of cash during the quarter. As compared to December 31, 1998,
current assets, excluding cash and current deferred tax assets, increased $24.9
million and current liabilities, excluding current maturities of senior secured
debt, increased $0.2 million. The increase in current assets was the result of
increased inventory levels of certain Duncan Hines(R) products produced by P&G
in advance of relocating certain production equipment to the Company's contract
manufacturers' production facilities and a higher receivables balance caused by
the timing of the frozen seafood and baking mix sales relative to Easter being
at the end of March.
Net cash used in investing activities was $26.4 million for the quarter ended
March 31, 1999. During the quarter, the Company spent $6.5 million on capital
expenditures. The Company spent $3.5 million primarily for the relocation of
manufacturing equipment to the Company's baking product contract manufacturers'
production facilities and $3.0 million primarily to expand capacity for its
frozen breakfast products. In addition, the Company invested in additional
manufacturing capacity of frozen seafood products with the purchase of a
production facility and the associated working capital. Capital expenditures
were funded from internal cash flow and borrowings on the senior secured
revolving debt facility under the New Senior Bank Facilities.
19
<PAGE>
During the quarter, financing activities provided cash of $24.2 million. The
Company repaid $5.0 million in principal on its New Senior Bank Facilities and
borrowed on the revolving facility to fund capital expenditures, software and
packaging design expenditures and its investment in frozen seafood manufacturing
capacity.
At March 31, 1999, the Company had $0.3 million of cash and cash equivalents and
an unused commitment of $60.0 million on its senior secured revolving debt
facility under the Amended New Senior Bank Facilities. The Company's primary
sources of liquidity are cash flows from operations and available borrowings
under the $175.0 million revolving debt facility. Management believes the
available borrowing capacity under the revolving debt facility combined with
cash provided by operations will provide the Company with sufficient cash to
fund operations as well as to meet existing obligations.
YEAR 2000
The dates on which the Company believes Year 2000 compliance will be completed
are based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved, or that there will not be
a delay in, or increased costs associated with, the implementation of Year 2000
compliance. Specific factors that might cause differences between the estimates
and actual results include, but are not limited to, the availability and cost of
personnel trained in these areas, the ability to locate and correct all relevant
computer code, timely responses to and corrections by third-parties and
suppliers, the ability to implement interfaces between the new systems and the
systems not being replaced, and similar uncertainties. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-parties, the Company cannot
ensure its ability to resolve problems associated with the Year 2000 issue that
may affect its operations and business, or expose it to third-party liability in
a timely and cost-effective manner.
The Year 2000 issue, which is common to most corporations, concerns the
inability of information systems, including computer software programs as well
as non-information technology systems, to properly recognize and process date-
sensitive information related to the Year 2000 and beyond. The Company believes
that it will be able to achieve Year 2000 compliance by the end of 1999 and does
not currently anticipate any material disruption of its operations as a result
of any failure by the Company to be Year 2000 compliant. However, to the extent
the Company is unable to achieve Year 2000 compliance, the Company's business
and results of operations could be materially affected. This could be caused by
computer-related failures in a number of areas including, but not limited to,
the failure of the Company's financial systems or manufacturing and inventory
management systems.
Efforts to identify the risks associated with Year 2000 compliance began in 1997
by identifying the potential areas of exposure. The Company's information
technology was split into three areas of concern: internal mission-critical
systems and applications, internal non-mission-critical systems and applications
and external data sources and trading partners.
Compliance with internal mission-critical systems and applications is nearly
complete. Given the relatively recent incorporation of the Company, most
systems and applications have been
20
<PAGE>
purchased within the last year or two. All purchases made were for systems that
were Year 2000 compliant or for those that had documented plans and dates for
future compliance. Currently, the Warehouse Management System in the frozen food
division, which accesses a compliant information database, is the only remaining
mission-critical application not compliant. The Company has elected to upgrade
the functionality of its current Warehouse Management System and, therefore,
will be replacing the entire system. The new system has been selected and is
scheduled to have installation and testing completed by August 1999. Internal
non-mission-critical systems and applications are currently being analyzed and
are presently expected to be compliant by the middle of 1999.
In addition to reviewing its internal systems, the Company has polled or is in
the process of polling its third-party vendors, customers and freight carriers
to determine whether they are Year 2000 compliant and to attempt to identify any
potential issues. If the Company's customers and vendors do not achieve Year
2000 compliance before the end of 1999, the Company may experience a variety of
problems, which may have a material adverse effect on the Company. Among other
things, to the extent the Company's customers are not Year 2000 compliant by the
end of 1999, such customers may lose electronic data interchange ("EDI")
capabilities at the beginning of the Year 2000. Where EDI communication would
no longer be available, the Company expects to utilize voice, facsimile and/or
mail communications in order to receive customer orders and process customer
billings. To the extent the Company's vendors or co-packers are not Year 2000
compliant by the end of 1999, such vendors or co-packers may fail to deliver
ordered materials and products to the Company and may fail to bill the Company
properly and promptly. Consequently, the Company may not have the correct
inventory to send to its customers and may experience a shortage or surplus of
inventory which could materially adversely affect the Company's business and
results of operations. The Company is in the process of developing a plan to
address potential problems with respect to its vendors; however, the Company
believes it has access to sufficient alternative sources of supply.
To date, the Company has incurred and expensed approximately $0.1 million
related to the assessment and development of the remediation plan and the
purchase of new compliant hardware and software. Management anticipates
spending and expensing an additional $0.5 million through the end of 1999 to
implement its entire Year 2000 plan. The costs of the project and the date on
which the Company plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived using numerous assumptions of
future events including the continued availability of certain resources, third-
parties' Year 2000 readiness and other factors.
The Company is in the process of developing contingency plans, which should be
completed in May, 1999 so that the Company's critical business processes can be
expected to continue to function on January 1, 2000 and beyond. The Company's
contingency plans will be structured to address both remediation of systems and
their components and overall business operating risk. These plans are intended
to mitigate both internal risks as well as potential risks in the supply chain
of the Company's suppliers and customers.
Interest Rate Collar Agreements. At March 31, 1999, the Company was party to
two interest rate collar agreements. On August 22, 1996 the Company entered
into a three year interest rate collar agreement with a notional principal
amount of $70.0 million, a cap rate of 6.5% and a floor rate of 5.75%. On
November 26, 1997, the Company entered into a three year interest rate collar
21
<PAGE>
agreement with a notional principal amount of $50.0 million, a cap rate of 7.5%
and a floor rate of 5.50%.
Interest Rate Swap Agreements. The Company is party to two interest rate swap
agreements. On March 17, 1998, the Company entered into an interest rate swap
agreement with a notional principal amount of $150.0 million and a term of three
years. The effective swap rate on March 17, 1998 was 5.81%. On November 30,
1998, the Company amended the existing interest agreement whereby the
counterparty received the option to extend the termination date to March 17,
2003. The new effective swap rate through the termination date of the interest
rate swap agreement is 5.37%.
On April 13, 1999, the Company entered into a three-year interest rate swap
agreement (the "Swap") with a notional principal amount of $200.0 million. The
Company entered into the Swap to achieve its objective of hedging approximately
60% of its debt against movements in interest rates. The applicable rate is set
quarterly with the first reset date on July 1, 1999. The counterparty to the
Company's Swap is a major financial institution.
Under the Swap, the Company would receive payments from the counterparty if the
three-month LIBOR plus a spread of 3.25% falls below a cap rate of 8.63%, but
not below 7.8%. There would be no payments made to either counterparty if the
three-month LIBOR plus a spread of 3.25% exceeds 8.63% and is less than 10.25%.
The Company would make payments to the counterparty if the three-month LIBOR
plus a spread of 3.25% exceeds 10.25%.
Risks associated with the interest rate swap and collar agreements include those
associated with changes in the market value and interest rates. Management
considers the potential loss in future earnings and cash flows attributable to
the interest rate swap and collar agreements to not be material.
ITEM 3: QUANTITATIVE AND QUALTITATIVE DISCLOSURE ABOUT MARKET RISK
- - ------------------------------------------------------------------
The Company entered into interest rate swap and collar agreements for non-
trading purposes. Risks associated with the interest rate swap and collar
agreements include those associated with changes in the market value and
interest rates. Management considers the potential loss in future earnings and
cash flows attributable to the interest rate swap and collar agreements not to
be material.
22
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a) Exhibits
Exhibit
Number Exhibit
- - ------ -------
2.1 Asset Purchase Agreement, dated as of March 10, 1999, by and among the
Company and Sea Coast Foods, Inc., Galando Investments Limited
Partnership, Carry-on Limited Partnership, Joseph A. Galando, Barbara
J. Galando, Stanley J. Carey and Mary K. Carey.
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary
of State of the State of Delaware on June 19, 1998. (Incorporated by
reference to Exhibit 3.1 to Aurora Foods Inc.'s Form S-1 filed on
April 22, 1998, as amended (the "S-1")).
3.2 Amended and Restated By-laws of Aurora Foods Inc. (Incorporated by
reference to Exhibit 3.2 to the S-1).
4.1 Indenture dated as of July 1, 1998 by and between Aurora Foods Inc.
and Wilmington Trust Company (Incorporated by reference to Exhibit
4.13 to the S-1).
4.2 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2008.
(Included in Exhibit 4.1 hereto).
4.3 Specimen Certificate of the Common Stock. (Incorporated by reference
to Exhibit 4.1 to the S-1).
4.4 Registration Rights Agreement, dated July 1, 1998, between Aurora
Foods Inc. and Chase Securities Inc., Goldman, Sachs & Co. and Natwest
Capital Markets Limited (Incorporated by reference to Exhibit 4.15 to
the S-1).
10.1 Fourth Amended and Restated Credit Agreement, dated as of March 31,
1999 among Aurora Foods Inc., as borrower, the Lenders listed therein,
The Chase Manhattan Bank, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent and UBS AG, Stamford
Branch, as Documentation Agent.
27.1 Financial Data Schedule for the period ended March 31, 1999 submitted
to the Securities and Exchange Commission in electronic format.
(b) Report on Form 8-K
None.
23
<PAGE>
SIGNATURES
- - ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AURORA FOODS INC.
Dated: May 13, 1999 By: /s/ M. Laurie Cummings
-----------------------
M. Laurie Cummings
Chief Financial Officer
(Duly Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)
24
<PAGE>
EXHIBIT 2.1
===============================================================================
STOCK PURCHASE AGREEMENT
===============================================================================
AURORA FOODS INC.
SEA COAST FOODS, INC.
GALANDO INVESTMENTS LIMITED PARTNERSHIP
CAREY-ON LIMITED PARTNERSHIP
AND
JOSEPH A. GALANDO, BARBARA J. GALANDO,
STANLEY J. CAREY, AND MARY K. CAREY
DATED AS OF MARCH 10, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I DEFINITIONS......................................................................... 1
ARTICLE II PURCHASE OF COMPANY SHARES........................................................ 9
2.1 Purchase of Shares...................................................................... 9
2.2 Adjustment of Initial Purchase Price.................................................... 10
2.3 Earn Out Payment........................................................................ 11
2.4 Closing................................................................................. 14
2.5 Closing Date Deliveries................................................................. 14
2.6 Payment for Noncompete; Allocation; Agreed Value for Certain Assets..................... 16
2.7 Ardolino Adjustment..................................................................... 16
2.8Late Payments............................................................................. 16
ARTICLE III REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY................................. 17
3.1 Organization and Standing; No Subsidiaries; Charter Documents........................... 17
3.2 Capital Structure....................................................................... 17
3.3 Authority............................................................................... 17
3.4 Compliance with Laws and Other Instruments.............................................. 18
3.5 Financial Statements.................................................................... 18
3.6 Absence of Undisclosed Liabilities...................................................... 19
3.7 Absence of Certain Changes.............................................................. 19
3.8 Taxes................................................................................... 20
3.9 Employees............................................................................... 21
3.10 Employee Benefit Plans................................................................ 21
3.11 Certain Agreements.................................................................... 22
3.12 Litigation............................................................................ 22
3.13 Title to and Condition of Assets...................................................... 23
3.14 Major Contracts....................................................................... 23
3.15 Customers and Suppliers............................................................... 25
3.16 Real Property......................................................................... 25
3.17 Environmental Matters................................................................. 26
3.18 Intellectual Property Rights.......................................................... 26
3.19 Investment Bankers, Brokers, and Finders.............................................. 28
3.20 Products Liability.................................................................... 28
3.21 Accounts Receivable................................................................... 28
3.22 Inventory............................................................................. 28
3.23 Insurance............................................................................. 29
3.24 No Powers of Attorney or Guaranties................................................... 29
3.25 No Conflict of Interest............................................................... 29
3.26 Year 2000 Compliance.................................................................. 30
3.27 Books and Records..................................................................... 30
3.28 Certain Payments...................................................................... 30
3.29 Complete Disclosure................................................................... 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GROUPS......................................... 30
4.1 Authority............................................................................... 30
4.2 Ownership of Shares; No Liens or Encumbrances........................................... 31
4.3 No Conflict............................................................................. 31
4.4 Litigation.............................................................................. 31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.......................................... 32
5.1 Organization; Standing and Power........................................................ 32
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5.2 Authority............................................................................... 32
5.3 Compliance with Laws and Other Instruments.............................................. 32
5.4 Investment Bankers, Brokers, and Finders................................................ 33
5.5 Investment Purpose...................................................................... 33
ARTICLE VI COVENANTS OF COMPANY............................................................. 33
6.1 Conduct of Business..................................................................... 33
6.1.1 Ordinary Course.................................................................... 33
6.1.2 Dividends; Changes in Stock........................................................ 34
6.1.3 Issuance of Securities............................................................. 34
6.1.4 Governing Documents................................................................ 34
6.1.5 No Acquisitions.................................................................... 34
6.1.6 No Dispositions.................................................................... 35
6.1.7 Indebtedness....................................................................... 35
6.1.8 Plans; Employees................................................................... 35
6.1.9 Claims............................................................................. 35
6.1.10 Agreement......................................................................... 35
6.2 Breach of Representations and Warranties; Supplemental Disclosure....................... 35
6.3 Consents................................................................................ 36
6.4 Reasonable Efforts...................................................................... 36
6.5 Audit................................................................................... 36
ARTICLE VII COVENANTS OF BUYER............................................................... 36
7.1 Breach of Representations and Warranties................................................ 36
7.2 Consents................................................................................ 36
7.3 Reasonable efforts...................................................................... 36
ARTICLE VIII ADDITIONAL AGREEMENTS............................................................ 37
8.1 Access to Information................................................................... 37
8.2 HSR Act Filings......................................................................... 37
8.3 Employee Benefits....................................................................... 38
8.4 Officers and Directors.................................................................. 38
8.5 Expenses................................................................................ 39
8.6 Additional Agreements................................................................... 39
8.7 Public Announcements.................................................................... 39
8.8 Termination of Previous Shareholders Agreement.......................................... 40
8.9 Noncompetition; Nonsolicitation......................................................... 40
8.10 Exclusivity; Acquisition Proposals.................................................... 42
8.11 Shareholder Representative............................................................ 43
8.12 Release of Personal Guaranties........................................................ 43
8.13 Taxes................................................................................. 43
8.14 Redemption of Certain Company Shares; Distribution of Certain Assets.................. 45
8.15 Conduct of Business During the Earn Out Period........................................ 45
8.16 Limited Trademark License............................................................. 46
8.17 Certain Promotional Expenses.......................................................... 46
8.18 Trademark Filings..................................................................... 46
ARTICLE IX CONDITIONS PRECEDENT................................................................ 47
9.1 Conditions to Each Party's Obligation to Effect the Transaction......................... 47
9.1.1 Consents........................................................................... 47
9.1.2 No Restraints...................................................................... 47
9.1.3 No Burdensome Condition............................................................ 47
9.1.4 Closing Date Deliveries............................................................ 47
9.1.5 Other Documents and Certificates................................................... 47
9.2 Conditions of Obligations of Buyer...................................................... 47
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
9.2.1 Representations and Warranties of the Company, the Shareholders, and the General
Partners................................................................................ 47
9.2.2 Performance of Obligations of the Company, the Shareholders, and the General Partners... 48
9.2.3 Opinion of Company's Counsel............................................................ 48
9.2.4 Repayment of Shareholder Loans.......................................................... 48
9.2.5 Certificate Regarding Foreign Status.................................................... 48
9.2.6 Receipt of Audit........................................................................ 48
9.2.7 Termination of Related Party Agreements................................................. 49
9.2.8 Amendment of Lease...................................................................... 49
9.2.9 Terminations of Liens................................................................... 49
9.3 Conditions of Obligations of the Shareholders............................................... 49
9.3.1 Representations and Warranties of Buyer................................................. 49
9.3.2 Performance of Obligations of Buyer..................................................... 49
9.3.3 Opinion of Buyer's Counsel.............................................................. 49
ARTICLE X INDEMNIFICATION....................................................................... 50
10.1 Indemnification by Shareholders and General Partners....................................... 50
10.2 Indemnification By Buyer................................................................... 50
10.3 Notice of Claims........................................................................... 51
10.4 Third Party Claims......................................................................... 51
10.5 Time Limit................................................................................. 52
10.6 Limitations................................................................................ 53
10.7 Special Indemnity for Lu-Mar/CMS Claims.................................................... 53
10.8 Allocation of Liability; Non-discrimination................................................ 53
10.9 Exclusive Remedy........................................................................... 54
10.10 Maintenance of Insurance; Pursuit of Third Party Claims................................... 54
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER...................................................... 55
11.1 Termination................................................................................. 55
ARTICLE XII GENERAL PROVISIONS..................................................................... 56
12.1 Governing Law; Jurisdiction and Venue....................................................... 56
12.2 Notices..................................................................................... 56
12.3 Interpretation.............................................................................. 58
12.4 Counterparts................................................................................ 58
12.5 Miscellaneous............................................................................... 58
</TABLE>
-iii-
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 3.9 Officers and Sole Director
Schedule 3.10 Employee Benefit Plans
Schedule 3.12 Litigation
Schedule 3.13(b) Tangible Personal Property
Schedule 3.14 Major Contracts
Schedule 3.15 Customers and Suppliers
Schedule 3.16 Leased Premises
Schedule 3.18(a) Registered Intellectual Property
Schedule 3.18(b) Licensed Intellectual Property
Schedule 3.23 Insurance Policies
Schedule 8.14 Assets to be Distributed in Redemption of Certain Company
Shares
Schedule 8.15 Post-Closing Reporting Obligations of Company to Buyer
Schedule 9.1.1 Consents
Schedule 9.2.7 Related Party Agreements
Company Disclosure Schedule
Group Disclosure Schedule
Buyer Disclosure Schedule
LIST OF EXHIBITS
----------------
Exhibit 1 FY 2000 Plan; Adjustments for Earnings for Periods from
February 1, 1999 until Closing
Exhibit 2.5(a)(ix) Escrow Agreement
Exhibit 9.2.3 Opinion of Company's Counsel
Exhibit 9.3.3 Opinion of Buyer's Counsel
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made effective as of
March 10, 1999, by and among Aurora Foods Inc., a Delaware corporation
("Buyer"); Sea Coast Foods, Inc., a Washington corporation (the "Company");
Galando Investments Limited Partnership, a Washington limited partnership and
Carey-On Limited Partnership, a Washington limited partnership (individually, a
"Shareholder" and collectively, the "Shareholders"), and Joseph A. Galando,
Barbara J. Galando, Stanley J. Carey, and Mary K. Carey, individually and as the
general partners of the Shareholders (individually, a "General Partner" and
collectively, the "General Partners").
RECITALS
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
Buyer, the Company, the Shareholders, and the General Partners hereby agree as
follows:
AGREEMENT
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms shall have the following
meanings:
"Accounting Arbitrator" shall mean the independent accounting firm
designated in Section 2.2.
"Acquisition Transaction" shall have the meaning given in Section 8.10.
"Affiliate" shall mean, with respect to any person, (i) any Associate of
such person and (ii) any person that Controls, is under common Control with, or
is Controlled by that person, whether directly or indirectly or through one or
more intermediaries.
"Agreement" shall mean this Stock Purchase Agreement.
"Antitrust Laws" shall mean the HSR Act, the Sherman Act, as amended, the
Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any
other federal, state or foreign statutes, rules, regulations, or Orders that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
"Applicable Percentage" shall mean, in the case of either Galando
Investments Limited Partnership, the General Partners of Galando Investments
Limited Partnership, or the Galando Group, 83.275%, and in the case of Carey-On
Limited Partnership, the General Partners of Carey-On Limited Partnership, or
the Carey Group, 16.725%.
1
<PAGE>
"Ardolino Adjustment" shall have the meaning given in Section 2.7.
"Ardolino Payments" shall mean any payments made pursuant to that certain
Agreement dated December 11, 1998, by and between the Company and Ralph
Ardolino.
"Assets" shall mean all of the properties and assets owned, leased, or
licensed by the Company, except for the Leased Premises, whether personal or
mixed, tangible or intangible, wherever located.
"Associate" shall mean with respect to any person, (i) any corporation or
organization of which such person is an officer, director, member, or partner,
or is, directly or indirectly, the beneficial owner of 10% or more of a class of
equity securities, (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
person.
"Audit" shall have the meaning given in Section 6.5.
"Business Condition" with respect to any entity shall mean the business,
financial condition, results of operations or assets (without giving effect to
the consequences of the Transaction contemplated by this Agreement) of such
entity and its subsidiaries taken as a whole.
"Buyer" shall mean Aurora Foods Inc., a Delaware corporation.
"Buyer Disclosure Schedule" shall mean a document referring specifically to
the representations and warranties in this Agreement that is delivered by Buyer
to the Company prior to the execution of this Agreement.
"Buyer Required Statutory Approvals" shall have the meaning given in
Section 5.3(b).
"Carey Group" shall mean Carey-On Limited Partnership, Stanley J. Carey,
and Mary K. Carey.
"Claim Notice" shall mean a written notice in reasonable detail of the
facts and circumstances that form the basis of an indemnification claim
hereunder and setting forth an estimated amount of the potential Losses and the
sections of this Agreement upon which the claim for indemnification for such
Losses is based.
"Closing" shall mean the closing of the Transaction.
"Closing Date" shall have the meaning given in Section 2.4.
"Closing Statement" shall have the meaning given in Section 2.2(a).
"Closing Balance Sheet" shall have the meaning given in Section 2.2(b).
2
<PAGE>
"CMS" shall mean Club Marketing Services, Inc.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Sea Coast Foods, Inc., a Washington corporation or, to
the extent applicable after the Closing, a separate business unit of the Buyer
that is the successor to the Chef's Choice business of the Company or other
successor to such business.
"Company Action" shall have the meaning given in Section 3.18(h).
"Company Disclosure Schedule" shall mean a document referring specifically
to the representations and warranties in this Agreement that is delivered by the
Company to Buyer prior to the execution of this Agreement.
"Company Financial Statements" shall have the meaning given in Section 3.5.
"Company Indebtedness" shall mean (i) debt for borrowed money and borrowed
money in respect of which the Company has provided its guarantee; (ii) all
capitalized lease obligations (but excluding all operating lease obligations);
(iii) amounts due under that certain Promissory Note dated May 7, 1998, to
Nicholas L. MacPhee and Daniel L. MacPhee in the original principal amount of
$3,852,000; and (iv) the Ardolino Payments.
"Company Required Statutory Approvals" shall have the meaning given in
Section 3.4(c).
"Company Shares" shall mean the issued and outstanding shares of capital
stock of the Company.
"Competing Products" shall have the meaning given in Section 8.9(a).
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nonsolicitation Agreement entered into between the Company and Buyer, dated
October 23, 1998.
"Consent" shall mean a consent, approval, Order, or authorization of, or
registration, declaration, or filing with, or exemption by any third party,
including without limitation by any Governmental Entity.
"Control" of a corporation, limited liability company or other body
corporate by a person is deemed to occur if:
(a) securities of the corporation, limited liability company or other body
corporate, to which are attached more than 50% of the votes that may be
cast to elect members of the managing directors, board of directors or
other governing body of the corporation, limited liability company or other
body corporate, or other rights to elect a majority of such members are
held, other than by way of security or pledge only, by or for the benefit
of that person, and
3
<PAGE>
(b) the votes attached to those securities are sufficient, or such rights
are sufficient, if exercised, to elect a majority of the members of the
board of directors or other governing body of the corporation, limited
liability company or other body corporate,
and any derivative thereof has a similar meaning.
"Counternotice" shall mean a written objection to a claim or payment
setting forth the basis for disputing such claim or payment.
"Covenant Dispute" shall have the meaning given in Section 8.9(e).
"Covered Matter" shall have the meaning given in Section 10.6(b).
"Current Balance Sheet" shall have the meaning given in Section 3.5.
"Default Interest Rate" shall have the meaning given at Section 2.8.
"Demanding Party" shall have the meaning given in Section 8.9(e)(i).
"Designated Individuals" shall have the meaning given in Section 2.3(f).
"Earnings" shall mean the earnings of the Company before deductions for
interest and income taxes; provided, however, that in determining Earnings there
shall be no deduction for (or inclusion as an expense in respect of) (a) any
advertising, marketing, slotting or other promotional expenses directed by Buyer
or its Affiliates unless approved in writing by the Shareholder Representative
before being incurred; (b) any personnel expenses directed by Buyer or its
Affiliates unless approved in writing by the Shareholder Representative before
being incurred; provided, however, that any bonuses payable under the Employment
Agreements with respect to the Earn Out Period shall be deducted from Earnings;
(c) any management fees charged by Buyer or its Affiliates to the Company; (d)
any allocation of corporate overhead of Buyer or its Affiliates; (e) any
expenses incurred in connection with the transactions contemplated by this
Agreement, including without limitation, the Ardolino Payments, the costs of the
Audit, and the costs of any PWC (or other Buyer auditor) audit of the Company or
of other PWC work done pursuant to Section 2.3(a); (f) any other expenses not
contemplated by the FY 2000 Plan and directed by Buyer or its Affiliates,
unless approved in writing by the Shareholder Representative before being
incurred; (g) any amortization or depreciation of goodwill recognized in
connection with the transactions contemplated by this Agreement or any purchase
accounting adjustments recorded by the Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement; and (h) any extraordinary
or non-recurring items of income or loss, including without limitation any
transition expenses incurred in connection with relocation of the Company, in
connection with the interfacing of the Company systems with the Buyer systems,
and similar expenses. Earnings shall also be determined by making the
adjustments to net revenues or expenses of the Company for the period from
February 1, 1999 until Closing of the type contemplated by Exhibit 1.
4
<PAGE>
"Earn Out Payment" shall have the meaning given in Section 2.3.
"Earn Out Period" shall have the meaning given in Section 2.3.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity which is, or at any relevant time
was, a member of a controlled group of corporations with, under common control
with, or a member of an affiliated service group with, the Company, as defined
under Section 414(b), (c), (m) or (o) of the Code.
"Employment Agreements" means employment agreements executed in connection
with execution of this Agreement between each of Joseph A. Galando, Steve
Galando and Ralph Ardolino and the Buyer, which agreements shall not become
effective unless and until Closing takes place.
"Environmental Laws" means all federal, state, regional or local statutes,
laws, rules, regulations, codes, Orders, Licenses, plans, or ordinances where
the Company conducts business, any of which govern pollution, protection of the
environment, air emissions, water discharges, hazardous or toxic substances, or
solid or hazardous waste, as any of these terms are defined in such statutes,
laws, rules, regulations, codes, Order, Licenses, or ordinances.
"Escrow Agent" shall mean U.S. Bank Trust, National Association, acting as
escrow agent pursuant to the terms of the Escrow Agreement.
"Escrow Agreement" shall have the meaning given in Section 2.5(a)(ix).
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture, and fixtures used by or located on
the premises of the Company, whether or not set forth in the Current Balance
Sheet and whether or not acquired by the Company since the date of the Current
Balance Sheet.
"FY 2000 Earnings" shall have the meaning given in Section 2.3.
"FY 2000 Earnings Dispute Notice" shall have the meaning given in Section
2.3.
"FY 2000 Plan" shall mean the Company budget with respect to the period
from February 1, 1999 through January 31, 2000, a copy of which is attached
hereto as Exhibit 1.
"Galando Group" shall mean Galando Investments Limited Partnership, Joseph
A. Galando, and Barbara J. Galando.
"Governmental Entity" shall mean an administrative agency, court, or
commission or other governmental authority or instrumentality, whether domestic
or foreign.
5
<PAGE>
"Group" shall mean either the Carey Group or the Galando Group.
"Hazardous Substances" shall include any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent thereof,
whether liquid, solid, semi-solid, sludge and/or gaseous, including without
limitation chemicals, compounds, by-products, pesticides, asbestos-containing
materials, petroleum or petroleum products, and polychlorinated biphenyls, the
presence of which requires investigation or remediation under any Environmental
Laws, or which are at the time of Closing regulated, listed or controlled by,
under or pursuant to any Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Taxes" shall mean any and all federal, state, or local Taxes
imposed on net income.
"Independent Law Firm" shall have the meaning given in Section 8.13.
"Initial Purchase Price" shall have the meaning given in Section 2.1.
"Intellectual Property Rights" shall mean (i) all registered or
unregistered trademarks, trade names, and service marks and any applications to
register any of the foregoing, together with any goodwill related thereto, (ii)
patents and patent applications including without limitation any extensions,
reexaminations, or re-issues of any patents, (iii) registered or unregistered
copyrights and any applications for registration of copyrights, (iv) trade
secrets, processes, know-how, formulas, recipes, or other tangible or intangible
proprietary information or material, and (v) any agreement for any of the
foregoing, relating to the assets or the business of the Company as of the date
of this Agreement.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge of the Company" shall mean the actual knowledge, after
reasonable inquiry, of the following individuals: (i) Joseph A. Galando; (ii)
Stanley J. Carey; (iii) Steve Galando; (iv) David Galando; and with respect to
Sections 3.14 and 3.15 only (v) Ralph Ardolino.
"Leased Premises" shall mean all parcels of real estate subject to leases
to which the Company is a party as a lessee.
"Licensed Intellectual Property" shall have the meaning set forth in
Section 3.18(b).
"Licenses" shall mean all licenses, certificates, permits, approvals and
registrations as are required by any Governmental Entity.
"Licensor Action" shall have the meaning given in Section 3.18(i).
6
<PAGE>
"Losses" shall mean direct and actual losses, damages, liabilities, claims,
judgments, settlements, fines, costs, and expenses (including reasonable
attorneys' fees) of any kind net of (i) any insurance proceeds received (less
the fees and expenses incurred to obtain such proceeds); (ii) any actual
recovery from third parties (less the fees and expenses incurred to obtain such
proceeds); and (iii) the present value of any Tax benefits (net of any Tax
detriment arising from the inclusion in income of the payment of any amount as
indemnification hereunder) actually realized as a result of such losses, and
excluding all indirect and/or consequential damages of any kind, other than
indirect and/or consequential damages falling within the scope of the Lu-Mar/CMS
Claims.
"Lu-Mar" shall mean Lu-Mar Lobster and Shrimp, Inc.
"Lu-Mar/CMS Claims" shall mean the claims listed at items (1), (2) and (3)
on Schedule 3.12.
"Material Adverse Effect" shall mean a material adverse effect other than
resulting from (i) changes attributable to conditions affecting the frozen food
business generally, or (ii) changes in general economic conditions.
"Minimum Working Capital" shall have the meaning given in Section 2.2.
"Notice of Dispute" shall have the meaning given in Section 2.2(c).
"Notices" shall mean non-compliance orders and notices of violation.
"Orders" shall mean a decree, judgment, injunction, ruling or other order
of a Governmental Entity having jurisdiction.
"Payment Certificate" shall mean a written claim for payment of Losses in
reasonable detail and specifying the amount of such Losses.
"Plan" shall mean an "employee benefit plan" within the meaning of Section
3(3) of ERISA, including, without limitation, any employee bonus, profit
sharing, retirement, stock purchase, stock option, recapitalization, insurance,
medical, life, disability, severance, or other benefit plan governing active,
former or retired employees of the Company and any ERISA Affiliate.
"Prior Tax Returns" shall have the meaning given in Section 8.13.
"Proceedings" shall mean claims in writing, suits, actions, or
administrative, arbitral, or judicial proceedings.
"Purchase Price" shall have the meaning given in Section 2.1.
"PWC" shall have the meaning given in Section 2.3(a).
7
<PAGE>
"Registered Intellectual Property" shall have the meaning set forth in
Section 3.18(a).
"Responding Party" shall have the meaning given in Section 8.9(e)(i).
"Shareholders" shall mean Galando Investments Limited Partnership, a
Washington limited partnership, and Carey-On Limited Partnership, a Washington
limited partnership.
"Shareholder Representative" shall have the meaning given in Section 8.11.
"Tax Accounting Firm" shall have the meaning given at Section 8.13.
"Tax" and "Taxes" shall mean any and all taxes, charges, fees, levies, or
other assessments of whatever kind or nature, including without limitation any
federal, state, local, or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, premium,
windfall profits, environmental, occupational, lease, fuel, customs, duties,
capital stock, franchise, profits, withholding, Social Security, disability,
real property, personal property (tangible and intangible), sales, use,
transfer, registration, value added, alternative or minimum, estimated, or any
other kind of tax whatsoever, including the recapture of any tax items, and
including any interest, addition, penalty, or other associated charge thereto,
whether disputed or not.
"Tax Returns" shall mean any returns, informational returns, reports, or
statements with respect to Taxes that are required to be filed with any taxing
authority.
"Third Party Action" shall have the meaning given in Section 3.18(g).
"Third Party Claim" shall have the meaning given in Section 10.4.
"Transaction" shall mean the purchase of the Company Shares by Buyer from
the Shareholders pursuant to the terms of this Agreement.
"Threshold Amount" shall have the meaning given in Section 10.6.
"Working Capital" means the amount by which the Company's current assets
exceed the Company's current liabilities. For these purposes: (a) the current
portion of the Company Indebtedness shall be excluded from current liabilities
(accordingly, but not by way of limitation, there shall be no deduction for
Company Indebtedness to Nicholas L. MacPhee and Daniel MacPhee); (b) prepaid tax
deposits shall be excluded from current assets and accruals, if any, for Taxes
in respect and to the extent of the prepaid tax deposits shall be excluded from
current liabilities; (c) any accruals made in connection with the Ardolino
Payments shall be excluded from current liabilities; (d) all assets and
liabilities listed on Schedule 8.14 (the shrimp supply business) shall be
excluded from current assets and current liabilities; (e) accounts receivable
shall be recorded net of allowance for bad debts, but there shall be no
reduction for amounts due to the payors in respect of advertising, promotions,
and slotting allowances; (f) the accrual for taxes shall be based on the
principles and methods used by the Company in the Prior Tax Returns and the
Company's books and records through the Closing Date and its treatment of
8
<PAGE>
items therein; and (g) bonuses attributable to the period from February 1, 1999
to the Closing Date under the Employment Agreements shall be accrued (which
accrual shall be based on the assumption that FY 2000 Earnings will be
$11,500,000).
"Working Capital Accounting Principles" shall have the meaning given in
Section 2.2(b).
ARTICLE II
PURCHASE OF COMPANY SHARES
2.1 Purchase of Shares. At Closing, the Shareholders shall sell and
transfer to the Buyer, and the Buyer shall purchase from the Shareholders, those
Company Shares not previously redeemed by the Company pursuant to Section 8.14.
In consideration for the sale and transfer to Buyer by each of the Shareholders
of the Company Shares not previously redeemed by the Company pursuant to Section
8.14, and the representations, warranties, and covenants contained herein, Buyer
agrees to pay to the Shareholders: (a) on the Closing Date, an aggregate amount
equal to the sum of: (i) Forty Nine Million Nine Hundred Thousand Dollars
($49,900,000), plus (ii) any amounts by which the Working Capital level, as set
forth on the Closing Statement, is higher than Four Million Two Hundred Thousand
Dollars ($4,200,000) (the "Minimum Working Capital"), less (iii) any amounts by
which the Working Capital level, as set forth on the Closing Statement, is less
than the Minimum Working Capital, and less (iv) the amount of principal of, and
accrued interest on, Company Indebtedness as of the Closing Date, as set forth
on the Closing Statement (the "Initial Purchase Price"); plus (b) the Earn Out
Payment (if any) calculated in accordance with the provisions of Section 2.3;
plus (c) the Ardolino Adjustment (if any) in accordance with the provisions of
Section 2.7 (the Initial Purchase Price together with the Earn Out Payment and
the Ardolino Adjustment, the "Purchase Price"). Out of the Initial Purchase
Price, Seven Million Dollars ($7,000,000) shall be remitted by Buyer to Escrow
Agent, to be held and released by Escrow Agent in accordance with the terms of
the Escrow Agreement. The balance of the Initial Purchase Price shall be
payable at Closing by wire transfer of immediately available funds, and shall be
payable to Shareholders pro rata according to the number of Company Shares held
by each of them and the resulting Applicable Percentage for such Shareholder, as
set forth below:
<TABLE>
<CAPTION>
Shareholder Number of Shares Applicable Percentage
- - -------------------------- -------------------------- -------------------------------
<S> <C> <C>
Galando Investments
Limited Partnership 712* 83.275%
Carey-On Limited
Partnership 143* 16.725%
</TABLE>
* The above numbers will be adjusted prior to Closing pursuant to Section 8.14
but that will not affect the Applicable Percentages.
9
<PAGE>
2.2 Adjustment of Initial Purchase Price. Notwithstanding the
foregoing, the Initial Purchase Price shall be determined and adjusted as
follows:
(a) At least two (2) business days prior to Closing, the Company
shall prepare and provide to Buyer a statement (the "Closing Statement"),
estimating (i) Company Indebtedness as of the opening of business on the Closing
Date, and (ii) the amount by which Working Capital as of the opening of business
on the Closing Date exceeds or is less than the Minimum Working Capital.
(b) As soon as practicable after the Closing Date, but in no
event more than ninety (90) days thereafter, the Shareholder Representative
shall, at the cost of the Shareholders, cause to be prepared and delivered to
Buyer a closing balance sheet of the Company as of the opening of business on
the Closing Date (the "Closing Balance Sheet"), prepared in accordance with
generally accepted accounting principles, as consistently applied by the Company
and as modified by the past practice of the Company, including without
limitation (i) the same materiality standard as used in the past by the Company;
and (ii) the variations from generally accepted accounting principles as used in
the Company's past practice as set forth at items (1), (7), and (9) (in the case
of item (9), with respect to periods from February 1, 1999) of Section 3.5 of
the Company Disclosure Schedule (for avoidance of doubt, advertising, promotion,
and slotting expenses shall not be accrued) (such accounting principles as
modified by the past practice of the Company, together with the adjustments
contemplated by the definition of Working Capital, the "Working Capital
Accounting Principles"), calculating Company Indebtedness and Working Capital as
of the opening of business on the Closing Date. (For avoidance of doubt, Working
Capital shall be determined in accordance with the Working Capital Accounting
Principles). During the period from the Closing until the final adjustment, if
any, to the Initial Purchase Price pursuant to this Section 2.2, Buyer shall
give the Shareholder Representative and his accountants, counsel, and other
representatives, reasonable access during normal business hours to (i) all of
the Company's properties, books, contracts, commitments, and records, and (ii)
all other information concerning the business, properties and personnel of the
Company, as the Shareholder Representative may reasonably request and as is
necessary to prepare, make revisions to, and evaluate proposed changes to the
Closing Balance Sheet.
(c) If Buyer wishes to dispute the Closing Balance Sheet, Buyer
shall notify the Shareholder Representative in writing within thirty (30) days
after the date of receipt of the Closing Balance Sheet. Such notice (a "Notice
of Dispute"), shall specify the points of disagreement. Failure of Buyer to
respond to the Closing Balance Sheet within the thirty (30) day notice period
shall be deemed an acceptance of the Closing Balance Sheet prepared by the
Shareholder Representative, and his calculation of Company Indebtedness and
Working Capital, whereupon they shall be deemed final, conclusive, and binding
on all parties. In the event of the delivery to the Shareholder Representative
of a Notice of Dispute, Buyer and the Shareholder Representative shall consult
in good faith with respect to such point(s) of disagreement in an effort to
resolve such dispute. If such dispute cannot be resolved within fifteen (15)
days after the Shareholder Representative receives the Notice of Dispute, Buyer,
the Shareholders, and the Company hereby mutually agree to appoint Ernst & Young
LLP (the "Accounting Arbitrator"), to determine all outstanding points of
disagreement with respect to the Closing Balance Sheet.
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(d) Buyer and the Shareholders agree that in resolving any
dispute with respect to the Closing Balance Sheet and the calculation of Company
Indebtedness and Working Capital, the Accounting Arbitrator shall apply the
Working Capital Accounting Principles. All determinations made by the Accounting
Arbitrator shall be final, conclusive and binding on each party. Upon such
determination, the Closing Balance Sheet as adjusted by the Accounting
Arbitrator, and the Accounting Arbitrator's determination of the Company
Indebtedness and Working Capital, shall be deemed final, conclusive, and binding
on all parties. The Accounting Arbitrator shall be directed to make its
determination within forty-five (45) days of appointment. Each party shall bear
its own costs and expenses associated with such determination. The fees and
expenses of the Accounting Arbitrator (if any) shall be borne one half by Buyer
and the balance by the Shareholders in accordance with their Applicable
Percentage.
(e) The Initial Purchase Price will be adjusted based upon the
Closing Balance Sheet in accordance with the foregoing. In the event an amount
is owed hereunder by Buyer to Shareholders as a result of any such adjustment,
Buyer shall deliver such amount in immediately available funds to the
Shareholders, allocated among the Shareholders in accordance with their
Applicable Percentage, within fifteen (15) days after: (i) lapse of the thirty
(30) day period that Buyer has, following receipt of the Closing Balance Sheet,
for disputing the Closing Balance Sheet, in the event there is no Notice of
Dispute, or (ii) a final determination by the Accounting Arbitrator. In the
event an amount is owed hereunder by Shareholders to Buyer as a result of any
such adjustment, the Shareholders shall deliver, each in accordance with its
Applicable Percentage, such amount in immediately available funds to the Buyer
within fifteen (15) days after: (i) lapse of the thirty (30) day period that
Buyer has, following receipt of the Closing Balance Sheet, for disputing the
Closing Balance Sheet, in the event there is no Notice of Dispute, or (ii) a
final determination by the Accounting Arbitrator. In addition to such payment
due on such fifteenth (15th) day, the party responsible for making such payment
shall on such 15th day pay interest accrued on such payment from the Closing
Date until such 15th day, calculated at a rate of seven percent (7%) per annum.
2.3 Earn Out Payment.
(a) As soon as practicable after January 31, 2000,
PriceWaterhouseCoopers LLP ("PWC") shall, at the expense of the Buyer, audit the
financial statements of the Company as of January 31, 1999 and management's
calculation of the Earnings of the Company for the period from February 1, 1999
through January 31, 2000 (the "Earn Out Period", and such Earnings, the "FY 2000
Earnings") in the manner specified in this Section 2.3. No later than April 30,
2000, the Company shall deliver notice of the FY 2000 Earnings to the
Shareholders, as audited by PWC, together with PWC's audit report on the
Company's financial statements as of January 31, 1999 and on management's
calculation of Earnings. During the Earn Out Period, as soon as practicable
after the end of: (i) each month and in any event within forty-five (45) days
thereafter, the Company shall provide the Shareholders with a balance sheet with
respect to the Company as of the end of such month, and a statement of income
for such month and for the current fiscal year to date, and (ii) each quarter
and in any event within forty-five (45) days thereafter, the Company shall
provide the Shareholders with a statement of cash flows for such quarter and for
the current fiscal year to date, in each case prepared in accordance with this
Section 2.3 and with generally accepted accounting principles, as consistently
applied by the
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Company (the same materiality standard as used in the past by the Company shall
be used in preparing such statements but any variations from generally accepted
accounting principles set forth at Section 3.5 of the Company Disclosure
Schedule shall not be used by in preparing such statements), all in reasonable
detail and signed by the principal financial officer of Buyer.
(b) The FY 2000 Earnings shall be calculated in accordance with
this Section 2.3, the definition of Earnings, and with generally accepted
accounting principles, as consistently applied by the Company (the same
materiality standard as used in the past by the Company shall be used in
calculating FY 2000 Earnings but any variations from generally accepted
accounting principles set forth at Section 3.5 of the Company Disclosure
Schedule shall not be used in calculating FY 2000 Earnings). During the period
from the Closing until the date the Earn Out Payment, if any, is actually made
pursuant to this Section 2.3, Company and Buyer shall give the Shareholder
Representative and his accountants, counsel, and other representatives,
reasonable and prompt access during normal business hours to (i) all of the
properties, books, contracts, commitments, and records related to the Company,
and (ii) all other information concerning the Company that the Shareholder
Representative may reasonably request and that is necessary to evaluate and
propose changes to the FY 2000 Earnings notified by Company. In addition, Buyer
shall direct PWC to give to Moss Adams LLP advance notice of and permit Moss
Adams LLP to be present at all inventories done or used by PWC in connection
with its calculation of FY 2000 Earnings and to review all of PWC's work papers
in connection therewith.
(c) In the event the FY 2000 Earnings are less than or equal to
Ten Million Dollars ($10,000,000), then no additional amounts shall be payable
to the Shareholders. In the event the FY 2000 Earnings exceed Ten Million
Dollars ($10,000,000), an additional amount (the "Earn Out Payment") shall be
calculated and paid by Buyer to the Shareholders in accordance with this Section
2.3(c). If the FY 2000 Earnings are greater than Ten Million Dollars
($10,000,000) but less than Eleven Million Five Hundred Thousand Dollars
($11,500,000), then the Earn Out Payment shall equal the product of such excess
and Three and One-Third (3 1/3). If the FY 2000 Earnings equal or exceed Eleven
Million Five Hundred Thousand Dollars ($11,500,000), then the Earn Out Payment
shall equal the sum of: (i) Five Million Dollars ($5,000,000) and (ii) the
product of such excess and One and Two-Thirds (1 2/3).
(d) Unless there is a dispute regarding the Earn-Out Payment (in
which case the provisions of Section 2.3(e) or Section 2.3(g) shall govern) or
the Earn Out Payment is required to be paid earlier in accordance with the
provisions of Section 2.3(f), the Earn Out Payment shall be paid by Buyer to the
Shareholders in cash or immediately available funds by May 15, 2000. Any payment
of the Earn Out Payment under this Section 2.3(d) or the substitute payment
under Section 2.3(f) shall be made to the Shareholders in accordance with their
Applicable Percentage.
(e) Upon receipt of the notice of FY 2000 Earnings from Company
contemplated by Section 2.3(a), the Shareholder Representative shall have thirty
(30) days in which to object in writing to Buyer with respect to the Company's
calculation of the FY 2000 Earnings (the "FY 2000 Earnings Dispute Notice"). In
the event the Shareholder
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Representative does not object to the Company's calculation of the FY 2000
Earnings within such thirty (30) day period, the Company's calculation of the FY
2000 Earnings, as notified to the ShareholderRepresentative, shall be deemed
final, conclusive, and binding on all parties. In the event the Shareholder
Representative gives a timely FY 2000 Earnings Dispute Notice, then the
Shareholder Representative and Buyer shall work together in good faith to reach
an agreement on the appropriate Earn Out Payment. If within fifteen (15) days
after Buyer's receipt of the FY 2000 Earnings Dispute Notice, the parties have
not reached an agreement, the parties shall engage the Accounting Arbitrator to
calculate the amount, except as otherwise provided at Section 2.3(g). The
decision of the Accounting Arbitrator shall be final, conclusive, and binding on
all parties. The Accounting Arbitrator shall make its determinations using the
accounting and other principles set forth in Section 2.3(b). The Accounting
Arbitrator shall be directed to make its determination within forty-five (45)
days of its engagement. Payment shall be due within ten (10) days after the
resolution of any such dispute. In addition to the Earn Out Payment due on such
tenth (10th) day, Buyer shall on such 10th day pay interest accrued on the Earn
Out Payment from May 15, 1999 until such 10th day, calculated at a rate of seven
percent (7%) per annum. Each of Buyer and the Shareholders shall pay the costs
and expenses of their own accountants and attorneys and shall equally bear the
expense of the arbitration, with the one-half portion to be borne by the
Shareholders being paid by each of them in accordance with their Applicable
Percentage.
(f) If prior to the end of the Earn Out Period, either (X) any of
the following events occurs on or prior to December 1, 1999: (a) as a result of
any merger, sale of shares, other disposition, or other event or series of
events, the Company is no longer Controlled by the Buyer (but not including a
merger of the Company into the Buyer), (b) any sale, license, lease or other
disposition by Company of all or substantially all of the assets of the Company
(unless to the Buyer or an entity Controlled by the Buyer), (c) any event or
circumstance in which either of the following occurs: (i) more than one of the
following individuals no longer holds the position at the Buyer in which he or
she is employed as of the date of this Agreement: Ian R. Wilson, James B.
Ardrey, Ray Chung or M. Laurie Cummings (such individuals, collectively, the
"Designated Individuals"), or (ii) fewer than two members of the board of
directors of Buyer or its successor by merger or otherwise are Designated
Individuals, provided that for purposes of the foregoing, cessation of status as
an executive or board member of Buyer because of death or disability shall be
disregarded, (d) any sale, license, lease or other disposition by Buyer of all
or substantially all of its assets, (e) the commencement of bankruptcy,
insolvency, receivership or similar proceedings by or against any of Buyer or
Company, or (f) Buyer or its assignee under the relevant Employment Agreement,
other than pursuant to action directed or approved in writing by the Shareholder
Representative, terminates the employment of either Steve Galando or Ralph
Ardolino with the Company for reasons other than (i) "Cause," as defined in
their respective Employment Agreements, or (ii) failure of the Company to earn
at least Three Million Eight Hundred Fifty One Thousand Dollars ($3,851,000) in
Earnings during the period from February 1 to July 31, 1999 (termination by
Buyer must take place on or before September 30, 1999 to qualify for this
exception), or (Y) Buyer or its assignee under the relevant Employment Agreement
terminates at any time during the Earn Out Period the employment of Joseph A.
Galando with the Company for any reasons other than "Cause," death, or
"permanent disability" as defined in such Employment Agreement, then the
Shareholders shall, at the election of the Shareholder Representative, exercised
within the later of thirty (30) days after the receipt by the
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Shareholder Representative of notice of the event in question or thirty (30)
days after the actual occurrence of the event in question, be entitled to
receive Five Million Dollars ($5,000,000) in lieu of any Earn Out Payment
calculated under this section. Such payment shall be in cash or immediately
available funds and shall be made within ten (10) days of the election by the
Shareholder Representative described above in a single payment.
(g) In the event that Shareholders Representative alleges in its
FY 2000 Earnings Dispute Notice an entitlement to a higher Earn Out Payment
because of breaches of Buyer's covenants at Section 8.15, and the parties are
unable to resolve the dispute within the fifteen (15) day resolution period
referenced to at Section 2.3(e), then the Accounting Arbitrator shall not be
engaged and the dispute shall be resolved in accordance with Section 12.1. Buyer
shall pay interest on the Earn Out Payment, if any, determined to be due by the
court of competent jurisdiction, from May 15, 2000 until the date the
determination of the court becomes final and the Earn Out Payment is due per
such determination, which interest shall (i) be at a rate of seven percent (7%)
per annum, and (ii) be paid on the date the Earn Out Payment is due per such
court determination.
2.4 Closing. The Closing will take place at the offices of Preston
Gates & Ellis LLP, 701 Fifth Avenue, Suite 5000, Seattle, Washington on
Wednesday, March 31, 1999 (the "Closing Date"), unless another place or date is
agreed to in writing by the parties hereto.
2.5 Closing Date Deliveries.
(a) On the Closing Date, the Company, the Shareholders, and
the General Partners, as applicable, shall deliver to Buyer the following:
(i) Copy of the Articles of Incorporation of the
Company, certified as of a recent date by the Washington Secretary of State;
(ii) Certificate of Existence of the Company as of a
recent date issued by the Washington Secretary of State and certificates of
qualification as a foreign corporation as of a recent date in those states where
the Company is so qualified;
(iii) Officer's Certificate of the Company, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer, as to (w)
no amendments to the Articles of Incorporation of the Company since the date of
the certification by the Washington Secretary of State of the Articles of
Incorporation of Company provided pursuant to Section 2.5(a)(i); (x) Bylaws of
the Company; (y) resolutions of the Board of Directors of the Company and the
Shareholders authorizing the execution and performance of this Agreement and the
Transaction contemplated hereby; and (z) incumbency and signatures of the
officers of the Company executing this Agreement and any agreement executed and
delivered in connection herewith;
(iv) Stock certificates evidencing the Company Shares
being sold to Buyer hereunder, together with duly executed stock assignments in
form reasonably appropriate for transfer, and copies of the stock certificates
evidencing the Company Shares redeemed by the
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Company pursuant to Section 8.14 marked cancelled, together with copies of duly
executed stock assignments to the Company in respect of such stock certificates;
(v) An opinion of Preston Gates & Ellis LLP, counsel
to the Company, in the form of Exhibit 9.2.3, attached hereto;
(vi) The certificates required by Sections 9.2.1 and
9.2.2;
(vii) The stock register and minute book of the
Company;
(viii) Executed letters of resignation from each of the
Company's current officers and its sole director; and
(ix) A copy of the Escrow Agreement executed by the
Shareholders and Escrow Agent, substantially in the form of Exhibit 2.5(a)(ix)
hereto (the "Escrow Agreement").
(b) On the Closing Date, Buyer shall deliver the following:
(i) To Escrow Agent, that portion of the Initial
Purchase Price to be remitted to Escrow Agent pursuant to Section 2.1, to each
Shareholder, the balance of the Initial Purchase Price due to such Shareholder
in accordance with Section 2.1, and to Joseph A. Galando and Stanley J. Carey,
the noncompetition payments contemplated by Section 2.6;
(ii) The certificates required by Sections 9.3.1 and
9.3.2.
(iii) Copies of Buyer's Certificate of Incorporation,
certified as of a recent date by the Delaware Secretary of State;
(iv) Certificate of good standing of Buyer issued as
of a recent date by the Delaware Secretary of State;
(v) Officer's Certificate of Buyer, dated the Closing
Date, in form and substance reasonably satisfactory to the Company, as to (a) no
amendments to the Certificate of Incorporation since the date of the
certification by the Delaware Secretary of State of the Certificate of
Incorporation of Buyer provided pursuant to Section 2.5(b)(i); (b) the Bylaws of
Buyer; (c) the resolutions of the Board of Directors of Buyer authorizing the
execution and performance of this Agreement and the Transaction contemplated
hereby; and (d) incumbency and signatures of the officers of Buyer executing
this Agreement and any agreement executed and delivered in connection herewith;
(vi) To the Shareholders, an opinion of counsel to
Buyer in substantially the form of Exhibit 9.2.3, attached hereto; and
(vii) To the Shareholders, a copy of the Escrow
Agreement, executed by the Buyer.
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2.6 Payment for Noncompete; Allocation; Agreed Value for Certain
Assets.
(a) Simultaneously with the payment of the Initial Purchase
Price, the Buyer shall pay Fifty Thousand Dollars ($50,000) to Joseph A. Galando
and Fifty Thousand Dollars ($50,000) to Stanley J. Carey, in consideration for
their respective noncompetition covenants contained in this Agreement. Such
payments shall be made in immediately available funds.
(b) Buyer, the Company, the Shareholders, and the General
Partners agree that the fair market value of the assets, net of liabilities
transferred pursuant to Section 8.14, is as set forth on Schedule 8.14.
(c) Buyer, the Company, the Shareholders, and the General
Partners each agree that they shall complete all Tax Returns in a manner that
reflects: (i) only the foregoing payments for, and no additional allocation from
the Purchase Price for, the noncompetition covenants contained in this
Agreement; and (ii) the value of the assets set forth on Schedule 8.14.
2.7 Ardolino Adjustment. If, prior to the first anniversary of the
Closing Date, Ralph Ardolino terminates his employment with the Company
voluntarily or is terminated for "Cause" (as defined in his Agreement with the
Company dated December 11, 1998) or breaches the noncompetition or
confidentiality provisions of his Agreement with the Company dated December 11,
1998, and as a result the Company is relieved of its obligation to make the
second Ardolino Payment, then within ten (10) days of such event Buyer shall pay
to the Shareholders pro rata in accordance with their Applicable Percentage an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000) (the "Ardolino
Adjustment").
2.8 Late Payments. In the event that any payment under this Article
II or any portion thereof is not paid when due, then the party required to make
payment shall also be required to pay interest on the unpaid amount at the rate
of 12% per annum (the "Default Interest Rate") from the date the payment was due
until the entire amount has been paid. For the avoidance of doubt, the amount of
any payment, such as the Earn Out Payment, that by its terms includes or may
include a 7% interest component shall be determined, including such interest
component, as of the date it is required to be paid, and thereafter interest
shall accrue on the unpaid portion of the amount as so calculated at the Default
Interest Rate. The foregoing is in addition to any other remedies a party may
have.
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY
Except as disclosed in the Company Disclosure Schedule and subject to the
provisions of Section 10.8, the Company, the Galando Group, and the Carey Group
represent and warrant to Buyer as herein set forth below. Such representations
and warranties shall be deemed to be made as of the date hereof and as of the
Closing Date. Disclosure of an item in response to one section of this
Agreement shall constitute disclosure and response to every section of this
Agreement, notwithstanding the fact that no express cross-reference is made,
provided that the
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information provided in the Company Disclosure Schedule is meaningful and not
misleading in the context deemed disclosed for such other purpose(s).
3.1 Organization and Standing; No Subsidiaries; Charter Documents. The
Company is a corporation duly organized and validly existing under the laws of
the State of Washington, has all requisite power and authority to own, lease,
and operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which a failure to so qualify would have a Material Adverse Effect on the
Business Condition of the Company. The Company does not have any subsidiaries
or own of record or beneficially any capital stock of or equity interest or
investment in any person. The copies of the Articles of Incorporation and
Bylaws of the Company previously delivered or made available to Buyer are true
and complete copies of such instruments as amended through the date of this
Agreement and are in full force and effect as of the date hereof.
3.2 Capital Structure.
(a) The authorized capital stock of the Company consists of Fifty
Thousand (50,000) shares of voting common stock, of which Eight Hundred Fifty
Five (855) shares are issued and outstanding and One Million (1,000,000) shares
of non-voting common stock, of which no shares are issued and outstanding. All
Company Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with applicable federal and state
securities laws.
(b) There are not any options, warrants, calls, conversion
rights, commitments, agreements, contracts, understandings, restrictions,
arrangements, or rights of any character to which the Company is a party or by
which the Company may be bound obligating the Company to issue, deliver, or
sell, or cause to be issued, delivered, or sold, additional shares of the
capital stock of the Company, or obligating the Company to grant, extend, or
enter into any such option, warrant, call, conversion right, commitment,
agreement, restriction, or right. The Company Shares to be purchased by Buyer
pursuant to this Agreement shall, at the Closing, constitute all of the issued
and outstanding capital stock of the Company.
3.3 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the Company Required
Statutory Approvals, to consummate the Transaction contemplated hereby. The
execution and delivery by the Company of this Agreement and the consummation of
the Transaction contemplated hereby have been duly authorized by all necessary
corporate actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms, except that
such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws relating to enforcement of creditors'
rights generally, and (ii) general equitable principles.
3.4 Compliance with Laws and Other Instruments.
(a) The Company holds all Licenses necessary for the lawful
conduct of its business pursuant to all applicable statutes, laws, ordinances,
rules, and regulations of all
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Governmental Entities having jurisdiction over it or any part of its operations,
excepting, however, where such a failure would not have a Material Adverse
Effect on the Business Condition of the Company. To the Knowledge of the
Company, there are no violations or claimed violations of any such License or
any such statute, law, ordinance, rule, or regulation.
(b) Subject to the satisfaction of the conditions set forth in
Sections 9.1 and 9.3, the execution and delivery of this Agreement do not, and
the consummation of the Transaction contemplated hereby will not conflict with
or result in any violation of, or default under, or give rise to a right of
termination, cancellation, or acceleration of any obligation or to loss of a
material benefit under, or the creation of a lien, pledge, security interest,
charge, or other encumbrance on assets pursuant to (i) any provision of the
Articles of Incorporation or Bylaws of the Company, or (ii) any loan or credit
agreement, note, bond, mortgage, indenture, contract, lease, or other agreement
or instrument, permit, concession, franchise, License, Order, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
Assets, other than, in the case of (ii), any such violation or default which
individually or in the aggregate would not have a Material Adverse Effect on the
Business Condition of the Company.
(c) No Consent of any third party is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Transaction
contemplated hereby except for Consents, if any, relating to the filing of a
premerger notification report and all other required documents by Buyer and the
Company, and the expiration of all applicable waiting periods under the HSR Act
(the "Company Required Statutory Approvals"), except for such Consents as are
identified and set forth on Schedule 9.1.1, and except for such other Consents
which if not obtained would not have a Material Adverse Effect on the Business
Condition of the Company.
3.5 Company Financial Statements. The following financial statements have
been provided to Buyer: (i) reviewed income statement and balance sheet of the
Company as of the close of the fiscal year ended January 31, 1998, (ii) an
internally prepared balance sheet dated January 31, 1999 (which balance sheet
shall be referred to as the "Current Balance Sheet"); (iii) an internally
prepared income statement of the Company for the period from February 1, 1998 to
January 31, 1999 (the statements in (i) through (iii) above are collectively
referred to as the "Company Financial Statements"). Such Company Financial
Statements: (i) were compiled from and are in accordance with the books and
records regularly maintained by the Company; (ii) are true and correct in all
material respects and present fairly, in all material respects, the financial
position of the Company and the results of its operations as of the dates
indicated; and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied (except as otherwise indicated in the
notes thereto); provided, however, that the Current Balance Sheet does not
include footnotes and there have been no period-end adjustments.
3.6 Absence of Undisclosed Liabilities. Except for (i) liabilities that
are accrued or reserved against in the Current Balance Sheet, and (ii)
liabilities that have been incurred in the ordinary course of business since the
date of the Current Balance Sheet or that would not, in accordance with the
Company's normal accounting practices, be recorded in the Company's books as of
or prior to the date of preparation of the Current Balance Sheet, and subject to
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normal booked allowances and unbooked allowances for advertising, promotion, and
slotting, which have historically been accounted for by the Company on a cash
basis, not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate,
(a) the Company has no liabilities or obligations (whether absolute, accrued, or
contingent) that generally accepted accounting principles would require the
Company to set forth on the Current Balance Sheet; and (b) the Company has no
liabilities or obligations (whether absolute, accrued, or contingent) other than
(w) those that are the subject of exceptions at items (i) and (ii) in the first
sentence of this Section 3.6, (x) liabilities or obligations disclosed in this
Agreement, the Company Disclosure Schedule, or other schedules to this
Agreement, (y) obligations under contracts and commitments of the Company that
are not required to the listed on Schedules 3.14 or 3.18(b) or (z) liabilities
that would be covered by the Company's insurance policies. (In interpreting
this and other representations and warranties of this Agreement, the principle
that the specific governs and controls over the general shall apply.
Accordingly, by way of example but not by way of limitation, if there is a
specific representation and warranty on the absence of infringement by the
Company of the Intellectual Property Rights of third parties which is qualified
to the Knowledge of the Company, the Shareholders shall have no liability for
infringement by the Company which was not to the Knowledge of the Company,
notwithstanding the provisions of this Section 3.6).
3.7 Absence of Certain Changes. Except as disclosed on the Company
Disclosure Schedule, and except as otherwise specifically disclosed or permitted
by this Agreement, since the date of the Current Balance Sheet, the Company has
conducted its business in the ordinary course and there has not been: (i) any
Material Adverse Effect on the Business Condition of the Company or any
development or combination of developments that is reasonably likely to result
in such a Material Adverse Effect; (ii) any damage, destruction or loss, whether
or not covered by insurance, having a Material Adverse Effect on the Business
Condition of the Company; (iii) any increase or change in the compensation or
benefits payable or to become payable by the Company to any of its employees,
except in the ordinary course of business consistent with past practice,
provided that the foregoing and item (v) below shall not be deemed to restrict
or limit the Company's ability to pay bonuses to its employees; (iv) any
acquisition or sale of a material amount of property of the Company, except in
the ordinary course of business; (v) any increase or modification in any bonus,
pension, insurance, or other employee benefit plan or arrangement made to, for,
or with any of its employees; (vi) the granting of stock options, restricted
stock awards, stock bonuses, stock appreciation rights and similar equity based
awards; (vii) any amendments to the Articles of Incorporation or Bylaws of the
Company; (viii) any resignation or termination of any officer or key employee of
the Company (to the Knowledge of the Company, there is no impending resignation
or termination of employment of any such officer or key employee); (ix) any
sale, assignment, transfer, or license of any patents, trademarks, copyrights,
trade secrets or other intangible assets; (x) any material change in the
accounting policies of the Company or, with respect to the operation of the
business or the Assets, any material change such as a change from co-packing to
manufacturing by the Company or from an independent sales force to the use of
employees; (xi) any disposal or lapse of any material rights to use any
Intellectual Property Rights; (xii) any waiver, compromise, or cancellation of
any right, or cancellation or compromise of any claim or liability, other than
in the ordinary course of business and in a manner and amount consistent with
the past practice of the Company (settlement of the Lu-Mar/CMS Claim shall not
be a violation of this representation and warranty); (xiii) any termination,
discontinuation, closure, or disposal of any material facility
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related to its business or the Assets; or (xiv) any agreement or arrangement to
take any of the actions referred to in this Section 3.7.
3.8 Taxes.
(a) The Company has timely filed (or caused to be filed) all Tax
Returns required to be filed by the Company, which Tax Returns are true,
correct, and complete in all material respects. All Taxes of the Company for all
taxable periods ending before the Closing Date, or otherwise attributable to all
periods ending before the Closing Date, and all Taxes for periods beginning
before and ending after the Closing which are allocable to the Shareholders
under Section 8.13(c), have been or shall have been paid prior to Closing or
shall have been adequately accrued or reserved (net of prepaid tax deposits) on
the Closing Balance Sheet in accordance with generally accepted accounting
principles, consistently applied. The Company Disclosure Schedule accurately
sets forth the tax years beginning on or after February 1, 1995 for which the
Company's federal and state income tax returns, respectively, have been audited
and any years that are the subject of a pending audit by the IRS and the
applicable state agencies. Except as so disclosed, the Company is not subject to
any pending or, to the Knowledge of the Company, threatened, tax audit or
examination and the Company has not waived any statute of limitations with
respect to the assessment of any Tax.
(b) There are no liens for Taxes upon the Assets of the Company,
except for Taxes that are not yet payable. The Company has not entered into any
agreements, waivers, or other arrangements in respect of the statute of
limitations in respect of its Taxes or Tax Returns. The Company has withheld all
Taxes required to be withheld in respect of wages, salaries, and other payments
to all employees, officers, and directors and timely paid all such amounts
withheld to the proper taxing authority.
(c) No tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transactions contemplated by this Agreement.
(d) The Company has never been a party to any tax allocation
agreement. The Company has never been a member of an affiliated group filing a
consolidated federal income tax return or merged with another corporation.
(e) The Company has never made an election under Section 341(f)
of the Code.
3.9 Employees. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or,
to the Knowledge of the Company, threatened with respect to the Company. No
employee of the Company has any written agreement or contract regarding his or
her employment, other than an agreement for at-will employment. To the
Knowledge of the Company, no employee of the Company, nor any consultant with
whom the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement, or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company and, to the Knowledge of the Company, the continued employment by the
Company of its present
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employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice alleging that any such violation has occurred. No employee of the
Company has been granted the right to continued employment by the Company or to
any material compensation following termination of employment with the Company.
To the Knowledge of the Company, the Company is in material compliance with all
currently applicable laws respecting employment, employment practices and terms,
conditions of employment and wages and hours. The Company is not engaged in any
unfair labor practice and there is no unfair labor practice complaint pending or
threatened against the Company before the National Labor Relations Board. There
are no pending or threatened charges or complaints alleging sexual harassment or
other discrimination by the Company or any of its employees. Schedule 3.9
identifies: (a) the name of each director and officer of the Company (including
the title of any officer); and (b) all accrued but unpaid vacation pay and any
other compensation owing to any General Partner as of January 31, 1999 that is
not reflected on the Current Balance Sheet.
3.10 Employee Benefit Plans.
(a) Each Plan is listed in Schedule 3.10. The Company has
delivered or made available to Buyer true and correct copies of all governing
instruments and related agreements with respect to each such Plan. Except as set
forth on the Company Disclosure Schedule, (i) to the Knowledge of the Company,
each Plan has been maintained and administered in material compliance with its
terms and with the requirements prescribed by ERISA, the Code and all other
applicable statutes, Orders, rules, and regulations; (ii) each Plan is, to the
extent required by applicable law or contract, fully funded without having any
deficit or unfunded actuarial liability; (iii) to the extent applicable, to the
Knowledge of the Company, the Plans comply, in all material respects, with the
requirements of ERISA and the Code, and any Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so qualified
and, to the Knowledge of the Company, nothing has occurred to cause the loss of
such qualified status; (iv) no Plan is or ever was covered by Title IV of ERISA
or Section 412 of the Code; (v) there are no pending or anticipated material
claims against or otherwise involving any of the Plans and no suit, action, or
other litigation (excluding claims for benefits incurred in the ordinary course
of Plan activities) has been brought against or with respect to any such Plan
nor, to the Knowledge of the Company, is there a basis for such claim; (vi)
there is no pending, nor to the Knowledge of the Company, threatened
investigation or audit involving any Plan by the IRS, Department of Labor or
other Governmental Entity and all contributions, reserves or premium payments,
required to be made as of the date hereof to the Plans have been made and the
Company and each ERISA Affiliate shall continue to make such payments through
the Closing Date; (vii) neither the Company nor any ERISA Affiliate is a party
to, or has ever contributed to or had any obligation to contribute to, any plan
subject to Subtitle E of Title IV of ERISA; (viii) neither the Company nor any
ERISA Affiliate has obligations for retiree health and life benefits other than
for continuation coverage as may be required by Part 6 of Title 1 of ERISA; and
(x) with respect to any "group health plan" within the meaning of Section 607 of
ERISA or Section 5000(b)(1) of the Code, maintained by the Company or any of its
ERISA Affiliates, the Company and/or any ERISA Affiliate has, to the Knowledge
of the Company, complied in all material respects with the provisions of Parts 6
and 7 of the Title 1 of ERISA and Sections 4980, 9801, 9802, 9811 or 9812 of the
Code.
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(b) Neither the Company, nor any Plan, nor any ERISA Affiliate
has engaged in a prohibited transaction within the meaning of Section 406 of
ERISA and 4975 of the Code which is not an exempt transaction under Section 408
of ERISA or Section 4975(d) of the Code, or incurred any liability or penalty
under Section 4975 of the Code or Section 502 of ERISA;
3.11 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the Transaction contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee, or independent contractor of the Company, from the Company
under any Plan, agreement, or otherwise, (ii) increase any benefits otherwise
payable under any Plan or agreement, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
3.12 Litigation. Schedule 3.12 contains a list of each pending or
threatened Proceeding against the Company or to which the Company is a party.
Except as set forth on Schedule 3.12, there is no Proceeding pending or, to the
Knowledge of the Company, threatened, that would, if adversely determined,
individually or in the aggregate, have a Material Adverse Effect on the Business
Condition of the Company, nor is there any Order of any Governmental Entity or
arbitrator outstanding against the Company having, or which, insofar as
reasonably can be foreseen, in the future could have any such effect. Except as
set forth on Schedule 3.12, to the Knowledge of the Company, there is no
investigation pending or threatened against the Company before any foreign,
federal, state, municipal, or other governmental department, commission, board,
bureau, agency, instrumentality, or other Governmental Entity.
3.13 Title to and Condition of Assets.
(a) The Company has good and marketable title to all of its
Assets, free and clear of any material liens or restrictions that would preclude
their current use, except: (i) liens of current taxes and assessments not yet
delinquent, and (ii) liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to materialmen, warehousemen and the like.
(b) Schedule 3.13(b) sets forth (i) complete and correct
descriptions of each item of tangible personal property (x) owned by the Company
that has a depreciated book value per unit in excess of $1,000; (y) used but not
owned by the Company and in the possession of the Company and having a value per
unit in excess of $1,000 (other than items provided in connection with the
Leased Premises); or (z) used by the Company and having rental payments therefor
in excess of $1,000 per annum, and (ii) a complete and correct description of
the owner of, and any agreement relating to the use of, each such item of
tangible personal property not owned by the Company and the circumstances under
which such property is used (other than items provided in connection with the
Leased Premises).
(c) The Fixed Assets taken as a whole currently in use or
necessary for the business and operations of the Company are in reasonable
working condition for operations of the Company's business. Except as set forth
in this Agreement, the tangible Assets are AS IS,
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WHERE IS, and without representation as to merchantability or fitness for any
particular purpose. Except for the Leased Premises, the Assets constitute all of
the assets necessary for the Company's business as currently operated; provided,
however, that the foregoing shall not be deemed to constitute a representation
or warranty of non-infringement with respect to any Intellectual Property
Rights.
3.14 Major Contracts. Schedule 3.14 contains a list of each of the
following agreements to which the Company is a party or subject as of the date
of this Agreement:
(a) All contractual obligations under which the Company has or
will after the Closing have any liability or obligation to or for the benefit of
either of the Shareholders, any of the General Partners, or any Affiliate of the
Shareholders or General Partners;
(b) Any lease for personal property in which the amount of
payments that the Company is required to make on an annual basis exceeds $1,000,
which is for a duration of more than one year, and which is not reflected in the
Company Financial Statements as a capitalized lease;
(c) Any contract containing covenants purporting to materially
limit the Company's freedom to compete in any line of business in any geographic
area;
(d) All contractual obligations (including, without limitation,
options) to sell or otherwise dispose of any Assets, except for sales of
inventory in the ordinary course of business;
(e) All contractual obligations under which the Company is or may
become obligated to pay any amount in respect of indemnification obligations,
purchase price adjustment or otherwise in connection with any (i) acquisition or
disposition of assets or securities (except for sales of inventory in the
ordinary course of business), (ii) merger, consolidation or other business
combination, or (iii) series or group of related transactions or events of a
type specified in subclauses (i) and (ii);
(f) All agreements with sales representatives and distributors;
(g) All partnership or joint venture agreements or similar
arrangements;
(h) Any loan or other agreements relating to the borrowing of
money;
(i) any contract that grants any person the exclusive right to
sell products or provide services within any geographical region;
(j) any contract creating a capital lease obligation, any
contract for the sale of accounts receivable, any contract constituting a
guarantee of debt of any person, or any contract requiring the Company to
maintain the financial position of any other person (other than endorsements in
the ordinary course of business);
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(k) any contract between the Company and any Governmental Entity;
(l) any contract involving interest rate swaps, cap or collar
agreements, commodity or financial future or option contracts, or similar
derivative or hedging contracts;
(m) any contract among the Company and its security holders
including shareholders agreements, voting trusts, proxies, and similar
arrangements and any other contract of which the Company has knowledge between
any of the Company's security holders that governs any rights or creates any
obligations with respect to any securities issued by the Company;
(n) any confidentiality or similar contract with the Company's
current material suppliers; or
(o) Any other material agreement or commitment to which the
Company is a party, or otherwise relating to or affecting any of the Company's
assets, properties, or operations, requiring payments in excess of Fifty
Thousand Dollars ($50,000), including without limitation the purchase or sale of
all or substantially all of the assets of any person or any operating division
thereof, whether by asset sale, stock sale, merger, or otherwise (but excluding
purchase orders and slotting and promotion arrangements in the ordinary course
of business and, with respect to slotting and promotion arrangements, consistent
with past practice).
All contracts, plans, agreements, leases, and other commitments listed on
Schedule 3.14 are valid and in full force and effect with respect to the Company
and, to the Knowledge of the Company, the other parties thereto and neither the
Company nor, to the Knowledge of the Company, has any other party thereto,
breached any material provisions of, or is in default in any material respect
under the terms thereof. True and complete copies of each of the written
contracts listed on Schedule 3.14 have been made available to Buyer. Except for
such contracts and purchase orders and slotting and promotion arrangements in
the ordinary course of business and, with respect to slotting and promotion
arrangements, consistent with past practice, there is no contract the
cancellation or termination of which would have a Material Adverse Effect on the
Business Condition of the Company. There are no renegotiations of, or attempts
to renegotiate, any material amounts paid or payable to or by the Company under
current or completed contracts with any person having the contractual or
statutory right to demand or require such negotiation.
3.15 Customers and Suppliers. Schedule 3.15 sets forth a complete and
correct list of: (a) the Company's ten largest customers during the fiscal year
ended January 31, 1998 based upon gross sales amounts, (b) the three (3) largest
suppliers by dollar volume of the Company and the aggregate dollar volume of
purchases by the Company from such suppliers for the fiscal year ended January
31, 1998; (c) the Company's ten largest customers during the nine-month period
ended October 31, 1998; and (d) the three (3) largest suppliers by dollar volume
of the Company and the aggregate dollar volume of purchases by the Company from
such suppliers for the nine-month period ended October 31, 1998. To the
Knowledge of the Company, none of such customers or suppliers has terminated or
expressed an intent to terminate its business with the Company in the future or
to reduce the amount of such business in a manner that would have a Material
Adverse Effect on the Business Condition of the Company.
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3.16 Real Property. The Company does not own any real property. Schedule
3.16 sets forth a list of all Leased Premises, in each case, setting forth the
lessor and lessee thereof and the date and term of each of the leases, and the
street address of each property covered thereby. Each of the leases is in full
force and effect and has not been amended, and the Company is not in material
default or breach under any lease. No event has occurred which, with the passage
of time or the giving of notice or both, would cause a material breach of or
default under any of such leases. The Company has delivered or made available to
Buyer true and correct copies of such leases. The Company enjoys in all material
respects peaceful and undisturbed possession under each such lease. With respect
to each such Leased Premises:
(a) The Company has a valid leasehold interest in the Leased
Premises;
(b) The Company has not received notice of: (i) any condemnation
Proceeding with respect to any portion of the Leased Premises or any access
thereto; or (ii) any special assessment that may encumber any of the Leased
Premises.
3.17 Environmental Matters.
(a) The Company is and has at all times been in material
compliance with all Environmental Laws governing its business and operations,
including, without limitation: (i) all requirements of Environmental Law
relating to the discharge and handling of Hazardous Substances; (ii) all
requirements of Environmental Law relating to notice, record keeping and
reporting; and (iii) all requirements of Environmental Law relating to obtaining
and maintaining Licenses for the ownership of its properties and assets and the
operation of its business as presently conducted, including Licenses relating to
the handling and discharge of Hazardous Substances.
(b) There are no Notices or Proceedings pending or, to the
Knowledge of the Company, threatened against the Company, or its businesses,
operations, properties, or assets, issued by any Governmental Entity or third
party with respect to any Environmental Laws (or Licenses issued to the Company
thereunder) in connection with, related to or arising out of the ownership by
the Company of its properties or assets or the operation of its business.
(c) The Company has not discharged, nor has it allowed or
arranged for any third party to discharge Hazardous Substances to, at, or upon
any location other than a site lawfully permitted to receive such Hazardous
Substances. There has not occurred, nor is there presently occurring, a
discharge of any Hazardous Substance on, into or beneath the surface of any real
property currently leased by the Company, in an amount requiring the Company to
make a notice or report to a Governmental Entity.
(d) The Company does not own or operate, nor has the Company
owned or operated any "aboveground storage tanks" or any "underground storage
tanks" as defined in any applicable Environmental Law, and to the Knowledge of
the Company, there are not now nor have there ever been any such underground
storage tanks beneath any real property currently leased by the Company that are
required to be registered under applicable Environmental Laws.
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3.18 Intellectual Property Rights.
(a) Schedule 3.18(a) sets forth a true and complete list of all
Intellectual Property Rights that the Company has registered or has submitted an
application to register with any state, federal, or foreign government office or
agency (the "Registered Intellectual Property"). The Company believes it has
taken appropriate steps to register or submit applications to register, in its
name, in all territories in which the Company currently conducts business, all
trademarks that are material to the Company's business as conducted as of the
date hereof and for which registration would be appropriate in the Company's
judgment.
(b) Schedule 3.18(b) sets forth a true and complete list of all
Intellectual Property Rights (other than software that is generally commercially
available to the public) that is licensed or sublicensed to or by the Company
(the "Licensed Intellectual Property"). The Company is in full compliance, in
all material respects, with all of the terms and conditions of any agreement to
which it is a party covering the Licensed Intellectual Property. Neither the
Company nor any Shareholder has received, during the three-year period preceding
the date of this Agreement, any notice of breach, default, termination or
cancellation regarding any agreement covering any of the Licensed Intellectual
Property.
(c) Each of the registrations or applications for registration
for the Registered Intellectual Property is valid and in full force and effect.
To the Knowledge of the Company, each of the registrations or applications for
registration for the Licensed Intellectual Property is valid and in full force
and effect. The Company has complied in all material respects with all laws,
rules, and regulations (and, with respect to the Licensed Intellectual Property,
the terms of the relevant agreement) relating to the maintenance of such
registrations or applications, including without limitation the payment of any
maintenance fees for the period through and including the date of this
Agreement.
(d) To the Knowledge of the Company, the Company has the right to
use or exploit all of the Intellectual Property Rights necessary or requisite
for the conduct of the business of the Company as currently conducted in the
territories in which the Company currently conducts business. The consummation
of the Transaction will not void, in whole or in part, any of the Company's
rights with respect to such use or exploitation. To the Knowledge of the
Company, the Company's use of the Intellectual Property Rights as currently used
in the territories in which the Company currently conducts business does not
infringe upon or violate the Intellectual Property Rights of any person or
entity, including without limitation rights with respect to any patent,
trademark, or copyright.
(e) The Company has obtained all consents, waivers, or approvals
necessary, if any, for the Company to exploit the Licensed Intellectual Property
following the consummation of the Transaction on terms and conditions identical
to those to which the Company would have been bound under such license or other
agreement if the Transaction had not been consummated and no other consents,
waivers, or approvals are necessary for the Company to use or exploit the
Licensed Intellectual Property following the consummation of the
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Transaction; provided, however, that the foregoing shall not be construed to
constitute a representation or warranty regarding non-infringement.
(f) The Registered Intellectual Property, the rights of the
Company in the Licensed Intellectual Property, and the other Intellectual
Property Rights owned by the Company: (i) are free and clear of any encumbrances
whatsoever, including without limitation security interests, liens, pledges, or
claims and will not become subject to any such encumbrances as a result of the
consummation of the Transaction; and (ii) are not subject to any outstanding
order, judgment, decree, or court stipulation restricting the licensing, use, or
other exploitation thereof by the Company, whether prior to or following the
consummation of the Transaction.
(g) Neither the Company nor any Shareholder has, during the
three-year period preceding the date of this Agreement, been a party to any
action, suit, claim, hearing, or arbitration alleging that the Company's use or
exploitation of any Intellectual Property Rights infringes or violates the
rights of any person or entity (each a "Third Party Action"). No Third Party
Actions are pending against the Company or, to the Knowledge of the Company,
threatened. To the Knowledge of the Company, no conditions exist upon which a
Third Party Action could reasonably be based.
(h) The Company has not, during the three-year period preceding
the date of this Agreement, asserted or threatened to assert an action, suit,
claim, hearing, or arbitration against any person or entity alleging that such
person's or entity's acts or omissions infringe or violate any of the Company's
rights with respect to the Intellectual Property (each a "Company Action"). No
Company Actions are pending and, to the Knowledge of the Company, no conditions
exist upon which a Company Action could reasonably be based.
(i) To the Knowledge of the Company, during the three-year period
preceding the date of this Agreement, no licensor of any of the Licensed
Intellectual Property has asserted any action, suit, claim, hearing, or
arbitration against any person or entity alleging that such person's or entity's
acts or omissions infringe or violate any of the Company's rights with respect
to the Licensed Intellectual Property (each a "Licensor Action"). No Licensor
Actions are pending against the Company and, to the Knowledge of the Company, no
conditions exist upon which a Licensor Action could reasonably be based.
3.19 Investment Bankers, Brokers, and Finders. Except for Zachary Scott &
Co. in accordance with the terms of its engagement letter (and all of whose fees
and costs shall be borne solely by the Shareholders and the General Partners),
neither the Company, the Shareholders, the General Partners, nor any of the
directors, officers, or employees of either the Company or the Shareholders has
employed any investment banker, broker, or finder or incurred any liability for
any financial advisory fees, brokerage fees, commissions, or similar payments in
connection with the Transaction contemplated by this Agreement.
3.20 Products Liability. There are no claims presently pending or, to the
Knowledge of the Company, threatened against the Company that are for products
liability on account of any express or implied warranty or are for personal
injury.
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3.21 Accounts Receivable. The accounts receivable indicated on the
Current Balance Sheet and to be indicated on the Closing Balance Sheet, net of
the allowance indicated for accounts of doubtful collectibility, represent bona
fide claims that have or will have arisen in the ordinary course of business and
can reasonably be anticipated to be paid in full (other than with respect to
setoff for advertising, promotions, and slotting allowances) without outside
collection efforts within ninety (90) days of the due date, subject to no
counterclaims or setoffs (other than in respect of advertising, promotions, and
slotting allowances).
3.22 Inventory. The inventory reflected in the Current Balance Sheet is
good and merchantable material, of a quality and quantity saleable in the
ordinary course of business of the Company, and is carried on the books and
records of the Company on an actual cost basis consistent with the past
practices of the Company and in accordance with generally accepted accounting
principles consistently applied.
3.23 Insurance. Set forth in Schedule 3.23 is a complete and accurate
list as of the date hereof of all insurance policies carried by the Company (as
a party, named insured or otherwise the beneficiary of coverage) and an accurate
list of all self-insured and insurance-covered losses and workers' compensation
claims from February 1, 1996 through November 30, 1998, excluding any losses or
claims below the deductibles. All such insurance policies are in full force and
effect and shall remain in full force and effect through the Closing Date.
Neither the Company nor, to the Knowledge of the Company, any other insured
party to any insurance policy, is in breach or default (including any breach or
default with respect to the payment of premiums or the giving of notices), and
to the Knowledge of the Company, no event has occurred that, with notice or
lapse of time or both, would constitute such a breach or default or permit
termination or modification of any such policy. The Company has not been denied
coverage since February 1, 1996.
3.24 No Powers of Attorney or Guaranties. The Company has not granted any
general or special powers of attorney. The Company does not have any obligation
or liability (whether actual, contingent, or otherwise) as guarantor, surety,
co-signer, endorser (except with respect to ordinary course endorsements of
banker's acceptances, checks, drafts, and similar instruments on any item
payable in an amount not exceeding $50,000), co-maker, indemnity, obligor on an
asset or income maintenance agreement or otherwise in respect of the obligation
of any person, corporation, partnership, joint venture, association,
organization, or other entity.
3.25 No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its officers or directors or any member of the Galando
Group, the Carey Group, or their respective Affiliates, in any amount whatsoever
other than in connection with normal salary and benefit obligations to
employees, and expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. None of such officers or
directors, or member of the Galando Group, the Carey Group, or their respective
Affiliates, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation that
competes with the Company except that officers, directors and/or shareholders of
the Company may own stock in publicly traded companies that may compete with the
Company or with which the Company is affiliated or has a business relationship.
To the
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Knowledge of the Company, no officer or director or member of the Galando Group,
the Carey Group, or their respective Affiliates, is, directly or indirectly,
interested in any material contract with the Company.
3.26 Year 2000 Compliance. The vendor of the Company's newly installed
accounting system has certified that that system is Year 2000 compliant. Inn
Foods Incorporated, VPS Companies, and Central Cold Storage, vendors to the
Company, have assured the Company in writing that they can effectively operate
their computer systems, and therefore their businesses, after December 31, 1999.
Notwithstanding the foregoing, Buyer acknowledges and agrees that it assumes all
liabilities of the Company related to Year 2000 compliance and agrees to assume
the liability for systems conversion to make the Company's information systems
compatible with Buyer's information systems.
3.27 Books and Records. The Company: (a) makes and keeps accurate books
and records, and (b) maintains internal accounting controls that provide
reasonable assurance that: (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets; (iii) access to its assets is permitted only in accordance with
management's authorization; and (iv) the reported accountability for its assets
is compared with existing assets at reasonable intervals.
3.28 Certain Payments. Neither the Company nor any director, officer,
employee, or, to the Knowledge of the Company, agent or other person associated
with or acting on behalf of the Company, has used any corporate funds for any
unlawful contribution, gift, entertainment, or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic governmental official or employee from corporate funds;
violated or is in violation of a provision of the United States Foreign Corrupt
Practices Act of 1977; or made any illegal bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment.
3.29 Complete Disclosure. To the Knowledge of the Company, this Agreement
and the schedules hereto, taken as a whole, do not include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements herein not misleading. Buyer acknowledges that (i) the Company's
financial forecasts provided to Buyer were made in good faith and based on the
Company's management's reasonable beliefs, but are not intended as guarantees as
to future performance, (ii) there may be variations in performance from the
forecasts provided by the Company, and (iii) those variations may be material.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GROUPS
Except as disclosed in the Group Disclosure Schedule, and subject to the
provisions of Section 10.8, each of the Galando Group and the Carey Group
represents and warrants to Buyer as set forth below with respect to itself and
its members and only with respect to itself and its members. Such
representations shall be deemed to be made as of the date hereof and as of the
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Closing Date. Disclosure of an item in response to one section of this
Agreement shall constitute disclosure and response to every section of this
Agreement, notwithstanding the fact that no express cross-reference is made,
provided that the information provided in the Group Disclosure Schedule is
meaningful and not misleading in the context deemed disclosed for such other
purpose(s).
4.1 Authority. Each of the Shareholders and General Partners has the full
power and authority to enter into this Agreement and the Transaction
contemplated hereby. The execution and delivery by the Shareholders of this
Agreement and the consummation of the Transaction contemplated hereby have been
duly authorized by all necessary partnership actions on the part of the
Shareholders. This Agreement has been duly executed and delivered by the
Shareholders and the General Partners and constitutes a valid and binding
obligation of the Shareholders and the General Partners enforceable in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws relating to
enforcement of creditors' rights generally, and (ii) general equitable
principles.
4.2 Ownership of Shares; No Liens or Encumbrances.
(a) Galando Investments Limited Partnership is the sole lawful
record and beneficial owner of Seven Hundred Twelve (712) Company Shares and has
valid title thereto, free and clear of all liens, pledges, encumbrances,
security interests, restrictions on transfer (other than restrictions under
federal and state securities laws), claims, and equities of every kind. Except
for this Agreement, there are no outstanding warrants, options, or rights of any
kind to acquire the Company Shares from Galando Investments Limited Partnership.
(b) Carey-On Limited Partnership is the sole lawful record and
beneficial owner of One Hundred Forty Three (143) Company Shares and has valid
title thereto, free and clear of all liens, pledges, encumbrances, security
interests, restrictions on transfer (other than restrictions under federal and
state securities laws), claims, and equities of every kind. Except for this
Agreement, there are no outstanding warrants, options, or rights of any kind to
acquire the Company Shares from Carey-On Limited Partnership.
(c) Upon the delivery to Buyer at Closing of the certificates
representing the Company Shares to be sold to Buyer pursuant to this Agreement,
all of the Shareholders' right, title, and interest in and to the Company Shares
shall have been transferred to Buyer, free and clear of any liens of any kind,
except as may have been permitted to be imposed by Buyer.
4.3 No Conflict. The execution and delivery of the Agreement and the
performance of the Transaction contemplated hereunder will not violate, conflict
with, constitute a default or breach under, any material agreement, contract, or
instrument to which the Shareholders or the General Partners may be bound or of
any judgment, order, decree to which the Shareholders or the General Partners
may be bound, nor will the execution, delivery and performance of this Agreement
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
the Company Shares.
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4.4 Litigation. There are no Proceedings against the Shareholders or the
General Partners before any court or governmental agency that may affect any of
the Shareholders' ownership of or title to their Shares or their right or
ability to enter into this Agreement and consummate the Transaction.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as disclosed in the Buyer Disclosure Schedule, Buyer represents and
warrants to the Company and the Shareholders as herein set forth below. Such
representations shall be deemed to be made as of the date hereof and as of the
Closing Date. Disclosure of an item in response to one section of this
Agreement shall constitute disclosure and response to every section of this
Agreement, notwithstanding the fact that no express cross-reference is made,
provided that the information provided in the Buyer Disclosure Schedule is
meaningful and not misleading in the context deemed disclosed for such other
purpose(s).
5.1 Organization; Standing and Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware, has all requisite power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which a
failure so to qualify would have a Material Adverse Effect on the Business
Condition of Buyer.
5.2 Authority. Buyer has all requisite corporate power and authority to
enter into this Agreement and, subject to the Buyer Required Statutory
Approvals, to consummate the Transaction contemplated hereby. The execution and
delivery by Buyer of this Agreement and the consummation of the Transaction
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and constitutes a valid and binding obligation of Buyer enforceable in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws relating to
enforcement of creditors' rights generally, and (ii) general equitable
principles.
5.3 Compliance with Laws and Other Instruments.
(a) Subject to satisfaction of the conditions set forth in
Sections 9.1, the execution and delivery of this Agreement and the consummation
of the Transaction contemplated hereby will not conflict with or result in any
violation or default under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to a loss of a material
benefit under or the creation of a lien, pledge, security interest, charge or
other encumbrance on assets of (i) any provision of the Certificate of
Incorporation or Bylaws of Buyer, or (ii) any loan or credit agreement note,
bond, mortgage, indenture, contract, lease, or other agreement or instrument,
permit, concession, franchise, License, Order, statute, law, ordinance, rule or
regulation applicable to Buyer or its properties or assets, other than, in the
case of (ii), any such
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violation or default, which individually or in the aggregate would not have a
Material Adverse Effect on the Business Condition of Buyer.
(b) No Consent of any third party is required by or with respect
to Buyer in connection with the execution and delivery of this Agreement by
Buyer or the consummation by Buyer of the Transaction contemplated hereby,
except for Consents, if any, relating to the filing of a premerger notification
report and all other required documents by Buyer and the Company under the HSR
Act ("Buyer Required Statutory Approvals"), and except for such other Consents
which if not obtained or made would not have a Material Adverse Effect on the
Business Condition of Buyer.
5.4 Investment Bankers, Brokers, and Finders. Neither Buyer nor any
of its directors, officers, or employees has employed any investment banker,
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or similar payments in connection with the
Transaction contemplated by this Agreement.
5.5 Investment Purpose. Buyer is acquiring the Company Shares for
its own account, not as nominee or agent, for investment and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933. Buyer does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participation to any such person or to any third person, with
respect to the Company Shares.
ARTICLE VI
COVENANTS OF COMPANY
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing Date, the Company
agrees (except as expressly contemplated by this Agreement or with Buyer's prior
written consent, which will not be unreasonably withheld) that:
6.1 Conduct of Business.
6.1.1 Ordinary Course. The Company shall carry on its business
in the usual, regular, and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts consistent with past practice and policies to preserve intact
its present business organization, keep available the services of its present
officers, consultants, and employees, and preserve its relationships with
customers, suppliers, distributors and others having business dealings with it.
The Company shall promptly notify Buyer of any event or occurrence or emergency
not in the ordinary course of business of the Company that is material and
adverse to the Business Condition of the Company. The Company shall not:
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(a) grant any severance or termination pay to any officer or
director or, except in the ordinary course of business consistent with past
practices, to any employee of the Company;
(b) commence a lawsuit other than: (i) for the routine collection
of bills; (ii) in such cases where the Company in good faith determines that
failure to commence suit would result in a material impairment of a valuable
aspect of the Company's business, provided the Company consults with Buyer prior
to filing such suit; or (iii) for a breach of this Agreement;
(c) enter into one or more agreements, contracts, or commitments
that extend for a period of one (1) year beyond the date of this Agreement or
that obligate the Company to pay aggregate gross amounts in excess of $100,000,
except for purchases of supplies and sales of inventory, and slotting and
promotion arrangements, in the ordinary course of business; provided, however,
that Buyer agrees that the Company may enter into revised agreements with VPS
Inn Foods, Inc. and Choice One Foods, subject to Buyer's prior approval, which
shall not be unreasonably withheld or delayed;
(d) fail to maintain in full force and effect each insurance
policy listed on Schedule 3.23;
(e) engage in advertising, promotion, and marketing programs out
of the ordinary course of business or not consistent with past practice; or
(e) make any capital expenditures in excess of $25,000.
6.1.2 Dividends; Changes in Stock. Except as provided in Section 8.14,
the Company shall not: (i) declare or pay any dividends on or make other
distributions (other than in cash) in respect to any of its capital stock; (ii)
split, combine, or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in substitution
of shares of its capital stock; or (iii) repurchase or otherwise acquire,
directly or indirectly, any shares of its capital stock.
6.1.3 Issuance of Securities. The Company shall not issue, deliver, or
sell, or authorize, propose, or agree or commit to the issuance, delivery, or
sale of any shares of its capital stock of any class, any securities convertible
into its capital stock or, any options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions, arrangements
or rights of any character obligating it to issue any such shares, or other
convertible securities.
6.1.4 Governing Documents. The Company shall not amend its Articles of
Incorporation or Bylaws or similar governing documents.
6.1.5 No Acquisitions. The Company shall not acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association, or other business
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organization or division thereof or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the Business
Condition of the Company.
6.1.6 No Dispositions. The Company shall not sell, lease, license,
transfer, mortgage, encumber, or otherwise dispose of any of its assets or
cancel, release, or assign any indebtedness or claim, except in the ordinary
course of business or in amounts which are not material, individually or in the
aggregate, to the Business Condition of the Company; provided, however, that the
Company shall be entitled to bonus out two (2) automobiles currently owned by
the Company and used by two (2) of the Company's employees to such employees.
6.1.7 Indebtedness. The Company shall not incur any indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise, except in the ordinary
course of business or in amounts that are not material, individually or in the
aggregate, to the Business Condition of the Company; provided, however, that
nothing in this Section 6.1.7 shall be interpreted to prohibit borrowing by the
Company pursuant to its existing line of credit.
6.1.8 Plans; Employees. The Company shall not adopt or amend in any
material respect any Plan, or pay any pension or retirement allowance not
required by any existing Plan. The Company shall not enter into any employment
contracts or increase the salaries, wage rates, or fringe benefits of its
officers or employees other than pursuant to scheduled reviews under the
Company's normal compensation review cycle, in all cases consistent with the
Company's existing policies and past practice. Nothing herein shall prohibit
the payment of special or one-time bonuses by the Company.
6.1.9 Claims. The Company shall not settle any Proceeding, except in
the ordinary course of business or in amounts that are not material,
individually or in the aggregate, to the Business Condition of the Company,
provided that the foregoing shall not restrict the Company's ability to settle
the Lu-Mar/CMS Claims.
6.1.10 Agreement. The Company shall not agree to take any of the
actions prohibited by this Section 6.1.
6.2 Breach of Representations and Warranties; Supplemental
Disclosure. The Company shall not take any action that would cause or
constitute a breach of any of the representations and warranties set forth in
Articles III or IV or that would cause any of such representations and
warranties to be inaccurate in any material respect. In the event of, and
promptly after becoming aware of the occurrence, or the pending or threatened
occurrence, of any event that would cause or constitute such a breach or
inaccuracy, the Company will give detailed notice thereof to Buyer and will use
reasonable efforts to prevent or promptly remedy such breach or inaccuracy. The
Shareholders and the General Partners shall have the continuing obligation up to
and including the Closing Date to supplement or amend the schedules to this
Agreement with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the schedules; provided, however, that for the purposes
of the rights and obligations of the parties hereunder,
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any such supplemental disclosure shall not be deemed to have been disclosed as
of the date of this Agreement unless so agreed to in writing by Buyer.
6.3 Consents. The Company will promptly apply for or otherwise seek,
and use reasonable efforts to obtain, all consents and approvals, and make all
filings, required with respect to the Company for the consummation of the
Transaction.
6.4 Reasonable Efforts. The Company will use reasonable efforts to
effectuate the Transaction contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement, provided that the
Company shall in no event be required to agree to the imposition of, or comply
with, any condition, obligation, or restriction on the Company of the type
referred to in Section 9.1.3 hereof.
6.5 Audit. The Company shall, at its expense, which expense (if not
previously paid) shall be reflected in the calculation of Working Capital, cause
an audit (the "Audit") of its balance sheet at, and income statement and
statement of changes in cash flow for the twelve-month period ended, January 31,
1999 to be performed by Moss Adams LLP. The Audit shall be performed in
accordance in accordance with generally accepted accounting principles, as
consistently applied by the Company and with the same materiality standard as
used in the past by the Company. For avoidance of doubt, the practices
referenced at Section 3.5 of the Company Disclosure Schedule shall not be used
in the performance of the Audit.
ARTICLE VII
COVENANTS OF BUYER
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing Date, Buyer agrees
(except as expressly contemplated by this Agreement or with the Company's prior
written consent, which will not be unreasonably withheld) that:
7.1 Breach of Representations and Warranties. Buyer will not take
any action that would cause or constitute a breach of any of the representations
and warranties set forth in Article V or that would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event that would cause or constitute such a
breach or inaccuracy, Buyer will give detailed notice thereof to the Company and
will use reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
7.2 Consents. Buyer will promptly apply for or otherwise seek, and
use reasonable efforts to obtain, all consents and approvals, and make all
filings, required with respect to Buyer for the consummation of the Transaction.
7.3 Reasonable Efforts. Buyer will use its reasonable efforts to
effectuate the Transaction contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement, provided that Buyer
shall in no event be required to agree to the
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imposition of, or to comply with, any condition, obligation or restriction on
Buyer of the type referred to in Section 9.1.3 hereof.
ARTICLE VIII
ADDITIONAL AGREEMENTS
In addition to the foregoing, Buyer, Company, the Shareholders, and the
General Partners each agree to take the following actions after the execution of
this Agreement.
8.1 Access to Information. Subject to the terms of the
Confidentiality Agreement, the Company shall, subject to applicable law, afford
Buyer and its accountants, counsel, and other representatives, reasonable access
during normal business hours during the period prior to Closing, to (i) all of
its properties, books, contracts, commitments, and records, and (ii) all other
information concerning the business, properties and personnel of the Company, as
Buyer may reasonably request and as is necessary to complete the Transaction and
prepare for an orderly transition of operations after the Closing. The Company
agrees promptly to provide to Buyer and its accountants, counsel, and
representatives, copies of internal financial statements upon the request
therefor. No information or knowledge obtained in any investigation pursuant to
this Section 8.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Transaction.
8.2 HSR Act Filings.
(a) Each of Buyer and the Company shall (i) promptly make or
cause to be made the filings required of such party or any of its affiliates or
subsidiaries under the HSR Act with respect to the Transaction, (ii) prior to
the time that a request for additional information is made, comply at the
earliest practicable date with any request under the HSR Act for additional
information, documents, or other material received by such party or any of its
affiliates or subsidiaries from the Federal Trade Commission or the Department
of Justice or other Governmental Entity in respect of such filings, the
Transaction or such other transactions, and (iii) cooperate with the other party
in connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental Entity
under any Antitrust Laws with respect to any such filing, the Transaction, or
any such other transaction. Each party shall promptly inform the other party of
any material communication, and any proposed understanding, undertaking, or
agreement with, any Governmental Entity regarding any such filings, the
Transaction, or any such other transactions. Neither party shall participate in
any meeting with any Governmental Entity in respect of any such filings,
investigation, or other inquiry without giving the other party notice of the
meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) Each of Buyer and the Company shall use its reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Transaction or any other transactions
provided for in this Agreement under the Antitrust Laws. In connection
therewith, if any Proceeding is instituted (or threatened to be instituted)
challenging the Transaction as violative of any Antitrust Law, and, if by mutual
agreement,
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Buyer and the Company decide that litigation is in their best interests, each of
Buyer and the Company shall cooperate and use reasonable efforts vigorously to
contest and resist any such Proceeding and to have vacated, lifted, reversed, or
overturned any Order, that is in effect and that prohibits, prevents, or
restricts consummation of the Transaction. Each of Buyer and the Company shall
use its reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws with
respect to the Transaction as promptly as possible after the execution of this
Agreement. Notwithstanding anything to the contrary in this Section 8.2, (x)
Buyer shall not be required to divest any of its businesses, product lines, or
assets, or to take or agree to take any other action or agree to any limitation
that would have a Material Adverse Effect on the Business Condition of Buyer or
the Company after Closing, and (y) the Company shall not be required to divest
any of its businesses, product lines, or assets, or to take or agree to take any
other action or agree to any limitation that would have a Material Adverse
Effect on the Business Condition of the Company.
8.3 Employee Benefits. Buyer and the Company agree that Buyer will
provide: (a) health and welfare benefits for the Company's employees that are at
least equivalent to the benefits provided to Buyer's employees, and (b) other
benefits for the Company's employees that are in the aggregate equivalent in
value to the benefits provided to Buyer's employees. For purposes of Buyer's
compensation scheme and employee benefits, the Company's employees will for
purposes of participation and vesting, but not for benefit accrual, receive
prior service considerations and credit as if the Company's employees had been
employed by Buyer for the period for which they were employed by the Company.
To the extent not prohibited by applicable laws and regulations or the relevant
benefit plans, as of Closing all Company employees shall be considered
immediately and fully vested in any such employee benefit plans of the Company
in which benefits vest over time. Notwithstanding the foregoing: (x) except as
provided in Section 8.3(a), nothing contained herein shall be considered as
requiring Buyer to continue any specific plan or benefit or as precluding
amendments to any specific plan or benefit; and (y) nothing expressed or implied
in this Agreement shall confer upon any employee, beneficiary, dependent, legal
representative, or collective bargaining agent of such employee any right or
remedy of any nature or kind whatsoever under or by reason of this Agreement,
including without limitation, any right to employment or to continued employment
for any specified period, at any specified location or under any specified job
category. As of the Closing Date, Buyer shall assume liability for severance
and relocation costs, if any, for employees of the Company
8.4 Officers and Directors. Buyer agrees that all rights to
indemnification (including without limitation advancement of expenses) existing
on the date hereof in favor of the present or former officers and directors of
the Company with respect to actions taken in their capacities as directors or
officers of the Company prior to the Closing Date as provided in the Company's
Articles of Incorporation or Bylaws shall survive the consummation of the
Transaction and continue in full force and effect for a period of six (6) years
following the Closing Date and shall be guaranteed by Buyer; provided, however,
that such indemnification rights of a General Partner shall be subject to setoff
for any amounts that Buyer is entitled to recover from that General Partner
pursuant to Article X; and provided further, that each General Partner hereby
releases the Company from any and all obligations to indemnify such General
Partner in his or her capacity as an officer or director of the Company to the
extent that Buyer is
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entitled to such setoff and agree that they shall not seek indemnification, or
make a Claim in respect of the same, to such extent.
8.5 Expenses. Except as otherwise contemplated by or expressly
provided for in this Agreement, all costs and expenses incurred in connection
with this Agreement and the consummation of the Transaction shall be paid by the
party incurring such costs and expenses; provided, however, that Buyer shall
bear the entire cost of the HSR Act filing fee and any litigation pursuant to
Section 8.2.
8.6 Additional Agreements. In case at any time after the Closing
Date any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest Buyer with full title to all properties,
assets, rights, approvals, immunities, and franchises of the Company, the proper
officers and directors of Buyer and the General Partners shall take all such
necessary action.
8.7 Public Announcements. Buyer shall consult with and shall furnish
to the Shareholder Representative drafts of all press releases, SEC filings, or
other public statements with respect to this Agreement or the transactions
contemplated hereby that Buyer believes that it is required by law or
regulations or the rules of the New York Stock Exchange to make, shall provide
the Shareholder Representative a reasonable opportunity to comment thereon prior
to publication, and shall make such changes thereto as may reasonably be
requested by the Shareholder Representative. Except to the extent required by
law or regulations or the rules of the New York Stock Exchange, Buyer, the
Company, the Shareholders, and the General Partners each respectively agree not
to make any press release or other public announcement concerning the
Transaction contemplated by this Agreement without the prior consent and
approval of the other parties hereto, which consent shall not be unreasonably
withheld. Nothing contained herein shall prevent either party at any time from
furnishing any information to any Governmental Entity when it believes it is
legally required to do so, provided such party gives the other party prompt
notice of such Order and complies with any protective order (or equivalent)
imposed on such disclosure.
8.8 Termination of Previous Shareholders Agreement. The
Shareholders, the General Partners, and the Company hereby agree that the
Shareholders Agreement dated May 13, 1986, as at any time amended, shall not be
deemed to prohibit the Transaction, hereby consent for purposes of such
agreement to the sale and transfer of the Company Shares to the Buyer as
contemplated by this Agreement, and hereby agree that effective as of Closing,
such Shareholders Agreement shall be deemed terminated and no longer in force
and effect.
8.9 Noncompetition; Nonsolicitation.
(a) Except with regard to his or her continued activities for or
on behalf of the Company, each General Partner agrees for himself or herself
that, without the prior written consent of Buyer, which may be withheld in the
sole discretion of Buyer, he or she shall not, and he or she shall cause any
Affiliate under his or her Control not to, for a period of four (4) years after
the Closing Date, directly or indirectly seek, solicit, enter into, invest in
(other than an investment of less than five percent (5%) of the shares of a
company traded on a registered stock
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exchange or NASDAQ), or engage in, whether as an officer, director, member,
employee, or consultant (whether or not compensated), any employment, business,
enterprise, agreement, or consulting arrangement with any other person or
entity, that is at that time engaged in, or that has clear plans for future
engagement in, the business of manufacturing, marketing, or distributing in the
territory, for retail or club channel distribution in the territory, products
that are frozen or refrigerated prepackaged meals, meal kits, entrees, or frozen
or refrigerated products related to meal kits, or entrees ("Competing
Products"). For purposes of the foregoing, "territory" means the United States,
Canada, and Mexico. Buyer hereby consents to: (A) General Partners, and
Affiliates under the Control of one or more General Partners, engaging in shrimp
supply operations of the type currently engaged in by the Company, and (B) the
continuation by Joseph A. Galando and Barbara J. Galando of their activities as
an investor and member of and lender and lessor (through G & C LLC), and by
Stanley J. Carey and Mary K. Carey of their activities as lessor (through G & C
LLC) to Innovasian Cuisine Enterprises, L.L.C., which sells bulk Asian food
through food service and grocery deli distribution channels; provided, however,
that in the event that Innovasian Cuisine Enterprises, L.L.C. offers or plans to
offer products that fall within the definition of Competing Products, then
Joseph A. Galando and Barbara J. Galando shall immediately resign from the Board
of Directors (or similar governing body) of, and cease providing any consulting
or other services to, Innovasian Cuisine Enterprises, L.L.C.
(b) Each General Partner further agrees for himself or herself
that, for a period of four (4) years after the Closing Date, he or she will not,
and he or she shall cause any Affiliate under his or her Control not to, contact
any of the Company's customers and suppliers for the purpose of establishing
relationships for business that competes with the business of the Company of
manufacturing, marketing or distributing Competing Products in the territory.
(c) Each General Partner further agrees for himself or herself
that, for a period of four (4) years after the Closing Date, he or she will not,
and he or she shall cause any Affiliate under his or her Control not to, solicit
or assist in the solicitation of any employees of the Company or directly or
indirectly offer to enter into any type of contract or other arrangement
(including without limitation providing consulting services, whether compensated
or not) with any employee of the Company who is employed with the Company as of
the date hereof or the Closing Date, if such offer or solicitation would require
or result in such employee's termination of any employment or contractual
relationship with the Company or ceasing to work full time for the Company, or
would otherwise interfere with or constitute a breach of such employee's
obligations or responsibilities to the Company; provided, however, that this
Section 8.9(c) shall not apply to any such employee who is the parent, sibling,
child, aunt, uncle, first cousin, nephew, niece, grandparent, or grandchild of a
General Partner, except Steve Galando.
(d) The General Partners acknowledge and agree that noncompliance
with the terms of this Section 8.9 may cause irreparable injury to Buyer for
which Buyer will have not an adequate remedy at law, and that Buyer shall
therefore be entitled to extraordinary relief, including but not limited to
temporary restraining orders, preliminary injunctions, permanent injunctions, or
decrees of specific performance. The existence of these rights shall not
preclude Buyer from pursuing any other rights and remedies at law or in equity
that Buyer may have, including recovery of Losses. The foregoing is without
prejudice to the provisions of Section 8.9(e).
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(e) The parties agree that any dispute arising under or in
connection with this Section 8.9 or with the interpretation or enforcement
thereof (a "Covenant Dispute") will be settled by arbitration as set forth in
this Section 8.9(e), except as provided at Section 8.9(e)(vi). Except as set
forth in Section 8.9(e)(vi), no Proceeding shall be instituted by either party
in regard to any Covenant Dispute, except to compel compliance with these
arbitration provisions or to enforce the award of the arbitrator, and the
provisions of this Section 8.9(e) shall be a complete defense to any other
Proceeding instituted in any federal, state, or local court with respect to any
Covenant Dispute. Any such arbitration will be subject to the following terms:
(i) The party demanding arbitration (the "Demanding
Party") must give the other party (the "Responding Party") written notice. The
written notice must contain, in addition to the demand for arbitration, a brief
statement of the issues and claims to be resolved by arbitration, an appropriate
reference to the provision of this Agreement that is involved, and the relief,
including Losses, if any, that the Demanding Party requests through arbitration
and must name the individual that the Demanding Party selects as an arbitrator.
(ii) The Responding Party shall provide a written
response to the Demanding Party within ten (10) days following receipt of the
notice. The response shall contain a brief statement of the Responding Party's
position concerning the issues and claims in dispute and must name the
individual selected by the Responding Party as an arbitrator.
(iii) Within five (5) days following receipt of such
written response, the arbitrators selected by the Demanding Party and the
Responding Party shall select a third arbitrator. If either party fails to
select an arbitrator within the time period contemplated by this Section 8.9(e)
and such failure continues for a period of five (5) days after receipt of notice
from the other party noting the failure to select an arbitrator, the arbitrator
that was timely selected by the other party shall serve as the sole arbitrator.
No arbitrator shall be or have been employed by any party or their respective
affiliates. Unless the parties and a majority of the arbitrators agree to the
contrary, the arbitrators shall hold their hearing and make their determination
within thirty-five (35) days after the appointment of the last arbitrator.
(iv) The arbitration hearing and all arbitral Proceedings
will be conducted in Seattle, Washington. The arbitrators will allow each party
an opportunity to submit oral and written evidence and argument concerning the
issue or issues in dispute. Arbitral hearings shall be scheduled so as not to
delay, under any circumstances, the making of an arbitral determination within
the 30 day period referred to in Section 8.9(e)(iii). The arbitration shall be
governed by the American Arbitration Association's Commercial Arbitration Rules,
including the "Expedited Procedures" rules thereof (as such rules are most
currently revised as of the date of the notice of arbitration), except to the
extent that those rules are in conflict with any other provision of this Section
8.9(e), in which case said provision of this Section 8.9(e) shall be used.
Discovery shall be limited to what is strictly necessary and shall in no event
be permitted to delay the making of an arbitral determination within the period
referred to in Section 8.9(e)(iii). The arbitrators may resolve only the issue
or issues in dispute under this Section 8.9 and must include as part of their
consideration a full review of this Agreement and all material incorporated
herein by reference. The arbitrators shall render their decision within five (5)
days
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of the arbitration hearing. Decisions of the arbitrators, including damages
awarded, shall be made by a majority vote. The decision of the arbitrators shall
be final, conclusive, and binding on all the parties.
(v) Except to the extent inconsistent with the terms of
this Section 8.9(e), the terms and provisions of RCW 7.04 are incorporated in
and made a part of this Agreement for purposes of resolving any Covenant
Dispute.
(vi) A Demanding Party shall be entitled to request of
arbitrators declaratory relief, which the arbitrators shall be authorized to
grant. The arbitrators shall be authorized to grant the relief contemplated by
Section 8.9(d). Notwithstanding the arbitration provisions of this Section
8.9(e), Buyer shall be entitled to temporary or preliminary injunctive relief
from a court of competent jurisdiction in the event of any threatened,
impending, or actual breach of the provisions of this Section 8.9.
8.10 Exclusivity; Acquisition Proposals. Unless and until this
Agreement shall have been terminated by a party pursuant to Article XI hereof,
none of the Shareholders, General Partners and the Company shall (and each shall
use its best efforts to ensure that none of its officers, directors, agents,
representatives or affiliates) take or cause or permit any person to take,
directly or indirectly, any of the following actions with any party other than
Buyer and its designees: (i) solicit, encourage, or initiate any negotiations,
inquiries or discussions with respect to any offer or proposal to acquire all or
any significant part of its business, assets or capital shares whether by
merger, consolidation, other business combination, purchase of assets or
otherwise (each of the foregoing, an "Acquisition Transaction"); or (ii) enter
into or execute any agreement relating to an Acquisition Transaction. In the
event the Shareholders, the General Partners or the Company shall receive any
offer or proposal, directly or indirectly, of the type referred to in clause (i)
above, they shall immediately, and prior to taking any action in response
thereto, inform Buyer as to all material facts concerning any such offer,
proposal or request including the identity of the party making the offer,
proposal or request, and will thereafter cooperate with Buyer by informing Buyer
of additional material facts as they arise.
8.11 Shareholder Representative. As used herein, the term
"Shareholder Representative" shall mean Joseph A. Galando, or, if Joseph A.
Galando dies, resigns, or for any reason refuses or is unable to act, the
substitute (which shall be a natural person) specified in a written notice of
substitution signed by Joseph A. Galando or his heirs, successors, assigns, or
designees and given to the Company and Buyer in the manner specified in Section
11.2 hereof. The Company and Buyer shall be entitled to rely conclusively upon
action or inaction by the Shareholder Representative as being fully authorized
and approved by and binding upon all of the Shareholders and the General
Partners notwithstanding any assertion by any Shareholder or General Partner to
the contrary, it being the purpose and intent of this Section 8.11 that Buyer
and the Company shall be entitled to treat the Shareholder Representative as if
such person were the sole selling Shareholder of all Company Shares. The
Shareholders and the General Partners hereby agree among themselves, and with
and for the benefit of the Company and Buyer, that the Shareholder
Representative is hereby appointed the agent and attorney-in-fact for each
Shareholder and each General Partner with full power, authority and discretion
to act on behalf of each Shareholder and each General Partner with respect to
all action, inaction, disputes,
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decisions or other matters arising out of or in connection with this Agreement.
Such attorney-in-fact shall have full power of substitution. This power of
attorney is hereby acknowledged and declared to be irrevocable and a power
coupled with an interest (in favor of each other Shareholder, General Partner,
Buyer and the Company), shall survive the term or dissolution of each
Shareholder, and shall extend to and be binding upon such Shareholder's or
General Partner's legal representatives, heirs, successors, and assigns. The
Shareholder Representative shall have no liability to any Shareholder or General
Partner with respect to actions or omissions in his capacity as Shareholder
Representative, except to the extent that such actions or omissions are in bad
faith or constitute gross negligence.
8.12 Release of Personal Guaranties. At the Closing, Buyer shall
cause the Company to repay all Company Indebtedness to U.S. Bank N.A. and the
Company shall secure a complete release of the personal guaranties of each of
the General Partners in respect of such Company Indebtedness.
8.13 Taxes.
(a) Tax Returns with respect to taxable periods of the Company
ending before the Closing Date will be prepared by the Shareholder
Representative and timely filed, including extensions. The Shareholder
Representative shall provide Buyer with a reasonable opportunity to review and
comment on such Tax Returns. Those Tax Returns that are due after the Closing
Date requiring signature by the Company will be submitted by the Shareholder
Representative to the Company for signature. Buyer will cause the Company to
sign such returns and related schedules and forms promptly upon the Shareholder
Representative's reasonable request. The returns prepared and filed or to be
prepared and filed by the Shareholder Representative for the Company will be
prepared on a basis which is consistent with the basis upon which similar
returns for prior periods have been prepared and filed ("Prior Tax Returns").
The Buyer and the Company shall take no action inconsistent with the Prior Tax
Returns and, accordingly, but not by way of limitation, shall not file amended
returns if the effect might be to increase, for that or any other period, the
Taxes payable or make refund claims in respect of the periods covered by the
Prior Tax Returns, unless otherwise agreed to by the Shareholder Representative.
(b) Tax Returns with respect to taxable periods beginning before
and ending after the Closing Date will be prepared by Buyer and timely filed,
including extensions, and all Taxes payable for or during such period will be
allocable between Buyer and Shareholders as provided in Section 8.13(c) hereof.
Such returns will be prepared on a basis consistent with the basis upon which
Prior Tax Returns have been prepared.
(c) For federal income tax purposes, the taxable year of the
Company shall end as of the close of business on the day before the Closing Date
and, with respect to all other Taxes, the Shareholder Representative and Buyer
will, unless prohibited by applicable law, close the taxable period of the
Company as of the close of business on the date before the Closing Date. Neither
the Shareholder Representative nor Buyer shall take any position inconsistent
with the preceding sentence on any Tax Return. In any case where applicable law
does not permit the Company to close its taxable year on the day prior to the
Closing Date or in any case in which a Tax is assessed with respect to a taxable
period which includes the day prior to the Closing Date
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(but does not end on that day), then the Taxes, if any, attributable to the
taxable period of the Company beginning on or before and ending after the
Closing Date shall be allocated (i) to the Shareholders for the period up to and
including the day prior to the Closing Date and (ii) to Buyer for the period
beginning on the Closing Date. Any Taxes attributable to any period beginning
before and ending after the Closing Date shall be calculated by means of a
closing of the books and records of the Company as of the close of business the
day prior to the Closing Date, provided that exemptions, allowances or
deductions that are calculated on an annual basis (including, but not limited
to, depreciation and amortization deductions) shall be allocated between the
period ending on the day prior to the Closing Date and the period beginning on
the Closing Date in proportion to the number of days in each such period.
(d) Buyer and the Shareholder Representative agree to furnish or
cause to be furnished to each other, and each at their own expense, as promptly
as practicable, such information (including access to books and records) and
reasonable assistance, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided, relating to the Company as is reasonably necessary for the
filing of any Tax Return or election in respect thereof, for the preparation for
any audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any adjustment or proposed adjustment with respect to Taxes.
Notwithstanding any other provision contained in this Agreement, Buyer or the
Company shall retain in its possession, and shall provide the Shareholder
Representative reasonable access to (including the right to make copies of),
such supporting books and records and any other materials that the Shareholder
Representative may specify with respect to Tax matters relating to any taxable
period ending on or before the Closing Date, or commencing before and ending
after the Closing Date, until the relevant statute of limitations (or extensions
thereof) has expired. After such time, Buyer may dispose of such material,
provided that prior to such disposition Buyer shall give the Shareholder
Representative a reasonable opportunity to take possession of such materials.
(e) If the parties disagree as to this Section 8.13 (but not
matters covered by Section 10.1(iv)), the parties shall attempt in good faith to
resolve such dispute. If such dispute is not resolved with 15 days, the parties
shall select an internationally recognized firm of independent public
accountants to resolve the dispute (the "Tax Accounting Firm"). If and to the
extent that the dispute presents legal issues, the Tax Accounting Firm shall
have the authority to consult an Independent Law Firm (as hereinafter defined).
The fees of the Tax Accounting Firm and the Independent Law Firm shall be borne
equally by the Shareholders on the one hand, based on their Applicable
Percentages, and Buyer, on the other hand, and the decision of such Tax
Accounting Firm and Independent Law Firm shall be final, binding, and conclusive
on all parties. Following the decision of the Tax Accounting Firm and/or the
Independent Law Firm, the parties shall each take or cause to be taken any
action that is necessary or appropriate to implement such decision of the Tax
Accounting Firm and the Independent Law Firm. "Independent Law Firm" shall mean
a nationally recognized independent law firm, jointly selected by the parties;
or, if the parties cannot agree on such law firm, the Shareholder Representative
and Buyer shall such submit the name of a nationally recognized independent law
firm that does not at the time provide, and has not in the prior two years
provided, services to the Shareholder Representative or Affiliates or Buyer or
Affiliates, and in such case the "Independent Law Firm" shall mean the firm
selected by lot from among these two firms.
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8.14 Redemption of Certain Company Shares; Distribution of Certain
Assets. Prior to the day before the Closing, the Company will redeem a certain
number of Company Shares held by Galando Investments Limited Partnership and by
Carey-On Limited Partnership in exchange for (i) the boat, automobiles, and real
property listed on Schedule 8.14 and (ii) those Assets and Liabilities connected
with the shrimp supply business of the Company, which are listed at on Schedule
8.14 (in accordance with Section 10.7, the Company shall retain liability for
the Lu-Mar/CMS Claims but such claims shall be subject to the special
indemnification at Section 10.7). The exact number of Company Shares so
redeemed, which shall be allocated among the Shareholders in accordance with
their Applicable Percentages, shall be determined by the Company two (2) days
prior to Closing based on the relationship the net fair market value of the
assets to be distributed to the Shareholders pursuant to this Section 8.14, as
estimated by the Company two (2) business days prior to Closing, bears to the
sum of (x) that net fair market value and (y) the Initial Purchase Price as
established in the Company's Closing Statement. The Company shall notify Buyer
of the number of Company Shares being redeemed simultaneously with its
notification to Buyer of the Closing Statement.
8.15 Conduct of Business During the Earn Out Period.
(a) During the Earn Out Period, Buyer shall operate or cause the
Company to be operated as a stand-alone entity and in conformity with sound
business practices and shall make or cause to be made all business decisions
with respect to the Company in good faith, taking into account the objective of
maximizing the Earn Out Payment. Without limiting the generality of the
foregoing, during the Earn Out Period, Buyer agrees that: (i) Buyer shall not
alter the pricing formulas or unit pricing in any customer contract or use
differential pricing in any such contract the term of which extends beyond
January 31, 2000, unless directed by the Shareholder Representative or agreed to
in advance in writing by the Shareholder Representative; (ii) Buyer shall not
require of Company management or personnel the devotion of any material time or
material resources to other business activities of Buyer; (iii) reporting
obligations of the Company to Buyer shall be in accordance with the provisions
of Schedule 8.15; (iv) Buyer shall not alter the branding or packaging strategy
with respect to the Company's products, unless directed by the Shareholder
Representative or agreed to in advance in writing by the Shareholder
Representative; and (v) Buyer shall not move the Company's current headquarters.
(b) During the Earn Out Period, and in accordance with the applicable
Employment Agreement, Buyer shall employ Joseph A. Galando as President of the
Company, Joseph A. Galando shall have all of the duties and responsibilities
attendant to the position of chief executive officer of the Company, and Buyer
shall assume the liability therefor.
(c) During the Earn Out Period the Buyer shall: (i) provide capital
to the Company in an amount and at times as reasonably necessary to permit the
Company to execute the FY 2000 Plan and to permit growth of the Company beyond
the FY 2000 Plan if the Company is generating sales to support that growth; (ii)
provide marketing leads to the Company with respect to Buyer's national accounts
that would be likely prospects of the Chef's Choice products; and (iii) agrees
to assume liability for the Company's brokerage agreements in effect on the
Closing Date . Buyer agrees to maintain at its sole cost the administrative
offices and functions of the
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Company in Seattle until June 30, 2000, it being agreed that this covenant shall
have no impact on the calculation of the Earn Out Payment. Buyer agrees to
assume the liability for any changes to packaging UPC codes after the Earn Out
Period.
8.16 Limited Trademark License. Company hereby grants to the
Shareholders and General Partners, or to the entity to which they transfer the
shrimp supply business assets listed on Schedule 8.14, the right to use the "Sea
Coast" trademark, as found on the packaging inventory listed on Schedule 8.14
and distributed out to the Shareholders and General Partners pursuant to Section
8.14, in connection with the usage of such packaging inventory, in sales of
shrimp products by the shrimp supply business. This limited right does not
include the right to use the "Sea Coast" trademark on any new packaging
inventory that may be manufactured, purchased, or ordered after the Closing
Date.
8.17 Certain Promotional Expenses. The Company has incurred
liabilities for certain demonstration and other promotional expenses (other than
slotting) as of the Closing Date that are not dependent on the future sales of
the Company and represent firm commitments on the part of the Company. Subject
to Buyer's rights under Article X, Buyer agrees to assume such liabilities and
pay them as such liabilities become due. The Company has also incurred
liabilities for slotting expenses. Buyer agrees to assume such liabilities and
pay them as such liabilities become due.
8.18 Trademark Filings. The Company shall file Fifth Requests for
Extensions of Time to File Statements of Use for SKILLET CHEF, Serial No.
75/028,483 and CHEF'S SKILLET, Serial No. 74/723,286 and a Second Request for
Extension of Time to File a Statement of Use for SEACOAST BRAND, Serial No.
75/304,331 at or prior to Closing, but in no event more than six months since
the previous requests for Extension of Time were submitted.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Each Party's Obligation to Effect the Transaction.
The respective obligation of each party to effect the Transaction shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
9.1.1 Consents. All Consents legally required for the
consummation of the Transaction contemplated by this Agreement, including
without limitation all Consents listed on Schedule 9.1.1, shall have been filed,
occurred, or been obtained, other than such Consents, the failure of which to
obtain would not have a Material Adverse Effect on the Business Condition of the
Company.
9.1.2 No Restraints. No statute, rule, regulation, or Order
shall have been enacted, entered, promulgated, or enforced by any United States
court or Governmental Entity of competent jurisdiction that enjoins or prohibits
the consummation of the Transaction and that is
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then in effect and no Proceeding seeking such an Order shall have been
instituted and then be continuing.
9.1.3 No Burdensome Condition. There shall not be any action
taken, or any statute, rule, regulation, or Order enacted, entered, enforced, or
deemed applicable to the Transaction by any Governmental Entity which, in
connection with the grant of any Required Statutory Approval, imposes any
restriction, condition or obligation upon Buyer other than as provided in
Section 8.2, or the Company which would have a Material Adverse Effect on the
Business Condition of the Company.
9.1.4 Closing Date Deliveries. Each party shall have received
the deliveries referred to in Section 2.5 hereof.
9.1.5 Other Documents and Certificates. Each party shall have
received such other documents, certificates, opinions, or statements as it may
reasonably request from the other parties or their representatives in connection
with the Transaction.
9.2 Conditions of Obligations of Buyer. The obligations of Buyer to
effect the Transaction are subject to the satisfaction of the following
conditions, unless waived by Buyer:
9.2.1 Representations and Warranties of the Company, the
Shareholders, and the General Partners. The representations and warranties of
the Company, the Shareholders, and the General Partners set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except: (i) as
otherwise contemplated by this Agreement, or (ii) in respects that do not have a
Material Adverse Effect on the Business Condition of the Company; provided,
however, that if the Shareholders and General Partners have made accurate
supplemental disclosure in accordance with Section 6.2 and Buyer nevertheless
chooses to close the Transaction, Buyer shall not be entitled to claim for
breach of the relevant representation or warranty in connection with which such
supplemental disclosure was made. Buyer shall have received a certificate signed
by the Shareholder Representative to such effect on the Closing Date; provided,
however, that the execution of such certificate shall not subject the
Shareholder Representative to any liability in excess of the caps and
limitations set forth in Article X, nor shall it change the allocation of
liability contemplated by Section 10.8.
9.2.2 Performance of Obligations of the Company, the
Shareholders, and the General Partners. The Company, the Shareholders, and the
General Partners shall have performed all agreements and covenants required to
be performed by it or them under this Agreement prior to the Closing Date,
except for breaches that do not have a Material Adverse Effect on the Business
Condition of the Company or on the benefits of the Transaction provided for in
this Agreement. Buyer shall have received a certificate signed by the
Shareholder Representative to such effect on the Closing Date; provided,
however, that the execution of such certificate shall not subject the
Shareholder Representative to any liability in excess of the caps and
limitations set forth in Article X, nor shall it change the allocation of
liability contemplated by Section 10.8.
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9.2.3 Opinion of Company's Counsel. Buyer shall have received
an opinion dated the Closing Date of Preston Gates & Ellis LLP, counsel to the
Company, in substantially the form attached as Exhibit 9.2.3.
9.2.4 Repayment of Shareholder Loans. The General Partners
shall each repay the loans, if any and to the extent then outstanding, made by
the Company to them.
9.2.5 Certificate Regarding Foreign Status. The Buyer shall
have received from the Shareholders a certificate pursuant to Treasury
Regulation Section 1.1445-2(b)(2) stating that each such Shareholder is not a
"foreign person" within the meaning of Code Section 1445(a).
9.2.6 Receipt of Audit. The Buyer shall have received the
Audit, and such Audit, after taking into account adjustments made to conform the
Company's financial statements to generally accepted accounting principles as
applied without the exceptions listed at Section 3.5 of the Company Disclosure
Schedule, shall show no material variation in "net sales", "gross profit",
"operating profit", or "advertising and promotions" from the income statements
of the Company for the year ended January 31, 1999 and included in the Company
Financial Statements (other than as a result of reclassifications between sales,
advertising and promotions and returns and allowances). For the foregoing
purposes, material variations attributable solely to the Company's shrimp supply
business shall be disregarded.
9.2.7 Termination of Related Party Agreements. The related
party agreements listed on Schedule 9.2.7 shall have been terminated.
9.2.8 Amendment of Lease. The lease for the Leased Premises
shall have been amended to terminate the term of the lease as of June 30, 2000.
9.2.9 Terminations of Liens. Arrangements suitable to Buyer
shall have been made to provide to Buyer, following payment of Company
Indebtedness to U.S. Bank N.A. as contemplated by Section 8.12, and upon payment
of the Initial Purchase Price, UCC terminations and releases for the following
filings: (1) in California, File No. 9828660165 and (2) in Washington, File Nos.
84200062 (and continuations), 942640141 and 981280070.
9.3 Conditions of Obligations of the Shareholders and General
Partners. The obligation of the Shareholders and General Partners to effect the
Transaction is subject to the satisfaction of the following conditions, unless
waived by the Shareholders and General Partners:
9.3.1 Representations and Warranties of Buyer. The
representations and warranties of Buyer set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except: (i) as otherwise contemplated
by this Agreement, or (ii) in respects that do not have a Material Adverse
Effect on the Buyer's Business Condition or on the benefits of the Transaction
provided for in this Agreement. The Shareholders and the General Partners shall
have received a certificate signed on behalf of Buyer by an authorized officer
of Buyer to such effect on the Closing Date.
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9.3.2 Performance of Obligations of Buyer. Buyer shall have
performed all agreements and covenants required to be performed by Buyer under
this Agreement prior to the Closing Date except for breaches that do not have a
Material Adverse Effect on Buyer's Business Condition or on the benefits of the
Transaction provided for in this Agreement, and the Shareholders and the General
Partners shall have received a certificate signed on behalf of Buyer by an
authorized officer of Buyer to such effect.
9.3.3 Opinion of Buyer's Counsel. The Shareholders and the
General Partners shall have received an opinion dated the Closing Date of
Richards & O'Neil, LLP, counsel to Buyer, substantially in the form of Exhibit
9.3.3.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Shareholders and General Partners. Subject to
Sections 10.5, 10.6, and 10.8, the Shareholders and the General Partners shall
defend, indemnify, and hold Buyer harmless from and against, and reimburse Buyer
with respect to, any and all Losses incurred by Buyer by reason of or arising
out of or in connection with any (i) breach, or any claim (including claims by
parties other than Buyer) that if true, would constitute a breach, by the
Company, the Shareholders, or the General Partners of any representation or
warranty of the Company, the Shareholders, or the General Partners contained in
this Agreement or in any certificate delivered to Buyer pursuant to the
provisions of this Agreement, (ii) failure, partial or total, of the Company,
the Shareholders, or the General Partners to perform any of the covenants
required by this Agreement at Sections 6.1.1, 6.1.2, 6.1.4, 6.1.5, 6.1.6, 6.1.7,
6.1.8, 6.1.9, 6.1.10 (except as it relates to agreements covered by Section
6.1.3), 6.2, 6.3, 6.4, 6.5, and 8.1, to be performed by the Company, the
Shareholders, or the General Partners, (iii) failure, partial or total, of the
Company, the Shareholders, or the General Partners to perform any of the
covenants required by this Agreement, but not covered by Section 10.1(ii), to be
performed by the Company, the Shareholders, or the General Partners, and (iv)
Taxes of the Company for all taxable periods ending prior to the Closing Date
and Taxes of the Company for periods beginning before and ending after the
Closing which are allocable to the Shareholders under Section 8.13(c), in each
case to the extent neither paid prior to Closing nor included in accruals or
reserves taken into account in the calculation of Working Capital or in Company
Indebtedness for purposes of adjustments to the Initial Purchase Price, and
Taxes paid by the Company as a result of the distribution of assets contemplated
by Section 8.14, to the extent neither paid prior to Closing nor included in
accruals or reserves taken into account in the calculation of Working Capital or
in Company Indebtedness for purposes of adjustments to the Initial Purchase
Price. There shall be no right of contribution from the Company or any successor
to the Company. As partial security for the indemnification obligations of the
Shareholders and General Partners under this Article X, a portion of the Initial
Purchase Price shall be deposited by the Buyer into escrow with Escrow Agent
pursuant to the Escrow Agreement, as contemplated by Section 2.1.
10.2 Indemnification By Buyer. Subject to Section 10.6, Buyer shall
defend, indemnify, and hold the Shareholders, the General Partners, the Company,
and their employees,
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officers, directors, and trustees harmless from and against, and reimburse the
Shareholders, the General Partners, and the Company and their employees,
officers, directors, and trustees with respect to, any and all Losses of every
nature whatsoever incurred by the Shareholders, the General Partners, the
Company, and employees, officers, and directors of the Company by reason of or
arising out of or in connection with any (i) breach, or claim (including without
limitation claims by parties other than the Company, the General Partners, or
the Shareholders) that if true, would constitute a breach, by Buyer of any
representation or warranty of Buyer contained in this Agreement or in any
certificate delivered to Company, Shareholders or General Partners pursuant to
the provisions of this Agreement, and (ii) failure, partial or total, of Buyer
to perform any of the covenants required by this Agreement to be performed by
Buyer.
10.3 Notice of Claims. All claims for indemnification under this
Agreement, other than Third Party Claims as described in Section 10.4, shall be
resolved in accordance with the following procedures:
(a) If an indemnified party reasonably believes that it has
incurred or may incur any Losses, it shall deliver a Claim Notice to the
indemnifying party for such Losses.
(b) When Losses are actually incurred or paid by an indemnified
party or on an indemnified party's behalf or otherwise fixed or determined, the
indemnified party shall deliver a Payment Certificate to the indemnifying party
for such Losses.
(c) If, after receiving a Payment Certificate, the indemnifying
party desires to dispute such claim or the amount claimed in the Payment
Certificate, it shall deliver to the indemnified party a Counternotice as to
such claim or amount. If no such Counternotice is received within the
aforementioned thirty (30) day period, the indemnifying party shall be deemed to
have rejected or denied liability in respect of the Payment Certificate.
(d) If, within thirty (30) days after receipt or deemed receipt
by the indemnified party of the Counternotice to a Payment Certificate, the
parties have not reached agreement as to the claim or amount in question, the
claim for indemnification shall be decided in accordance with the provisions of
Section 12.1, unless otherwise specified in this Agreement.
(e) With respect to any Losses for which indemnification is
being claimed based upon an asserted liability or obligation to a person or
entity not a party to this Agreement, the obligations of the indemnifying party
hereunder shall not be reduced as a result of any action by the indemnified
party in responding to such claim if such action is reasonably required to
minimize damages, avoid a forfeiture or penalty, or comply with a legal
requirement.
10.4 Third Party Claims.
(a) If an indemnified party receives notice of a demand for
arbitration, summons or other notice of the commencement of a proceeding, audit,
investigation, review, suit or other action by a third party (together, "Third
Party Claim") for which it intends to seek indemnification hereunder, it shall
give the indemnifying party prompt written notice of such claim (together with
all copies of the claim, any process served, and all filings with respect
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thereto), so that the indemnifying party's defense of such claim under this
Section hereunder may be timely instituted. The indemnifying party under this
Article X shall have the right to conduct and control, through counsel of its
own choosing, any Third Party Claim, or settlement thereof; provided, however,
that the indemnifying party may only conduct and control the defense of any
third party claim if it has confirmed in writing to the indemnified party that
the Third Party Claim is one with respect to which the indemnifying party is
obligated to indemnify hereunder. The indemnified party may, at its election,
participate in the defense of any such Third Party Claim, with counsel of its
choosing, but shall be required to bear the fees and expenses of such counsel.
(b) If the indemnifying party fails to defend any Third Party
Claim, then the indemnified party may defend, with counsel of its own choosing,
and (i) settle such Third Party Claim and then recover from the indemnifying
party the amount of such settlement or of any judgment and the reasonable costs
and expenses of such defense, or (ii) litigate the Third Party Claim to the
completion of trial or arbitration and then promptly recover from the
indemnifying party the reasonable costs and expense of such defense and the
amount of the judgment, verdict or award, if any, against the indemnifying
party.
(c) Notwithstanding Section 10.4(b)(i), the indemnifying party
shall not be liable to pay or otherwise satisfy any settlement of a Third Party
Claim unless the indemnified party shall have given the indemnifying party
written notice of the terms of the proposed settlement and the indemnifying
party shall have failed, within twenty (20) days of receipt of such notice, to
undertake the defense of the Third Party Claim.
(d) The indemnifying party shall not settle any Third Party
Claim that includes any term that requires any act or forbearance by the
indemnified party in respect of such Third Party Claim without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld. Except for the settlement of a Third Party Claim that involves the
payment of money only, no Third Party Claim may be settled by an indemnifying
party without the written consent of the indemnified party, which consent shall
not be unreasonably withheld or delayed. No settlement of a Third Party Claim
that involves the payment of money only shall be made by any indemnifying party
unless the indemnifying party has and reserves a sufficient amount of
immediately available funds to provide for such settlement.
(e) Buyer, the Shareholders, the Company, and the General
Partners shall cooperate in all reasonable respects with each other in
connection with the defense, negotiation, or settlement of any legal proceeding,
claim, or demand referred to in this Section 10.4.
10.5 Time Limit. The provisions of Sections 10.1(i) and 10.1(ii)
requiring indemnification by the Shareholders and the General Partners in
respect of breaches of representations and warranties and claims in respect of
the same and for failure to perform those covenants specified at Section
10.1(ii) shall apply only to Losses that are incurred or relate to claims,
demands, or liabilities that are asserted or threatened on or before the earlier
of (a) May 31, 2000, and (b) thirty (30) days following the delivery to the
Buyer by PWC of its report on the audited financial statements for the Company
for the twelve-month period ending January 31, 2000, and in respect of which
Buyer delivers a Claim Notice on or before such
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earlier date; provided, however, that the obligation of the Shareholders and
General Partners to indemnify Buyer for such claims for which a Claim Notice is
given within the time period set forth above shall continue until the final
resolution of each such claim; and provided further, that the obligation of the
Shareholders and General Partners to indemnify Buyer for claims related to
Taxes, breaches of the representation and warranty at Section 3.10(b), and/or
breaches of the representations contained in Sections 3.2(b) or 4.2 shall
continue until thirty (30) days after the expiration of all applicable statutes
of limitations.
10.6 Limitations.
(a) Except with respect to breaches of the representations and
warranties contained in Article IV, claims related to Taxes, and claims for
breach of the representation and warranty of Section 3.10(b), Buyer shall be
entitled to indemnification in respect of Sections 10.1(i) and 10.1(ii) for
breaches of representations and warranties and claims in respect of the same and
for failure to perform those covenants specified in Section 10.1(ii), only if
the aggregate Losses for such breaches suffered by Buyer exceed Five Hundred
Thousand Dollars ($500,000) (the "Threshold Amount"), and provided further that
at such time as the amount to which Buyer is entitled to be indemnified exceeds
the Threshold Amount, Buyer shall be entitled to indemnification only for
amounts in excess of the Threshold Amount. Claims for breaches of the
representations and warranties contained in Article IV and Section 3.10(b) and
for Taxes (and representations and warranties in respect thereof) shall not
count in deciding whether Losses exceed the Threshold Amount.
(b) The aggregate amount to which Buyer shall be entitled to be
indemnified under Sections 10.1(i), 10.1(ii), and 10.1(iv), for breaches of
representations and warranties and claims in respect of the same, for failure to
perform those covenants specified in Section 10.1(ii), and for Taxes (all
matters covered by the foregoing referenced Sections 10.1(i), 10.1(ii), and
10.1(iv), collectively, "Covered Matters") as against the Shareholders and the
General Partners will not exceed Seven Million Five Hundred Thousand Dollars
($7,500,000), except as set forth below. The foregoing limitation on liability
shall not apply to breaches by the Shareholders or General Partners of their
representations and warranties in Section 4.2 or breaches by the Company of its
representations and warranties in Section 3.2(b).
10.7 Special Indemnity for Lu-Mar/CMS Claims. The Company shall
retain liability for the Lu-Mar/CMS Claims. The Company shall continue to defend
the Lu-Mar/CMS Claims and pursue recoveries from Lu-Mar and CMS, at the sole
direction and under the sole control of the Shareholder Representative and
toward that end, the Company shall provide to the Shareholder Representative
access to Company personnel and records and shall generally cooperate with the
Shareholder Representative. The Shareholders and General Partners shall, in
accordance with their Applicable Percentage, defend, indemnify, and hold Buyer
and the Company harmless from and against, and reimburse Buyer and the Company
with respect to, any and all Losses incurred by Buyer by reason of or arising
out of or in connection with the Lu-Mar/CMS Claims, including Losses not
compensated through releases of Escrow Funds. Notwithstanding the foregoing, in
the event the Carey Group fails to pay its Applicable Percentage required by the
prior sentence, Buyer shall be entitled to recover from the Galando
51
<PAGE>
Group that portion not recovered from the Carey Group, subject to the provisions
of Section 10.8(c).
10.8 Allocation of Liability; Non-discrimination.
(a) Each of the Galando Group and its members, and each of the
Carey Group and its members, shall be liable under this Article X only with
respect to breaches by that Group, or its members, of (x) the representations
and warranties made by that Group or its members at Article IV with respect to
that Group and its members; (y) any obligation by that Group or its members
under this Agreement to pay its Applicable Percentage of any costs, expenses, or
other amounts (except as otherwise specified at Section 10.7), or (z) any
covenant at Article VIII, including without limitation the covenants of Section
8.9 made by the Group or any of its members. Neither the Galando Group (or any
members thereof) nor the Carey Group (or any members thereof) shall have any
liability for breaches by the other Group or its members of matters set forth in
this Section 10.8(a) (by way of example, only the Galando Group shall have any
liability for a breach of Section 4.4 arising out of proceeding against a
Galando Group member and the Carey Group shall have no liability for such
breach). Except as provided in the next sentence, within a Group and its
members, liability under this Section 10.8(a) shall be joint and several.
Liability for a breach by a Group member of Section 8.9 shall be borne only by
that Group member.
(b) Except as otherwise provided in Section 10.8(a), the
liability of the Carey Group for any single claim arising under this Article X
shall be limited to an amount equal to the product of such claim and the
Applicable Percentage of the Carey Group. While the Galando Group's liability
for Claims not covered by Section 10.8(a) is not limited to its Applicable
Percentage, prior to Buyer's being entitled to recover from the Galando Group
for any single Claim not covered by Section 10.8(a), or in respect of the Lu-
Mar/CMS Claims, an amount in excess of the Galando Group's Applicable
Percentage, Buyer must use reasonable collection efforts to recover on such
Claim against the Carey Group, including the initiation and pursuit of
litigation against the Carey Group for a period of six (6) months from
initiation of litigation against the Carey Group.
(c) Except as otherwise provided in Section 10.8(a), in the
event that Buyer elects to pursue a claim for indemnification with respect to
any claims against one Shareholder or General Partner, it shall make such a
claim against all Shareholders and General Partners and shall thereafter pursue
such claim in a manner that does not favor one over another because of the
continued business relationship of any Shareholder or General Partner with the
Company.
10.9 Exclusive Remedy. The sole and exclusive remedy of Buyer, the
Shareholders, and the General Partners for Covered Matters shall be claims made
in accordance with and subject to the limitations of this Article X. Pursuant
to the foregoing, but without limitation of the foregoing, all claims, whether
stated in contract, tort, or otherwise, with respect to Covered Matters that are
the subject of potential indemnification pursuant to this Article X, shall be
subject to the thresholds, caps, limitations, and procedures of this Article X,
provided that nothing contained in this Agreement shall limit remedies for
actual fraud.
52
<PAGE>
10.10 Maintenance of Insurance; Pursuit of Third Party Claims.
Following Closing and for a period extending until July 31, 2000, Buyer shall
maintain, in respect of the Company, insurance of at least the amount, with no
greater deductible, and covering at least the same risks, as insurance
maintained by the Company immediately prior to Closing. Such insurance shall be
maintained with sound and reputable insurers. In addition, in the event that a
third party claim may result in reduction of a Loss otherwise indemnifiable by
the Shareholders or the General Partners, Buyer agrees to use commercially
reasonable efforts to recover on such claim.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by mutual consent of Buyer, the Shareholders, the General
Partners, and the Company;
(b) by any of Buyer or the Shareholder Representative (provided
that the terminating party (in the case of the Shareholder Representative, any
of the Company, Shareholders, or General Partners) is not then in material
breach of any representation, warranty, covenant, or agreement contained in this
Agreement) if there has been a breach of any representation, warranty, covenant,
or agreement that has a Material Adverse Effect on the Business Condition of the
Company (if Buyer is the terminating party) or Buyer (if a General Partner is
the terminating party), as the case may be, or on the benefits of the
Transaction provided for in this Agreement, and such breach has not been cured,
or reasonable efforts are not being employed to cure such breach, within ten
(10) days after notice thereof is given to the party committing such breach;
(c) by any of Buyer, the Shareholder Representative, or the
Company if the Transaction shall not have been consummated before May 1, 1999
(or May 15, 1999, in the event that a second request is received pursuant to the
HSR Act);
(d) by Buyer in the event that Buyer receives notice pursuant to
Section 6.2 of this Agreement of a supplement or amendment to any schedule
hereto, which supplement or amendment discloses any change or effect that, in
Buyer's reasonable judgment, either by itself or in conjunction with other prior
such supplemental disclosures constitutes a Material Adverse Effect on the
Business Condition of the Company. If (a) Buyer exercises its right to terminate
this Agreement pursuant to the preceding clause, and (b) any of the General
Partners had actual knowledge of the facts contained in such supplements or
amendments prior to the date of this Agreement, then the Company shall, as
Buyer's sole and exclusive remedy, reimburse Buyer for all of Buyer's reasonable
fees and expenses (including without limitation the fees and disbursements of
Buyer's attorneys) incurred in contemplation of this Agreement and the
Transaction.
53
<PAGE>
ARTICLE XII
GENERAL PROVISIONS
12.1 Governing Law; Jurisdiction and Venue. This Agreement shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of Washington. The parties agree that King County,
Washington, shall be the exclusive proper place of venue for any action,
dispute, or controversy arising from or in connection with this Agreement and
submit to the jurisdiction of the state and federal courts located in King
County, Washington. Except as otherwise provided in Sections 2.2, 2.3, 8.9(e),
10.4 and 10.6, the parties irrevocably agree that any Proceeding arising out of
or in connection with this Agreement shall be brought either in the King County
Superior Court or in the United States District Court Division in which King
County is located. The Shareholders and General Partners shall maintain an
agent for service of process in the city of Seattle for a period of seven (7)
years after the Closing Date. The initial agent for service of process shall be
Robert Medved, and the address of such agent is 212 108th Avenue, Bellevue,
Washington 98004-6209. The Shareholders and General Partners shall provide
prompt notice of any change in the name or address of the agent in accordance
with the provisions of Section 12.2. Except as otherwise provided by statute or
court rule, no party shall be entitled to recover attorneys' fees or other costs
incurred in any Proceeding.
12.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed sufficiently given and served for all purposes
when personally delivered or given by telex or machine-confirmed facsimile or
three (3) business days after a writing is deposited in the United States mail,
first class postage or other charges prepaid and registered, return receipt
requested, addressed as follows (or at such other address for a party as shall
be specified by like notice):
(a) if to Buyer, to:
Aurora Foods Inc.
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Phone: (415) 982-3019
Fax: (415) 982-3023
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attention: Craigh Leonard
Phone: (212) 207-1222
Fax: (212) 750-9022
54
<PAGE>
(b) if to the Company, to:
Sea Coast Foods, Inc.
13838 First Avenue South
Seattle, WA 98168
Attention:
Phone: (206) 243-3939
Fax: (206) 243-4640
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Ave.
Seattle, WA 98104-7078
Attention: Stephan H. Coonrod and Jamie D. Pedersen
Phone: (206) 623-7580
Fax: (206) 623-7022
c) if to the Shareholders and General Partners, to:
Joseph A. Galando
3124 SW 171st
Burien, WA 98166
Phone: (206) 242-0948
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Ave.
Seattle, WA 98104-7078
Attention: Stephan H. Coonrod and Jamie D. Pedersen
Phone: (206) 623-7580
Fax: (206) 623-7022
and to:
Robert A. Medved
212 108th Avenue
Bellevue, WA 98004-6209
Phone: (206) 637-7700
Fax: (425) 637-7711
12.3 Interpretation. When a reference is made in this Agreement to
Sections, Schedules, or Exhibits, such reference shall be to a Section,
Schedule, or Exhibit to this
55
<PAGE>
Agreement unless otherwise indicated. The words "include", "includes", and
"including" when used therein shall be deemed in each case to be followed by the
words "without limitation". The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section, a
Schedule, or an Exhibit will mean a section in, or schedule or exhibit to, this
Agreement unless otherwise explicitly set forth.
12.4 Counterparts. This Agreement may be executed in one or more
counterparts (including facsimile counterparts), all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to each
the other parties, it being understood that all parties need not sign the same
counterpart.
12.5 Miscellaneous. This Agreement, the Confidentiality Agreement,
and the documents referred to herein (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder (except as otherwise expressly
provided herein and except that Section 8.4 is for the benefit of Company's
directors and officers and is intended to confer rights on such persons); and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided. By execution of this Agreement, each General Partner
waives any community property rights that he or she may have with respect to the
Company Shares.
(the remainder of this page has been intentionally left blank)
56
<PAGE>
SIGNATURE PAGE - STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement
to be executed by their respective and duly authorized officers, and the
Shareholders or their respective trustees have duly executed this Agreement, all
as of the date first written above.
<TABLE>
<CAPTION>
BUYER SHAREHOLDERS
<S> <C>
AURORA FOODS INC. GALANDO INVESTMENTS LIMITED PARTNERSHIP
By /s/ Ray Chung By /s/ Joseph A. Galando
--------------------------------- -----------------------------------
Ray Chung, Executive Vice President Joseph A. Galando, General Partner
By /s/ Barbara J. Galando
-----------------------------------
Barbara Galando, General Partner
COMPANY CAREY-ON LIMITED PARTNERSHIP
SEA COAST FOODS, INC.
By /s/ Joseph A. Galando By /s/ Stanley J. Carey
--------------------------------- -----------------------------------
Joseph A. Galando, President Stanley J. Carey, General Partner
By /s/ Mary K. Carey
-----------------------------------
Mary K. Carey, General Partner
GENERAL PARTNERS
/s/ Joseph A. Galando /s/ Stanley J. Carey
_____________________________ _____________________________
Joseph A. Galando Stanley J. Carey
/s/ Barbara J. Galando /s/ Mary K. Carey
_____________________________ _____________________________
Barbara J. Galando Mary K. Carey
</TABLE>
57
<PAGE>
The following list briefly identifies the contents of the Schedules and
Exhibits to the Stock Purchase Agreement, dated as of March 10, 1999 among
Aurora Foods Inc., Sea Coast Foods, Inc., Galando Investments Limited
Partnership, Carey-On Limited Partnership and Joseph A. Galando, Barabara J.
Galando, Stanley J. Carey, and Mary K. Carey. (Terms used but not defined have
the meanings assigned to them in the Stock Purchase Agreement.) In accordance
with Regulation S-K under the Securities Act of 1933 the actual Schedules and
Exhibits have not been filed with the Securities and Exchange Commission (the
"Commission"). The Company hereby agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request.
1. Company Disclosure Schedule - List of exceptions and disclosures by the
Company with respect to the representations and warranties contained in
Article 3 of the Agreement.
2. Group Disclosure Schedule - List of exceptions and disclosures by the Group
with respect to the representations and warranties contained in Article 4 of
the Agreement.
3. Schedule 3.9 - Officer and Sole Director - List of officers and sole
director of the Company.
4. Schedule 3.10 - Employee Benefit Plans - List of the Company's employee
benefit plans.
5. Schedule 3.12 - Litigation - List of the Company's litigation.
6. Schedule 3.13(b) - Tangible Personal Property - List of the Company's
tangible personal property.
7. Schedule 3.14 - Major Contracts - List of the Company's major contracts.
8. Schedule 3.15 - Customers and Suppliers - List of the Company's largest
customers and supplier.
9. Schedule 3.16 - Lease Premises - List of the Company's leased premises.
10. Schedule 3.18(a) - Registered Intellectual Property - List of trademarks
owned by the Company.
11. Schedule 3.18(b) - Licensed Intellectual Property - List of trademarks
licensed to the Company.
12. Schedule 3.23 - Insurance Policies - List of the companies insurance
policies.
13. Schedule 8.14 - Assets to be Distributed to Shareholders - List of assets
distributed to the Company's shareholders.
14. Schedule 8.15 - Post-Closing Reporting Obligations of Company to Buyer -
List of post-closing obligations of Company to Buyer.
<PAGE>
15. Schedule 9.1.1 - Third Party Consents - Indicates there are none necessary.
16. Exhibit 1 - FY 2000 Plan; Adjustments for Earnings for Periods from
February 1, 1999 until Closing - Description of Company's expenses from
February 1 to the Closing. Attached thereto is the FY 2000 plan of the
Company.
17. Exhibit 2.5(a)(ix) - Form of Escrow Agreement
18. Exhibit - 8 Escrow Fees - Schedule of Fees for Escrow Services.
19. Exhibit 9.2.3. Form of Opinion for Company's counsel.
20. Exhibit 9.3.3. Form of Opinion of Buyer's Counsel.
<PAGE>
EXHIBIT 10.1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
EXECUTION COPY
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 31, 1999
AMONG
AURORA FOODS INC.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
NATIONAL WESTMINSTER BANK PLC,
AS SYNDICATION AGENT
AND
UBS AG, STAMFORD BRANCH,
AS DOCUMENTATION AGENT
- - --------------------------------------------------------------------------------
<PAGE>
AURORA FOODS INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS 1
1.1 Certain Defined Terms 2
---------------------
1.2 Accounting Terms Utilization of GAAP for Purposes of Calculations Under
------------------
Agreement 36
---------
1.3 Other Definitional Provisions 36
-----------------------------
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 36
2.1 Commitments; Loans 36
------------------
2.2 Interest on the Loans 43
---------------------
2.3 Fees 47
----
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding
Payments; Application of Proceeds of Collateral and Payments under Guaranties 48
----------
2.5 Use of Proceeds 57
---------------
2.6 Special Provisions Governing Eurodollar Rate Loans 58
--------------------------------------------------
2.7 Increased Costs; Taxes; Capital Adequacy 60
----------------------------------------
2.8 Obligation of Lenders and Issuing Lenders to Mitigate 64
-----------------------------------------------------
SECTION 3.LETTERS OF CREDIT 65
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein 65
-----------------------------------------------------------------------------
3.2 Letter of Credit Fees 67
---------------------
3.3 Drawings and Payments and Reimbursement of Amounts Paid Under Letters of Credit 68
-----------------------
3.4 Obligations Absolute 71
--------------------
3.5 Indemnification; Nature of Issuing Lender's Duties 72
--------------------------------------------------
3.6 Increased Costs and Taxes Relating to Letters of Credit 73
-------------------------------------------------------
SECTION 4.CONDITIONS TO LOANS AND LETTERS OF CREDIT 74
4.1 Conditions to Tranche B Term Loans 74
----------------------------------
4.2 Conditions to All Loans 77
-----------------------
4.3 Conditions to Letters of Credit 78
-------------------------------
SECTION 5.REPRESENTATIONS AND WARRANTIES 78
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries 78
-----------------------------------------------------------------------------
5.2 Authorization of Borrowing, etc. 79
--------------------------------
5.3 Financial Condition 81
-------------------
5.4 No Material Adverse Change; No Restricted Junior Payments 81
---------------------------------------------------------
5.5 Title to Properties; Liens; Intellectual Property 81
-------------------------------------------------
5.6 Litigation: Adverse Facts 83
--------------------------
5.7 Payment of Taxes 83
----------------
5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts 83
----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.9 Governmental Regulation 84
-----------------------
5.10 Securities Activities 84
---------------------
5.11 Employee Benefit Plans 84
----------------------
5.12 Certain Fees 85
------------
5.13 Environmental Protection 85
------------------------
5.14 Employee Matters 86
----------------
5.15 Solvency 86
--------
5.17 Related Agreements 87
------------------
5.18 Disclosure 88
----------
5.19 Subordination of Seller Notes 88
-----------------------------
5.20 Year 2000 Matters 88
-----------------
SECTION 6.AFFIRMATIVE COVENANTS 89
6.1 Financial Statements and Other Reports 89
--------------------------------------
6.2 Corporate Existence, etc. 94
-------------------------
6.3 Payment of Taxes and Claims; Tax Consolidation 94
-----------------------------------------------
6.4 Maintenance of Properties; Insurance 94
------------------------------------
6.5 Inspection; Lender Meeting 95
--------------------------
6.6 Compliance with Laws, etc. 95
--------------------------
6.7 Environmental Disclosure and Inspection 95
---------------------------------------
6.8 Company's Remedial Action Regarding Hazardous Materials 97
-------------------------------------------------------
6.9 Execution of Subsidiary Guaranty and Subsidiary Security Agreements by Subsidiaries and Future
----------------------------------------------------------------------------------------------
Subsidiaries 97
------------
6.10 Conforming Leasehold Interests; Matters Relating to Additional Real Property Collateral 98
---------------------------------------------------------------------------------------
6.11 Interest Rate Protection 100
------------------------
6.12 Further Assurances 100
------------------
SECTION 7.NEGATIVE COVENANTS 101
7.1 Indebtedness 101
------------
7.2 Liens and Related Matter 102
------------------------
7.3 Investments; Joint Ventures 104
---------------------------
7.4 Contingent Obligations 104
----------------------
7.5 Restricted Junior Payments 105
--------------------------
7.6 Financial Covenants 106
-------------------
7.7 Restriction on Fundamental Changes; Asset Sales 109
-----------------------------------------------
7.8 Sales and Lease-Backs 111
---------------------
7.9 Transactions with Shareholders and Affiliates 111
---------------------------------------------
7.10 Disposal of Subsidiary Stock 111
----------------------------
7.11 Conduct of Business 112
-------------------
7.12 Amendments or Waivers of Certain Related Agreements; Amendments of Documents Relating to
Subordinated Indebtedness; Designation of 112
7.13 Fiscal Year 113
-----------
SECTION 8.EVENTS OF DEFAULT
8.1 Failure to Make Payments When Due 113
---------------------------------
8.2 Default in Other Agreements 114
---------------------------
8.3 Breach of Certain Covenants 114
---------------------------
8.4 Breach of Warranty 114
------------------
8.5 Other Defaults Under Loan Documents 114
-----------------------------------
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. 115
-----------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. 115
---------------------------------------------------
8.8 Judgments and Attachments 115
-------------------------
8.9 Dissolution 116
-----------
8.10 Employee Benefit Plans 116
----------------------
8.11 Change in Control 116
-----------------
8.12 Invalidity of Guaranties 116
------------------------
8.13 Failure of Security 117
-------------------
8.14 Termination or Breach of Certain Transition Agreements 117
------------------------------------------------------
8.15 Default Under Subordination Provisions 117
--------------------------------------
SECTION 9. AGENTS 118
9.1 Appointment 118
-----------
9.2 Powers; General Immunity 119
------------------------
9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness 121
---------------------------------------------------
9.4 Right to Indemnity 121
------------------
9.5 Successor Agents and Swing Line Lender 121
--------------------------------------
9.6 Collateral Documents 122
--------------------
SECTION 10. MISCELLANEOUS 122
10.1 Assignments and Participations in Loans, Letters of Credit 122
----------------------------------------------------------
10.2 Expenses 126
--------
10.3 Indemnity 126
---------
10.4 Set-Off; Security Interest in Deposit Accounts 127
----------------------------------------------
10.5 Ratable Sharing 127
---------------
10.6 Amendments and Waivers 128
----------------------
10.7 Independence of Covenants 130
-------------------------
10.8 Notices 130
-------
10.9 Survival of Representations, Warranties and Agreements 130
------------------------------------------------------
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative 131
-----------------------------------------------------
10.11 Marshalling; Payments Set Aside 131
-------------------------------
10.12 Severability 131
------------
10.13 Obligations Several; Independent Nature of Lenders' Rights 131
----------------------------------------------------------
10.14 Headings 131
--------
10.15 Applicable Law 132
--------------
10.16 Successors and Assigns 132
----------------------
10.17 Consent to Jurisdiction and Service of Process 132
----------------------------------------------
10.18 Waiver of Jury Trial 133
--------------------
10.19 Confidentiality 133
---------------
10.20 Counterparts; Effectiveness 134
---------------------------
</TABLE>
<PAGE>
ANNEXES
Annex A Pricing Grid
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TRANCHE A TERM NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF REVOLVING NOTE
VII FORM OF SWING LINE NOTE
VIII FORM OF SUBSIDIARY GUARANTY
IX FORM OF PLEDGE AGREEMENT
X FORM OF SECURITY AGREEMENT
XI FORM OF SEA COAST PATENT AND TRADEMARK SECURITY AGREEMENT
XII FORM OF COMPLIANCE CERTIFICATE
XIII FORM OF OPINION OF COUNSEL TO LOAN PARTIES
XIV FORM OF OPINION OF SIMPSON THACHER & BARTLETT
XV RESERVED (FORM OF OPINION OF LOCAL COUNSEL)
XVI FORM OF ASSIGNMENT AGREEMENT
XVII FORM OF PERMITTED SELLER NOTE
XVIII FORM OF CERTIFICATE RE NON-BANK STATUS
XIX FORM OF COLLATERAL ACCOUNT AGREEMENT
XX FORM OF COLLATERAL ACCESS AGREEMENT
XXI FORM OF MORTGAGE
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES; LENDING OFFICES
5.3 MATERIAL SALES, TRANSFERS OR DISPOSITIONS; MATERIAL LIABILITIES; MATERIAL
PURCHASES OR ACQUISITIONS
5.5B OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS
5.5C OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS (LOG
CABIN)
5.5D OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS
(DUNCAN HINES)
5.5E OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS (VAN DE
KAMP'S)
5.5F OTHER NECESSARY INTELLECTUAL PROPERTY RIGHTS; MATERIAL CONTRACTS (SEA
COAST)
5.8 MATERIAL CONTRACTS
7.6E STIPULATED CONSOLIDATED EBITDA AND CONSOLIDATED CAPITAL EXPENDITURES
<PAGE>
AURORA FOODS INC.
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
This FOURTH AMENDED AND RESTATED CREDIT AGREEMENT is dated as of March
31, 1999 and entered into by and among AURORA FOODS INC., a Delaware corporation
("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "Lender" and collectively as
"Lenders"), THE CHASE MANHATTAN BANK, as administrative agent for Lenders (in
such capacity, "Administrative Agent"), NATIONAL WESTMINSTER BANK PLC, as
syndication agent (in such capacity, "Syndication Agent") and UBS AG, Stamford
Branch, as documentation agent (in such capacity, "Documentation Agent").
R E C I T A L S
- - - - - - - -
WHEREAS, Company, certain financial institutions (the "Existing
Lenders"), The Chase Manhattan Bank, as administrative agent, National
Westminster Bank Plc, as syndication agent, and UBS AG, Stamford Branch, as
documentation agent, are parties to the Third Amended and Restated Credit
Agreement, dated as of July 1, 1998 (the "Existing Credit Agreement"), pursuant
to which the Existing Lenders provided term loan facilities in an aggregate
principal amount of $225,000,000 (the "Existing Term Loan Facilities") and a
revolving credit facility in an aggregate principal amount of $175,000,000 (the
"Revolving Credit Facility").
WHEREAS, Company desires that the Existing Lenders and the New Lenders
(capitalized terms used in these recitals without definition shall have the
respective meanings assigned in subsection 1.1 hereof) amend and restate the
Existing Credit Agreement to provide Tranche B Term Loans in an aggregate
principal amount of $100,000,000 which will be used to finance the Sea Coast
Acquisition, to pay related fees and expenses and to reduce outstandings (but
not reduce the Revolving Credit Commitments) under the Revolving Credit
Facility.
WHEREAS, Company desires that all of its future Subsidiaries guaranty
all of the obligations of Company with respect to the credit facilities provided
by Lenders.
WHEREAS, Company desires to secure all of the Obligations and desires
that all of its future Subsidiaries secure their respective obligations under
the Subsidiary Guaranty, by granting to Administrative Agent, for the benefit of
Agents and Lenders, (i) a first priority Lien on substantially all of their
respective real and personal property and (ii) a first priority pledge of all of
the capital stock of their respective direct Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree as
follows:
SECTION 1.
DEFINITIONS
<PAGE>
2
1.1 Certain Defined Terms.
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The following terms used in this Agreement shall have the following
meanings:
"Acquisition" means the transactions contemplated by the Acquisition
Agreement.
"Acquisition Agreement" means that certain Asset Purchase Agreement
dated as of December 18, 1996, by and between Company and Seller, as in
effect on the Closing Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination
Date, the rate per annum obtained by dividing (i) the London Interbank
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offered rate for deposits in U.S. Dollars for maturities comparable to the
Interest Period for which such Adjusted Eurodollar Rate will apply as of
approximately 11:00 A.M. (London time) on such Interest Rate Determination
Date as set forth on Telerate Page 3750 by (ii) a percentage equal to 100%
minus the stated maximum rate of all reserve requirements (including,
-----
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any member
bank of the Federal Reserve System in respect of "Eurocurrency liabilities"
as defined in Regulation D (or any successor category of liabilities under
Regulation D).
"Adjustment Date" means the first Business Day following receipt by
the Administrative Agent of both (i) the financial statements required to
be delivered pursuant to subsection 6.1(ii) or 6.1(iii), as the case may
be, for the most recently completed fiscal period and (ii) the certificate
required to be delivered pursuant to subsection 6.1(iv) with respect to
such fiscal period.
"Administrative Agent" means Chase, in its capacity as Administrative
Agent, and any successor to Chase in such capacity appointed pursuant to
subsection 9.5A.
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affected Loans" has the meaning assigned to that term in subsection
2.6C.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and
"under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through
the ownership of voting securities or by contract or otherwise.
"Agent" means, individually, each of Administrative Agent, the
Syndication Agent and the Documentation Agent, and "Agents" means
Administrative Agent, the Syndication Agent and the Documentation Agent,
collectively.
<PAGE>
3
"Aggregate Amounts Due" has the meaning assigned to that term in
subsection 10.5.
"Agreement" means this Fourth Amended and Restated Credit Agreement
dated as of March 31, 1999, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Applicable Margin" means the Applicable Margin set forth on Annex A
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hereto opposite the level for which the ratio of Consolidated Total Debt to
Consolidated EBITDA so determined satisfies the corresponding criteria set
forth under the heading "Ratio of Consolidated Total Debt to Consolidated
EBITDA", which Applicable Margin shall be adjusted on each Adjustment Date;
provided that in the event that the financial statements required to be
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delivered pursuant to subsection 6.1(ii) and (iii), as applicable, and the
related certificate required pursuant to subsection 6.1(iv), are not
delivered when due, then if such financial statements are not delivered
prior to the date upon which the resultant Potential Event of Default shall
become an Event of Default, then, effective upon such Potential Event of
Default becoming an Event of Default, during the period from the date upon
which such financial statements were required to be delivered until one
Business Day following the date upon which they actually are delivered, the
Applicable Margin (x) with respect to Revolving Loan and Tranche A Term
Loans shall be 1.50% if such Loans are Base Rate Loans and 2.50% if such
Loans are Eurodollar Rate Loans (y) with respect to Tranche B Term Loans
shall be 1.75% if such Loans are Base Rate Loans and 2.75% if such Loans
are Eurodollar Rate Loans and (z) with respect to the Commitment Fee shall
be 0.50%.
"Applied Amount" has the meaning assigned to that term in subsection
2.4C(ii).
"Approved Fund" means, with respect to a Lender that is a fund that
invests in loans, any other fund that invests in loans and has the same
investment advisor as such Lender or is managed by an Affiliate of such
investment advisor.
"Asset Sale" means the sale (including in any sale-leaseback
transaction) by Company or any of its Subsidiaries to any Person (other
than Company or any of its Wholly Owned Subsidiaries) of (i) any of the
stock of any of Company's Subsidiaries, (ii) all or substantially all of
the assets of any division or line of business of Company or any of its
Subsidiaries, or (iii) any other assets other than sales of assets
(including without limitation inventory) in the ordinary course of business
and sales of obsolete equipment, excluding any such other assets to the
---------
extent that the aggregate value of such assets sold in any single
transaction or transactions is equal to $5,000,000 or less in any one
Fiscal Year.
"Assignment Agreement" means an assignment agreement in substantially
the form of Exhibit XVI annexed hereto or in such other form as may be
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approved by Administrative Agent.
<PAGE>
4
"Assumption Agreement" means that certain Assignment and Assumption
Agreement dated as of December 31, 1996, by and between Seller and Company,
as in effect on the Closing Date and as such agreement may thereafter be
amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 7.12A.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate, (y)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate
or (z) the secondary market rate for certificates of deposit (grossed up
for maximum statutory reserve requirements) plus 1.00%.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Business" means the assets and liabilities of Company relating to the
manufacture and sale of pancake syrup and pancake and waffle mix marketed
under the Mrs. Butterworth's and Country Crock brand names, as set forth in
the Acquisition Agreement.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or required
by law or other governmental action to close, and (ii) with respect to all
notices, determinations, fundings, issuances and payments in connection
with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day
that is a Business Day described in clause (i) above and that is also (a) a
day for trading by and between banks in Dollar deposits in the London
interbank market and (b) a day on which banking institutions are open for
business in London.
"CALPERS" means the California Public Employees Retirement System.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) marketable securities issued or directly
and unconditionally guaranteed by the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable
<PAGE>
5
from either Standard & Poor's Rating Service ("S&P") or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's,
issued by any Lender or any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia
having unimpaired capital and surplus of not less than $250,000,000 (each
Lender and each such commercial bank being herein called a "Cash Equivalent
Bank"); and (v) Eurodollar time deposits having a maturity of less than one
year purchased directly from any Cash Equivalent Bank (provided such
deposit is with such Cash Equivalent Bank or any other Cash Equivalent
Bank).
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received by Company or any of its Subsidiaries from such Asset
Sale.
"Certificate re Non-Bank Status" means a certificate substantially in
the form of Exhibit XVIII annexed hereto delivered by a Lender to
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Administrative Agent pursuant to subsection 2.7B(iii).
"Chase" means The Chase Manhattan Bank and its successors, including,
without limitation, its successors by merger.
"Closing Date" means December 31, 1996.
"Collateral" means all of the properties and assets (including capital
stock) in which Liens are purported to be granted by the Collateral
Documents.
"Collateral Access Agreement" means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgement or agreement of any
landlord or mortgagee in respect of any Real Property Asset where any
Collateral is located or any warehouseman or processor in possession of any
Inventory of any Loan Party, substantially in the form of Exhibit XX
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annexed hereto with such changes thereto as may be agreed to by
Administrative Agent in the reasonable exercise of its discretion.
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by Company and Administrative Agent on the Effective
Date, substantially in the form of Exhibit XIX annexed hereto, pursuant to
-----------
which Company may pledge cash to Administrative Agent to secure the
obligations of Company to reimburse Issuing Lenders for payments made under
one or more Letters of Credit as such Collateral Account Agreement may
hereafter be amended, restated, supplemented or otherwise modified from
time to time.
<PAGE>
6
"Collateral Documents" means the Pledge Agreement, the Security
Agreement, the Patent and Trademark Security Agreement, the Log Cabin
Patent and Trademark Security Agreement, the Duncan Hines Patent and
Trademark Security Agreement, the Van de Kamp's Patent and Trademark
Agreement, the Sea Coast Patent and Trademark Agreement, the Collateral
Account Agreement, the Mortgages and any other documents, instruments or
agreements delivered by any Loan Party pursuant to this Agreement or any of
the other Loan Documents in order to grant or perfect liens on any assets
of such Loan Party as security for the Obligations.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or
services by Company or any of its Subsidiaries in the ordinary course of
business of Company or such Subsidiary.
"Commitment Fee" and "Commitment Fees" have the meanings assigned to
such terms in subsection 2.3A.
"Commitments" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"Company" has the meaning assigned to that term in the introduction to
this Agreement.
"Company Common Stock" means the common stock of Company, par value
$0.01 per share.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit XII annexed hereto delivered to Administrative Agent by Company
-----------
pursuant to subsection 6.1(iv).
"Condemnation Proceeds" has the meaning assigned to that term in
subsection 2.4B(iii)(d).
"Conforming Leasehold Interest" means any Recorded Leasehold Interest
as to which the lessor has agreed in writing for the benefit of
Administrative Agent (which writing has been delivered to Administrative
Agent), whether under the terms of the applicable lease, under the terms of
a Landlord Consent and Estoppel, or otherwise, to the matters described in
the definition of "Landlord Consent and Estoppel," which interest, if a
subleasehold or sub-subleasehold interest, is not subject to any contrary
restrictions contained in a superior lease or sublease.
"Consolidated Capital Expenditures" means, for any period, the
aggregate amount paid or accrued by Company and its Subsidiaries for the
rental, lease, purchase (including by way of the acquisition of Securities
of a Person), construction or use of any property during such period, the
value or cost of which, in conformity with GAAP, would appear on the
consolidated balance sheet of Company and its Subsidiaries in the category
of
<PAGE>
7
"purchases of property, plant or equipment" at the end of such period,
excluding any such expenditure made to restore, replace or rebuild property
to the condition of such property immediately prior to any damage, loss,
destruction or condemnation of such property, to the extent such
expenditure is made with insurance proceeds or condemnation awards relating
to any such damage, loss, destruction or condemnation; provided, however,
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that Consolidated Capital Expenditures shall not include expenditures up to
an aggregate amount equal to the portion of the purchase price for any
Permitted Acquisition made pursuant to subsection 7.7(vi) that would
otherwise be treated as a Consolidated Capital Expenditure.
"Consolidated Cash Interest Coverage Ratio" means, for any period, the
ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Cash
Interest Expense for such period.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense payable in Cash during such period.
"Consolidated Current Assets" means, as at any date of determination,
the total assets of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current assets in conformity with GAAP,
excluding Cash and Cash Equivalents and any current tax asset.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities
in conformity with GAAP, but excluding all short-term Indebtedness for
borrowed money and the current portion of any long-term Indebtedness of the
Company, in each case to the extent included therein, and any current taxes
payable and the current portion of any deferred taxes.
"Consolidated EBITDA" means, for any period, (i) the sum of the
amounts for such period of (a) Consolidated Net Income, plus (b) to the
----
extent deducted in determining such Consolidated Net Income, (1)
Consolidated Interest Expense, (2) depreciation, (3) depletion, (4)
amortization, (5) all federal, state, local and foreign income taxes, (6)
transaction fees paid to the MDC Entities and/or Dartford and/or Fenway in
connection with acquisitions made after the Existing Effective Date, so
long as such transaction fees are paid in accordance with the terms of the
MDC Advisory Services Agreement, the Dartford Management Agreement and the
Fenway Advisory Agreement, (7) non-recurring charges incurred prior to
September 30, 1998 related to the Log Cabin Business, with respect to (A)
relocation of Company's assets, (B) the purchase of computers and computer-
related equipment and (C) transition related expenses in connection with
the foregoing, but only to the extent that such non-recurring charges,
together with all expenditures excluded from Consolidated Capital
Expenditures under clause (iii)(a) of the definition of Consolidated Fixed
Charges do not exceed $6,000,000 in the aggregate, (8) non-recurring
charges incurred prior to June 30, 1999 with respect to relocation of the
Company's assets related to the Duncan Hines Business and transition
related expenses in connection therewith, but only to the extent that such
non-recurring charges, together with all expenditures excluded from
Consolidated Capital Expenditures
<PAGE>
8
under clause (iii)(b) of the definition of Consolidated Fixed Charges do
not exceed $15,000,000 in the aggregate, (9) manufacturing overhead costs
related to the Duncan Hines Transitional Supply Agreement not to exceed
$8,200,000 per year as long as the Duncan Hines Transitional Supply
Agreement is in effect, (10) all other non-cash items reducing Consolidated
Net Income and (11) any extraordinary and unusual losses, minus (ii) the
-----
sum of the amounts for such period of (a) all other non-cash items
increasing Consolidated Net Income, plus (b) any extraordinary and unusual
gains, all of the foregoing as determined on a consolidated basis for
Company and its Subsidiaries in conformity with GAAP and calculated in
accordance with subsection 7.6E, if applicable.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a) Consolidated EBITDA, (b) to the extent deducted from
Consolidated EBITDA by virtue of clause (ii)(b) of the definition thereof,
extraordinary and unusual cash gains, and (c) the Consolidated Working
Capital Adjustment minus (ii) the sum, without duplication, of the amounts
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for such period of (a) voluntary and scheduled cash repayments of
Consolidated Total Debt (excluding repayments of Revolving Loans except to
the extent the Revolving Loan Commitments are permanently reduced in
connection with such repayments), (b) Consolidated Capital Expenditures
(net of any proceeds of any related financings with respect to such
expenditures), (c) expenditures made in connection with any Permitted
Acquisition pursuant to subsection 7.7(vi) (net of any proceeds of any
related financings with respect to such acquisitions), including without
limitation transaction fees paid in cash to the MDC Entities and/or
Dartford and/or Fenway in connection with such acquisitions, so long as
such transaction fees are paid in accordance with the terms of the MDC
Advisory Services Agreement, the Dartford Management Agreement and the
Fenway Agreement, (d) Consolidated Interest Expense, (e) to the extent
added back to Consolidated EBITDA by virtue of clause (i)(b)(11) of the
definition thereof, extraordinary and unusual cash losses, (f) to the
extent added back to Consolidated EBITDA by virtue of clauses (i)(b)(7) or
(i)(b)(8) of the definition thereof, non-recurring charges paid in cash,
(g) to the extent added back to Consolidated EBITDA by virtue of clause
(i)(b)(9) of the definition thereof, manufacturing overhead costs related
to the Duncan Hines Transitional Supply Agreement, and (h) the provision
for current taxes based on income of Company and its Subsidiaries and
payable in cash with respect to such period.
"Consolidated Fixed Charges" means, for any period, an amount equal to
the sum of the amounts for such period of (i) scheduled amortization of
Indebtedness of Company and its Subsidiaries (as reduced by prepayments
previously made), and discount or premium relating to any such Indebtedness
for such period, whether expensed or capitalized, (ii) Consolidated Cash
Interest Expense, (iii) Consolidated Capital Expenditures (excluding (a)
expenditures which would otherwise be included in Consolidated Capital
Expenditures incurred prior to September 30, 1998 related to the Log Cabin
Business, with respect to (1) relocation of Company's assets, (2) the
purchase of computers and computer-related equipment and (3) transition
related expenses in connection with the foregoing, but only to the extent
that such expenditures, together with all non-recurring charges added back
to Consolidated EBITDA by virtue of clause (i)(b)(7) of the definition
thereof, do not exceed $6,000,000 in the aggregate and (b)
<PAGE>
9
expenditures which would otherwise be included in Consolidated Capital
Expenditures incurred prior to June 30, 1999 with respect to relocation of
the Company's assets related to the Duncan Hines Business and transition
related expenses in connection therewith, but only to the extent that such
expenditures, together with all non-recurring charges added back to
Consolidated EBITDA by virtue of clause (i)(b)(8) of the definition
thereof, do not exceed $15,000,000 in the aggregate), and (iv) taxes
actually paid in cash by Company or any of its Subsidiaries.
"Consolidated Interest Expense" means, for any period, the net
interest expense of Company and its Subsidiaries for such period (net of
any interest income of Company and its Subsidiaries during such period) as
determined on a consolidated basis in conformity with GAAP.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
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Person in which any other Person (other than Company or any of the
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid in cash to Company or any of
its Subsidiaries by such Person during such period and (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary of
Company or is merged into or consolidated with Company or any of its
Subsidiaries or the date such Person's assets are acquired by Company or
any of its Subsidiaries.
"Consolidated Total Debt" means, as at any date of determination, all
outstanding Indebtedness of Company and its Subsidiaries as determined on a
consolidated basis in conformity with GAAP.
"Consolidated Total Senior Debt" means, as at any date of
determination, all outstanding Indebtedness of Company and its Subsidiaries
other than Subordinated Indebtedness, as determined on a consolidated basis
in conformity with GAAP.
"Consolidated Working Capital" means, as at any date of determination,
the excess of Consolidated Current Assets over Consolidated Current
Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or
is less than) Consolidated Working Capital as of the end of such period.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) with
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10
respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements. Contingent Obligations shall include,
without limitation, (a) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of
business), comaking, discounting with recourse or sale with recourse by
such Person of the obligation of another, (b) the obligation to make take-
or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (x) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or discharge
of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (y) to maintain the
solvency or any balance sheet item, level of income or financial condition
of another if, in the case of any agreement described under subclauses (x)
or (y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if less, the amount to which such Contingent
Obligation is specifically limited.
"Contractual Obligation" means, as applied to any Person, any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is subject.
"CSI" means Chase Securities Inc. and its successors and assigns,
including, without limitation, its successors by merger.
"Dartford" means Dartford Partnership L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Dartford Advisory Agreement" means that certain Advisory Agreement
dated as of April 8, 1998, by and between Company and Dartford, as in
effect on the Effective Date and as such agreement may thereafter be
amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 7.12A.
"Dartford Expense Agreement" means that certain Expense Agreement
dated as of July 1, 1998, by and between Company and Dartford, as in effect
on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
"Defaulting Lender" means any Lender with respect to which a Lender
Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
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11
"Documentation Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Duncan Hines Acquisition" means the transactions contemplated by the
Duncan Hines Acquisition Agreement.
"Duncan Hines Acquisition Agreement" means that certain Asset Sale and
Purchase Agreement, dated as of November 26, 1997, by and between MBW LLC
and P&G, which agreement was assigned to the Company.
"Duncan Hines Assumption Agreement" means that certain Assumption
Agreement dated as of January 16, 1998, by and between P&G and Company.
"Duncan Hines Business" means the retail baking mix business purchased
from P&G pursuant to the Duncan Hines Acquisition Agreement.
"Duncan Hines Patent and Trademark Security Agreement" means that
certain Patent and Trademark Security Agreement dated as of January 16,
1998, by and between Company and Chase, as in effect on the Effective Date
and as such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsections 7.12A.
"Duncan Hines Patent License Agreement" means that certain Patent
License Agreement dated as of January 16, 1998, by and between P&G and
Company, as in effect on the Effective Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.12A.
"Duncan Hines Related Agreements" means the Duncan Hines Acquisition
Agreement, the Duncan Hines Assumption Agreement and the Duncan Hines
Transition Agreements.
"Duncan Hines Technology License Agreement" means the Technology
License Agreement dated as of January 16, 1998, by and between P&G and the
Company as in effect on the Effective Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under Section 7.12A.
"Duncan Hines Transition Agreements" means, collectively, (i) the
Duncan Hines Transitional Supply Agreement, (ii) the Duncan Hines
Transition Services Agreement, (iii) the Duncan Hines Technology License
Agreement and (iv) the Duncan Hines Patent License Agreement.
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12
"Duncan Hines Transition Services Agreement" means the Transitional
Services Agreement, dated as of January 16, 1998, by and between P&G and
Company as in effect on the Effective Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.12A.
"Duncan Hines Transitional Supply Agreement" means the Transitional
Supply Agreement, dated as of January 16, 1998, by and between P&G and the
Company as in effect on the Effective Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.12A.
"Effective Date" means the date (on or before April 1, 1999) on which
the conditions precedent set forth in subsection 4.1 shall be satisfied or
waived.
"Eligible Assignee" means (i) (a) a commercial bank organized under
the laws of the United States or any state thereof; (b) a commercial bank
organized under the laws of any other country or a political subdivision
thereof; provided that (x) such bank is acting through a branch or agency
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located in the United States or (y) such bank is organized under the laws
of a country that is a member of the Organization for Economic Cooperation
and Development or a political subdivision of such country; (c) any other
entity which is an "accredited investor" (as defined in Regulation D under
the Securities Act) which extends credit or buys loans as one of its
businesses including, but not limited to, insurance companies, funds and
lease financing companies; and (d) any other financial institution or fund
(whether a corporation, partnership, trust or other entity) that is engaged
in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and has combined capital and surplus or net
assets of at least $100,000,000, in each case (under clauses (a) through
(d) above) that is reasonably acceptable to Administrative Agent; and (ii)
any Lender, any Affiliate of any Lender, and any Approved Fund; provided
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that no Affiliate of Company shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is subject to ERISA and which is maintained
or contributed to by Company or any of its ERISA Affiliates.
"Environmental Claim" means any written accusation, allegation, notice
of violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for
any damage, including, without limitation, personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case
relating to, resulting from or in connection with Hazardous Materials and
relating to Company, any of its Subsidiaries, any of their respective
Affiliates that are directly or indirectly controlled by Company, or any
Facility.
<PAGE>
13
"Environmental Laws" means all laws, statutes, ordinances, orders,
rules, regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational
safety and health, public health and safety, industrial hygiene or
protection of wetlands, in any manner applicable to Company or any of its
Subsidiaries or any of their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. (S) 1801 et seq.,), the Resource Conservation
-- ---
and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution
---
Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S)
-- ---
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et
-- ---
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
---
(S)136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S) 651
-- ---
et seq.), and the Emergency Planning and Community Right-to-Know Act (42
-- ---
U.S.C. (S) 11001 et seq.), each as amended or supplemented, and any
-- ---
analogous future or present local, state and federal statutes and
regulations promulgated pursuant thereto, each as in effect as of the date
of determination.
"Equity Proceeds" means the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith)
from the issuance of any equity Securities of Company after the Effective
Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning
of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person
is a member; and (iii) solely for purposes of obligations under Section 412
of the Internal Revenue Code or under the applicable sections set forth in
Section 414(t)(2) of the Internal Revenue Code, any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which that Person, any corporation described in clause (i)
above or any trade or business described in clause (ii) above is a member.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043(c) of ERISA and the regulations issued thereunder with respect
to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation or with respect to which
no penalty will be assessed by the PBGC for failure to satisfy such notice
requirements); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal
Revenue Code) or the failure to make by its due date a required installment
under Section 412(m) of the
<PAGE>
14
Internal Revenue Code with respect to any Pension Plan or the failure to
make any required contribution to a Multiemployer Plan; (iii) the provision
by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of
ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by
Company or any of its ERISA Affiliates from any Pension Plan with two or
more contributing sponsors or the termination of any such Pension Plan
resulting, in either case, in liability pursuant to Section 4063 or 4064 of
ERISA, respectively; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan pursuant to Section 4042 of ERISA; (vi) the
imposition of liability on Company or any of its ERISA Affiliates pursuant
to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by Company or any of its
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan resulting in
withdrawal liability pursuant to Section 4201 of ERISA, or the receipt by
Company or any of its ERISA Affiliates of written notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4042 of ERISA or under Section 4041A of ERISA if
such termination would result in liability to Company or any of its ERISA
Affiliates; (viii) the imposition on Company or any of its ERISA Affiliates
of fines, penalties or taxes under Chapter 43 of the Internal Revenue Code
or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the failure of any Pension Plan (or any
other Employee Benefit Plan intended to be qualified under Section 401(a)
of the Internal Revenue Code) to qualify under Section 401(a) of the
Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (x) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to
ERISA with respect to any Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Credit Agreement" has the meaning assigned to that term in
the Recitals to this Agreement.
"Existing Effective Date" means July 1, 1998.
"Existing Lenders" has the meaning assigned to that term in the
Recitals to this Agreement.
"Existing Subordinated Note Documents" means the Existing Subordinated
Note Indentures, the Existing Subordinated Notes and each other document
executed in connection with the Existing Subordinated Notes, as each such
document may be
<PAGE>
15
amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 7.12B.
"Existing Subordinated Note Indentures" means the indentures pursuant
to which the Existing Subordinated Notes are issued, in a form delivered to
Agents and Lenders on or prior to the Effective Date, with such changes
thereto as are permitted under subsection 7.12B and as such indentures may
thereafter be amended, restated, supplemented or otherwise modified from
time to time to the extent permitted under subsection 7.12B.
"Existing Subordinated Notes" means (a) the 9-7/8% Series B Senior
Subordinated Notes of Company due 2007 issued on February 10, 1997, (b) the
9-7/8% Series D Senior Subordinated Notes of the Company due 2007 issued on
July 1, 1997 and (c) the 8-3/4% Senior Subordinated Notes of the Company
due 2008 issued on July 1, 1998 pursuant to the Existing Subordinated Note
Indentures in the form delivered to Agents and Lenders on or prior to the
Effective Date with such changes thereto as are permitted under subsection
7.12B and as such notes may thereafter be amended, restated, supplemented
or otherwise modified from time to time to the extent permitted under
subsection 7.12B.
"Existing Term Loan Facilities" has the meaning assigned to that term
in the Recitals to this Agreement.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or heretofore owned, leased, operated or used by Company or
any of its Subsidiaries (but only as to portions of buildings actually
leased or used) or any of their respective predecessors or any of their
respective Affiliates that are directly or indirectly controlled by
Company.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Administrative
Agent from three Federal funds brokers of recognized standing selected by
Administrative Agent.
"Fenway" means Fenway Partners Capital Fund, L.P., a Delaware limited
partnership.
"Fenway Advisory Agreement" means that certain Advisory Agreement
dated as of April 8, 1998, by and between Company and Fenway, as in effect
on the Effective Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
<PAGE>
16
"FFDC Act" means the Federal Food, Drug and Cosmetic Act, as amended
from time to time, and any successor statute.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i)
such Lien has priority over any other Lien on such Collateral and (ii) such
Lien is the only Lien (other than Permitted Encumbrances and Liens
permitted pursuant to subsection 7.2A) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
ending on December 31 of each calendar year.
"Fixed Charge Component" has the meaning assigned to that term in
subsection 7.6E(i).
"Flavor Supply Agreement" means that certain Flavor Supply Agreement
dated as of December 31, 1996, by and between Company and Quest, as in
effect on the Closing Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
"Flood Hazard Property" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards.
"Funding and Payment Office" means the office of Administrative Agent
and Swing Line Lender located at One Chase Manhattan Plaza, 8th Floor, New
York, New York 10081 or such offices of Administrative Agent or any
successor Administrative Agent specified by Administrative Agent or such
successor Administrative Agent in a written notice to Loan Parties and
Lenders.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, in each case as the same are applicable to
the circumstances as of the date of determination and specifically, terms
used herein applicable to Company and its Subsidiaries defined by reference
to GAAP shall give effect to the subtraction of minority interests.
"Gilster Co-Pack Agreement" means the Production Agreement, dated as
of June 4, 1998, by and between the Company and Gilster-Mary Lee
Corporation, as in effect on the Effective Date and as such agreement may
thereafter be amended, restated,
<PAGE>
17
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.12A.
"Governmental Acts" has the meaning assigned to that term in
subsection 3.5.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal,
state or local governmental authority, agency or court.
"Guaranty" means, individually, each of the Subsidiary Guaranty and
any other guaranty of the Obligations, and "Guaranties" means the
Subsidiary Guaranty and each other guaranty of the Obligations,
collectively.
"Guarantors" means the Subsidiary Guarantors.
"Hazardous Materials" means (i) any chemical, material or substance
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "infectious waste", "toxic substances" or any
other formulations intended to define, list or classify substances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity," or "EP toxicity" or words of similar import under any applicable
Environmental Laws; (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in
any form; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million; (ix)
pesticides; and (x) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority.
"Immaterial Subsidiaries" means, with respect to any Person, any
Subsidiary or Subsidiaries of such Person the assets of which constitute,
individually or in the aggregate, less than 5% of the total assets of such
Person and its Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to
Capital Leases that is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations
for borrowed money (other than accounts payable incurred in the ordinary
course of business and accrued expenses incurred in the ordinary course of
business), (iv) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding any such obligations
incurred under ERISA), which purchase price is (a) due more than six months
from the date of incurrence of the obligation in respect thereof or (b)
evidenced by a note or similar written instrument, and (v) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is
<PAGE>
18
nonrecourse to the credit of that Person. Obligations under Interest Rate
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 10.3.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Initial Public Offering" has the meaning assigned to that term in the
Recitals to this Agreement.
"Insurance Proceeds" has the meaning assigned to that term in
subsection 2.4B(iii)(d).
"Intellectual Property" means collectively the MBW Intellectual
Property, the Log Cabin Intellectual Property, the Duncan Hines
Intellectual Property, the Van de Kamp's Intellectual Property and the Sea
Coast Intellectual Property, each as defined in subsections 5.5B, 5.5C,
5.5D, 5.5E and 5.5F, respectively.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
the last Business Day of each March, June, September and December of each
year and (ii) with respect to any Eurodollar Rate Loan, the last day of
each Interest Period applicable to such Loan; provided that in the case of
--------
each Interest Period of longer than three months, "Interest Payment Date"
shall also include the date that is three months after the commencement of
such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to hedge Company or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
Adjusted Eurodollar Rate, for purposes of determining the interest rate in
respect of an Interest Period. The Interest Rate Determination Date in
respect of calculating the Adjusted Eurodollar Rate shall be the second
Business Day prior to the first day of the related Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Inventory" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which are
then held by such Person for sale or lease, including raw materials and
work in process.
<PAGE>
19
"Investment" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, stock or other Securities of any other Person (other than a
Person that, prior to such purchase or acquisition, was a Wholly Owned
Subsidiary of Company), or (ii) any direct or indirect loan, advance (other
than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Company or any of its Subsidiaries to
any other Person other than a Wholly Owned Subsidiary of Company, including
all Indebtedness and accounts receivable acquired from that other Person
that are not current assets or did not arise from sales to that other
Person in the ordinary course of business; provided, however, that the term
-------- -------
"Investment" shall not include (a) current trade and customer accounts
receivable for goods furnished or services rendered in the ordinary course
of business and payable in accordance with customary trade terms, (b)
advances and prepayments to suppliers for goods and services in the
ordinary course of business, (c) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims
due or owing to Company or any of its Subsidiaries or as security for any
such Indebtedness or claims, (d) Cash held in Deposit Accounts with banks
and trust companies (other than Lenders) not exceeding $5,000,000 in
aggregate amount, (e) Cash held in any Deposit Account with a Lender and
(f) shares in a mutual fund that invests solely in Cash Equivalents. The
amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to
such Investment.
"IP Collateral" means the Collateral under the Patent and Trademark
Security Agreement, the Log Cabin Patent and Trademark Security Agreement,
the Duncan Hines Patent and Trademark Security Agreement, the Van de Kamp's
Patent and Trademark Security Agreement and the Sea Coast Patent and
Trademark Security Agreement.
"Issuing Lender" means, with respect to any Letter of Credit, the
Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
--------
considered to be a Joint Venture to which such Person is a party.
"Kraft" means Kraft Foods, Inc., a Delaware corporation.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the
lessor under the related lease, satisfactory in form and substance to
Administrative Agent, pursuant to which such lessor agrees, for the benefit
of Administrative Agent, (i) that without any further consent of such
lessor or any further action on the part of the Loan Party holding such
Leasehold Property, such Leasehold Property may be encumbered pursuant to a
Mortgage and may be assigned to the purchaser at a foreclosure sale or in a
transfer in lieu of such a sale (and to a subsequent third party assignee
if Administrative Agent, any Lender, or an
<PAGE>
20
Affiliate of either so acquires such Leasehold Property), (ii) that such
lessor shall not terminate such lease as a result of a default by such Loan
Party thereunder without first giving Administrative Agent notice of such
default and at least 30 days (or, if such default cannot reasonably be
cured by Administrative Agent within such period, such longer period as may
reasonably be required) to cure such default, (iii) to the matters
contained in a Collateral Access Agreement, and (iv) to such other matters
relating to such Leasehold Property as Administrative Agent may reasonably
request.
"Leasehold Property" means any leasehold interest of any Loan Party as
lessee under any lease of real property, other than any such leasehold
interest designated from time to time by Administrative Agent in its sole
discretion as not being required to be included in the Collateral.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1, and the term
"Lenders" shall include Swing Line Lender unless the context otherwise
requires, provided that the term "Lenders", when used in the context of a
--------
particular Commitment, shall mean Lenders having that Commitment.
"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Loans
(including any Revolving Loans made to pay Refunded Swing Line Loans or to
reimburse drawings under Letters of Credit) in accordance with subsection
2.1A(iv) or its portion of any unreimbursed drawing or payment under a
Letter of Credit in accordance with subsection 3.3C or (ii) a Lender having
notified Company and/or Administrative Agent in writing that it does not
intend to comply with its obligations under subsection 2.1 or subsections
3.1C, 3.3B or 3.3C.
"Lending Office" means, as to any Lender, the office or offices of
such Lender specified as the "Lending Office" on Schedule 2.1, or such
-------------
other office or offices as such Lender may from time to time notify Company
and Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing
Lenders for the account of Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding (whether or not the conditions to drawing thereunder have been
met) plus (ii) the aggregate amount of all drawings under Letters of Credit
----
honored by Issuing Lenders and not theretofore reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).
"Leverage Ratio" means, as of any date of determination, the ratio of
Consolidated Total Debt, as of the date of determination, to Consolidated
EBITDA, for
<PAGE>
21
the twelve-month period ending on the date of determination, in each
case calculated for Company and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, fixed or floating charge or encumbrance of any kind
(including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any
security interest) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means, as the context requires, one or more of
the Term Loans, Revolving Loans and Swing Line Loans or any
combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of an Issuing
Lender relating to, the Letters of Credit), the Subsidiary Guaranty,
the Collateral Documents and any Interest Rate Agreement entered into
by Company with a Lender or an Affiliate of any Lender.
"Loan Party" means, individually, each of Company and any
Subsidiary Guarantor, and "Loan Parties" means Company and each
Subsidiary Guarantor, collectively.
"Log Cabin Acquisition" means the acquisition of the Log Cabin
Business pursuant to the terms of the Log Cabin Acquisition Agreement.
"Log Cabin Acquisition Agreement" means that certain Asset
Purchase Agreement dated as of May 7, 1997 between the Company and
Kraft.
"Log Cabin Assumption Agreement" means that certain Assumption
Agreement dated as of July 1, 1997, by and between Kraft and Company.
"Log Cabin Business" means the assets of the retail syrup
business marketed under the Log Cabin and Country Kitchen trademarks
and the foodservice business marketed under the Log Cabin, Log Cabin
Lite and Wigwam trademarks and under private label arrangements.
"Log Cabin Patent and Trademark Security Agreement" means the Log
Cabin Patent and Trademark Security Agreement entered into by and
among Company, the Subsidiary Guarantors and the Administrative Agent
dated as of July 1, 1997 as in effect on the Effective Date, as such
Log Cabin Patent and Trademark Security Agreement may thereafter be
amended, restated, supplemented or otherwise modified from time to
time.
"Log Cabin Patent License Agreement" means that certain Patent
and Know-How License Agreement dated as of July 1, 1997, by and
between Kraft and Company, as in effect on the Effective Date and as
such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.12A.
<PAGE>
22
"Log Cabin Transition Agreements" means the Log Cabin Patent
License Agreement.
"Management Fees" means the fees payable by Company pursuant to
the MDC Advisory Agreement, the Dartford Advisory Agreement and the
Fenway Advisory Agreement.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System
as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect
upon the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company and its Subsidiaries,
taken as a whole, (ii) the material impairment of the ability of any
Loan Party to perform the Obligations and (iii) a material adverse
effect upon the legality, validity, binding effect or enforceability
against a Loan Party of a Loan Document to which it is a party.
"Material Contract" means any of the Employment Agreements or any
other contract or other arrangement to which Company or any of its
Subsidiaries is a party (other than the Loan Documents) for which
breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect.
"Maximum Consolidated Capital Expenditures Amount" has the
meaning assigned to that term in subsection 7.6D.
"MBW LLC" means MBW Investors LLC, a Delaware limited liability
company.
"MDC Advisory Agreement" means that certain Advisory Agreement
dated as of April 8, 1998, by and between Company and MDC Management
Company III, L.P., as in effect on the Effective Date and as such
agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.12A.
"MDC Entities" means McCown De Leeuw & Co. III, L.P., a
California limited partnership, McCown De Leeuw & Co. Offshore
(Europe) III, L.P., a Bermuda limited partnership, McCown De Leeuw &
Co. III (Asia), L.P., a Bermuda limited partnership, Gamma Fund LLC, a
California limited liability company, McCown De Leeuw & Co. IV, L.P.,
a California limited partnership, McCown De Leeuw & Co. IV Associates,
L.P., a California limited partnership, and Delta Fund LLC, a
California limited liability company.
"Mortgage" means any mortgage or legal charge (whether designated
as a deed of trust or a mortgage or by any similar title) granted by
Company or any of its Subsidiaries (or, at Administrative Agent's
option, an amendment to an existing Mortgage, in form satisfactory to
Administrative Agent, adding such Mortgaged Property to the Real
Property Assets encumbered by an existing Mortgage) in any Real
Property Asset to
<PAGE>
23
secure the Obligations, as such mortgage or legal charge may be
amended, restated, supplemented or otherwise modified from time to
time substantially in the form of Exhibit XXI annexed hereto, and
-----------
"Mortgages" means all such instruments collectively.
"Mortgage Policy" has the meaning assigned to that term in
subsection 6.10B(iv).
"Mortgaged Property" has the meaning assigned to that term in
subsection 6.10B.
"Multiemployer Plan" means a "multiemployer plan", as defined in
Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA, to
which Company or any of its ERISA Affiliates is contributing or to
which Company or any of its ERISA Affiliates has an obligation to
contribute.
"NatWest" means National Westminster Bank PLC and its successors,
including, without limitation, its successors by merger.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale
including, without limitation, (i) income taxes reasonably estimated
to be actually payable as a result of such Asset Sale within one year
of the date of receipt of such Cash Proceeds, (ii) transfer, sales,
use and other taxes payable in connection with such Asset Sale, (iii)
payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is
secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such
Asset Sale, and (iv) broker's commissions and reasonable fees and
expenses of counsel, accountants and other professional advisors in
connection with such Asset Sale.
"New Lender" means any Lender which is a party to this Agreement
on the Effective Date which is not an Existing Lender.
"Non-Defaulting Lender" means and includes each Lender other than
a Defaulting Lender.
"Non-US Lenders" has the meaning assigned to that term in
subsection 2.7B(iii).
"Notes" means one or more of the Tranche A Term Notes, Tranche B
Term Notes, Revolving Notes or Swing Line Note or any combination
thereof.
"Notice of Borrowing" means a notice in the form of Exhibit I
---------
annexed hereto delivered by Company to Administrative Agent pursuant
to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially
in the form of Exhibit II annexed hereto delivered by Company to
----------
Administrative Agent pursuant to subsection 2.2D with respect to a
proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Loans specified
therein.
<PAGE>
24
"Notice of Issuance of Letter of Credit" means a notice in the
form of Exhibit III annexed hereto delivered by Company to
-----------
Administrative Agent pursuant to subsection 3.1B(i) with respect to
the proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each Loan
Party from time to time owed to Agents, Lenders or any of them under
the Loan Documents, whether for principal, interest, reimbursement of
amounts drawn under Letters of Credit or payments for early
termination of Interest Rate Agreements, fees, expenses,
indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of
the board (if an officer), its president, its chief financial officer
or a vice president; provided that every Officer's Certificate with
--------
respect to the compliance with a condition precedent to the making of
any Loans hereunder shall include (i) a statement that the officer
making or giving such Officer's Certificate has read such condition
and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signer
he or she has made or has caused to be made such examination or
investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such condition has been complied
with, and (iii) a statement as to whether, in the opinion of the
signer, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
that is not a Capital Lease other than any such lease under which that
Person is the lessor.
"P&G" means The Procter & Gamble Company, an Ohio corporation.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement entered into by and among Company, the
Subsidiary Guarantors and Administrative Agent dated as of the Closing
Date, as such Patent and Trademark Security Agreement may thereafter
be amended, restated, supplemented or otherwise modified from time to
time.
"Patent License Agreement" means that certain Patent License
Agreement dated as of December 31, 1996, by and among Seller, Unilever
PLC and Company, as in effect on the Closing Date and as such
agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.12A.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA (or any successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Title IV of ERISA.
<PAGE>
25
"Permitted Acquisition" means an acquisition of assets or a
business effected in accordance with the provisions of subsection
7.7(vi).
"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges
or claims the payment of which is not, at the time, required by
subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of
carriers, warehousemen, mechanics and materialmen and other Liens
imposed by law (other than any such Lien imposed pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or by
ERISA) incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) any attachment or judgment Lien not constituting an
Event of Default under subsection 8.8;
(v) leases or subleases granted to others not interfering
in any material respect with the ordinary conduct of the business
of Company or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other
similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor
under any Capital Lease permitted by subsection 7.1(iii) or any
Operating Lease not prohibited by this Agreement, (b) restriction
or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (c) subordination of the interest
of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
<PAGE>
26
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(x) deposits in the ordinary course of business to secure
liabilities to insurance carriers, lessors, utilities and other
service providers; and
(xi) bankers liens and rights of setoff with respect to
customary depository arrangements entered into in the ordinary
course of business.
"Permitted Seller Note" means a promissory note substantially in
the form of Exhibit XVII annexed hereto representing any Indebtedness
------------
of Company incurred in connection with any Permitted Acquisition
payable to the seller in connection therewith, as such note may be
amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under subsection 7.12B; provided that no
--------
Permitted Seller Note shall (i) be guarantied by any Subsidiary of
Company or secured by any property of Company or any of its
Subsidiaries or (ii) bear cash interest at a rate in excess of 12% per
annum; and provided further, that no Permitted Seller Note shall
-------- -------
provide for any prepayment or repayment of all or any portion of the
principal thereof prior to the date of the final scheduled installment
of principal of any of the Loans.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability
companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Pledge Agreement" means that certain Fourth Amended and Restated
Pledge Agreement by and among Company, the Subsidiary Guarantors and
Administrative Agent dated as of the Effective Date and substantially
in the form of Exhibit IX annexed hereto, as such Pledge Agreement may
----------
be amended, restated, supplemented or otherwise modified from time to
time.
"Pledged Collateral" means the "Pledged Collateral" as defined in
the Pledge Agreement.
"Potential Event of Default" means a condition or event that,
after notice or after any applicable grace period has lapsed, or both,
would constitute an Event of Default.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Chase as its prime commercial lending
rate in effect at its principal office in New York City. The Prime
Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Chase or any other
Lender may make commercial loans or other loans at rates of interest
at, above or below the Prime Rate.
"Proceedings" has the meaning assigned to that term in subsection
6.1(x).
<PAGE>
27
"Pro Forma Calculation Period" has the meaning assigned to that
term in subsection 7.6E(i).
"Pro Rata Share" means with respect to each Lender, the Revolving
Loan Pro Rata Share, Tranche A Term Loan Pro Rata Share and Tranche B
Term Loan Pro Rata Share of such Lender; in any such case as the
applicable percentage may be adjusted by assignments permitted
pursuant to subsection 10.1. The initial Pro Rata Share of each Lender
is set forth opposite the name of that Lender in Schedule 2.1 annexed
------------
hereto.
"PTO" means the United States Patent and Trademark Office or any
successor or substitute office in which filings are necessary or, in
the opinion of Administrative Agent, desirable in order to create or
perfect Liens on any IP Collateral.
"Pure Food and Drug Laws" means the FFDC Act and the pure food
and drug laws of each of the states of the United States into which
products of the Business, the Log Cabin Business and the Duncan Hines
Business are or have been shipped.
"Quest" means Quest International Flavors & Food Ingredients
Company.
"Quest Agreements" means, collectively, (i) that certain Flavor
Escrow Agreement dated as of December 31, 1996, by and among Quest,
the escrow agent named therein and Company, as in effect on the
Closing Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A, and (ii) the Flavor Supply
Agreement.
"Real Property Asset" means, at any time of determination, any
interest then owned by any Loan Party in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with
respect to which a Record Document (as hereinafter defined) has been
recorded in all places necessary or desirable, in Administrative
Agent's reasonable judgment, to give constructive notice of such
Leasehold Property to third-party purchasers and encumbrances of the
affected real property. For purposes of this definition, the term
"Record Document" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof,
executed and acknowledged by the owner of the affected real property,
as lessor, or (b) if such Leasehold Property was acquired or subleased
from the holder of a Recorded Leasehold Interest, the applicable
assignment or sublease document, executed and acknowledged by such
holder, in each case in form sufficient to give such constructive
notice upon recordation and otherwise in form reasonably satisfactory
to Administrative Agent.
"Red Wing" means The Red Wing Company, Inc., a Delaware
corporation.
"Red Wing Co-Pack Agreement" means each of the First Amended and
Restated Production Agreement, dated as of November 19, 1997, by and
between Red Wing and Company and the Production Agreement, dated as of
November 19, 1997, by and between Red Wing and the Company
(collectively, the "Red Wing Co-Pack
<PAGE>
28
Agreements") as in effect on the Effective Date and as such agreement
may thereafter be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection
7.12A.
"Refunded Swing Line Loans" has the meaning assigned to that term
in subsection 2.1A(iv).
"Register" has the meaning assigned to that term in subsection
2.1D.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Regulatory Shares" means, with respect to any Person, shares of
such Person required to be issued as qualifying shares to directors or
persons similarly situated or shares issued to Persons other than
Company or a Wholly Owned Subsidiary of Company in response to
regulatory requirements of foreign jurisdictions pursuant to a
resolution of the Board of Directors of such Person, so long as such
shares do not exceed one percent of the total outstanding shares of
equity such Person and any owners of such shares irrevocably covenant
with Company to remit to Company or waive any dividends or
distributions paid or payable in respect of such shares.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means the Subordinated Note Indentures, the
Subordinated Notes, the other Subordinated Note Documents, the
Acquisition Agreement, the Log Cabin Acquisition Agreement, the Duncan
Hines Acquisition Agreement, the Sea Coast Acquisition Agreement, the
Assumption Agreement, the Log Cabin Assumption Agreement, the Duncan
Hines Assumption Agreement, the MDC Advisory Agreement, the Dartford
Advisory Agreement, the Fenway Advisory Agreement, the Transition
Agreements, the Log Cabin Transition Agreements, the Red Wing Co-Pack
Agreements, the Dartford Expense Agreement, the Gilster Co-Pack
Agreement and the Duncan Hines Transition Agreements.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor
or outdoor environment (including, without limitation, the abandonment
or disposal of any barrels, containers or other closed receptacles
containing any Hazardous Materials), or into or out of any Facility,
including the movement of any Hazardous Material through the air,
soil, surface water, groundwater or property.
"Requisite Lenders" means Non-Defaulting Lenders having or
holding not less than 51% of the sum of the aggregate Term Loan
Exposure of all Non-Defaulting Lenders plus the aggregate Revolving
----
Loan Exposure of all Non-Defaulting Lenders.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any
class of stock of Company now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to the
<PAGE>
29
holders of that class, (ii) any redemption, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of Company now or
hereafter outstanding other than stock repurchases for Company's 1998
Employee Stock Purchase Program, (iii) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of stock of Company now or
hereafter outstanding, and (iv) any payment or prepayment of principal
of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
"Revolving Loan Commitment" means the commitment of a Lender to
make Revolving Loans to Company pursuant to subsection 2.1A(iii) and
"Revolving Loan Commitments" means such commitments of all Lenders in
the aggregate.
"Revolving Loan Commitment Termination Date" means June 30, 2005
or any earlier date of termination of the Revolving Loan Commitments
pursuant to this Agreement.
"Revolving Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Lender's Revolving Loan Commitment
and (ii) after the termination of the Revolving Loan Commitments, the
sum of (a) the aggregate outstanding principal amount of the Revolving
Loans of that Lender plus (b) in the event that Lender is an Issuing
----
Lender, the aggregate Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender (net of any participations purchased
by other Lenders in such Letters of Credit) plus (c) the aggregate
----
amount of all participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any
Letters of Credit plus (d) the aggregate amount of all participations
----
purchased by that Lender in any outstanding Swing Line Loans plus (e)
----
in the case of Swing Line Lender, the sum of the aggregate outstanding
principal amount of all Swing Line Loans (in each case net of any
participations therein purchased by other Lenders).
"Revolving Loan Pro Rata Share" means with respect to all
payments, computations and other matters relating to the Revolving
Loan Commitment or the Revolving Loans of any Lender or any Letters of
Credit issued by any Lender or any participations purchased by any
Lender therein or in any Swing Line Loans, the percentage obtained by
dividing (i) the Revolving Loan Exposure of that Lender by (ii) the
-------- --
aggregate Revolving Loan Exposure of all Lenders, in any such case as
the applicable percentage may be adjusted by assignments permitted
pursuant to subsection 10.1.
"Revolving Loans" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(iii).
"Revolving Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E(i)(c) on the Effective Date and
(ii) any promissory notes issued by Company pursuant to the last
sentence of subsection 10.1B(i) in connection with assignments of the
Revolving Loan Commitment and Revolving Loans of any Lender, in
<PAGE>
30
each case substantially in the form of Exhibit VI annexed hereto, as
----------
they may be amended, restated, supplemented or otherwise modified from
time to time.
"S&P" means Standard & Poor's Ratings Service, or any successor
thereto.
"Sea Coast" means Sea Coast Foods, Inc., a Washington
corporation.
"Sea Coast Acquisition" means the acquisition of all the capital
stock of Sea Coast pursuant to terms of the Sea Coast Acquisition
Agreement, for a purchase price, excluding fees and expenses, not to
exceed $50,000,000, plus an "earn out" payment as described in the Sea
Coast Acquisition Agreement.
"Sea Coast Acquisition Agreement" means that certain Stock
Purchase Agreement dated as of March 10, 1999 between the Company, Sea
Coast, Galando Investments Limited Partnership, Carey-On Limited
Partnership, Joseph A. Galando, Barbara J. Galando, Stanley J. Carey
and Mary K. Carey.
"Sea Coast Patent and Trademark Security Agreement" means the Sea
Coast Patent and Trademark Security Agreement entered into by and
among Company, the Subsidiary Guarantors and the Administrative Agent
dated as of March 31, 1999, as in effect on the Effective Date, as
such Sea Coast Patent and Trademark Security Agreement may thereafter
be amended, restated, supplemented or otherwise modified from time to
time.
"Securities" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation
in any profit-sharing agreement or arrangement, options, warrants,
bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"Security Agreement" means the Fourth Amended and Restated
Security Agreement entered into by and among Company, the Subsidiary
Guarantors and Administrative Agent dated as of the Effective Date and
substantially in the form of Exhibit X annexed hereto, as such
---------
Security Agreement may be amended, restated, supplemented or otherwise
modified from time to time.
"Seller" means Conopco, Inc., a New York corporation, doing
business as Van den Bergh Foods Company.
"Senior Leverage Ratio" means, as of any date of determination,
the ratio of Consolidated Total Senior Debt, as of the date of
determination, to Consolidated EBITDA, for the twelve-month period
ending on the date of determination, in each case
<PAGE>
31
calculated for Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Shared Technology License Agreement" means that certain Shared
Technology License Agreement dated as of December 31, 1996, by and
between Seller and Company, as in effect on the Closing Date and as
such agreement may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.12A
"Solvent" means, with respect to any Person, that as of the date
of determination both (i) (a) the then fair saleable value of the
property of such Person is (y) greater than the total amount of
liabilities (including contingent liabilities) of such Person and (z)
not less than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become
absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such
Person's capital is not unreasonably small in relation to its business
or any contemplated or undertaken transaction; and (c) such Person
does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, debts beyond its ability to pay such
debts as they become due; and (ii) such Person is "solvent" within the
meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall
be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of Company or any of its Subsidiaries, (ii)
the obligations of third party insurers of Company or any of its
Subsidiaries arising virtue of the laws of any jurisdiction requiring
third party insurers, (iii) performance, payment, deposit or surety
obligations of Company or any of its Subsidiaries, in any case if
required by law or governmental rule or regulation or in accordance
with custom and practice in the industry, and (iv) such other
obligations of Company and its Subsidiaries as may be reasonably
acceptable to Administrative Agent; provided that Standby Letters of
--------
Credit may not be issued for the purpose of supporting (a) trade
payables or (b) Indebtedness constituting "antecedent debt" (as that
term is used in Section 547 of the Bankruptcy Code).
"Subordinated Note Documents" means collectively the Existing
Subordinated Note Documents and the VDK Subordinated Note Documents.
"Subordinated Note Indentures" means collectively the Existing
Subordinated Note Indentures and the VDK Subordinated Note Indenture.
"Subordinated Notes" means collectively the Existing Subordinated
Notes and the VDK Subordinated Notes.
<PAGE>
32
"Subordinated Indebtedness" means (i) the Indebtedness of Company
under the Subordinated Note Documents, (ii) any Indebtedness permitted
under subsection 7.1(vi), (iii) the Indebtedness of Company evidenced
by any Permitted Seller Notes, and (iv) any other Indebtedness of
Company or any of its Subsidiaries subordinated in right of payment to
the Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms in form and substance satisfactory
to Administrative Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of
which more than 50% of the total voting power of shares of stock or
other ownership interests entitled (without regard to the occurrence
of any contingency) to vote in the election of the Person or Persons
(whether directors, managers, trustees or other Persons performing
similar functions) having the power to direct or cause the direction
of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means Sea Coast and any Subsidiary of
Company that becomes party to the Subsidiary Guaranty at any time
after the Effective Date pursuant to subsection 6.9.
"Subsidiary Guaranty" means that certain Subsidiary Guaranty,
substantially in the form of Exhibit VIII annexed hereto, executed and
------------
delivered by Sea Coast on the Effective Date and by each Subsidiary
Guarantor from time to time after the Effective Date pursuant to
subsection 6.9, as such Subsidiary Guaranty may be amended, restated,
supplemented or otherwise modified from time to time.
"Subsidiary Security Agreements" has the meaning assigned to that
term in subsection 6.9.
"Supplemental Collateral Agent" has the meaning assigned to that
term in subsection 9.1B.
"Swing Line Lender" means Chase, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing
Line Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line
Lender to make Swing Line Loans to Company pursuant to subsection
2.1A(iv).
"Swing Line Loans" means the Loans made by Swing Line Lender
pursuant to subsection 2.1A(iv).
"Swing Line Note" means (i) the promissory note of Company issued
pursuant to subsection 2.1E(ii) on the Effective Date and (ii) any
promissory note issued by Company to any successor Administrative
Agent and Swing Line Lender pursuant to the last sentence of
subsection 9.5B, in each case substantially in the form of Exhibit IX
----------
<PAGE>
33
annexed hereto, as it may be amended, restated, supplemented or
otherwise modified from time to time.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "Tax on the overall net
--------
income" of a Person shall be construed as a reference to a tax imposed
by the jurisdiction in which that Person's principal office (and/or,
in the case of a Lender, its relevant Lending Office) is located or in
which that Person is deemed to be doing business on all or part of the
net income, profits or gains of that Person (whether worldwide, or
only insofar as such income, profits or gains are considered to arise
in or to relate to a particular jurisdiction, or otherwise).
"Term Loan Commitment" means the aggregate commitment of a Lender
to make Tranche A Term Loans and Tranche B Term Loans to Company
pursuant to subsections 2.1A(i) and 2.1A(ii), respectively, and "Term
Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Term Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the funding of the Term Loans, that
Lender's Term Loan Commitment and (ii) after the funding of the Term
Loans, the outstanding principal amount of the Term Loan of that
Lender.
"Term Loans" means the Tranche A Term Loans and Tranche B Term
Loans made by Lenders to Company pursuant to subsection 2.1A(i) and
2.1A(ii), respectively.
"Term Notes" means one or more of the Tranche A Term Notes and
Tranche B Term Notes, or any combination thereof.
"Tiger" means Gloriande (Luxembourg) SarL, a corporation
organized under the laws of Luxembourg and an affiliate of Tiger Oats.
"Title Company" means one or more title insurance companies
reasonably satisfactory to Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at
any date of determination, the sum of (i) the aggregate principal
amount of all outstanding Revolving Loans (other than Revolving Loans
made for the purpose of repaying any Refunded Swing Line Loans or
reimbursing the applicable Issuing Lender for any amount drawn under
any Letter of Credit but not yet so applied) plus (ii) the aggregate
----
principal amount of all outstanding Swing Line Loans plus (iii) the
Letter of Credit Usage.
<PAGE>
34
"Tranche A Term Loan Commitment" means the commitment of a Lender
to make a Tranche A Term Loan to Company pursuant to subsection
2.1A(i), and "Tranche A Term Loan Commitments" means such commitments
of all Lenders in the aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender
as of any date of determination (i) prior to the funding of the
Tranche A Term Loans, that Lender's Tranche A Term Loan Commitment and
(ii) after the funding of the Tranche A Term Loans, the outstanding
principal amount of the Tranche A Term Loan of that Lender.
"Tranche A Term Loan Pro Rata Share" means with respect to all
payments, computations and other matters relating to the Tranche A
Term Loan Commitment or the Tranche A Term Loan of any Lender, the
percentage obtained by dividing (i) the Tranche A Term Loan Exposure
--------
of that Lender by (ii) the aggregate Tranche A Term Loan Exposure of
--
all Lenders, in any such case as the applicable percentage ntage may
be adjusted by assignments permitted pursuant to subsection 10.1.
"Tranche A Term Loans" means the Loans made by the Lenders to the
Company any pursuant to subsection 2.1A(i).
"Tranche A Term Notes" means (i) any promissory notes of Company
issued pursuant to subsection 2.1E(i)(a) on the Effective Date and
(ii) any promissory notes issued by Company pursuant to the last
sentence of subsection 10.1B(i) in connection with assignments of the
Tranche A Term Loan Commitments or Tranche A Term Loans of any
Lenders, in each case substantially in the form of Exhibit IV annexed
----------
hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"Tranche B Term Loan Commitment" means the commitment of a Lender
to make a Tranche B Term Loan to Company pursuant to subsection
2.1A(ii), and "Tranche B Term Loan Commitments" means such commitments
of all Lenders in the aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender
as of any date of determination (i) prior to the funding of the
Tranche B Term Loans, that Lender's Tranche B Term Loan Commitment and
(ii) after the funding of the Tranche B Term Loans, the outstanding
principal amount of the Tranche B Term Loan of that Lender.
"Tranche B Term Loan Pro Rata Share" means with respect to all
payments, computations and other matters relating to the Tranche B
Term Loan Commitment or the Tranche B Term Loan of any Lender, the
percentage obtained by dividing (i) the Tranche B Term Loan Exposure
--------
of that Lender by (ii) the aggregate Tranche B Term Loan Exposure of
--
all Lenders, in any such case as the applicable percentage may be
adjusted by assignments permitted pursuant to subsection 10.1.
"Tranche B Term Loans" means the Loans made by the Lenders to the
Company pursuant to subsection 2.1A(ii).
"Tranche B Term Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E(i)(b) on the Effective Date and
(ii) any promissory notes
<PAGE>
35
issued by Company pursuant to the last sentence of subsection 10.1B(i)
in connection with assignments of the Tranche B Term Loan Commitments
or Tranche B Term Loans of any Lenders, in each case substantially in
the form of Exhibit V annexed hereto, as they may be amended,
---------
restated, supplemented or otherwise modified from time to time.
"Transition Agreements" means, collectively, (i) that certain
License Agreement dated as of December 31, 1996, by and between Seller
and Company, as in effect on the Closing Date and as such agreement
may thereafter be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under subsection
7.12A; (ii) the Shared Technology License Agreement; (iii) the Patent
License Agreement; and (iv) the Quest Agreements.
"UBS" means UBS Capital LLC, a New York limited liability
company.
"UBS AG" means UBS AG, Stamford Branch and its successors,
including, without limitation, any successors by merger.
"Unfunded Current Liability" means, with respect to any Pension
Plan, the amount, if any, by which the actuarial present value of the
accumulated plan benefits under such Pension Plan as of the close of
its most recent plan year exceeds the fair market value of the assets
allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by such Pension Plan's actuary in the most recent
annual valuation of such Pension Plan.
"Van de Kamp's" means Van de Kamp's, Inc., a Delaware
corporation.
"Van de Kamp's Patent and Trademark Security Agreement" means the
Van de Kamp's Patent and Trademark Security Agreement entered into by
and among Company, the Subsidiary Guarantors and the Administrative
Agent dated as of the Existing Effective Date, as such Van de Kamp's
Patent and Trademark Security Agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time.
"VDK Credit Agreement" means the Second Amended and Restated
Credit and Guarantee Agreement, dated as of July 9, 1996, among VDK
Holdings, Van de Kamp's, the banks and other financial institutions
from time to time parties thereto, and Chase, as agent, as the same
may be amended, restated, supplemented or otherwise modified from time
to time.
"VDK Holdings" means VDK Holdings, Inc., a Delaware corporation.
"VDK Subordinated Note Documents" means the VDK Subordinated Note
Indenture, the VDK Subordinated Notes and each other document executed
in connection with the VDK Subordinated Notes, as each such document
may be amended, restated, supplemented or otherwise modified from time
to time to the extent permitted under subsection 7.12B.
<PAGE>
36
"VDK Subordinated Note Indenture" means the indenture pursuant to
which the VDK Subordinated Notes are issued, in a form delivered to
Agents and Lenders on or prior to the Existing Effective Date, with
such changes thereto as are permitted under subsection 7.12B and as
such indenture may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.12B.
"VDK Subordinated Notes" means the 12% Senior Subordinated Notes
of Van de Kamp's due 2005 issued on September 15, 1995 pursuant to the
VDK Subordinated Note Indenture in the form delivered to the Agents
and Lenders on or prior to the Existing Effective Date with such
changes thereto as are permitted under subsection 7.12B and as such
notes may thereafter be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under Subsection
7.12B.
"Wholly Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all of the outstanding capital stock or
other ownership interests of which (other than Regulatory Shares)
shall at the time be owned by such Person or by one or more Wholly
Owned Subsidiaries of such Person or by such Person and one or more
Wholly Owned Subsidiaries of such Person.
1.2 Accounting Terms Utilization of GAAP for Purposes of Calculations
------------
Under Agreement.
- - ---------------
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii),
(iii) and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP
(except, with respect to interim financial statements, normal year end audit
adjustments and the absence of explanatory footnotes) as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 6.1(v)). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3A.
1.3 Other Definitional Provisions.
-----------------------------
References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes", "including" and similar terms used in any Loan
Document shall be construed as if followed by the words "without limitation".
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Loans.
------------------
<PAGE>
37
A. Commitments. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Loan
Parties set forth herein and in the other Loan Documents, each Lender hereby
severally agrees to make the applicable Loans described in subsections 2.1A(i),
2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the Swing
Line Loans as described in subsection 2.1A(iv).
(i) Tranche A Term Loans. Each Lender with a Tranche A
---------------------
Term Loan Commitment severally agrees to lend to Company on the
Existing Effective Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche A Term Loan Commitments. The
amount of each Lender's Tranche A Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate
------------
amount of the Tranche A Term Loan Commitments is $225,000,000;
provided that the Tranche A Term Loan Commitments of Lenders shall be
--------
adjusted to give effect to any assignments of the Tranche A Term Loan
Commitments pursuant to subsection 10.1B. Company may make only one
borrowing under the Tranche A Term Loan Commitments. Amounts borrowed
under this subsection 2.1A(i) and subsequently repaid or prepaid may
not be reborrowed.
(ii) Tranche B Term Loans. Each Lender with a Tranche B
--------------------
Term Loan Commitment severally agrees to lend to Company on the
Effective Date an amount not exceeding its Pro Rata Share of the
aggregate amount of the Tranche B Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each
Lender's Tranche B Term Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the Tranche
------------
B Term Loan Commitments is $100,000,000; provided that the Tranche B
--------
Term Loan Commitments of Lenders shall be adjusted to give effect to
any assignments of the Tranche B Term Loan Commitments pursuant to
subsection 10.1B. Company may make only one borrowing under the
Tranche B Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(ii) and subsequently repaid or prepaid may not be
reborrowed.
(iii) Revolving Loans. Each Lender with a Revolving Loan
---------------
Commitment severally agrees, subject to the limitations set forth
below with respect to the maximum amount of Revolving Loans permitted
to be outstanding from time to time, to maintain such existing
Revolving Loans and to lend to Company from time to time during the
period from the Existing Effective Date to but excluding the Revolving
Loan Commitment Termination Date an aggregate amount which shall not
exceed its Pro Rata Share of the aggregate amount of the Revolving
Loan Commitments, to be used for the purposes identified in subsection
2.5B. The original amount of each Lender's Revolving Loan Commitment
is set forth opposite its name on Schedule 2.1 annexed hereto and the
------------
aggregate original amount of the Revolving Loan Commitments is
$175,000,000; provided that the Revolving Loan Commitments of Lenders
--------
shall be adjusted to give effect to any assignments of the Revolving
Loan Commitments pursuant to subsection 10.1B; provided further, that
-------- -------
the amount of
<PAGE>
38
the Revolving Loan Commitments shall be reduced from time to time by
the amount of any reductions thereto made pursuant to subsection 2.4B.
Each Lender's Revolving Loan Commitment shall expire on the Revolving
Loan Commitment Termination Date and all Revolving Loans and all other
amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that
date. Amounts borrowed under this subsection 2.1A(iii) may be repaid
and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Notwithstanding anything contained herein to the contrary, in no event
shall the Total Utilization of Revolving Loan Commitments at any time exceed the
Revolving Loan Commitments then in effect.
(iv) Swing Line Loans. Swing Line Lender hereby agrees,
----------------
subject to the limitations set forth below with respect to the maximum
aggregate amount of all Swing Line Loans outstanding from time to
time, to make a portion of the Revolving Loan Commitments available to
Company from time to time during the period from the Existing
Effective Date to but excluding the Revolving Loan Commitment
Termination Date by making Base Rate Loans as Swing Line Loans to
Company in an aggregate amount not to exceed the amount of the Swing
Line Loan Commitment, to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans,
when aggregated with the sum of Swing Line Lender's outstanding
Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter
of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $10,000,000; provided that the amounts of the Swing Line
--------
Loan Commitment are subject to reduction as provided in clause (b) of
the next paragraph. The Swing Line Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Swing Line Loans
and all other amounts owed hereunder with respect to the Swing Line
Loans shall be paid in full no later than that date. Amounts borrowed
under this subsection 2.1A(iv) may be repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, the Swing
Line Loans, and the Swing Line Loan Commitment shall be subject to the following
limitations in the amounts indicated:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect;
(b) any reduction of the Revolving Loan Commitments made pursuant to
subsection 2.4B which reduces the aggregate Revolving Loan Commitments to
an amount less than the then current sum of the Swing Line Loan Commitment
shall result in an automatic corresponding pro rata reduction of the Swing
Line Loan Commitment such that the sum thereof equals the amount of the
Revolving Loan Commitments, as so
<PAGE>
39
reduced, without any further action on the part of Company, Administrative
Agent or Swing Line Lender.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may, at any
time in its sole and absolute discretion, deliver to Administrative Agent (with
a copy to Company), no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed Funding Date, a notice (which shall be
deemed to be a Notice of Borrowing given by Company) requesting Lenders to make
Revolving Loans that are Base Rate Loans to Company on such Funding Date in an
amount equal to the amount of such Swing Line Loans (the "Refunded Swing Line
Loans") outstanding on the date such notice is given which Swing Line Lender
requests Lenders to prepay. Anything contained in this Agreement to the contrary
notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other
than Swing Line Lender shall be immediately delivered by Administrative Agent to
Swing Line Lender (and not to Company) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such Revolving
Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by
Swing Line Lender to Company, and such portion of the Swing Line Loans deemed to
be so paid, shall no longer be outstanding as Swing Line Loans and shall no
longer be due under the Swing Line Note of Swing Line Lender but shall instead
constitute part of Swing Line Lender's outstanding Revolving Loans to Company
and shall be due under the Revolving Note issued by Company to Swing Line
Lender. Company hereby authorizes each of Administrative Agent and Swing Line
Lender to charge Company's accounts with Administrative Agent and Swing Line
Lender (up to the amount available in each such account) in order to immediately
pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent
the proceeds of such Revolving Loans made by Lenders, including the Revolving
Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full
the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed
to be paid) to Swing Line Lender should be recovered by or on behalf of Company
from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors
or otherwise, the loss of the amount so recovered shall be ratably shared among
all Lenders in the manner contemplated by subsection 10.5.
If for any reason Revolving Loans are not made pursuant to this
subsection 2.1A(iv) in an amount sufficient to repay any amounts owed to Swing
Line Lender in respect of any outstanding Swing Line Loans on or before the
third Business Day after demand for payment thereof by Swing Line Lender, each
Lender with a Revolving Loan Commitment shall be deemed to, and hereby agrees
to, have purchased a participation in such outstanding Swing Line Loans, and in
an amount equal to its Pro Rata Share of the applicable unpaid amount together
with accrued interest thereon. Upon one Business Day's notice from Swing Line
Lender, each such Lender shall deliver to Swing Line Lender an amount equal to
its respective participation in the applicable unpaid amount in same day funds
at the Funding and Payment Office. In order to evidence such participation each
such Lender agrees to enter into a participation agreement at the request of
Swing Line Lender in form and substance satisfactory to Swing Line Lender. In
the event any such Lender fails to make available to Swing Line Lender the
amount of such Lender's participation as provided in this paragraph, Swing Line
Lender shall be entitled to recover such amount on demand from such Lender
together with
<PAGE>
40
interest thereon at the rate customarily used by Swing Line Lender for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate, as applicable.
Notwithstanding anything contained herein to the contrary, (i) the
obligation of each Lender with a Revolving Loan Commitment to make Revolving
Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the
second preceding paragraph and each such Lender's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the immediately
preceding paragraph shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against Swing Line Lender, Company or any other Person for any reason
whatsoever; (b) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan
Document by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that no
--------
such Lender shall have any such obligation unless (x) Swing Line Lender believed
in good faith that all conditions under Section 4 to the making of the
applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, were
satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans
were made, or (y) such Lender had actual knowledge, by receipt of any notices
required to be delivered to such Lenders pursuant to subsection 6.1(ix) or
otherwise, that any such condition under Section 4 had not been satisfied and
such Lender failed to notify Swing Line Lender and Administrative Agent in
writing that it had no obligation to make Revolving Loans until such condition
was satisfied (any such notice to be effective as of the date of receipt thereof
by Swing Line Lender and Administrative Agent), or (z) the satisfaction of any
such condition under Section 4 not satisfied had been waived by Requisite
Lenders prior to or at the time such Refunded Swing Line Loans or other unpaid
Swing Line Loans were made; and (ii) Swing Line Lender shall not be obligated to
make any Swing Line Loans if it has elected not to do so after the occurrence
and during the continuation of a Potential Event of Default or Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including
-------------------
any such Loans made as Eurodollar Rate Loans with a particular Interest Period)
made on any Funding Date (other than Revolving Loans made pursuant to a request
by Swing Line Lender pursuant to subsection 2.1A(iv) for the purpose of repaying
any Refunded Swing Line Loans or Revolving Loans made pursuant to subsection
3.3B for the purpose of reimbursing any Issuing Lender for the amount of a
drawing or payment under a Letter of Credit issued by it) shall be in an
aggregate minimum amount of $500,000 and integral multiples of $250,000 in
excess of that amount. Swing Line Loans made on any Funding Date shall be in an
aggregate minimum amount of $250,000 and integral multiples of $100,000 in
excess of that amount. Whenever Company desires that Lenders make Term Loans or
Revolving Loans it shall deliver to Administrative Agent on behalf of Company a
Notice of Borrowing no later than 12:00 Noon (New York time), at least three
Business Days in advance of the proposed Funding Date in the case of a
Eurodollar Rate Loan, or at least one Business Day in advance of the proposed
Funding Date in the case of a Base Rate Loan. Whenever Company desires that
Swing Line Lender make a Swing Line Loan, it shall deliver to Administrative
Agent a Notice of Borrowing no later than 12:00 Noon (New York time) on the
proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount and type
<PAGE>
41
of Loans requested, (iii) in the case of Swing Line Loans, that such Loans shall
be Base Rate Loans, (iv) in the case of any Loans other than Swing Line Loans,
whether such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in
the case of any Loans requested to be made as Eurodollar Rate Loans, the initial
Interest Period requested therefor. Term Loans and Revolving Loans may be
continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the
manner provided in subsection 2.2D. In lieu of delivering the above-described
Notice of Borrowing, Company may give Administrative Agent telephonic notice by
the required time of any proposed borrowing under this subsection 2.1B; provided
--------
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans
---------------------
under this Agreement shall be made by Lenders simultaneously and proportionately
to their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing and of the amount of such
Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York time) on the applicable
Funding Date, and Swing Line Lender shall make the amount of its Swing Line Loan
available to Administrative Agent not later than 12:00 Noon (New York time) on
the applicable Funding Date, in each case in same day funds, at the Funding and
Payment Office. Except as provided in subsection 2.1A(iv) or subsection 3.3B
with respect to Revolving Loans used to repay Refunded Swing Line Loans or
<PAGE>
42
to reimburse any Issuing Lender for the amount of an honored drawing or payment
under a Letter of Credit issued by it, upon satisfaction or waiver of the
conditions precedent specified in subsections 4.1 (in the case of Tranche B Term
Loans made on the Effective Date) and 4.2 (in the case of all Loans),
Administrative Agent shall make the proceeds of such Loans available to Company
on the applicable Funding Date by causing an amount of same day funds equal to
the proceeds of all such Loans received by Administrative Agent from Lenders or
Swing Line Lender, as the case may be, to be credited to the account of Company
at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate applicable to such Loan. Nothing in this subsection 2.1C shall be deemed to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Company may have against any Lender as a result of
any default by such Lender hereunder.
D. The Register.
------------
(i) Administrative Agent shall maintain, at the address
referred to in subsection 10.8, a register for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each
Lender from time to time (the "Register"). The Register shall be
available for inspection by Company or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender
and each repayment or prepayment in respect of the principal amount of
the outstanding Loans of each Lender. Any such recordation shall be
conclusive and binding on Company and each Lender, absent manifest
error; provided, that failure to make any such recordation, or any
--------
error in such recordation, shall not affect Company's Obligations in
respect of the applicable Loans.
<PAGE>
43
(iii) Each Lender shall record on its internal records
(including, without limitation, the Notes held by such Lender) the
amount of each Loan made by it and each payment in respect thereof.
Any such recordation shall be prima facie evidence of the amount of
such Loans; provided that failure to make any such recordation, or any
--------
error in such recordation, shall not affect Company's Obligations in
respect of the applicable Loans; and provided, further that in the
-------- -------
event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern, absent
manifest error.
(iv) Company, Agents and Lenders shall deem and treat the
Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any Commitment or
Loan shall be effective, in each case unless an until an Assignment
Agreement effecting the assignment or transfer thereof shall have been
accepted by Administrative Agent and recorded in the Register as
provided in subsection 10.1B(ii). Prior to such recordation, all
amounts owed with respect to the applicable Commitment or Loan shall
be owed to the Lender listed in the Register as the owner thereof, and
any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding
Commitments or Loans.
(v) Company hereby designates Chase, and any financial
institution serving as a successor Administrative Agent, to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Company hereby agrees that, to
the extent Chase serves in such capacity, Chase and its officers,
directors, employees, agents and affiliates shall constitute
Indemnities for all purposes under subsection 10.3.
E. Notes. Company shall execute and deliver on or before the
-----
Effective Date (i) to each requesting Lender (or to Administrative Agent for
that Lender) (a) a Tranche A Term Note substantially in the form of Exhibit IV
----------
annexed hereto, to evidence that Lender's Tranche A Term Loans in the principal
amount of that Lender's Tranche A Term Loans and with other appropriate
insertions, (b) a Tranche B Term Note substantially in the form of Exhibit V
---------
annexed hereto, to evidence that Lender's Tranche B Term Loans in the principal
amount of that Lender's Tranche B Term Loans and with other appropriate
insertions, and (c) a Revolving Note substantially in the form of Exhibit VI
----------
annexed hereto to evidence that Lender's Revolving Loans, in the principal
amount of that Lender's Revolving Loan Commitment and with other appropriate
insertions, and (ii) to Swing Line Lender, a Swing Line Note substantially in
the form of Exhibit VII annexed hereto to evidence Swing Line Lender's Swing
-----------
Line Loans, in the principal amount of the Swing Line Commitment and with other
appropriate insertions. The Notes and the Obligations evidenced thereby shall be
governed by, subject to and benefit from all of the terms and conditions of this
Agreement and the other Loan Documents and shall be guarantied and/or secured by
the Collateral as provided in the Loan Documents.
2.2 Interest on the Loans.
---------------------
<PAGE>
44
A. Rate of Interest. Subject to the provisions of subsections 2.6
----------------
and 2.7, each Term Loan and each Revolving Loan shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate, as the case may be, plus the Applicable Margin.
Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear
interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate, plus the Applicable Margin. The applicable basis for
determining the rate of interest with respect to any Loan shall be selected by
Company initially at the time a Notice of Borrowing is given with respect to
such Loan pursuant to subsection 2.1B. The basis for determining the interest
rate with respect to any Term Loan or any Revolving Loan may be changed from
time to time pursuant to subsection 2.2D. If on any day any Term Loan or
Revolving Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate,
plus the Applicable Margin for Base Rate Loans.
Subject to the provisions of subsections 2.2E and 2.7, the Term Loans
and the Revolving Loans shall bear interest through maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate
plus the Applicable Margin for Base Rate Loans; or
----
(ii) if a Eurodollar Rate Loan, then at the sum of the
Adjusted Eurodollar Rate plus the Applicable Margin for Eurodollar
Loans.
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line
Loans shall bear interest through maturity at the sum of the Base Rate plus the
----
Applicable Margin with respect to Base Rate Revolving Loans.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
----------------
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one-, two-, three- or six-month period;
provided that:
- - --------
(i) the initial Interest Period for any Eurodollar Rate
Loan shall commence on the Funding Date in respect of such Loan, in
the case of a Loan initially made as a Eurodollar Rate Loan, or on the
date specified in the applicable Notice of Conversion/Continuation, in
the case of a Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/ Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
<PAGE>
45
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
--------
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the
Tranche A Term Loans shall extend beyond June 30, 2005, no interest
period with respect to any portion of the Tranche B Term Loans shall
extend beyond September 30, 2006, and no Interest Period with respect
to any portion of the Revolving Loans shall extend beyond the
Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the
Term Loans shall extend beyond a date on which Company is required to
make a scheduled payment of principal of such Term Loans unless the
sum of (a) the aggregate principal amount of such Term Loans that are
Base Rate Loans plus (b) the aggregate principal amount of such Term
----
Loans that are Eurodollar Rate Loans with Interest Periods expiring on
or before such date equals or exceeds the principal amount required to
be paid on the Term Loans on such date;
(vii) no Interest Period with respect to any portion of the
Revolving Loans shall extend beyond the date on which a permanent
reduction of the Revolving Loan Commitments is scheduled to occur
unless the sum of (a) the aggregate principal amount of Revolving
Loans that are Base Rate Loans plus (b) the aggregate principal amount
----
of Revolving Loans that are Eurodollar Rate Loans with Interest
Periods expiring on or before such date plus (c) the excess of the
----
Revolving Loan Commitments then in effect over the aggregate principal
amount of Revolving Loans then outstanding equals or exceeds the
permanent reduction of the Revolving Loan Commitments that is
scheduled to occur on such date;
(viii) there shall be no more than ten (10) Interest Periods
outstanding at any time; and
(ix) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Conversion/Continuation, Company shall be
deemed to have selected an Interest Period of one month.
<PAGE>
46
C. Interest Payments. Subject to the provisions of subsection 2.2E,
-----------------
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event that any Swing Line Loans, any Revolving
--------
Loans or any Term Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B(i), interest accrued on such Swing Line Loans, Revolving Loans
or Term Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier,
at final maturity).
D. Conversion or Continuation. Subject to the provisions of
--------------------------
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Term Loans or Revolving Loans equal to $500,000 and
integral multiples of $250,000 in excess of that amount from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis or (ii) upon
the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue all or any portion of such Loan equal to $500,000 and integral
multiples of $250,000 in excess of that amount as a Eurodollar Rate Loan;
provided, however, that a Eurodollar Rate Loan may only be converted into a Base
- - -------- -------
Rate Loan on the expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has
occurred and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate
<PAGE>
47
Determination Date, and Company shall be bound to effect a conversion or
continuation in accordance therewith.
E. Post-Default Interest. Upon the occurrence and during the
---------------------
continuation of any Event of Default, the outstanding principal amount of all
Loans and, to the extent permitted by applicable law, any interest payments
thereon not paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest in
any proceeding under the Bankruptcy Code, or other applicable bankruptcy or
insolvency laws) payable upon demand at a rate that is 2% per annum in excess of
the interest rate otherwise payable under this Agreement with respect to the
applicable Loans (or, in the case of any such fees and other amounts, at a rate
which is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Revolving Loans bearing interest at a rate determined by
reference to the Base Rate); provided that, in the case of Eurodollar Rate
--------
Loans, upon the expiration of the Interest Period in effect at the time any such
increase in interest rate is effective such Eurodollar Rate Loans shall
thereupon become Base Rate Loans and shall thereafter bear interest payable upon
demand at a rate equal to 2% per annum in excess of the interest rate otherwise
payable under this Agreement for Base Rate Loans that are Term Loans or
Revolving Loans, as applicable. Payment or acceptance of the increased rates of
interest provided for in this subsection 2.2E is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of any Agent or Lender.
F. Computation of Interest. Interest on Loans shall be computed
-----------------------
on the basis of a 360-day year and for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
--------
day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
----
A. Commitment Fees. Company agrees to pay to Administrative Agent,
---------------
for distribution to each Lender having a Revolving Loan Commitment, in
proportion to that Lender's Pro Rata Share of the Revolving Loan Commitments,
commitment fees ("Commitment Fees"; each, a "Commitment Fee") for the period
from and including the Existing Effective Date to and excluding the Revolving
Loan Commitment Termination Date equal to (i) the average of the daily excess of
the Revolving Loan Commitments over the sum of (x) the aggregate principal
amount of Revolving Loans outstanding (but not any Swing Line Loans
outstanding), and (y) the Letter of Credit Usage multiplied by (ii) the
-------------
Applicable Margin for Commitment Fees. All such Commitment Fees shall be
calculated on the basis of a 360-day year and the actual number of days elapsed
and shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year and on the Revolving Loan Commitment Termination Date.
<PAGE>
48
B. Other Fees. Company agrees to pay to Agents such other fees in
----------
the amounts and at the times separately agreed upon between Company and the
applicable Agents.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments; Application of Proceeds of Collateral and
Payments under Guaranties.
----------
A. Scheduled Payments of Term Loans and Scheduled Reductions of
-------------
Revolving Loan Commitments.
- - --------------------------
(i) Scheduled Payments of Tranche A Term Loans. Company
------------------------------------------
shall make principal payments on the Tranche A Term Loans in
installments on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
-------------------------------------------------------------
<S> <C>
December 31, 1998 $ 5,000,000
-------------------------------------------------------------
March 31, 1999 $ 5,000,000
June 30, 1999 $ 5,000,000
September 30, 1999 $ 5,000,000
December 31, 1999 $ 5,000,000
-------------------------------------------------------------
March 31, 2000 $ 5,000,000
June 30, 2000 $ 5,000,000
September 30, 2000 $ 7,500,000
December 31, 2000 $ 7,500,000
-------------------------------------------------------------
March 31, 2001 $ 7,500,000
June 30, 2001 $ 7,500,000
September 30, 2001 $ 7,500,000
December 31, 2001 $ 7,500,000
-------------------------------------------------------------
March 31, 2002 $ 7,500,000
June 30, 2002 $ 7,500,000
September 30, 2002 $10,000,000
December 31, 2002 $10,000,000
-------------------------------------------------------------
March 31, 2003 $10,000,000
June 30, 2003 $10,000,000
September 30, 2003 $10,000,000
December 31, 2003 $10,000,000
-------------------------------------------------------------
March 31, 2004 $10,000,000
June 30, 2004 $10,000,000
September 30, 2004 $12,500,000
December 31, 2004 $12,500,000
=============================================================
</TABLE>
<PAGE>
49
<TABLE>
<CAPTION>
-------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
-------------------------------------------------------------
<S> <C>
March 31, 2005 $12,500,000
June 30, 2005 $12,500,000
=============================================================
</TABLE>
provided that the scheduled installments of principal of the Tranche A
--------
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4C; and provided further, that the final
----------------
installment payable by Company in respect of the Tranche A Term Loans
shall be in an amount, if such amount is different from that specified
above, sufficient to repay all amounts owing by Company under this
Agreement with respect to the Tranche A Term Loans.
(ii) Scheduled Payments of Tranche B Term Loans. Company
------------------------------------------
shall make principal payments on the Tranche B Term Loans in
installments on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
-------------------------------------------------------------
<S> <C>
June 30, 1999 $ 125,000
September 30, 1999 $ 125,000
December 31, 1999 $ 125,000
-------------------------------------------------------------
March 31, 2000 $ 125,000
June 30, 2000 $ 125,000
September 30, 2000 $ 125,000
December 31, 2000 $ 125,000
-------------------------------------------------------------
March 31,2001 $ 125,000
June 30, 2001 $ 125,000
September 30, 2001 $ 125,000
December 31, 2001 $ 125,000
-------------------------------------------------------------
March 31,2002 $ 125,000
June 30, 2002 $ 125,000
September 30, 2002 $ 125,000
December 31, 2002 $ 125,000
-------------------------------------------------------------
March 31,2003 $ 125,000
June 30, 2003 $ 125,000
September 30, 2003 $ 125,000
December 31, 2003 $ 125,000
-------------------------------------------------------------
March 31,2004 $ 125,000
June 30, 2004 $ 125,000
September 30, 2004 $ 125,000
December 31, 2004 $ 125,000
=============================================================
</TABLE>
<PAGE>
50
<TABLE>
<CAPTION>
-------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
-------------------------------------------------------------
<S> <C>
March 31,2005 $ 125,000
June 30, 2005 $ 125,000
September 30, 2005 $ 125,000
December 31, 2005 $ 125,000
-------------------------------------------------------------
March 31, 2006 $32,208,000
June 20, 2006 $32,208,000
September 30, 2006 $32,209,000
=============================================================
</TABLE>
provided that he scheduled installments of principal of the Tranche B
--------
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4C; and provided further, that the final
----------------
installment payable by Company in respect of the Tranche B Term Loans
shall be in an amount, if such amount is different from that specified
above, sufficient to repay all amounts owing by Company under this
Agreement with respect to the Tranche B Term Loans.
(iii) Scheduled Reductions of Revolving Loan Commitments.
--------------------------------------------------
Except as set forth in the following proviso, the Revolving Loan
Commitments shall be permanently reduced on the date and in the
amount set forth below:
<TABLE>
<CAPTION>
-------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TERM LOANS
-------------------------------------------------------------
<S> <C>
June 30, 2005 $175,000,000
-------------------------------------------------------------
</TABLE>
and provided further, that the scheduled reductions of the Revolving
----------------
Loan Commitments set forth above shall be reduced in connection with
any voluntary or mandatory reductions of the Revolving Loan
Commitments in accordance with subsection 2.4C.
B. Prepayments and Voluntary Reductions in Revolving Loan
--------------
Commitments.
- - -----------
(i) Voluntary Prepayments. Company may, upon written or
---------------------
telephonic notice to Administrative Agent on or prior to 12:00
Noon (New York time) on the date of prepayment, which notice, if
telephonic, shall be promptly confirmed in writing, at any time
and from time to time prepay, without premium or penalty, any
Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $250,000 and integral multiples of
$100,000 in excess of that amount. In addition, so long as no
Swing Line Loans are then outstanding, Company may, upon not less
than one Business Day's prior written or telephonic notice, in
the case of Base Rate Loans, and three Business Days' prior
written or telephonic notice, in the case of Eurodollar Rate
Loans, in
<PAGE>
51
each case confirmed in writing to Administrative Agent (which
notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from
time to time prepay, without premium or penalty, the Loans other
than Swing Line Loans on any Business Day in whole or in part in
an aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount; provided, however, that
-------- -------
prepayment of a Eurodollar Rate Loan on any day other than the
expiration of the Interest Period applicable thereto shall be
subject to compliance with subsection 2.6D. Notice of prepayment
having been given as aforesaid, the Loans shall become due and
payable on the prepayment date specified in such notice and in
the aggregate principal amount specified therein. Any voluntary
prepayments pursuant to this subsection 2.4B(i) shall be applied
as specified in subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments.
--------------------------------------------------
Company may, upon not less than three Business Days' prior
written or telephonic notice confirmed in writing to
Administrative Agent (which notice Administrative Agent will
promptly transmit by telefacsimile or telephone to each Lender),
at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the
Revolving Loan Commitments in an amount up to the amount by which
the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed
termination or reduction; provided that any such partial
--------
reduction of the Revolving Loan Commitments shall be in an
aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount. Company's notice to
Administrative Agent shall designate the date (which shall be a
Business Day) of such termination or reduction and the amount of
any partial reduction, and such termination or reduction of the
Revolving Loan Commitments shall be effective on the date
specified in such notice and shall reduce the Revolving Loan
Commitment of each Lender proportionately to its Pro Rata Share.
Any such voluntary reduction of the Revolving Loan Commitments
shall be applied as specified in subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of
-------------------------------------------------
Revolving Loan Commitments.
--------------------------
The Loans shall be prepaid and the Revolving Loan Commitments shall be
reduced in the manner provided in subsection 2.4C upon the occurrence of the
following circumstances:
(a) Prepayments and Reductions from Asset Sales. No later than the
-------------------------------------------
second Business Day following the date of receipt by Company or any of its
Subsidiaries of the Net Cash Proceeds of any Asset Sale (other than any
portion of such Net Cash Proceeds that is reinvested (or scheduled for
reinvestment) in assets of the general type used in the business of Company
and its Subsidiaries within 360 days from the date of receipt of such Net
Cash Proceeds (such Net Cash Proceeds that are reinvested or to be
reinvested not to exceed $55,000,000 in aggregate amount in any Fiscal
Year)), Company shall prepay the Loans (and/or the Revolving Loan
Commitments shall be reduced) in an
<PAGE>
52
aggregate amount equal to such Net Cash Proceeds; provided, however, that
-------- -------
Company may not reinvest (or schedule for reinvestment) Net Cash Proceeds
upon the occurrence and during the continuation of an Event of Default.
Company shall, no later than 360 days after receipt of any such Net Cash
Proceeds that have not theretofore been applied to the Obligations, make an
additional prepayment of the Loans (and/or the Revolving Loan Commitments
shall be reduced) in the full amount of all such proceeds that have not
therefore been so reinvested. Concurrently with any prepayment of the Loans
and/or reduction of the Commitments pursuant to this subsection
2.4B(iii)(a), Company shall deliver to Administrative Agent an Officer's
Certificate demonstrating the derivation of the Net Cash Proceeds of the
correlative Asset Sale from the gross sales price thereof. In the event
that Company shall, at any time after receipt of Net Cash Proceeds of any
Asset Sale requiring a prepayment or a reduction of the Revolving Loan
Commitments pursuant to this subsection 2.4B(iii)(a), determine that the
prepayments and/or reductions of the Revolving Loan Commitments previously
made in respect of such Asset Sale were in an aggregate amount less than
that required by the terms of this subsection 2.4B(iii)(a), Company shall
promptly cause to be made an additional prepayment of the Loans (and/or
reduction in the Revolving Loan Commitments) in an amount equal to the
amount of any such deficit, and Company shall concurrently therewith
deliver to Administrative Agent an Officer's Certificate demonstrating the
derivation of the additional Net Cash Proceeds resulting in such deficit.
(b) Prepayments and Reductions Due to Issuance of Debt. On or prior
--------------------------------------------------
to the first Business Day after receipt by Company or any of its
Subsidiaries of any proceeds of any Indebtedness (other than the Loans and
any other Indebtedness permitted under subsection 7.1(i), (ii), (iii),
(iv), (v), (vii) or (viii)), Company shall prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) in an amount equal to the
amount of such proceeds; provided, however, that such proceeds from
-------- -------
Indebtedness permitted under subsection 7.1(vi) shall not be applied to
prepay Loans pursuant to this subsection if and to the extent such proceeds
are applied by Company to repay the Indebtedness with respect to the
Subordinated Notes; and provided further, that payment or acceptance of the
----------------
amounts provided for in this subsection 2.4B(iii)(b) shall not constitute a
waiver of any Event of Default resulting from the incurrence of such
Indebtedness or otherwise prejudice any rights or remedies of Agents or
Lenders.
(c) Prepayments and Reductions Due to Issuance of Equity Securities.
---------------------------------------------------------------
At any time the Leverage Ratio is greater than 3.25:1.00, on or prior to
the first Business Day after receipt by Company or any of its Subsidiaries
of any Equity Proceeds after the Effective Date, Company shall prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) in an amount
equal to 50% of such Equity Proceeds; provided, however, that such Equity
-------- -------
Proceeds shall not be applied to prepay Loans pursuant to this subsection
if and to the extent such Equity Proceeds were derived (x) directly or
indirectly from a sale of Securities to employees or directors of Company
and its Subsidiaries pursuant to any employee stock option or stock
purchase plan or other employee benefit plan, and (y) from sales of
Securities to management officers and directors after the Effective Date to
the extent the consideration paid therefor does not exceed $5,000,000.
<PAGE>
53
(d) Prepayments and Reductions from Insurance and Condemnation
----------------------------------------------------------
Proceeds. No later than the second Business Day following the date of
--------
receipt by Company or any of its Subsidiaries of any cash payments under
any of the casualty insurance policies covering damage to or loss of
property maintained pursuant to subsection 6.4 resulting from damage to or
loss of all or any portion of the Collateral or any other tangible asset
(net of actual and documented reasonable costs incurred by Company or any
of its Subsidiaries in connection with adjustment and settlement thereof,
"Insurance Proceeds") or any proceeds resulting from the taking of assets
by the power of eminent domain, condemnation or otherwise (net of actual
and documented reasonable costs incurred by Company or any of its
Subsidiaries in connection with adjustment and settlement thereof,
"Condemnation Proceeds") (other than, if no Event of Default shall have
occurred and be continuing or shall be caused thereby, any portion of any
such proceeds that is reinvested (or scheduled for reinvestment) in assets
of the general type used in the business of Company and its Subsidiaries
within 360 days from the date of receipt of such proceeds), Company shall
prepay the Loans (and/or the Revolving Loan Commitments shall be reduced)
in the amount of such proceeds not so reinvested (or scheduled for such
reinvestment). Company shall, no later than 360 days after receipt of any
such Insurance Proceeds or Condemnation Proceeds that have not theretofore
been applied to the Obligations, make an additional prepayment of the Loans
(and/or the Revolving Loan Commitments shall be reduced) in the full amount
of all such proceeds that have not therefore been reinvested in such
assets.
(e) Prepayments and Reductions from Consolidated Excess Cash Flow. In
-------------------------------------------------------------
the event that there shall be Consolidated Excess Cash Flow for any Fiscal
Year (commencing with the Fiscal Year ending in December 1998), Company
shall, no later than 100 days after the end of such Fiscal Year, prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) in an
aggregate amount equal to 50% of such Consolidated Excess Cash Flow for
such Fiscal Year; provided however, that if the Leverage Ratio is less than
----------------
or equal to 4.00:1.00, then such prepayment of the Loans and/or reduction
of the Revolving Loan Commitments shall be in an aggregate amount equal to
25% of such Consolidated Excess Cash Flow for such Fiscal Year.
(f) Prepayments Due to Reductions or Restrictions of Revolving Loan
---------------------------------------------------------------
Commitments. Company shall prepay the Swing Line Loans and/or the Revolving
-----------
Loans from time to time to the extent necessary so that (y) the Total
Utilization of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect, and (z) the aggregate principal
amount of all outstanding Swing Line Loans shall not at any time exceed the
Swing Line Loan Commitment then in effect. All Swing Line Loans shall be
prepaid in full prior to the prepayment of any Revolving Loans pursuant to
this subsection 2.4B(iii)(f).
<PAGE>
54
C. Application of Prepayments and Unscheduled Reductions of
-------------
Revolving Loan Commitments.
- - --------------------------
(i) Application of Voluntary Prepayments by Type of Loans.
-----------------------------------------------------
Any voluntary prepayments pursuant to subsection 2.4B(i) shall be
applied: first to repay outstanding Swing Line Loans to the full
-----
extent thereof, second to repay outstanding Revolving Loans to the
------
full extent thereof, and third, to repay outstanding Tranche A Term
-----
Loans and Tranche B Term Loans pro rata and shall be applied to the
remaining installments thereof on a pro rata basis to the full extent
thereof.
(ii) Application of Mandatory Prepayments by Type of Loans.
-----------------------------------------------------
Any amount (the "Applied Amount") required to be applied as a
mandatory prepayment of the Loans and/or a reduction of the Revolving
Loan Commitments pursuant to subsections 2.4B(iii)(a)-(e) shall be
applied: first to prepay the Tranche A Term Loans and Tranche B Term
-----
Loans pro rata and shall be applied to the remaining installments
thereof on a pro rata basis to the full extent thereof, second, to the
------
extent of any remaining portion of the Applied Amount, to prepay the
Swing Line Loans to the full extent thereof and to permanently reduce
the Revolving Loan Commitments by the amount of such prepayment,
third, to the extent of any remaining portion of the Applied Amount,
-----
to prepay the Revolving Loans to the full extent thereof and to
further permanently reduce the Revolving Loan Commitments by the
amount of such prepayment, and fourth, to the extent of any remaining
------
portion of the Applied Amount, to further permanently reduce the
Revolving Loan Commitments to the full extent thereof; provided
--------
however, that so long as any Tranche A Term Loans are outstanding,
-------
each Lender of Tranche B Term Loans shall have the right to refuse all
or any portion of any mandatory prepayment allocable to it, and the
amount so refused shall be applied to prepay the Tranche A Term Loans.
Notwithstanding the foregoing or anything herein to the contrary, no
portion of the proceeds of Indebtedness permitted under subsection
7.1(vi) which are applied to prepay the Loans shall be applied to
permanently reduce the Revolving Loan Commitments.
(iii) Application of Prepayments of Term Loans to the
-----------------------------------------------
Scheduled Installments of Principal Thereof. Any prepayments of the
-------------------------------------------
Tranche A Term Loans or Tranche B Term Loans pursuant to subsection
2.4B(i) or 2.4B(iii) shall be applied to prepay the Tranche A Term
Loans or Tranche B Term Loans on a pro rata basis in accordance with
the outstanding principal amounts thereof. Any mandatory prepayments
applied to the Tranche A Term Loans or Tranche B Term Loans pursuant
to this subsection shall be applied on a pro rata basis (in accordance
with the respective outstanding principal amounts thereof) to each
scheduled installment of principal of the Tranche A Term Loans or
Tranche B Term Loans set forth in subsections 2.4A(i) or 2.4A(ii),
respectively, that is unpaid at the time of such prepayment.
<PAGE>
55
(iv) Application of Prepayments to Base Rate Loans and
-------------------------------------------------
Eurodollar Rate Loans. Considering Term Loans and Revolving Loans
---------------------
being prepaid separately, any prepayment thereof shall be applied
first to Base Rate Loans to the full extent thereof before application
to Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Company pursuant to
subsection 2.6D.
(v) Application of Unscheduled Reductions of Revolving
--------------------------------------------------
Loan Commitments. Any voluntary or mandatory reduction of the
----------------
Revolving Loan Commitments pursuant to subsection 2.4B(ii) or
2.4B(iii) shall be applied to reduce the scheduled reductions of the
Revolving Loan Commitments set forth in subsection 2.4A(iii) in
reverse chronological order.
D. Application of Proceeds of Collateral and Payments Under
-----------------------------
Guaranties.
----------
(i) Application of Proceeds of Collateral. Except as
-------------------------------------
provided in subsection 2.4B(iii)(a) with respect to prepayments from
Net Cash Proceeds of Asset Sales, all proceeds received by
Administrative Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral under any
Collateral Document may, in the discretion of Administrative Agent, be
held by Administrative Agent as Collateral for, and/or (then or at any
time thereafter) applied in full or in part by Administrative Agent
against, the applicable Secured Obligations (as defined in such
Collateral Document) in the following order of priority:
(a) To the payment of all costs and expenses of such sale, collection
or other realization, including without limitation reasonable compensation
to Administrative Agent and its agents and counsel, and all other
reasonable expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such Collateral
Document and all advances made by Administrative Agent thereunder for the
account of the applicable Loan Party, and to the payment of all reasonable
costs and expenses paid or incurred by Administrative Agent in connection
with the exercise of any right or remedy under such Collateral Document,
all in accordance with the terms of this Agreement and such Collateral
Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations for the ratable benefit of
the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments
----------------------------------------
received by Administrative Agent under any Guaranty shall be applied
<PAGE>
56
promptly from time to time by Administrative Agent in the following
order of priority:
(a) To the payment of the reasonable costs and expenses of any
collection or other realization under such Guaranty, including without
limitation reasonable compensation to Administrative Agent and its agents
and counsel, and all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with the
terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess of such payments, to the
payment of all other Guarantied Obligations (as defined in such Guaranty)
for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess of such payments, to the
payment the applicable Subsidiary Guarantor or to whosoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
E. General Provisions Regarding Payments.
-------------------------------------
(i) Manner and Time of Payment. All payments by Company of
--------------------------
principal, interest, fees and other Obligations hereunder and under
the Notes shall be made in same day funds and without defense, setoff
or counterclaim, free of any restriction or condition, and delivered
to Administrative Agent not later than 12:00 Noon (New York time) on
the date due at the Funding and Payment Office for the account of
Lenders; funds received by Administrative Agent after that time on
such due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Company hereby authorizes Administrative
Agent to charge its accounts with such Administrative Agent in order
to cause timely payment to be made to Administrative Agent of all
principal, interest, fees and expenses due hereunder (subject to
sufficient funds being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest.
-------------------------------------------------
Except as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest
on the principal amount being repaid or prepaid, and all such payments
(and in any event any payments made in respect of any Loan on a date
when interest is due and payable with respect to such Loan) shall be
applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
-------------------------
interest payments shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Administrative Agent shall promptly
distribute to each Lender, at its applicable Lending Office specified
on Schedule 2.1 or at such other address as such Lender may request,
------------
its Pro Rata Share of all such payments received by Administrative
Agent and the commitment fees of such Lender when received by
Administrative Agent pursuant to subsection 2.3. Notwithstanding the
foregoing
<PAGE>
57
provisions of this subsection 2.4E(iii) if, pursuant to the provisions
of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn
as to any Affected Lender or if any Affected Lender makes Base Rate
Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans,
Administrative Agent shall give effect thereto in apportioning
payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be
-------------------------
made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
-------------------
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
--------
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.
2.5 Use of Proceeds.
---------------
A. Tranche B Term Loans. The proceeds of the Tranche B Term Loans
--------------------
shall be applied to (i) finance the Sea Coast Acquisition, (ii) pay related fees
and expenses in connection therewith and (iii) reduce outstandings (but not
reduce the Revolving Credit Commitments) under the Revolving Credit Facility.
B. Revolving Loans; Swing Line Loans. The proceeds of the
---------------------------------
Revolving Loans and any Swing Line Loans have been and shall be applied by
Company to finance expenditures which are included in the definition of
Consolidated Capital Expenditures and for working capital and general corporate
purposes, including acquisitions in accordance with subsection 7.7(vi), and
which may include the making of intercompany loans to any of Company's Wholly
Owned Subsidiaries, in accordance with subsection 7.1(iv), for their own working
capital and general corporate purposes.
C. Compliance With Laws. Company hereby undertakes that no portion
--------------------
of the proceeds of any Loans or other extensions of credit under this Agreement
shall be used by any Loan Party in any manner which would be illegal under, or
which would cause the invalidity or unenforceability (in each case in whole or
in part) of any Loan Document under, any applicable law.
D. Margin Regulations. Without limiting the generality of
------------------
subsection 2.5C, no portion of the proceeds of any borrowing under this
Agreement shall be used by Company or any of its Subsidiaries in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
<PAGE>
58
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to Eurodollar Rate
Loans as to the matters covered:
A. Determination of Applicable Interest Rate. As soon as
-----------------------------------------
practicable after 11:00 A. M. (New York time) on each Interest Rate
Determination Date, Administrative Agent shall determine (which determination
shall, absent manifest error, be final, conclusive and binding upon all parties)
the interest rate that shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Company and each Lender.
B. Inability to Determine Applicable Interest Rate. In the
-----------------------------------------------
event that Administrative Agent shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties
hereto), on any Interest Rate Determination Date with respect to any Eurodollar
Rate Loans, that by reason of circumstances arising after the date of this
Agreement affecting the London interbank market, adequate and fair means do not
exist for ascertaining the interest rate applicable to such Loans on the basis
provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent
shall on such date give notice (by telecopy or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans, until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist (such notification not to be unreasonably
withheld or delayed) and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect of
which such determination was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans.
-------------------------------------------------------
In the event that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Administrative Agent)
that the making, maintaining or continuation of its Eurodollar Rate Loans (i)
has become unlawful as a result of compliance by such Lender in good faith with
any law, treaty, governmental rule, regulation, guideline or order (or would
conflict with any such treaty, governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith would
not be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market,
then, and in any such event, such Lender shall be an "Affected Lender" and it
shall on that day give notice (by telecopy or by telephone confirmed in writing)
to Company and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to, Eurodollar Rate Loans, shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected
<PAGE>
59
Lender relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the
Affected Lender shall make such Loan as (or convert such Loan to, as the case
may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its
outstanding Eurodollar Rate Loans, as the case may be (the "Affected Loans"),
shall be terminated at the earlier to occur of the expiration of the Interest
Period then in effect with respect to the Affected Loans or when required by
law, and (d) the Affected Loans shall automatically convert into Base Rate Loans
on the date of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Lender as described above relates to a Eurodollar
Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telecopy or by
telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest
---------------------------------------------------------
Periods. Company shall compensate each Lender, upon written request by that
- - -------
Lender (which request shall set forth the basis for requesting such amounts),
for all reasonable losses, expenses and liabilities (including, without
limitation, any interest paid by that Lender to lenders of funds borrowed by it
to make or carry its Eurodollar Rate Loans and any loss, expense or liability
sustained by that Lender in connection with the liquidation or reemployment of
such funds) which that Lender may sustain: (i) if for any reason (other than a
default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur
on a date specified therefor in a Notice of Borrowing or a telephonic request
for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including without limitation any prepayment pursuant to
subsection 2.4B(i)) or conversion of any of its Eurodollar Rate Loans occurs on
a date that is not the last day of an Interest Period applicable to that Loan,
(iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any
date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make,
--------------------------------
carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans.
-------------------------------------------------------
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of
<PAGE>
60
such Eurodollar deposit from an offshore office of that Lender to a domestic
office of that Lender in the United States of America; provided, however, that
-----------------
each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit
and the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence
-----------------------------------
of and during the continuation of a Potential Event of Default or an Event of
Default, (i) Company may not elect to have a Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest Period
then in effect for that Loan and (ii) subject to the provisions of subsection
2.6D, any Notice of Borrowing or Notice of Conversion/ Continuation given by
Company with respect to a requested borrowing or conversion/ continuation that
has not yet occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to
------------------------------------------
the provisions of subsection 2.7B (which shall be controlling with respect to
the matters covered thereby), in the event that any law, treaty or governmental
rule, regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasigovernmental authority (whether or not having the force of
law):
(i) results in a change in the basis of taxation of such
Lender (or its applicable lending office) (other than a change
with respect to any Tax on the overall net income of such Lender)
with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable
lending office) of principal, interest, fees or any other amount
payable hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including, without limitation, any marginal, emergency,
supplemental, special or other reserve), special deposit,
compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the
account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender
(other than any such reserve or other requirements with respect
to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate; or
(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Lender (or its applicable
lending office) or its obligations hereunder, or the London
interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or
<PAGE>
61
receivable by such Lender (or its applicable lending office) with respect
thereto; then, in any such case, Lender shall promptly notify Company and
Administrative Agent thereof and Company shall promptly pay to such Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender shall reasonably determine) as
may be necessary to compensate such Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Such Lender shall deliver
to Company (with a copy to Administrative Agent) a written statement, setting
forth in reasonable detail the basis for calculating the additional amounts owed
to such Lender under this subsection 2.7A, which statement shall be prima facie
evidence of such additional amounts.
B. Withholding of Taxes.
--------------------
(i) Payments to Be Free and Clear. All sums payable by
-----------------------------
Company under this Agreement and the other Loan Documents shall
(except to the extent required by law) be paid free and clear of, and
without any deduction or withholding on account of, any Tax (other
than a Tax on the overall net income of any Lender) imposed, levied,
collected, withheld or assessed by or within the United States of
America or any political subdivision in or of the United States of
America or any other jurisdiction from which a payment is made by or
on behalf of Company.
(ii) Withholding of Taxes. If Company or any other Person
--------------------
is required by law to make any deduction or withholding on account of
any such Tax from any sum paid or payable by Company to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any such requirement
or any change in any such requirement as soon as Company becomes aware of
it;
(b) Company shall pay any such Tax before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is imposed
on Company) for its own account or (if that liability is imposed on
Administrative Agent or such Lender, as the case may be) on behalf of and
in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, Administrative Agent or such Lender, as the case
may be, receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been required or
made; and
(d) within 30 days after paying any sum from which it is required by
law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to pay,
Company shall deliver to Administrative Agent evidence of such deduction,
withholding or payment and of the remittance thereof to the relevant taxing
or other authority;
<PAGE>
62
provided that no such additional amount shall be required to be paid to any
--------
Lender under clause (c) above except to the extent that any change after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Company, on or prior to the Existing Effective
Date (in the case of each Existing Lender), on or prior to the
Effective Date (in the case of each New Lender) or on or prior to the
date of the Assignment Agreement pursuant to which it becomes a Lender
(in the case of each other Lender), and at such other times as may be
necessary in the determination of Company or Administrative Agent
(each in the reasonable exercise of its discretion), (1) two original
copies of Internal Revenue Service Form 1001 or 4224 (or any successor
forms), accurately completed and duly executed by such Lender,
together with any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder
to establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other amounts
payable under any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the Internal
Revenue Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 (or any successor forms) pursuant to clause (1) above, a
Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8 (or any successor form), properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such Lender
of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, such Lender
shall (1) deliver to Administrative Agent for transmission to Company
two new original copies of Internal Revenue Service Form 1001 or 4224
(or any successor forms), or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8 (or any successor
form), as the
<PAGE>
63
case may be, accurately completed and duly executed by such Lender,
together with any other certificate or statement of exemption required
in order to confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to payments to such Lender under the Loan Documents or (2)
immediately notify Administrative Agent and Company of its inability
to deliver any such forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) in
respect of deductions or withholdings of United States federal income
taxes if such Lender shall have failed to satisfy the requirements of
subsection 2.7B(iii)(a) or 2.7B(iii)(b); provided that if such Lender
--------
shall have satisfied such requirements on the Closing Date (in the
case of each Existing Lender), on the Effective Date (in the case of
each New Lender) or on the date of the Assignment Agreement pursuant
to which it became a Lender (in the case of each other Lender),
nothing in this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c) of
subsection 2.7B(ii) in the event that, as a result of any change in
any applicable law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or application
thereof, such Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing the
fact that such Lender is not subject to withholding as described in
subsection 2.7B(iii)(a) or 2.7B(iii)(b).
C. Capital Adequacy Adjustment. If any Lender shall have
---------------------------
determined that the adoption, effectiveness, phase-in or applicability
after the date hereof of any law, rule or regulation (or any provision
thereof) regarding capital adequacy, or any change therein or in the
interpretation or administration thereof by the National Association of
Insurance Commissioners, any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its applicable lending office)
with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of the National Association of
Insurance Commissioners, any such governmental authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such
Lender as a consequence of, or with reference to, such Lender's Loans or
Commitments or Letters of Credit or participations therein or other
obligations hereunder with respect to the Loans or the Letters of Credit to
a level below that which such Lender reasonably determines such Lender or
such controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within fifteen
Business Days after receipt by Company from such Lender of the statement
referred to in the next sentence, Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Administrative Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
<PAGE>
64
D. Substitute Lenders. In the event Company is required under
------------------
the provisions of this subsection 2.7 to make payments in a material amount
to any Lender or in the event any Lender fails to lend to Company in
accordance with this Agreement, Company may, so long as no Event of Default
or Potential Event of Default shall have occurred and be continuing, elect
to terminate such Lender as a party to this Agreement; provided that,
--------
concurrently with such termination, (i) Company shall pay that Lender all
principal interest and fees and other amounts (including without limitation
amounts, if any, owed under this subsection 2.7) due to be paid to such
Lender with respect to all periods through such date of termination, (ii)
another financial institution satisfactory to Company and Administrative
Agent shall agree, as of such date, to become a Lender for all purposes
under this Agreement (whether by assignment or amendment) and to assume all
obligations of the Lender to be terminated as of such date, and (iii) all
documents and supporting materials necessary, in the judgment of
Administrative Agent to evidence the substitution of such Lender shall have
been received and approved by Administrative Agent as of such date.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate .
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as
practicable after the officer of such Lender or Issuing Lender responsible
for administering the Loans or Letters of Credit of such Lender or Issuing
Lender, as the case may be, becomes aware of the occurrence of an event or
the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender or Issuing Lender to
receive payments under subsection 2.7 or subsection 3.6, it will, to the
extent not inconsistent with the internal policies of such Lender or
Issuing Lender and any applicable legal or regulatory restrictions, use
reasonable efforts (i) to make, issue, fund or maintain the Commitments of
such Lender or the affected Loans or Letters of Credit of such Lender or
Issuing Lender through another lending or letter of credit office of such
Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the
circumstances which would cause such Lender to be an Affected Lender would
cease to exist or the additional amounts which would otherwise be required
to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 or
subsection 3.6 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing,
funding or maintaining of such Commitments or Loans or Letters of Credit
through such other lending or letter of credit office or in accordance with
such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or Loans or Letters of Credit or the
interests of such Lender or Issuing Lender; provided that such Lender or
--------
Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company
agrees to pay all incremental expenses incurred by such Lender or Issuing
Lender as a result of utilizing such other lending or letter of credit
office. A certificate as to the amount of any such expenses payable by
Company pursuant to this subsection 2.8 (setting forth in reasonable detail
the basis for requesting such amount) submitted by such Lender or Issuing
Lender to Company (with a copy to Administrative Agent) shall be conclusive
absent manifest error.
<PAGE>
65
SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of
------------------------------------------------------
Participations Therein.
----------------------
A. Letters of Credit. In addition to Company requesting that
-----------------
Lenders make Tranche A Term Loans pursuant to subsection 2.1A(i), Tranche B
Term Loans pursuant to subsection 2.1A(ii), Revolving Loans pursuant to
subsection 2.1A(iii), and that Swing Line Lender make Swing Line Loans
pursuant to subsection 2.1A(iv), Company may request, in accordance with
the provisions of this subsection 3.1, from time to time during the period
from the Existing Effective Date to but excluding the Revolving Loan
Commitment Termination Date, that one or more Lenders issue Letters of
Credit for the account of Company for the purposes specified in the
definitions of Commercial Letters of Credit and Standby Letters of Credit.
Subject to the terms and conditions of this Agreement and in reliance upon
the representations and warranties of Company herein set forth, any one or
more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not
be obligated to, issue such Letters of Credit in accordance with the
provisions of this subsection 3.1; provided that Company shall not request
--------
that any Lender issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving Loan
Commitments would exceed the Revolving Loan Commitments then in
effect;
(ii) any Letter of Credit if, after giving effect to
such issuance, the Letter of Credit Usage would exceed
$15,000,000;
(iii) any Standby Letter of Credit having an
expiration date later than the earlier of (a) the Revolving Loan
Commitment Termination Date and (b) the date which is one year
from the date of issuance of such Standby Letter of Credit;
provided that the immediately preceding clause (b) shall not
--------
prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive
periods not to exceed one year each unless such Issuing Lender
elects not to extend for any such additional period; provided
--------
further that, unless Requisite Lenders otherwise consent, such
-------
Issuing Lender shall give notice that it will not extend such
Standby Letter of Credit if it has knowledge that an Event of
Default has occurred and is continuing on the last day on which
such Issuing Lender may give notice to the beneficiary that it
will not extend such Standby Letter of Credit;
(iv) any Commercial Letter of Credit (a) having an
expiration date later than the earlier of (X) 30 days prior to
the Revolving Loan Commitment Termination Date and (Y) the date
which is 180 days from the date of issuance of such Commercial
Letter of Credit or (b) that is otherwise unacceptable to the
applicable Issuing Lender in its reasonable discretion;
(v) any Letter of Credit denominated in a currency
other than Dollars; or
<PAGE>
66
(vi) any Letter of Credit during any period when a
Lender Default exists, unless each Issuing Lender has entered into
arrangements satisfactory to it and Company to eliminate such Issuing
Lender's risk with respect to the Defaulting Lender, including by cash
collateralizing such Defaulting Lender's Pro Rata Share of the Letter
of Credit Usage (after giving effect to the issuance of the proposed
Letter of Credit).
B. Mechanics of Issuance.
---------------------
(i) Notice of Issuance. Whenever Company desires
------------------
the issuance of a Letter of Credit, it shall deliver to Administrative
Agent, at the Funding and Payment Office, a Notice of Issuance of
Letter of Credit no later than 12:00 Noon (New York time) at least
five Business Days, or such shorter period as may be agreed to by the
Issuing Lender in any particular instance, in advance of the proposed
date of issuance. The Notice of Issuance of Letter of Credit shall
specify (a) the proposed date of issuance (which shall be a Business
Day), (b) the face amount of or maximum aggregate liability under, as
applicable, the Letter of Credit, (c) the expiration date of the
Letter of Credit, (d) the name and address of the beneficiary, and (e)
the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any
documents and the verbatim text of any certificates to be presented by
the beneficiary which, if presented by the beneficiary prior to the
expiration date of the Letter of Credit, would require the Issuing
Lender to make payment under the Letter of Credit; provided that the
--------
Issuing Lender, in its reasonable discretion, may require changes in
the text of the proposed Letter of Credit or any such documents or
certificates; provided further that no Letter of Credit shall require
------- -------
payment against a conforming draft or other request for payment to be
made thereunder on the same Business Day (under the laws of the
jurisdiction in which the office of the Issuing Lender to which such
draft or other request for payment is required to be presented is
located) that such draft or other request for payment is presented if
such presentation is made after 10:00 A.M. (in the time zone of such
office of the Issuing Lender) on such Business Day.
Company shall notify the applicable Issuing Lender (and Administrative
Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which Company is
required to certify in the applicable Notice of Issuance of Letter of Credit is
no longer true and correct as of the proposed date of issuance of such Letter of
Credit, and upon the issuance of any Letter of Credit, Company shall be deemed
to have recertified, as of the date of such issuance, as to the matters to which
Company is required to certify in the applicable Notice of Issuance of Letter of
Credit.
(ii) Determination of Issuing Lender. Upon receipt by
-------------------------------
Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, in the event Administrative Agent elects to issue such Letter
of Credit, Administrative Agent shall promptly so notify Company, and
such Administrative Agent shall be the
<PAGE>
67
Issuing Lender with respect thereto. In the event that Administrative
Agent, in its sole discretion, elects not to issue such Letter of
Credit, Administrative Agent shall promptly so notify Company,
whereupon Company may request any other Lender to issue such Letter of
Credit by delivering to such Lender a copy of the applicable Notice of
Issuance of Letter of Credit. Any Lender so requested to issue such
Letter of Credit shall promptly notify Company and Administrative
Agent whether or not, in its sole discretion, it has elected to issue
such Letter of Credit, and any such Lender which so elects to issue
such Letter of Credit shall be the Issuing Lender with respect
thereto. In the event that all other Lenders shall have declined to
issue such Letter of Credit, notwithstanding the prior election of
Administrative Agent not to issue such Letter of Credit,
Administrative Agent shall be obligated to issue such Letter of Credit
and shall be the Issuing Lender with respect thereto, notwithstanding
the fact that the sum of the Letter of Credit Usage with respect to
such Letter of Credit and with respect to all other Letters of Credit
issued by Administrative when aggregated with Administrative Agent's
outstanding Revolving Loans and Swing Line Loans, may exceed
Administrative Agent's Revolving Loan Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction
----------------------------
or waiver (in accordance with subsection 10.6) of the conditions set
forth in subsection 4.3, the Issuing Lender shall issue the requested
Letter of Credit in accordance with the Issuing Lender's standard
operating procedures (any such issuance by Administrative Agent being
effected through the Funding and Payment Office), and upon its
issuance of such Letter of Credit the Issuing Lender shall promptly
notify Administrative Agent and each Lender of such issuance, which
notice shall be accompanied by a copy of such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end
------------------
of each calendar quarter ending after the Closing Date, so long as any
Letter of Credit shall have been outstanding during such calendar
quarter, each Issuing Lender shall deliver to Administrative Agent and
Administrative Agent shall deliver to each Lender a report setting
forth for such calendar quarter the daily maximum amount available to
be drawn under the Letters of Credit that were outstanding during such
calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit.
--------------------------------------------------------
Immediately upon the issuance of each Letter of Credit, each Lender having a
Revolving Loan Commitment shall be deemed to, and hereby agrees to, have
irrevocably purchased from the Issuing Lender a participation in such Letter
of Credit and any drawings honored or payments made thereunder in an amount
equal to such Lender's Pro Rata Share (with respect to the Revolving Loan
Commitments) of the maximum amount which is or at any time may become
available to be drawn or required to be paid thereunder.
3.2 Letter of Credit Fees.
---------------------
Company agrees to pay the following amounts to each Issuing Lender
with respect to Letters of Credit issued by it for the account of Company:
<PAGE>
68
(i) with respect to each Letter of Credit, (a) a fronting
fee equal to 1/4 of 1% per annum of the daily maximum amount available
to be drawn under such Letter of Credit and (b) a Letter of Credit fee
equal to the product of (x) the Applicable Margin with respect to
Eurodollar Rate Revolving Loans and (y) the daily maximum amount
available to be drawn under such Letter of Credit, in each case
payable in arrears on and to each March 31, June 30, September 30 and
December 31 of each year and computed on the basis of a 360-day year
for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of
each Letter of Credit and each drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary
and processing charges in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Lender shall distribute to each
other Lender its Pro Rata Share of such amount.
3.3 Drawings and Payments and Reimbursement of Amounts Paid Under Letters
---------------------------------------------------------------------
of Credit.
- - ---------
A. Responsibility of Issuing Lender With Respect to Requests For
-------------------------------------------------------------
Drawings and Payments. In determining whether to honor any drawing or request
- - ---------------------
for payment under any Letter of Credit by the beneficiary thereof, the Issuing
Lender shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit.
----------------------------------------------------------------
In the event an Issuing Lender has determined to honor a drawing or request for
payment under a Letter of Credit issued by it, such Issuing Lender shall
immediately notify Company and Administrative Agent, and Company shall reimburse
such Issuing Lender on or before the Business Day immediately following the date
on which such drawing is honored or such payment is made (the applicable
"Reimbursement Date"), in an amount in same day funds equal to the amount of
such drawing; provided that, anything contained in this Agreement to the
--------
contrary notwithstanding, (i) unless Company shall have notified Administrative
Agent and such Issuing Lender prior to 12:00 Noon (New York time) on the date of
such drawing or request for payment that Company intends to reimburse such
Issuing Lender for the amount of such honored drawing or payment with funds
other than the proceeds of Revolving Loans, Company shall be deemed to have
given a timely Notice of Borrowing to Administrative Agent requesting Lenders to
make Revolving Loans which are Base Rate Loans, on the applicable Reimbursement
Date in an amount equal to the amount of such honored drawing or payment and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the applicable Reimbursement Date, make Revolving Loans
and in the amount of such honored drawing or payment, the proceeds of which
shall be applied directly by Administrative Agent to reimburse such Issuing
Lender for the amount of such honored drawing or payment; provided
--------
<PAGE>
69
further that if for any reason proceeds of Revolving Loans are not received by
- - -------
such Issuing Lender on the applicable Reimbursement Date in an amount equal to
the amount of such honored drawing or payment, Company shall reimburse such
Issuing Lender, on demand, in an amount in Dollars and in same day funds equal
to the excess of the amount of such honored drawing or payment over the
aggregate amount of such Revolving Loans, if any, which are so received. Nothing
in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Company shall retain any and all rights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Payments Under Letters of
------------------------------------------------------------
Credit.
------
(i) Payment by Lenders. In the event that Company shall
------------------
fail for any reason to reimburse any Issuing Lender as provided in
subsection 3.3B in an amount equal to the amount of any honored
drawing or payment made by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify each
other Lender of the unreimbursed amount of such honored drawing or
payment and of such other Lender's respective participation therein
based on such Lender's Pro Rata Share of the Revolving Loan
Commitments. Each Lender shall make available to such Issuing Lender
an amount equal to its respective participation, in same day funds, at
the office of such Issuing Lender specified in such notice, not later
than 12:00 Noon (New York time) on the first Business Day (under the
laws of the jurisdiction in which such office of such Issuing Lender
is located) after the date notified by such Issuing Lender. In the
event that any Lender fails to make available to such Issuing Lender
on such Business Day the amount of such Lender's participation in such
Letter of Credit as provided in this subsection 3.3C, such Issuing
Lender shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the rate customarily used by
such Issuing Lender for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. Nothing in this
subsection 3.3C shall be deemed to prejudice the right of any Lender
to recover from any Issuing Lender any amounts made available by such
Lender to such Issuing Lender pursuant to this subsection 3.3C in the
event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of
Credit by such Issuing Lender in respect of which payment was made by
such Lender constituted gross negligence or willful misconduct on the
part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received
--------------------------------------------------
From Company. In the event any Issuing Lender shall have been
------------
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or
any portion of any honored drawing or payment made by such Issuing
Lender under a Letter of Credit issued by it, such Issuing Lender
shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such honored
drawing or payment such other Lender's Pro Rata Share of all payments
subsequently received by such Issuing Lender from Company in
reimbursement of such honored drawing or payment when such payments
are
<PAGE>
70
received. Any such distribution shall be made to a Lender at its
primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
------------------------------------------------
(i) Payment of Interest by Company. Company agrees to pay
------------------------------
to each Issuing Lender, with respect to drawings honored or payments
made under any Letters of Credit issued by it, interest on the amount
paid by such Issuing Lender in respect of each such drawing or payment
from the date such drawing is honored or payment is made to but
excluding the date such amount is reimbursed by Company (including any
such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date
such drawing is honored or payment is made to but excluding the
applicable Reimbursement Date, the Base Rate plus the Applicable
----
Margin with respect to Base Rate Revolving Loans, and (b) thereafter,
a rate which is 2% per annum in excess of the rate of interest
described in the foregoing clause (a). Interest payable pursuant to
this subsection 3.3D(i) shall be computed on the basis of a 360-day
year for the actual number of days elapsed in the period during which
it accrues and shall be payable on demand or, if no demand is made, on
the date on which the related drawing or payment under a Letter of
Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
---------------------------------------------------
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i), (a) such Issuing Lender shall
distribute to each other Lender, out of the interest received by such
Issuing Lender in respect of the period from the date of the
applicable honored drawing or payment under a Letter of Credit issued
by such Issuing Lender to but excluding the date on which such Issuing
Lender is reimbursed for the amount of such drawing or payment
(including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such other Lender
would have been entitled to receive in respect of the Letter of Credit
fee that would have been payable in respect of such Letter of Credit
for such period pursuant to subsection 3.2 if no drawing had been
honored or payment had been made under such Letter of Credit, and (b)
in the event such Issuing Lender shall have been reimbursed by other
Lenders pursuant to subsection 3.3C(i) for all or any portion of such
drawing or payment, such Issuing Lender shall distribute to each other
Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such drawing or payment such other Lender's
Pro Rata Share of any interest received by such Issuing Lender in
respect of that portion of such drawing or payment so reimbursed by
other Lenders for the period from the date on which such Issuing
Lender was so reimbursed by other Lenders to and including the date on
which such portion of such drawing or payment is reimbursed by
Company. Any such distribution shall be made to a Lender at its
Lending Office set forth on Schedule 2.1 or at such other address as
------------
such Lender may request.
<PAGE>
71
3.4 Obligations Absolute.
--------------------
The obligation of Company to reimburse each Issuing Lender for
drawings honored or payments made under the Letters of Credit issued by it and
to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, set-off, defense or
other right which Company or any Lender may have at any time
against a beneficiary or any transferee of any Letter of Credit
(or any Persons for whom any such transferee may be acting), any
Issuing Lender or other Lender or any other Person or, in the
case of a Lender, against Company whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company
or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any
Letter of Credit against presentation of a demand, draft or
certificate or other document which does not substantially comply
with the terms of such Letter of Credit;
(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or
prospects of Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan
Document by any party thereto;
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential
Event of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
- - --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing
<PAGE>
72
Lender under the circumstances in question (as determined by a final judgment of
a court of competent jurisdiction).
3.5 Indemnification; Nature of Issuing Lender's Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
---------------
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing or other request for payment under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any
---------------------------------
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing or
payment under such Letter of Credit; or (viii) any consequences arising from
causes beyond the control of such Issuing Lender, including, without limitation,
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
<PAGE>
73
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
In the event that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) results in any change in the basis of taxation of such
Issuing Lender or Lender (or its applicable lending or letter of
credit office) (other than a change with respect to any Tax on the
overall net income of such Issuing Lender or Lender) with respect to
the issuing or maintaining of any Letters of Credit or the purchasing
or maintaining of any participations therein or any other obligations
under this Section 3, whether directly or by such being imposed on or
suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including, without limitation, any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by
any Lender; or
(iii) imposes any other condition on or affecting such
Issuing Lender or Lender (or its applicable lending or letter of
credit office) regarding this Section 3 or any Letter of Credit or any
participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be prima facie evidence of such additional amounts.
<PAGE>
74
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of
Letters of Credit hereunder are subject to the satisfaction of the following
conditions.
4.1 Conditions to Tranche B Term Loans.
----------------------------------
The obligations of Lenders to make the Tranche B Term Loans are, in
addition to the conditions precedent specified in subsection 4.2, subject to
prior or concurrent satisfaction of the following conditions:
A. Company Documents.
-----------------
On or before the Effective Date, Company shall deliver or cause
to be delivered to Lenders (or to Administrative Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Effective
Date:
(i) Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of
State of the State of Delaware and each other state in which it
is qualified as a foreign corporation to do business, each dated
a recent date prior to the Effective Date;
(ii) Copies of its Bylaws, certified as of the Effective
Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment;
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party,
certified as of the Effective Date by its corporate secretary or
an assistant secretary as being in full force and effect without
modification or amendment;
(iv) Signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents;
(v) Executed originals of this Agreement, the Subsidiary
Guaranty and the other Loan Documents to which it is a party; and
(vi) Such other documents as Agents may reasonably
request.
B. No Material Adverse Effect. Since December 31, 1998, no
--------------------------
Material Adverse Effect (in the opinions of Administrative Agent or Lenders)
shall have occurred.
C. No Other Indebtedness Outstanding. Administrative Agent
---------------------------------
shall have received an Officers' Certificate of Company stating that, after
giving effect to the Sea Coast Acquisition,
<PAGE>
75
Loan Parties shall have no Indebtedness outstanding other than Indebtedness
permitted under the Loan Documents.
D. Necessary Consents. Company shall have obtained all consents
------------------
necessary or advisable in connection with the Sea Coast Acquisition, the Loan
Documents and the continued operation of the business conducted by Company and
its Subsidiaries, and each of the foregoing shall be in full force and effect
and in form and substance satisfactory to Administrative Agent (except as
disclosed to and approved by Administrative Agent).
E. Collateral Access Agreements. Administrative Agent shall
----------------------------
have received from Company Collateral Access Agreements in form and substance
satisfactory to Administrative Agent with respect to any facility which
equipment of Company is located on the Effective Date. Company shall not own
interest in any real property on the Effective Date other than the real property
referred to in Schedule 5.3, the Mortgaged Properties in Pennsylvania and
Tennessee and its Leasehold Property interest in its offices in Columbus, Ohio,
St. Louis, Missouri and Burien, Washington.
F. Perfection of Security Interests in Personal Property and
---------------------------------------------------------
Mixed Collateral. Company shall have taken or caused to be taken such actions in
- - ----------------
such a manner so that Administrative Agent has, for the benefit of Agents and
Lenders, a valid and perfected First Priority security interest in the entire
personal property and mixed Collateral. Such actions shall include, without
limitation: (i) the delivery pursuant to the applicable Collateral Documents of
(a) certificates (which certificates shall be properly endorsed in blank for
transfer or accompanied by irrevocable undated stock powers duly endorsed in
blank all in form and substance satisfactory to Administrative Agent)
representing all of the shares of capital stock required to be pledged pursuant
to the Collateral Documents, and (b) all promissory notes or other instruments
(duly endorsed, where appropriate, in a manner satisfactory to Administrative
Agent) evidencing any Collateral; (ii) delivery to Agents of (a) the results of
a recent search, by a Person satisfactory to Agents, of all effective Uniform
Commercial Code financing statements and fixture filings and all judgment and
tax lien filings which may have been made with respect to any personal or mixed
property of any Loan Party, together with copies of all such filings disclosed
by such search; (iii) the delivery to Administrative Agent of Uniform Commercial
Code financing statements and fixture filings executed by the applicable Loan
Parties as to all such Collateral granted by such Loan Parties for all
jurisdictions as may be necessary or desirable to perfect Administrative Agent's
security interest in such Collateral; (iv) the delivery to Administrative Agent
of all cover sheets or other documents or instruments required to be filed with
the PTO or the United States Copyright Office in order to create or perfect
Liens in respect of any IP Collateral or any registered copyrights of Company;
and (v) the delivery to Administrative Agent of evidence reasonably satisfactory
to Administrative Agent that all other filings (including, without limitation,
filings of Uniform Commercial Code termination statements and termination
statements with respect to prior Liens on IP Collateral), recordings and other
actions that Administrative Agent deems necessary or advisable to establish,
preserve and perfect the First Priority Liens granted to Administrative Agent in
personal and mixed property shall have been made.
G. Opinions of Loan Parties' Counsel. Lenders and their
---------------------------------
respective counsel shall have received (i) originally executed copies of one or
more favorable written opinions of
<PAGE>
76
Richards & O'Neil, LLP, counsel for the Loan Parties, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated as of the
Effective Date and setting forth substantially the matters in the opinion
designated in Exhibit XIII annexed hereto and as to such other matters as
------------
Administrative Agent acting on behalf of Lenders may reasonably request,
including, without limitation, as to no breach of any provision of the
Subordinated Notes and as to the Tranche B Term Loans constituting "Senior
Indebtedness" under and as defined in the Subordinated Note Indentures, and (ii)
evidence satisfactory to Administrative Agent that Loan Parties have instructed
such counsel to deliver such opinion to Lenders.
H. Opinions of Agents' Counsel. Lenders shall have received
---------------------------
originally executed copies of one or more favorable written opinions of Simpson
Thacher & Bartlett, counsel to Agents, dated as of the Effective Date,
substantially in the form of Exhibit XIV annexed hereto and as to such other
-----------
matters as Agents acting on behalf of Lenders may reasonably request.
I. Fees. Company shall have paid to Agents, for distribution
----
(as appropriate) to Agents and Lenders, the fees payable on the Effective Date
referred to in subsection 2.3.
J. Financial Statements; Pro Forma Consolidated Balance Sheet.
----------------------------------------------------------
On or before the Effective Date, the Administrative Agent shall have received
from Company (i) satisfactory audited financial statements of Company for the
year ending December 31, 1998, (ii) satisfactory audited financial statements of
Sea Coast for the twelve-month period ending January 31, 1999 and (iii)
satisfactory pro forma balance sheet of Company as at December 31, 1998 prepared
in accordance with GAAP and reflecting the consummation of the Sea Coast
Acquisition, which pro forma statement of assets shall be in form and substance
satisfactory to the Administrative Agent and shall be certified by the chief
financial officer of Company as (a) prepared based on good faith assumptions and
on the best information available to Company as of the date of delivery thereof
and (b) fairly presenting on a pro forma basis the financial position of Company
as at December 31, 1998, as adjusted as described in this clause (iii), assuming
that such events had occurred at such date.
K. Evidence of Insurance. Administrative Agent shall have
---------------------
received satisfactory certificates of insurance with respect to each of the
insurance policies required pursuant to subsection 6.4, and Agents shall be
satisfied with the nature and scope of these insurance policies.
L. Representations and Warranties; Performance of Agreements.
---------------------------------------------------------
Company shall have delivered to Administrative Agent an Officer's Certificate,
in form and substance satisfactory to Administrative Agent, to the effect that
the representations and warranties in Section 5 hereof are true and correct in
all material respects on and as of the Effective Date to the same extent as
though made on and as of that date and that Company shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by them on or before the
Effective Date, except as otherwise disclosed to and agreed to in writing by
Administrative Agent .
M. Completion of Proceedings. All corporate and other
-------------------------
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders,
<PAGE>
77
and their counsel shall be satisfactory in form and substance to Administrative
Agent and such counsel, and Administrative Agent and such counsel shall have
received all such counterpart originals or certified copies of such documents as
Administrative Agent may reasonably request.
4.2 Conditions to All Loans.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, signed by the chief executive officer,
the chief financial officer or the controller of Company or by any executive
officer of Company designated by any of the above-described officers on behalf
of Company in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein
and in the other Loan Documents shall be true and correct in all
material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to
an earlier date, in which case such representations and
warranties shall have been true and correct in all material
respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated
by such Notice of Borrowing that would constitute an Event of
Default or a Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement and the other Loan Documents provide shall be performed
or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any
Lender from making the Loans to be made by it, on that Funding
Date;
(v) The making of the Loans requested on such Funding Date
shall not violate any law including, without limitation,
Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Company or any
of its Subsidiaries or any property of Company or any of its
Subsidiaries that has not been disclosed by Company in
<PAGE>
78
writing and that is required to be so disclosed pursuant to
subsection 5.6 or 6.1(x) prior to the making of the last
preceding Loans (or, in the case of the initial Loans, prior to
the execution of this Agreement), and there shall have occurred
no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so
disclosed that, in either event, in the opinion of Administrative
Agent or of Requisite Lenders, would be expected to have a
Material Adverse Effect; and no injunction or other restraining
order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding
seeking to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of
Loans hereunder.
4.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, signed by the chief executive officer, the chief financial officer or
the controller of Company or by any executive officer of Company designated by
any of the above-described officers on behalf of Company in a writing delivered
to Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.2B shall be satisfied to the same
extent as if the issuance of such Letter of Credit were the making of a Loan and
the date of issuance of such Letter of Credit were a Funding Date.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to
make the Loans, to induce Issuing Lender to issue Letters of Credit and to
induce other Lenders to purchase participations therein, Company represents and
warrants to each Lender, on the date of this Agreement, on each Funding Date,
and on the date of issuance of each Letter of Credit, that the following
statements are true and correct:
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
- - ------------
<PAGE>
79
A. Organization and Powers. Each Loan Party is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of its state of
incorporation. Each Loan Party has all requisite corporate power and authority
to own and operate its properties, to carry on its business as now conducted and
as proposed to be conducted, to enter into the Loan Documents and to carry out
the transactions contemplated thereby. Company has all requisite corporate power
and authority to issue and pay the Notes.
B. Qualification and Good Standing. Each Loan Party is qualified to
-------------------------------
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified, authorized or in good
standing has not had and will not have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged
-------------------
only in the businesses permitted to be engaged in pursuant to subsection 7.11.
D. Company and Subsidiaries. All of the Subsidiaries of Company as
------------------------
of the Effective Date are identified in Schedule 5.1 annexed hereto. The capital
------------
stock of each of the Subsidiaries of Company identified in Schedule 5.1 annexed
hereto is duly authorized, validly issued, fully paid and nonassessable and none
of such capital stock constitutes Margin Stock. Company and each of the
Subsidiaries of Company identified in Schedule 5.1 annexed hereto are duly
------------
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation set forth therein, have
full corporate power and authority to own their assets and properties and to
operate their business as presently owned and conducted and as proposed to be
conducted, and are qualified to do business and in good standing in every
jurisdiction where their assets are located and wherever necessary to carry out
their business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
------------
hereto correctly sets forth the ownership interest of Company in each of its
Subsidiaries identified therein.
E. Acquisitions. Each Loan Party shall have, upon consummation
------------
thereof, all requisite corporate power and authority to consummate, on the terms
set forth in the applicable acquisition agreement and related documents, each
Permitted Acquisition consummated by it pursuant to subsection 7.7(vi). Upon
consummation of any such Permitted Acquisition, such Permitted Acquisition shall
have been duly authorized by all necessary corporate action of such Loan Party.
5.2 Authorization of Borrowing, etc.
--------------------------------
A. Authorization of Borrowing. The execution, delivery and performance of
--------------------------
the Loan Documents and the Related Agreements and the issuance, delivery and
payment of the Notes have been duly authorized by all necessary corporate or
other action on the part of each of the Loan Parties thereto.
B. No Conflict. After giving effect to the consummation of the
-----------
transactions contemplated hereby to occur on the Effective Date, the execution,
delivery and performance by each of the Loan Parties of the Loan Document and
the Related Agreements to which they are parties, the issuance, delivery and
payment of the Notes and the consummation of the
<PAGE>
80
transactions contemplated by the Loan Documents do not and will not (i) violate
any provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws (or other analogous organizational document) of any Loan Party or any
of its Subsidiaries or any order, judgment or decree of any court or other
agency of government binding on any Loan Party or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of any Loan Party or
any of its Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of any Loan Party or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Administrative Agent on behalf of Lenders), or (iv) require any
approval of stockholders or partners or any approval or consent of any Person
under any Contractual Obligation of any Loan Party or any of its Subsidiaries,
except for such approvals or consents which will be obtained on or before the
Effective Date.
C. Governmental Consents. The execution, delivery and performance by
---------------------
the Loan Parties of the Loan Documents and Related Agreements to which they are
party, the issuance, delivery and payment of the Notes and the consummation of
the transactions contemplated by the Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except for such registrations, consents, approvals, notices or other
actions which will be made, obtained or taken on or before the Effective Date.
D. Binding Obligation. Each of the Loan Documents and the Related
------------------
Agreements has been duly executed and delivered by each of the Loan Parties
party thereto and is the legally valid and binding obligation of each such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. Valid Issuance of Company Common Stock and Subordinated Notes.
-------------------------------------------------------------
(i) Company Common Stock. The Company Common Stock, when issued
--------------------
and delivered, was duly and validly issued, fully paid and
nonassessable. The issuance and sale of such Company Common Stock
either (a) were registered or qualified under applicable federal and
state securities laws or (b) were exempt therefrom.
(ii) Subordinated Notes. Company had the corporate power and
------------------
authority to issue the Subordinated Notes. The Subordinated Notes are
the legally valid and binding obligations of Company, enforceable
against Company in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or
by equitable principles relating to enforceability. The subordination
provisions of the Subordinated Note Indentures, the Subordinated Notes
and the other Subordinated Note Documents are enforceable against the
holders of the Subordinated Notes, and the Loans and all other
monetary Obligations hereunder are and will be within the definition
of
<PAGE>
81
"Senior Indebtedness" included in such provisions. The issuance
and sale of the Subordinated Notes either (a) were registered or
qualified under applicable federal and state securities laws or
(b)were exempt therefrom.
5.3 Financial Condition.
-------------------
A. Financial Statements. Company has heretofore delivered to
--------------------
the Administrative Agent, at Lenders' request, the following financial
statements and information: (i) audited financial statements of Company for the
year ending December 31, 1998, (ii) audited financial statements of Sea Coast
for the twelve-month period ending January 31, 1999 and (iii) pro forma balance
sheet of Company as at December 31, 1998 reflecting the consummation of the Sea
Coast Acquisition. All such financial statements have been prepared in
accordance with GAAP consistently applied throughout the period presented. At
the date of the most recent balance sheet referred to above, Company did not
have any material liability or material obligation which would be required to be
included in the financial statements referred to in this subsection in
accordance with GAAP which was not so included. Except as reflected in the
financial statements referred to in this subsection 5.3, except for the Sea
Coast Acquisition and except as set forth on Schedule 5.3 annexed hereto, during
------------
the period from December 31, 1998 to and including the date hereof there has
been no sale, transfer or other disposition by any Loan Party of any material
part of its business or property, no material liabilities were incurred by any
Loan Party and there has been no purchase or other acquisition of any business
or property by any Loan Party material in relation to the financial condition of
Company at December 31, 1998.
5.4 No Material Adverse Change; No Restricted Junior Payments.
---------------------------------------------------------
Since December 31, 1998, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither Company nor any of its Subsidiaries has directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Junior Payment or agreed to do so except as permitted by subsection
7.5.
5.5 Title to Properties; Liens; Intellectual Property.
-------------------------------------------------
A. Company and its Subsidiaries have good, sufficient and legal
title to all of their respective properties and assets reflected in the
financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7.7.
Except as permitted by this Agreement, all such properties and
assets are free and clear of Liens.
B. Company has acquired, pursuant to the Acquisition Agreement,
that which Seller has represented is the ownership of all patents, copyrights
(whether registered or unregistered), trademarks (whether registered or
unregistered), trade names, trade dress, service marks, assumed names and know-
how (such items, together with all applications therefor and all other
intellectual property and proprietary rights, whether or not subject to
statutory registration
<PAGE>
82
or protection, being collectively referred to herein as "MBW Intellectual
Property") relating exclusively to, or used exclusively in connection with, the
Business which (i) are owned by Seller on December 31, 1996 and (ii) are
necessary, together with the rights licensed to Company under the Shared
Technology License Agreement and the Patent License Agreement, for the operation
of the Business as conducted on the Closing Date, except as set forth on
Schedule 5.5B annexed hereto; provided, however, that such MBW Intellectual
- - ------------- -----------------
Property does not include any rights to the brand name "Country Crock,"
"Pennant" or "Bakers Source."
C. Company has acquired, pursuant to the Log Cabin Acquisition
Agreement, that which Kraft has represented is the ownership of all patents,
copyrights (whether registered or unregistered), trademarks (whether registered
or unregistered), trade names, trade dress, service marks, assumed names and
know-how (such items, together with all applications therefor and all other
intellectual property and proprietary rights, whether or not subject to
statutory registration or protection, being collectively referred to herein as
"Log Cabin Intellectual Property") relating exclusively to, or used exclusively
in connection with, the Log Cabin Business which (i) are owned by Kraft on July
1, 1997 and (ii) are necessary, together with the rights licensed to Company
under the Log Cabin Patent License Agreement, for the operation of the Log Cabin
Business as conducted on July 1, 1997, except as set forth on Schedule 5.5C
-------------
annexed hereto.
D. Company has acquired, pursuant to the Duncan Hines Acquisition
Agreement, that which P&G has represented is the ownership of all patents,
copyrights (whether registered or unregistered), trademarks (whether registered
or unregistered), trade names, trade dress, service marks, assumed names and
know-how (such items, together with all applications therefor and all other
intellectual property and proprietary rights, whether or not subject to
statutory registration or protection, being collectively referred to herein as
"Duncan Hines Intellectual Property") relating exclusively to, or used
exclusively in connection with, the Duncan Hines Business which (i) are owned by
P&G on January 16, 1998 and (ii) are necessary, together with the rights
licensed to Company under the Duncan Hines Patent License Agreement, for the
operation of the Duncan Hines Business as conducted on the Existing Effective
Date, except as set forth on Schedule 5.5D annexed hereto.
-------------
E. Company has acquired all patents, copyrights (whether registered or
unregistered), trademarks (whether registered or unregistered), trade names,
trade dress, service marks, assumed names and know-how (such items, together
with all applications therefor and all other intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection, being collectively referred to as "Van de Kamp's Intellectual
Property") necessary for the operation of Van de Kamp's as conducted on the
Existing Effective Date, except as set forth on Schedule 5.5E annexed hereto.
-------------
F. Company has acquired all patents, copyrights (whether registered or
unregistered), trademarks (whether registered or unregistered), trade names,
trade dress, service marks, assumed names and know-how (such items, together
with all applications therefor and all other intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection, being collectively referred to as "Sea Coast Intellectual Property")
necessary for the operation of Sea Coast as conducted on the Effective Date,
except as set forth on Schedule 5.5F annexed hereto.
-------------
<PAGE>
83
G. Each Loan Party owns, or is licensed to use, all Intellectual
Property necessary for the operation of its business as conducted except for
Intellectual Property the failure to own or license which could not reasonably
be expected to have a Material Adverse Effect. No claim of which any Loan Party
has been given notice has been asserted and is pending by any Person challenging
or questioning the use by any Loan Party of any such Intellectual Property the
validity or effectiveness of any such Intellectual Property, nor does Company
know of any valid basis for any such claim, except for such claims that in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
5.6 Litigation: Adverse Facts.
--------------------------
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, either individually or in
the aggregate together with all other such actions, proceedings and
investigations, has had, or could reasonably be expected to result in, a
Material Adverse Effect. Neither Company nor any of its Subsidiaries is or has
been (i) in violation of any applicable law (including any Pure Food and Drug
Laws that has had, or could reasonably be expected to result in, a Material
Adverse Effect or (ii) subject to or in default with respect to any final
judgment, writ, injunction, decree, rule or regulation of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, that has had, or could
reasonably be expected to result in, a Material Adverse Effect.
5.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all material
tax returns and reports of Company and its Subsidiaries required to be filed by
any of them have been timely filed, and all material taxes, assessments, fees
and other governmental charges upon Company and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Company does not know of any
proposed tax assessment against Company or any of its Subsidiaries other than
those which are being actively contested by Company or such Subsidiary in good
faith and by appropriate proceedings and for which reserves or other appropriate
provisions, if any, as may be required in conformity with GAAP shall have been
made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements; Material
------------------------------------------------------------------
Contracts.
---------
A. Neither Company nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or
is otherwise subject to any agreement or instrument or any charter or other
internal restriction which has had,
<PAGE>
84
or could reasonably be expected (based upon assumptions that are reasonable at
the time made) to result in, individually or in the aggregate, a Material
Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all
------------
the Material Contracts in effect on the Effective Date. All such Material
Contracts are in full force and effect and no defaults currently exist
thereunder, except where the failure to be in full force and effect, and except
for such defaults which, could not reasonably be expected to have a Material
Adverse Effect.
5.9 Governmental Regulation.
-----------------------
Neither Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable.
5.10 Securities Activities.
---------------------
Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
----------------------
A. Company and each of its ERISA Affiliates are in substantial
compliance with all applicable provisions and requirements of ERISA with respect
to each Employee Benefit Plan, and have substantially performed all their
obligations under each Employee Benefit Plan, except to the extent that any non-
compliance with ERISA or any such failure to perform would not result in
material liability of Company or any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or is
reasonably likely to result in any material liability to the PBGC or to any
other Person.
C. Except to the extent required under Section 4980B of the
Internal Revenue Code and/or Section 601 of ERISA, neither Company nor any of
its Subsidiaries maintains or contributes to any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Company or any of its Subsidiaries, except to the extent that the
provision of such benefits would not have a Material Adverse Effect.
D. No Pension Plan has an Unfunded Current Liability in an amount
that would have a Material Adverse Effect.
<PAGE>
85
5.12 Certain Fees.
------------
No broker's or finder's fee or commission will be payable with
respect to this Agreement or any of the loan transactions contemplated hereby,
and Company hereby indemnifies Lenders against, and agrees that it will hold
Lenders harmless from, any claim, demand or liability for any such broker's or
finder's fees alleged to have been incurred in connection herewith or therewith
and any expenses (including reasonable fees, expenses and disbursements of
counsel) arising in connection with any such claim, demand or liability.
5.13 Environmental Protection.
------------------------
(i) The operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at
or in the Facilities) comply in all material respects with all
Environmental Laws;
(ii) Company and each of its Subsidiaries have obtained all
material Governmental Authorizations under Environmental Laws
necessary to their respective operations, and all such
Governmental Authorizations are in good standing, and Company and
each of its Subsidiaries are in compliance with all material
terms and conditions of such Governmental Authorizations;
(iii) Neither Company nor any of its Subsidiaries has
received (a) any notice or claim to the effect that it is or may
be liable to any Person as a result of or in connection with any
Hazardous Materials or (b) any letter or request for information
under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9604) or
comparable state laws, and, to the best knowledge of Company,
none of the operations of Company or any of its Subsidiaries is
the subject of any federal or state investigation relating to or
in connection with any Hazardous Materials at any Facility or at
any other location;
(iv) None of the operations of Company or any of its
Subsidiaries is subject to any judicial or administrative
proceeding alleging the violation of or liability under any
Environmental Laws which could reasonably be expected to have a
Material Adverse Effect;
(v) To the knowledge of Company, neither Company nor any
of its Subsidiaries nor any of their respective Facilities or
operations are subject to any outstanding written order or
agreement with any governmental authority or private party
relating to (a) any Environmental Laws or (b) any Environmental
Claims that could reasonably be expected to have a Material
Adverse Effect;
(vi) Neither Company nor any of its Subsidiaries has any
material contingent liability in connection with any Release of
any Hazardous Materials by Company or any of its Subsidiaries;
<PAGE>
86
(vii) Neither Company nor any of its Subsidiaries nor, to
the knowledge of Company, any predecessor of Company or any of
its Subsidiaries has filed any notice under any Environmental Law
indicating past or present treatment or Release of Hazardous
Materials at any Facility, and none of Company's or any of its
Subsidiaries' operations involves the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) To the knowledge of Company, no Hazardous Materials
exist on or under any Facility in a manner that has a reasonable
possibility of giving rise to an Environmental Claim having a
Material Adverse Effect, and neither Company nor any of its
Subsidiaries has filed any notice or report of a Release of any
Hazardous Materials that has a reasonable possibility of giving
rise to an Environmental Claim having a Material Adverse Effect;
(ix) Neither Company nor any of its Subsidiaries nor, to
the knowledge of Company, any of their respective predecessors
has disposed of any Hazardous Materials in a manner that has a
reasonable possibility of giving rise to an Environmental Claim
having a Material Adverse Effect;
(x) To the knowledge of Company, no underground storage
tanks or surface impoundments are on or at any Facility; and
(xi) To the knowledge of Company, no Lien in favor of any
Person relating to or in connection with any Environmental Claim
has been filed or has been attached to any Facility.
5.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 Solvency.
--------
Each Loan Party is, and Company and its Subsidiaries, taken as a
whole, are, and, upon the incurrence of any Obligations by any Loan Party on any
date on which this representation is made, will be, Solvent.
<PAGE>
87
5.16 Matters Relating to Collateral.
------------------------------
A. Creation, Perfection and Priority of Liens. The execution and
------------------------------------------
delivery of the Collateral Documents by the Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 4.1, 6.9
and 6.10 and (ii) the delivery to Administrative Agent of any Pledged Collateral
not delivered to Administrative Agent at the time of execution and delivery of
the applicable Collateral Document (all of which Pledged Collateral has been so
delivered) are effective to create in favor of Administrative Agent for the
benefit of Agents and Lenders, as security for the respective Secured
Obligations (as defined in the applicable Collateral Document in respect of any
Collateral), a valid and perfected First Priority Lien on all of the Collateral,
and all filings and other actions necessary or desirable to perfect and maintain
the perfection and First Priority status of such Liens have been duly made or
taken and remain in full force and effect, other than the filing of any UCC
financing statements delivered to Administrative Agent for filing (but not yet
filed) and the periodic filing of UCC continuation statements in respect of UCC
financing statements filed by or on behalf of Administrative Agent.
B. Governmental Authorizations. No authorization, approval or
---------------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Administrative Agent pursuant
to any of the Collateral Documents or (ii) the exercise by Administrative Agent
of any rights or remedies in respect of any Collateral (whether specifically
granted or created pursuant to any of the Collateral Documents or created or
provided for by applicable law), except for filings or recordings contemplated
by subsection 5.16A and except as may be required, in connection with the
disposition of any Pledged Collateral, by laws generally affecting the offering
and sale of securities.
C. Absence of Third-Party Filings. Except such as may have been
------------------------------
filed in favor of Administrative Agent as contemplated by subsection 5.16A, (i)
no effective UCC financing statement, fixture filing or other instrument similar
in effect covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO or the United States Copyright Office.
D. Margin Regulations. The pledge of the Pledged Collateral
------------------
pursuant to the Collateral Documents does not violate Regulation T, Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to
--------------------------------
any Agent by or on behalf of any Loan Party with respect to any of the
Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects.
5.17 Related Agreements.
------------------
Company has delivered to Administrative Agent complete and
correct copies of each Related Agreement and of all exhibits and schedules
thereto.
<PAGE>
88
5.18 Disclosure.
----------
The representations of Company and its Subsidiaries contained in
the Loan Documents, the Related Agreements and in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement, when taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact (known to Company
or the applicable Subsidiary, in the case of any document not furnished by
Company or such Subsidiary) necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances in which the same
were made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There is no fact known (or which should upon
the reasonable exercise of diligence be known) to Company (other than matters of
a general economic nature) that has had, or could reasonably be expected to
result in, a Material Adverse Effect and that has not been disclosed herein or
in such other documents, certificates and statements furnished to Lenders for
use in connection with the transactions contemplated hereby.
5.19 Subordination of Seller Notes.
-----------------------------
The subordination provisions of any Permitted Seller Notes, if
any, will be enforceable against the holders thereof, and the Loans and other
monetary obligations hereunder are and will be within the definition of "Senior
Indebtedness" included in such provisions.
5.20 Year 2000 Matters.
-----------------
Any reprogramming required to permit the proper functioning (but
only to the extent that such proper functioning would otherwise be impaired by
the occurrence of the year 2000) in and following the year 2000 of computer
systems and other equipment containing embedded microchips, in either case owned
or operated by Company or any of its Subsidiaries or used or relied upon in the
conduct of their business (including any such systems and other equipment
supplied by others or with which the computer systems of Company or any of its
Subsidiaries interface), and the testing of all such systems and other equipment
as so reprogrammed, will be completed by September 30, 1999. The costs to
Company and its Subsidiaries that have not been incurred as of the date hereof
for such reprogramming and testing and for the other reasonably foreseeable
consequences to them of any improper functioning of other computer systems and
equipment containing embedded microchips due to the occurrence of the year 2000
are not expected to result in a Default or Event of Default or to have a
Material Adverse Effect. Except for any reprogramming referred to above, the
computer systems of Company and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient for the conduct of their business as currently conducted.
<PAGE>
89
SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Administrative Agent (and
Administrative Agent will, after receipt thereof, deliver to each Lender):
(i) Monthly Financials: as soon as available and in any
------------------
event within 30 days after each fiscal month-end (other than
March, June, September and December) thereafter, the consolidated
and consolidating statements of income (through the "Earnings
Before Tax" line) of Company and its Subsidiaries for such fiscal
month and for the period from the beginning of the then current
Fiscal Year to the end of such month, setting forth in each case
in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the
corresponding figures from the consolidated plan and financial
forecast for the current Fiscal Year delivered pursuant to
subsection 6.1(xiii), all in reasonable detail and certified by
the chief financial officer of Company as being fairly stated in
all material respects, subject to changes resulting from audit
and normal year-end adjustments;
(ii) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each Fiscal Quarter, (a)
the consolidated and consolidating balance sheets of Company and
its Subsidiaries as at the end of such Fiscal Quarter and the
related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the
previous fiscal year and the corresponding figures from the
consolidated plan and financial forecast for the current Fiscal
Year delivered pursuant to subsection 6.1(xiii), all in
reasonable detail and certified by the chief financial officer of
Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the
dates indicated and the results of their operations and their
cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior
management for such Fiscal Quarter and for the period
<PAGE>
90
from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter;
(iii) Year-End Financials: as soon as available and in any
-------------------
event within 90 days after the end of each Fiscal Year, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous
fiscal year and the corresponding figures from the consolidated
plan and financial forecast delivered pursuant to subsection
6.1(xiii) for the Fiscal Year covered by such financial
statements, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior
management for such Fiscal Year, and (c) in the case of such
consolidated financial statements, a report thereon of
independent certified public accountants of recognized national
standing selected by Company and reasonably satisfactory to
Administrative Agent, which report shall be unqualified as to the
ability of Company and its Subsidiaries to continue as a going
concern and as to scope of audit, and shall state that such
consolidated financial statements fairly present, in all material
respects, the consolidated financial position of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in
connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with
-------------------------------------
each delivery of financial statements of Company and its
Subsidiaries pursuant to subdivisions (ii) and (iii) above, (a)
an Officer's Certificate of Company stating that the signer has
reviewed the terms of this Agreement and have made, or caused to
be made under their supervision, a review in reasonable detail of
the transactions and condition of Company and its Subsidiaries
during the accounting period covered by such financial statements
and that such review has not disclosed the existence during or at
the end of such accounting period, and that the signer does not
have knowledge of the existence as at the date of such Officer's
Certificate, of any condition or event that constitutes an Event
of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and
period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (b) a
Compliance Certificate demonstrating in reasonable detail
compliance during and at the end of the applicable accounting
periods with the restrictions contained in
<PAGE>
91
Section 7, in each case to the extent compliance with such restrictions is
required to be tested during or at the end of the applicable accounting
period;
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1
will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions had
no such change in accounting principles and policies been made, then (a)
together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, consolidated financial statements of Company and its
Subsidiaries for (y) the current Fiscal Year to the effective date of such
change and (z) the two full Fiscal Years immediately preceding the Fiscal
Year in which such change is made, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to subdivision
(i), (ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial
officer of Company setting forth the differences which would have resulted
if such financial statements had been prepared without giving effect to
such change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon stating whether, in
connection with their audit examination, any condition or event, insofar as
such condition or event relates to the covenants set forth in subsection
7.6, that constitutes an Event of Default or Potential Event of Default has
come to their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
--------
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Event of Default or Potential Event of Default
that would not be disclosed in the course of their audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security
<PAGE>
92
holders, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission
or any governmental or private regulatory authority, and (c) all press
releases and other statements made available generally by Company or
any of its Subsidiaries to the public concerning material developments
in the business of Company or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
-----------------------
Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any
Person has given any notice to Company or any of its Subsidiaries or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 8.2, (c) of any
condition or event that is required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the
nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company has taken, is
taking and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
-------------------------------
officer of Company obtaining knowledge of the institution of, or non-
frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by Company to
Lenders or Administrative Agent any material development in any
Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within 45 days after the end of each Fiscal
Quarter, a schedule of all Proceedings involving an alleged liability of,
or claims against or affecting, Company or any of its
<PAGE>
93
Subsidiaries equal to or greater than $1,000,000 and promptly after request
by Administrative Agent such other information as may be reasonably
requested by Administrative Agent to enable Administrative Agent and its
counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the
------------
occurrence of any ERISA Event that could reasonably be expected to
result in a material liability, a written notice specifying the nature
thereof, what action Company or any of its ERISA Affiliates has taken,
is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
-------------
all written notices received by Company or any of its ERISA Affiliates
from a Multiemployer Plan sponsor concerning an ERISA Event; and (b)
such other documents or governmental reports or filings relating to
any Employee Benefit Plan as Administrative Agent shall reasonably
request;
(xiii) Financial Plans: as soon as available and in any event no
---------------
later than 90 days after the beginning of Fiscal Year 1999, and
thereafter as soon as practicable and in any event no later than 60
days after the beginning of each subsequent Fiscal Year, a monthly
consolidated and consolidating plan and financial forecast for such
Fiscal Year, including, without limitation, (a) forecasted
consolidated and consolidating balance sheets and forecasted
consolidated and consolidating statements of income and cash flows of
Company and its Subsidiaries for such Fiscal Year, together with a pro
forma Compliance Certificate for such Fiscal Year and an explanation
of the assumptions on which such forecasts are based, and (b) such
other information and projections as Administrative Agent may
reasonably request;
(xiv) Insurance: upon request by Administrative Agent, as soon
as practicable and in any event not less than once each Fiscal Year, a
report in form and substance satisfactory to Administrative Agent
outlining all material insurance coverage maintained as of the date of
such report by Company and its Subsidiaries and all material insurance
coverage planned to be maintained by Company and its Subsidiaries in
the immediately succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as practicable
--------------------------------
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of Company or any of its
Subsidiaries or by independent consultants, with respect to
significant environmental matters at any Facility or which relate to
an Environmental Claim which could result in a Material Adverse
Effect;
(xvi) Board of Directors: with reasonable promptness, written
------------------
notice of any change in the Board of Directors of Company;
<PAGE>
94
(xvii) New Subsidiaries: promptly upon any Person becoming
----------------
a Subsidiary of Company, a written notice setting forth with
respect to such Person (a) the date on which such Person became a
Subsidiary of Company and (b) all of the data required to be set
forth in Schedule 5.1 annexed hereto with respect to all
------------
Subsidiaries of Company (it being understood that such written
notice shall be deemed to supplement Schedule 5.1 annexed hereto
------------
for all purposes of this Agreement); and
(xviii) Other Information: with reasonable promptness, such
-----------------
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by
Administrative Agent.
6.2 Corporate Existence, etc.
-------------------------
Except as permitted under subsection 7.7, Company will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to the
business of Company and its Subsidiaries (on a consolidated basis).
6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay
all material taxes and all assessments and other governmental charges imposed
upon it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
--------
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings timely instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with any
Person other than a Subsidiary consolidated with the Company.
6.4 Maintenance of Properties; Insurance.
------------------------------------
Company will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained in good repair, working order and condition,
ordinary wear and tear excepted, all material properties used or useful in the
business of Company and its Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and businesses of its Subsidiaries against loss or damage of the
kinds customarily carried or maintained under similar
<PAGE>
95
circumstances by corporations of established reputation engaged in similar
businesses. Each such policy of casualty insurance covering damage to or loss of
property shall name Administrative Agent for the benefit of Agents and Lenders
as the loss payee thereunder for all losses, subject to application of proceeds
as required by subsection 2.4B(iii)(d), and shall provide for at least 30 days'
prior written notice to Administrative Agent of any modification or cancellation
of such policy.
6.5 Inspection; Lender Meeting.
--------------------------
Company shall, and shall cause each of its Subsidiaries to,
permit any authorized representatives designated by any Agent or Lender to visit
and inspect any of the properties of Company or any of its Subsidiaries,
including its and their financial and accounting records, and to make copies and
take extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers independent public accountants, all upon
reasonable advance notice and at such reasonable times during normal business
hours and as often as may be reasonably requested. Without in any way limiting
the foregoing, Company will, upon the request of Administrative Agent,
participate in a meeting of Agents and Lenders once during each Fiscal Year to
be held at Company's corporate offices (or such other location as may be agreed
to by Company and Administrative Agent) at such time as may be agreed to by
Company and Administrative Agent.
6.6 Compliance with Laws, etc.
--------------------------
Company shall, and shall cause each of its Subsidiaries to,
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Pure Food and Drug Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect.
6.7 Environmental Disclosure and Inspection.
---------------------------------------
A. Company shall, and shall cause each of its Subsidiaries to,
exercise all due diligence in order to comply and cause (i) all tenants under
any leases or occupancy agreements affecting any portion of the Facilities and
(ii) all other Persons on or occupying such property, to comply with all
Environmental Laws.
B. Company agrees that Administrative Agent may, from time to
time and in its reasonable discretion, retain, at Company's expense, an
independent professional consultant to review any report relating to Hazardous
Materials prepared by or for Company and to conduct its own investigation of any
Facility currently owned, leased, operated or used by Company or any of its
Subsidiaries, and Company agrees to use all reasonable efforts to obtain
permission for Administrative Agent's professional consultant to conduct its own
investigation of any such Facility previously owned, leased, operated or used by
Company or any of its Subsidiaries. Company shall use its reasonable efforts to
obtain for Administrative Agent and its agents, employees, consultants and
contractors the right, upon reasonable notice to Company, to enter into or on to
the Facilities currently owned, leased, operated or used by Company or any of
its Subsidiaries to perform such tests on such property as are reasonably
necessary to conduct such a review and/or investigation. Any such investigation
of any Facility shall be conducted, unless
<PAGE>
96
otherwise agreed to by Company and Administrative Agent, during normal business
hours and, to the extent reasonably practicable, shall be conducted so as not to
interfere with the ongoing operations at any such Facility or to cause any
damage or loss to any property at such Facility. Company and Administrative
Agent hereby acknowledge and agree that any report of any investigation
conducted at the request of Administrative Agent pursuant to this subsection
6.7B will be obtained and shall be used by Administrative Agent and Lenders for
the purposes of Lenders' internal credit decisions, to monitor and police the
Loans and to protect Lenders' security interests, if any, created by the Loan
Documents. Administrative Agent agrees to deliver a copy of any such report to
Company with the understanding that Company acknowledges and agrees that (i) it
will indemnify and hold harmless each Agent and Lender from any costs, losses or
liabilities relating to any Loan Party's use of or reliance on such report, (ii)
no Agent nor any Lender makes any representation or warranty with respect to
such report, and (iii) by delivering such report to Company, no Agent nor any
Lender is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
C. Company shall promptly advise Administrative Agent in writing and
in reasonable detail of (i) any Release of any Hazardous Materials required to
be reported to any federal, state, local or foreign governmental or regulatory
agency under any applicable Environmental Laws, (ii) any and all written
communications with respect to any Environmental Claims that have a reasonable
possibility of giving rise to a Material Adverse Effect or with respect to any
Release of Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency, (iii) any remedial action taken by
Company or any other Person in response to (x) any Hazardous Materials on, under
or about any Facility, the existence of which has a reasonable possibility of
resulting in an Environmental Claim having a Material Adverse Effect, or (y) any
Environmental Claim that could have a Material Adverse Effect, (iv) Company's
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of any Facility that could cause such Facility or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use thereof under any Environmental Laws, and (v) any request for information
from any governmental agency that suggests such agency is investigating whether
Company or any of its Subsidiaries may be potentially responsible for a Release
of Hazardous Materials.
D. Company shall promptly notify Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company or any of its
Subsidiaries and (ii) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing, industrial or other similar operations
that could reasonably be expected to subject Company or any of its Subsidiaries
to additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
E. Company shall, at its own expense, provide copies of such documents
or information as Administrative Agent may reasonably request in relation to any
matters disclosed pursuant to this subsection 6.7.
<PAGE>
97
6.8 Company's Remedial Action Regarding Hazardous Materials.
-------------------------------------------------------
Company shall promptly take, and shall cause each of its
Subsidiaries promptly to take, any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or Release
of any Hazardous Materials on or under any Facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations unless the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.
In the event Company or any of its Subsidiaries takes any remedial action with
respect to any Hazardous Materials on or under any Facility, Company or such
Subsidiary shall conduct and complete such remedial action in material
compliance with all applicable Environmental Laws, and in accordance with the
policies, orders and directives of all federal, state and local governmental
authorities except when, and only to the extent that, Company's or such
Subsidiary's liability for such presence, storage, use, disposal, transportation
or Release of any Hazardous Materials is being contested in good faith by
Company or such Subsidiary.
6.9 Execution of Subsidiary Guaranty and Subsidiary Security Agreements by
----------------------------------------------------------------------
Subsidiaries and Future Subsidiaries.
- - ------------------------------------
In the event that any Person becomes a Subsidiary of Company
after the date hereof, Company will promptly notify Administrative Agent of that
fact and cause each such Subsidiary to execute and deliver to Administrative
Agent a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the
Security Agreement and a new patent and trademark agreement substantially
similar to the Patent and Trademark Security Agreement, the Log Cabin Patent and
Trademark Security Agreement, the Duncan Hines Patent and Trademark Security
Agreement, the Van de Kamp's Patent and Trademark Security Agreement and the Sea
Coast Patent and Trademark Security Agreement (collectively, the "Subsidiary
Security Agreements"), and to take all such further actions and execute all such
further documents and instruments as may be required to grant and perfect in
favor of Administrative Agent, for the benefit of Lenders, a First Priority
security interest in all of the personal property assets of such Subsidiary
described in the Subsidiary Security Agreements. Company shall deliver to
Administrative Agent, together with such Loan Documents, (i) certified copies of
such Subsidiary's Articles or Certificate of Incorporation (or comparable
constituent documents), together, if applicable, with a good standing
certificate from the Secretary of State of the jurisdiction of its
incorporation, each to be dated a recent date prior to their delivery to
Administrative Agent, (ii) a copy, if applicable, of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant corporate secretary as of a
recent date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the incumbency and signatures of the officers of such Subsidiary executing the
Subsidiary Guaranty and to which such Subsidiary is a party and (b) the fact
that the attached resolutions of the Board of Directors of such Subsidiary
authorizing the execution, delivery and performance of the Subsidiary Guaranty
and the Subsidiary Security Agreements to which such Subsidiary is a party are
in full force and effect and have not been modified or rescinded, and (iv) a
favorable opinion of counsel to such Subsidiary, in form and substance
satisfactory to Administrative Agent and its counsel, as to (a) the due
organization and good standing of such Subsidiary, (b) the due authorization,
execution and delivery by such Subsidiary of the Subsidiary Guaranty and the
Subsidiary Security Agreements to which such Subsidiary is a party, (c) the
enforceability of the Subsidiary Guaranty and the Subsidiary Security Agreements
to which such Subsidiary is a party against
<PAGE>
98
such Subsidiary, and (d) such other matters as Administrative Agent may
reasonably request, all of the foregoing to be reasonably satisfactory in form
and substance to Administrative Agent and its counsel.
6.10 Conforming Leasehold Interests; Matters Relating to Additional Real
-------------------------------------------------------------------
Property Collateral.
- - -------------------
A. Conforming Leasehold Interests. If Company or any of its
------------------------------
Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such
Subsidiary to, use its best efforts (without requiring Company or such
Subsidiary to relinquish any material rights or incur any material obligations
or to expend more than a nominal amount of money over and above the
reimbursement, if required, of the landlord's out-of-pocket costs, including
attorneys fees) to cause such Leasehold Property to be a Conforming Leasehold
Interest.
B. Additional Mortgages, etc. From and after the Closing Date,
--------------------------
in the event that (i) Company or any Subsidiary Guarantor acquires any fee
interest in real property or any Leasehold Property (other than a fee interest
in a Real Property Asset or Leasehold Property with a value of $500,000 or less)
or (ii) at the time any Person becomes a Subsidiary Guarantor, such Person owns
or holds any fee interest in real property or any Leasehold Property (other than
a fee interest in a Real Property Asset or Leasehold Property with a value of
$500,000 or less), in either case excluding any such Real Property Asset the
encumbrancing of which requires the consent of any applicable lessor or (in the
case of clause (ii) above) then-existing senior lienholder, where Company and
its Subsidiaries are unable to obtain such lessor's or senior lienholder's
consent (any such non-excluded Real Property Asset described in the foregoing
clause (i) or (ii) being a "Mortgaged Property"), Company or such Subsidiary
Guarantor shall deliver to Administrative Agent, as soon as practicable after
such Person acquires such Mortgaged Property or becomes a Subsidiary Guarantor,
as the case may be, the following:
(i) Additional Mortgage. A fully executed and
-------------------
notarized Mortgage in proper form for recording in all
appropriate places in all applicable jurisdictions, encumbering
the interest of such Loan Party in such Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of
-------------------
counsel to such Loan Party, in form and substance satisfactory to
Administrative Agent and its counsel, as to the due
authorization, execution and delivery by such Loan Party of such
Mortgage and such other matters as Administrative Agent may
reasonably request, and (b) if required by Administrative Agent,
an opinion of counsel (which counsel shall be reasonably
satisfactory to Administrative Agent) in the state in which such
Mortgaged Property is located with respect to the enforceability
of the form of Mortgage to be recorded in such state and such
other matters (including any matters governed by the laws of such
state regarding personal property security interests in respect
of any Collateral) as Administrative Agent may reasonably
request, in each case in form and substance reasonably
satisfactory to Administrative Agent;
<PAGE>
99
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest.
----------------------------------------------------------
In the case of a Mortgaged Property consisting of a Leasehold Property, (a)
a Landlord Consent and Estoppel and (b) evidence that such Leasehold
Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent,
---------------
an ALTA mortgagee title insurance policy or an unconditional commitment
therefor (a "Mortgage Policy") issued by the Title Company with respect to
such Mortgaged Property, in an amount satisfactory to Administrative Agent,
insuring fee simple title to, or a valid leasehold interest in, such
Mortgaged Property vested in such Loan Party and assuring Administrative
Agent that such Mortgage creates a valid and enforceable First Priority
mortgage Lien on such Mortgaged Property, subject only to a standard survey
exception, which Mortgage Policy (1) shall include an endorsement for
mechanics' liens, for future advances under this Agreement and for any
other matters reasonably requested by Administrative Agent and (2) shall
provide for affirmative insurance and such reinsurance as Administrative
Agent may reasonably request, all of the foregoing in form and substance
reasonably satisfactory to Administrative Agent; and (b) evidence
satisfactory to Administrative Agent that such Loan Party has (i) delivered
to the Title Company all certificates and affidavits required by the Title
Company in connection with the issuance of the Mortgage Policy and (ii)
paid to the Title Company or to the appropriate governmental authorities
all expenses and premiums of the Title Company in connection with the
issuance of the Mortgage Policy and all recording and stamp taxes
(including mortgage recording and intangible taxes) payable in connection
with recording the Mortgage in the appropriate real estate records;
(v) Title Report. If no Mortgage Policy is required with
------------
respect to such Mortgaged Property, a title report issued by the Title
Company with respect thereto, dated not more than 30 days prior to the date
such Mortgage is to be recorded and satisfactory in form and substance to
Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies
------------------------------------------------
of all recorded documents listed as exceptions to title or otherwise
referred to in the Mortgage Policy or title report delivered pursuant to
clause (v) or (vi) above;
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
-------------------------------------------
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Mortgaged Property is a Flood
Hazard Property and (2) if so, whether the community in which such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, (b) if such Mortgaged Property is a Flood Hazard Property, such
Loan Party's written acknowledgement of receipt of written notification
from Administrative Agent (1) that such Mortgaged Property is a Flood
Hazard Property and (2) as to whether the community in which such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, and (c) in the event such Mortgaged
<PAGE>
100
Property is a Flood Hazard Property that is located in a
community that participates in the National Flood Insurance
Program, evidence that Company has obtained flood insurance in
respect of such Flood Hazard Property to the extent required
under the applicable regulations of the Board of Governors of the
Federal Reserve System; and
(viii) Environmental Audit. If required by Administrative
-------------------
Agent, reports and other information, in form, scope and
substance satisfactory to Administrative Agent and prepared by
environmental consultants satisfactory to Administrative Agent,
concerning any environmental hazards or liabilities to which
Company or any of its Subsidiaries may be subject with respect to
such Mortgaged Property.
6.11 Interest Rate Protection.
------------------------
Within 180 days after the Effective Date, Company shall enter
into one or more Interest Rate Agreements with respect to the Loans, in an
amount of not less than 50% of the aggregate amount of Consolidated Total Debt,
which Interest Rate Agreements shall have the effect of establishing a maximum
interest rate of not more than 10% per annum with respect to such notional
principal amount, each such Interest Rate Agreement to be in form and substance
satisfactory to Administrative Agent and with a term of not less than three
years from the Existing Effective Date.
6.12 Further Assurances.
------------------
At any time or from time to time upon the request of
Administrative Agent, Company will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as Administrative Agent may reasonably request in order to effect fully the
purposes of the Loan Documents and to provide for payment of the Obligations in
accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, Company shall
take, and cause each of its Subsidiaries to take, such actions as Administrative
Agent may reasonably request from time to time (including, without limitation,
the execution and delivery of guaranties, security agreements, pledge
agreements, Mortgages, stock powers, financing statements and other documents,
the filing or recording of any of the foregoing, title insurance with respect to
any of the foregoing that relates to an interest in real property, the delivery
of stock certificates and other collateral with respect to which perfection is
obtained by possession, and the obtaining of Collateral Access Agreements, in
form and substance satisfactory to Administrative Agent, executed by any Person
which is party to a co-packing agreement with Company or any of its Subsidiaries
under which equipment of Company or its Subsidiaries is maintained at a facility
of such Person) to ensure that the Obligations are guarantied by Subsidiary
Guarantors and are secured by substantially all of the assets of Company and its
Subsidiaries and all of the capital stock of Company and Subsidiary Guarantors.
In the event that Company or any of its Subsidiaries creates a new Subsidiary,
all of the capital stock or partnership interests of such new Subsidiary shall
be duly and validly pledged to Administrative Agent for the benefit of Agents
and Lenders pursuant to the Collateral Documents, subject to no other Liens.
<PAGE>
101
SECTION 7.
NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
7.1 Indebtedness.
------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to
the Obligations;
(ii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
7.4 and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished (other than any such Indebtedness corresponding to
extinguished Contingent Obligations permitted under subsections
7.4(i)(b));
(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness (a) under Capital Leases
capitalized on the consolidated balance sheet of Company as
liabilities, (b) in respect of sale and lease-back transactions
expressly permitted under subsection 7.8 and (c) secured by Liens
permitted under subsection 7.2A(iii); provided that the aggregate
--------
amount of Indebtedness permitted under this clause (iii) shall not
exceed $15,000,000 at any time outstanding;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its domestic Wholly Owned Subsidiaries, and any
domestic Wholly Owned Subsidiary of Company may become and remain
liable with respect to Indebtedness to Company or any other domestic
Wholly Owned Subsidiary of Company, provided that (a) all such
--------
intercompany Indebtedness shall be evidenced by promissory notes, (b)
all such intercompany Indebtedness owed by Company to any of its
respective Subsidiaries shall be subordinated in right of payment to
the payment in full of the Obligations pursuant to the terms of the
applicable promissory notes or an intercompany subordination
agreement, in each case in form and substance satisfactory to
Administrative Agent, and (c) any payment by Company or by any
Subsidiary of Company under any guaranty of the Obligations shall
result in a pro tanto reduction of the amount of any intercompany
--- -----
Indebtedness owed by Company or by such Subsidiary to Company or to
any of its Subsidiaries for whose benefit such payment is made;
<PAGE>
102
(v) Company may become and remain liable with respect to
Indebtedness under the Subordinated Note Documents;
(vi) Company may become and remain liable with respect to
Indebtedness the proceeds of which are applied to refinance all
or a portion of the Term Loans, the Revolving Loans and the
Subordinated Notes; provided, that such Indebtedness shall be
--------
subordinated in right of payment to the Obligations pursuant to
documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other
material terms which taken as a whole are no less favorable to
Company, its Subsidiaries and Lenders than the corresponding
terms of the Subordinated Note Documents, with interest payable
thereon in amounts consistent with the then prevailing rate in
the market for comparable debt Securities;
(vii) Company may become and remain liable with respect to
Permitted Seller Notes; provided that the aggregate principal
--------
amount of such Permitted Seller Notes issued after the Closing
Date shall not exceed $10,000,000; and
(viii) Company and its Subsidiaries may become and remain
liable with respect to other Indebtedness in an aggregate
principal amount not to exceed at any time outstanding
$25,000,000.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. Company shall not, and shall not permit
--------------------
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens securing Indebtedness permitted by subsection
7.1(iii)(c) incurred (a) to finance the acquisition, construction
or improvement of any tangible personal property assets, provided
--------
that (1) such Liens shall be created within 180 days after the
acquisition, construction or improvement of such assets, and (2)
the principal amount of Indebtedness secured by any such Liens
shall at no time exceed 100%, and the proceeds of such
Indebtedness shall be used to provide not less than 80%, of the
original purchase price of such asset or the amount expended to
construct or improve such asset, as the case may be; or
<PAGE>
103
(b) to renew, extend or refinance any Indebtedness described in clause
(a), provided that the amount of any such Indebtedness does not exceed
--------
the amount of Indebtedness so renewed, extended or refinanced which is
unpaid and outstanding immediately prior to such renewal, extension or
refinancing; provided, that in the case of clause (a) or (b) such
--------
Liens attach solely the assets financed with such Indebtedness;
(iv) Liens on any asset securing Indebtedness permitted by
Section 7.1(iii)(b); provided that (a) the proceeds of such
--------
Indebtedness shall be at least equal to 80% of the fair market value
(as determined in good faith by the Board of Directors, or any duly
authorized committee thereof, of Company) of such asset and (b) at the
time of incurrence of such Indebtedness, no Event of Default shall
have occurred and be continuing or would result therefrom;
(v) Liens on assets held under Capital Leases permitted under
subsection 7.1(iii)(a); and
(vi) Other Liens on assets of Company and its Subsidiaries
securing Indebtedness in an aggregate amount not to exceed $2,500,000
at any time outstanding.
B. Equitable Lien in Favor of Lenders. If Company or any of its
----------------------------------
Subsidiaries shall create or assume any consensual Lien upon any of its
properties or assets, whether now owned or hereafter acquired, other than Liens
excepted by the provisions of subsection 7.2A, it shall make or cause to be made
effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness secured thereby as long as any
such Indebtedness shall be so secured; provided that, notwithstanding the
--------
foregoing, this covenant shall not be construed as a consent by Requisite
Lenders to the creation or assumption of any such Lien not permitted by the
provisions of subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific
---------------------------
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither Company
nor any of its Subsidiaries shall enter into any agreement prohibiting the
creation or assumption of any Lien which secures the Obligations upon any of its
properties or assets, whether now owned or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
---------------------------------------------------------------
Subsidiaries. Except as provided herein Company will not, and will not permit
- - ------------
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
<PAGE>
104
7.3 Investments; Joint Ventures.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any Person, including
any Joint Venture, except:
(i) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may make intercompany
loans to the extent permitted under subsection 7.1(iv);
(iii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by subsection 7.6D;
(iv) Company and its Subsidiaries may make and own
Investments in connection with a Permitted Acquisition;
(v) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time
$7,500,000.
7.4 Contingent Obligations.
----------------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or become or remain liable with respect to
any Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations arising under (a) their
respective Guaranties and (b) guarantees of Indebtedness under
the Subordinated Note Documents or permitted under subsection
7.1(vi);
(ii) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit;
(iii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements entered
into (a) with Lenders or Affiliates of Lenders with respect to
which the aggregate net amount which Company would be liable to
pay to counterparties thereunder in the event all such Interest
Rate Agreements were terminated at the time of determination
shall not exceed $2,500,000 at any time and (b) as required under
subsection 6.11 herein;
(iv) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of
customary indemnification and purchase price adjustment
obligations incurred in the ordinary course of business in
connection with Asset Sales or other sales of assets;
<PAGE>
105
(v) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations under guarantees in
the ordinary course of business of the obligations of suppliers,
landlords, customers, franchisees and licensees of Company and
its Subsidiaries in an aggregate amount not to exceed at any time
$1,000,000;
(vi) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations under food product
futures arrangements consistent with past practices of the
Business, the Log Cabin Business, the Duncan Hines Business, Sea
Coast and Van de Kamp's and of any business acquired under
subsection 7.7(vi) for the supply of food products used in the
business of Company and its Subsidiaries; and
(vii) Company and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided
--------
that the maximum aggregate liability, contingent or otherwise, of
Company and its Subsidiaries in respect of all such Contingent
Obligations shall at no time exceed $1,000,000.
7.5 Restricted Junior Payments.
--------------------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any sum for
any Restricted Junior Payment; provided that (i) Company may make scheduled
--------
interest payments in respect of the Subordinated Notes in accordance with the
terms thereof and of the Subordinated Note Indentures; provided, that to the
--------
extent the Subordinated Note Indentures permit Company to pay interest thereon
or liquidated damages in like-kind instruments in a principal amount equal to
the amount of such interest or liquidated damages, Company shall pay such
interest or liquidated damages in such like-kind instruments; (ii) Company may
make Restricted Junior Payments to the extent necessary to redeem or defease all
or any portion of the Indebtedness under the Subordinated Note Documents with
proceeds from Indebtedness permitted under subsection 7.1(vi); (iii) Company may
make scheduled interest payments in respect of Permitted Seller Notes permitted
under subsection 7.1(vii) in accordance with the terms of such Permitted Seller
Notes; (iv) Company may make regularly scheduled payments of interest in respect
of any Subordinated Indebtedness in accordance with the terms of, and only to
the extent required by, and subject to the subordination provisions contained
in, the indenture or other agreement pursuant to which such Subordinated
Indebtedness was issued, as such indenture or other agreement may be amended
from time to time to the extent permitted under subsection 7.12B; provided, that
--------
to the extent the terms of such Subordinated Indebtedness permit Company to pay
interest or liquidated damages on such Subordinated Indebtedness in like-kind
instruments in a principal amount equal to the amount of such interest or
liquidated damages, Company shall pay such interest or liquidated damages with
such like-kind instruments; (v) Company may make Restricted Junior Payments to
the extent necessary to redeem or defease all or any portion of the Indebtedness
under the Subordinated Note Documents, provided that (a) no Event of Default or
--------
Potential Event of Default shall have occurred and be continuing or shall be
caused thereby, (b) Company shall be in compliance, on a pro forma basis giving
effect thereto, with the covenants set forth in subsection 7.6 hereof, (c) the
Senior Leverage Ratio (calculated on a pro forma basis giving effect to such
redemption or defeasance) shall be less than 3.75:1.00 if such redemption or
defeasance shall occur in 1998 or 1999, less than 3.50:1.00 if such redemption
or defeasance
<PAGE>
106
shall occur in 2000 or 2001, and less than 3.25: 1.00 if such redemption or
defeasance shall occur thereafter, (d) after giving effect to any such
redemption or defeasance, the sum of (x) the amount of cash on hand of Company
plus (y) the amount by which the Revolving Credit Commitments exceed the Total
- - ----
Utilization of the Revolving Loan Commitments, shall equal or exceed $40,000,000
(and Company shall have delivered to Administrative Agent an Officer's
Certificate (together with supporting information therefor), in form and
substance reasonably satisfactory to Administrative Agent, certifying to the
effect of clauses (b), (c) and (d)) and (e) and the aggregate amount of such
redemption or defeasance, together with any other such redemption or defeasance
since the Existing Effective Date, shall not exceed $100,000,000 plus the
applicable premium; and (vi) Company may make dividends or other distributions,
direct or indirect, on account of any shares of any class of capital stock of
Company; provided that (a) the Senior Leverage Ratio (calculated on a pro forma
--------
basis giving effect thereto) shall be less than 2.00:1.00 or (b) either of the
publicly announced ratings S&P or Moody's of the current senior unsecured, non-
credit enhanced long term Indebtedness of Company that has been publicly issued
are BBB-or better or Baa3 or better, respectively, and the amount of such
dividend shall not exceed 50% of Company's cumulative positive net income.
7.6 Financial Covenants.
-------------------
A. Minimum Consolidated Cash Interest Coverage Ratio. Company
-------------------------------------------------
shall not permit the Consolidated Cash Interest Coverage Ratio for any four-
Fiscal Quarter period ending during any of the test periods set forth in the
table below to be less than the correlative ratio for such test period set forth
in the table below:
<TABLE>
<CAPTION>
----------------------------------------------------------------
MINIMUM CONSOLIDATED
CASH INTEREST COVERAGE
TEST PERIOD RATIO
----------------------------------------------------------------
<S> <C>
7/01/98 - 12/31/98 1.90:1.00
----------------------------------------------------------------
1/01/99 - 12/31/99 2.00:1.00
----------------------------------------------------------------
1/01/00 - 12/31/00 2.00:1.00
----------------------------------------------------------------
1/01/01 - 12/31/01 2.25:1.00
----------------------------------------------------------------
1/01/02 - 12/31/02 2.50:1.00
----------------------------------------------------------------
1/01/03 - 12/31/03 2.50:1.00
----------------------------------------------------------------
1/01/04 - 12/31/04 2.50:1.00
----------------------------------------------------------------
1/01/05 - 9/30/06 2.50:1.00
================================================================
</TABLE>
B. Maximum Leverage Ratio. Company shall not permit the ratio of
(i) the excess of (a) Consolidated Total Debt as of the last day of any Fiscal
Quarter ending during any of the test periods set forth in the table below minus
-----
(b) cash on hand of Company to the extent the amount of such cash exceeds
$3,500,000 as of such date, to (ii) Consolidated EBITDA for
<PAGE>
107
the four-Fiscal Quarter period ending on such date to exceed the correlative
ratio for such test period set forth in the table below:
<TABLE>
<CAPTION>
----------------------------------------------------------------
MAXIMUM
TEST PERIOD LEVERAGE RATIO
----------------------------------------------------------------
<S> <C>
7/01/98 - 12/31/98 5.70:1.00
----------------------------------------------------------------
1/01/99 - 12/31/99 5.50:1.00
----------------------------------------------------------------
1/01/00 - 12/31/00 5.00:1.00
----------------------------------------------------------------
1/01/01 - 12/31/01 4.50:1.00
----------------------------------------------------------------
1/01/02 - 12/31/02 4.00:1.00
----------------------------------------------------------------
1/01/03 - 12/31/03 3.50:1.00
----------------------------------------------------------------
1/01/04 - 6/30/04 3.50:1.00
----------------------------------------------------------------
7/01/04 - 9/30/06 3.00:1.00
================================================================
</TABLE>
C. Minimum Fixed Charge Coverage Ratio. Company shall not permit
-----------------------------------
the ratio of (i) Consolidated EBITDA for any four-Fiscal Quarter period ending
during any of the test periods set forth in the table below to (ii) Consolidated
Fixed Charges for such four-Fiscal Quarter period to be less than the
correlative ratio for such test period set forth in the table below:
<TABLE>
<CAPTION>
----------------------------------------------------------------
MINIMUM FIXED CHARGE
TEST PERIOD COVERAGE RATIO
----------------------------------------------------------------
<S> <C>
7/01/98 - 12/31/98 1.10:1.00
----------------------------------------------------------------
1/01/99 - 12/31/99 1.15:1.00
----------------------------------------------------------------
1/01/00 - 12/31/00 1.15:1.00
----------------------------------------------------------------
1/01/01 - 12/31/01 1.20:1.00
----------------------------------------------------------------
1/01/02 - 12/31/02 1.20:1.00
----------------------------------------------------------------
1/01/03 - 12/31/03 1.25:1.00
----------------------------------------------------------------
1/01/04 - 12/31/04 1.25:1.00
----------------------------------------------------------------
1/01/05 - 9/30/06 1.25:1.00
================================================================
</TABLE>
D. Maximum Consolidated Capital Expenditures. Company shall not,
-----------------------------------------
and shall not permit any of its respective Subsidiaries to, make or incur
Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an
aggregate amount in excess of the corresponding amount (the "Maximum
Consolidated Capital Expenditures Amount") set forth
<PAGE>
108
below opposite such Fiscal Year; provided that the Maximum Consolidated Capital
--------
Expenditures Amount for any Fiscal Year shall be increased by an amount equal to
the excess, if any (but in no event more than 50% of the Maximum Consolidated
Capital Expenditures Amount for the previous Fiscal Year), of the Maximum
Consolidated Capital Expenditures Amount for the previous Fiscal Year over the
actual amount of Consolidated Capital Expenditures for such previous Fiscal
Year:
--------------------------------------------------------------------------
MAXIMUM CONSOLIDATED CAPITAL
FISCAL YEAR EXPENDITURES AMOUNT
(OR PORTION THEREOF)
--------------------------------------------------------------------------
Fiscal Year ending in December 1998 $25,000,000
and each Fiscal Year thereafter
--------------------------------------------------------------------------
; provided, however, that for purposes of this subsection 7.6D, Consolidated
-------- -------
Capital Expenditures shall not include (i) expenditures not exceeding $6,000,000
in the aggregate incurred on or prior to September 30, 1998 related to the
Business and the Log Cabin Business (a) to relocate Company's assets, (b) to
purchase computers and computer related equipment and (c) to pay transition
related expenses in connection with the foregoing, (ii) expenditures not
exceeding $15,000,000 in the aggregate incurred on or prior to June 30, 1999 to
relocate Company's assets related to the Duncan Hines Business and transition
related expenses in connection therewith and (iii) expenditures not exceeding
$5,000,000 in the aggregate incurred on or prior to December 31, 1998 related to
additional capital expenditure projects previously identified at Van de Kamp's.
E. Certain Calculations.
--------------------
(i) With respect to calculations of Consolidated Fixed
Charges, Consolidated EBITDA and Consolidated Cash Interest
Expense for any four-Fiscal Quarter period including the
Effective Date (each such period being a "Pro Forma Calculation
Period"), such calculations shall be made on a pro forma basis
assuming, in each case, (a) that the Effective Date, the Sea
Coast Acquisition and the related borrowings by Company pursuant
to this Agreement occurred on the first day of the applicable Pro
Forma Calculation Period; (b) that Consolidated EBITDA and
Consolidated Capital Expenditures for the three applicable Fiscal
Quarters ending prior to the Effective Date are as set forth on
Schedule 7.6E annexed hereto; and (c) that, with respect to
-------------
calculations of Consolidated Cash Interest Expense and each
component of Consolidated Fixed Charges other than Consolidated
Capital Expenditures (Consolidated Cash Interest Expense and each
such component being, individually, a "Fixed Charge Component"),
the amount of each such Fixed Charge Component for the Pro Forma
Calculation Period for the three applicable Fiscal Quarters
ending prior to the Effective Date are as set forth on Schedule
--------
7.6E annexed hereto.
----
(ii) With respect to any period during which new
Subsidiaries, assets or businesses are acquired pursuant to
subsection 7.7(vi), for purposes of determining compliance with
the financial covenants set forth in this subsection
<PAGE>
109
7.6, Consolidated EBITDA and Consolidated Interest Expense shall
be calculated with respect to such periods and such Subsidiaries,
assets or businesses on a pro forma basis (including (x) any
adjustments certified by the chief financial officer of the
Company, that would, in the reasonable determination of the
Company satisfy the requirements of Rule 11-02(a) of
Regulation S-X of the Securities Act as if included in a
registration statement filed with the Securities and Exchange
Commission and (y) any other operating expense reductions
reasonably expected to result from any acquisition of stock or
assets if such expected reductions are (1) set forth in
reasonable detail in a plan approved by and set forth in
resolutions adopted by the Board of Directors of the Company, and
(2) limited to operating expenses specified in such plan (and, if
any reductions are set forth in a range, the lowest amount of
such range) that would otherwise have resulted in the payment of
cash within twelve months after the date of consummation of such
transaction, net of any operating expenses (other than
extraordinary items, non-recurring or temporary charges and other
similar one-time expenses) reasonably expected to be incurred to
implement such plan, and that are to be paid in cash during such
twelve-month period, certified by the chief financial officer of
the Company) using the historical financial statements of all
entities or assets so acquired or to be acquired and the
consolidated financial statements of Company and its Subsidiaries
which shall be reformulated (i) as if such acquisition, and any
acquisitions which have been consummated during such period, and
any Indebtedness or other liabilities incurred in connection with
any such acquisition had been consummated or incurred at the
beginning of such period (and assuming that such Indebtedness
bears interest during any portion of the applicable measurement
period prior to the relevant acquisition at the weighted average
of the interest rates applicable to outstanding Loans during such
period), and (a) otherwise in conformity with certain procedures
to be agreed upon between Administrative Agent and Company, all
such calculations to be in form and substance satisfactory to
Administrative Agent.
7.7 Restriction on Fundamental Changes; Asset Sales.
-----------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries
to, alter the corporate, capital or legal structure of Company or any of its
Subsidiaries, create any new Subsidiaries or enter into any transaction of
merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise any part of the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly owned Subsidiary Guarantor, or be
liquidated, wound up or dissolved, or all or any substantial part
of its business, property or assets may be conveyed, sold,
leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Company or any wholly owned
Subsidiary
<PAGE>
110
Guarantor; provided that, in the case of such a merger, Company
--------
or such wholly owned Subsidiary Guarantor shall be the continuing
or surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted under subsection 7.6D;
(iii) Company and its Subsidiaries may acquire inventory,
equipment and other assets in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in
--------
an amount at least equal to the fair market value thereof (determined
in good faith by the board of directors of Company);
(v) Company and its Subsidiaries may make any Asset Sale
of assets that have, in the aggregate, a fair market value (determined
in good faith by the board of directors of Company) not in excess of
10% of Consolidated EBITDA for the four-Fiscal Quarter period most
recently ended prior to such Asset Sale; provided that (x) the
--------
consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by
the board of directors of Company); (y) not less than 80% of the
consideration received shall be cash; and (z) the proceeds of such
Asset Sales shall be applied as required by subsection 2.4B(iii)(a);
and
(vi) Company or any Subsidiary of Company may make
acquisitions of assets and businesses (including acquisitions of the
capital stock or other equity interests of another Person), provided
--------
that:
(a) immediately prior to and after giving effect to any such
acquisition, Company and its Subsidiaries shall be in compliance with the
provisions of subsection 7.11 hereof;
(b) after giving effect to any such acquisition, the sum of (x) the
amount of cash on hand of Company and its Subsidiaries plus (y) the amount
----
by which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments, shall equal or exceed $40,000,000;
(c) (1) Company shall be in compliance, on a pro forma basis giving
effect to the proposed acquisition, with the covenants set forth in
subsection 7.6 hereof, (2) the Senior Leverage Ratio (calculated on a pro
forma basis giving effect to the proposed acquisition) shall be less than
3.75:1.00 in Fiscal Years 1998 and 1999, 3.50:1.00 in Fiscal Years 2000 and
2001, and 3.25:1.00 thereafter and (3) no Event of Default or Potential
Event of Default shall have occurred and be continuing at the time of such
acquisition or shall be caused thereby; and Company shall have delivered to
Administrative Agent an Officer's Certificate (together with supporting
information therefor), in form and substance reasonably satisfactory to
Administrative Agent, certifying as to the foregoing and as to the matters
referred to in subsections 7.7(vi)(a) and (b) above;
<PAGE>
111
(d) any assets acquired pursuant to such acquisition shall be
subject to a First Priority Lien in favor of the Administrative Agent on
behalf of Lenders pursuant to the Collateral Documents; and
(e) each such acquisition shall be made on a fully consensual
basis between Company and its Subsidiaries, on the one hand, and the seller
or sellers of such assets or such business, on the other hand.
7.8 Sales and Lease-Backs.
---------------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether now
owned or hereafter acquired, (i) which Company or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person (other than
Company or any of its Subsidiaries) or (a) which Company or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Company or any of its
Subsidiaries to any Person (other than Company or any of its Subsidiaries) in
connection with such lease, except that Company and its Subsidiaries may enter
into such sale and lease-back transactions so long as the aggregate sales price
under all such transactions in any Fiscal Year does not exceed $5,000,000.
7.9 Transactions with Shareholders and Affiliates.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
--------
shall not apply to (i) any transaction between Company and any of its Wholly
Owned Subsidiaries or between any of its Wholly Owned Subsidiaries, (ii)
reasonable and customary fees paid to members of the boards of directors of
Company and its Subsidiaries, (iii) fees, expenses and other amounts payable to
the MDC Entities, Fenway, Dartford, UBS, Tiger and CALPERS on the Existing
Effective Date, (iv) the Management Fees, (v) any employment agreement entered
into by Company or any of its Subsidiaries in the ordinary course of business,
(vi) amounts paid under the Dartford Expense Agreement, and (vii) any issuance
of capital stock of Company in connection with employment arrangements, stock
options and stock ownership plans of Company or any of its Subsidiaries entered
into in the ordinary course of business.
7.10 Disposal of Subsidiary Stock.
----------------------------
Company shall not:
<PAGE>
112
(i) directly or indirectly sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock or
other equity Securities of any of its Subsidiaries, except as
permitted under this Agreement or the Collateral Documents or to
qualify directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly
to sell, assign, pledge or otherwise encumber or dispose of any
shares of capital stock or other equity Securities of any of its
Subsidiaries (including such Subsidiary), except as permitted
under this Agreement or the Collateral Documents or to Company,
another Wholly Owned Subsidiary of Company, or to qualify
directors if required by applicable law.
7.11 Conduct of Business.
-------------------
Company shall not, and shall not permit any of its Subsidiaries
to, engage in any business other than (i) the businesses engaged in by Company
and its Subsidiaries on the Effective Date and those food businesses which are
reasonably related to such businesses, and (ii) such other lines of business as
may be consented to by Administrative Agent and Requisite Lenders.
7.12 Amendments or Waivers of Certain Related Agreements;
Amendments of Documents Relating to Subordinated Indebtedness; Designation of
"Designated Senior Indebtedness"; Preferred Stock.
---------------
A. Amendments or Waivers of Certain Related Agreements. Neither
---------------------------------------------------
Company nor any of its Subsidiaries will agree to any material amendment to, or
waive any of its material rights under, any of the Acquisition Agreement, the
Log Cabin Acquisition Agreement, the Duncan Hines Acquisition Agreement, the Sea
Coast Acquisition Agreement, the Assumption Agreement, the Log Cabin Assumption
Agreement, the Duncan Hines Assumption Agreement, the MDC Advisory Agreement,
the Dartford Advisory Agreement, the Fenway Advisory Agreement, the Transition
Agreements, the Log Cabin Transition Agreements, the Duncan Hines Transition
Agreements, the Gilster Co-Pack Agreement or the Red Wing Co-Pack Agreements
after the Effective Date if such amendment or waiver would be adverse to Lenders
without in each case obtaining the prior written consent of Requisite Lenders to
such amendment or waiver.
B. Amendments of Documents Relating to Subordinated Indebtedness.
-------------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, amend or
otherwise change the terms of any Subordinated Indebtedness, or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate on such Subordinated
Indebtedness, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon, change any event of default or condition
to an event of default with respect thereto (other than to eliminate any such
event of default or increase any grace period related thereto), change the
redemption, prepayment or defeasance provisions thereof, change the
subordination provisions thereof (or of any guaranty thereof), or change any
collateral therefor (other than to release such collateral), or if the effect of
such amendment or change, together with all other amendments or changes made, is
to increase materially the obligations of the obliger thereunder or to confer
any additional rights on the holders of such Subordinated
<PAGE>
113
Indebtedness (or trustee or other representative on their behalf) which would be
adverse to Company or Lenders.
C. Designation of "Designated Senior Indebtedness". Company
-----------------------------------------------
shall not designate any Indebtedness as "Designated Senior Indebtedness" (as
defined in the Subordinated Note Indentures) for purposes of the Subordinated
Note Indentures, without the prior written consent of Requisite Lenders.
D. Preferred Stock. Without the prior written approval of
---------------
Requisite Lenders, Company shall not amend, restate, supplement or otherwise
modify its Certificate of Incorporation if the effect of such amendment,
restatement, supplement or modification is to provide for the issuance of any
preferred stock of Company or the filing or amendment of any certificate of
designation with respect thereto.
7.13 Fiscal Year.
-----------
Company shall not change its Fiscal Year-end from December 31.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur:
8.1 Failure to Make Payments When Due.
---------------------------------
Failure by Company to pay any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
prepayment or otherwise; failure by Company to pay when due any amount payable
to an Issuing Lender in reimbursement of any drawing honored or payment made
under a Letter of Credit; or failure by Company to pay any interest on any Loan
or any fee or any other amount due under this Agreement within five days after
the date due; or
<PAGE>
114
8.2 Default in Other Agreements.
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay
when due (a) any principal of or interest on any Indebtedness
(other than Indebtedness referred to in subsection 8.1) in an
individual principal amount of $2,500,000 or more or any items of
Indebtedness with an aggregate principal amount of $5,000,000 or
more or (b) any Contingent Obligation in an individual principal
amount of $2,500,000 or more or any Contingent Obligations with
an aggregate principal amount of $5,000,000 or more, in each case
beyond the end of any grace period provided therefor; or (ii)
breach or default by Company or any of its Subsidiaries with
respect to any other material term of (a) any evidence of any
Indebtedness in an individual principal amount of $2,500,000 or
more or any items of Indebtedness with an aggregate principal
amount of $5,000,000 or more or any Contingent Obligation in an
individual principal amount of $2,500,000 or more or any
Contingent Obligations with an aggregate principal amount of
$5,000,000 or more or (b) any loan agreement, mortgage, indenture
or other agreement relating to such Indebtedness or Contingent
Obligation(s), if in any case under this clause (ii) the effect
of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a
trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared
due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 Breach of Certain Covenants.
---------------------------
Failure of Company to perform or comply with any term or
condition contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this
Agreement; or
8.4 Breach of Warranty.
------------------
Any material representation, warranty, certification or other
statement made by Company or any of its Subsidiaries in any Loan Document or in
any statement or certificate at any time given by Company or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
8.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 8,
and such default shall not have been remedied or waived within 30 days after the
earlier of (i) an officer of Company becoming aware of such default or (ii)
receipt by Company of notice from any Agent or Lender of such default; or
<PAGE>
115
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter
a decree or order for relief in respect of Company or any of its
Subsidiaries (other than Immaterial Subsidiaries) in an
involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter
in effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal or
state law; or (ii) an involuntary case shall be commenced against
Company or any of its Subsidiaries (other than Immaterial
Subsidiaries) under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter
in effect; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over Company or any of its Subsidiaries (other than
Immaterial Subsidiaries), or over all or a substantial part of
its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Company or any of its Subsidiaries
(other than Immaterial Subsidiaries) for all or a substantial
part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial
part of the property of Company or any of its Subsidiaries (other
than Immaterial Subsidiaries), and any such event described in
this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
---------------------------------------------------
(i) Company or any of its Subsidiaries (other than
Immaterial Subsidiaries) shall have an order for relief entered
with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or Company or any
of its Subsidiaries (other than Immaterial Subsidiaries) shall
make any assignment for the benefit of creditors; or (ii) Company
or any of its Subsidiaries (other than Immaterial Subsidiaries)
shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due;
or the Board of Directors of Company or any of its Subsidiaries
(other than Immaterial Subsidiaries) (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to
approve any of the actions referred to in clause (i) above or
this clause (ii); or
8.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $2,500,000
or (ii) in the aggregate at any time an amount in excess of $5,000,000 (in
either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be
<PAGE>
116
entered or filed against Company or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
8.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Company or
any of its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
----------------------
There shall occur one or more ERISA Events which individually or
in the aggregate results in a Material Adverse Effect; or there shall exist an
Unfunded Current Liability, individually or in the aggregate for all Pension
Plans (excluding for purposes of such computation any Pension Plans with respect
to which there is no Unfunded Current Liability), which would have a Material
Adverse Effect; or
8.11 Change in Control.
-----------------
Any Person (other than the MDC Entities, Dartford, Fenway, UBS,
Tiger and CALPERS), including a "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act) which includes such Person, shall purchase or
otherwise acquire, directly or indirectly, beneficial ownership of Securities of
Company and, as a result of such purchase or acquisition, any Person (together
with its associates and Affiliates), shall directly or indirectly beneficially
own in the aggregate Securities representing more than 35% of the combined
voting power of Company voting Securities; or
8.12 Invalidity of Guaranties.
------------------------
At any time after the execution and delivery thereof, any
Guaranty of the Obligations of Company, for any reason other than the
satisfaction in full of all Obligations, ceases to be in full force and effect
or is declared to be null and void (except with respect to the obligations
thereunder of Immaterial Subsidiaries of Company) or any Loan Party (other than
Immaterial Subsidiaries of Company) denies in writing that it has any further
liability, including, without limitation, with respect to future advances by
Lenders, under any Loan Document to which it is a party; or
<PAGE>
117
8.13 Failure of Security.
-------------------
Any Collateral Document shall, at any time, cease to be in full
force and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof) or shall be declared null and void; or the
validity or enforceability thereof shall be contested in writing by any Loan
Party; or Agent shall not have or shall cease to have a valid security interest
in any Collateral purported to be covered thereby, perfected and with the
priority required by the relevant Collateral Document, for any reason other than
the failure of Agents or any Lender to take any action within its control,
subject only to Liens permitted under the applicable Collateral Documents; or
8.14 Termination or Breach of Certain Transition Agreements.
------------------------------------------------------
The Duncan Hines Co-Pack Agreement, Red Wing Co-Pack Agreements
or the Flavor Supply Agreement shall terminate for any reason whatsoever or any
such party shall fail to perform its obligations under any such agreement and
such failure could reasonably be expected to result in a Material Adverse
Effect, and, in either case, Company shall not have made arrangements
satisfactory to Requisite Lenders for obtaining any services that are required
to be provided by any such party to Company under such agreement that are not
being so provided as a result of such termination or failure to perform; or
8.15 Default Under Subordination Provisions.
--------------------------------------
Company or any guarantor of Subordinated Indebtedness shall fail
to comply with the subordination provisions contained in the Subordinated Note
Indentures or any other instrument, indenture or agreement pursuant to which
such Subordinated Indebtedness is issued;
THEN (i) upon the occurrence of any Event of Default described in
subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans, (b) an amount equal to the maximum amount that may at any
time be drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit) and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Company, and the obligation of each Lender to make any Loan,
the obligation of Administrative Agent to issue any Letter of Credit and the
right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, Administrative Agent shall, upon the written request of
Requisite Lenders, by written notice to Company, declare all or any portion of
the amounts described in clauses (a) through (c) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender
to make any Loan, the obligation of Administrative Agent to issue any Letter of
Credit and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate; provided that the foregoing shall not affect in any way the
--------
obligations of Lenders under subsection 3.3C(i).
<PAGE>
118
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to the
terms of the Collateral Account Agreement and shall be applied as therein
provided.
Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to such paragraph Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than non-
payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Company, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Company and do not grant Company the right to require Lenders to rescind
or annul any acceleration hereunder or preclude Agents or Lenders from
exercising any of the rights or remedies available to them under any of the Loan
Documents, even if the conditions set forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 Appointment.
-----------
A. Chase is hereby appointed Administrative Agent hereunder and
under the other Loan Documents and each Lender hereby authorizes Administrative
Agent to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. NatWest is hereby appointed Syndication Agent hereunder
and under the other Loan Documents and each Lender hereby authorizes Syndication
Agent to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. UBS AG is hereby appointed Documentation Agent hereunder
and under the other Loan Documents and each Lender hereby authorizes
Documentation Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents. Each Agent agrees to act upon the
express conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of
Agents and Lenders and Company shall have no rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties under
this Agreement, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Company or any of its Subsidiaries.
B. Appointment of Supplemental Collateral Agents. It is the
---------------------------------------------
purpose of this Agreement and the other Loan Documents that there shall be no
violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as agent or trustee in
such jurisdiction. It is recognized that in case of litigation under
<PAGE>
119
this Agreement or any of the other Loan Documents, and in particular in case of
the enforcement of any of the Loan Documents, or in case Administrative Agent
deems that by reason of any present or future law of any jurisdiction
Administrative Agent may not exercise any of the rights, powers or remedies
granted herein or in any of the other Loan Documents or take any other action
which may be desirable or necessary in connection therewith, it may be necessary
that Administrative Agent appoint an additional individual or institution as a
separate trustee, co-trustee, collateral agent or collateral coagent (any such
additional individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
Agents").
In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as
the context may require.
Should any instrument in writing from Company or any other Loan
Party be required by any Supplemental Collateral Agent so appointed by
Administrative Agent for more fully and certainly vesting in and confirming to
him or it such rights, powers, privileges and duties, Company shall, or shall
cause such Loan Party to, execute, acknowledge and deliver any and all such
instruments promptly upon request by Administrative Agent. In case any
Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Administrative Agent until the
appointment of a new Supplemental Collateral Agent.
9.2 Powers; General Immunity.
------------------------
A. Duties Specified. Each Lender irrevocably authorizes each
----------------
Agent to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other Loan Documents as are specifically delegated to
such Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. Each Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents, and it may perform such duties by or through its agents or
employees. No Agent shall have, by reason of this Agreement or any of the other
Loan Documents, a fiduciary relationship in respect of any Lender; and nothing
in this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be so construed as to impose upon any
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120
Agent any obligations in respect of this Agreement or any of the other Loan
Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be
-------------------------------------
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement or in
any financial or other statements, instruments, reports or certificates or any
other documents furnished by any Agent to Lenders or by or on behalf of Company
and/or its Subsidiaries to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Company or any other Person liable for the
payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or
as to the existence or possible existence of any Event of Default or Potential
Event of Default. Anything contained in this Agreement to the contrary
notwithstanding, Administrative Agent shall have no liability arising from
confirmations of the amount of outstanding Loans or the Total Utilization of
Revolving Loan Commitments or the component amounts thereof
C. Exculpatory Provisions. Neither any Agent nor any of such
----------------------
Agent's respective officers, directors, employees or agents shall be liable to
Lenders for any action taken or omitted by such Agent under or in connection
with any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. If any Agent shall request instructions from
Lenders with respect to any act or action (including the failure to take an
action) in connection with this Agreement or any of the other Loan Documents,
such Agent shall be entitled to refrain from such act or taking such action
unless and until such Agent shall have received instructions from Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Without prejudice to the generality of the foregoing,
(i) such Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Company and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against such
Agent as a result of such Agent acting or (where so instructed) refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of Requisite Lenders (or such other Lenders as may be
required to give such instructions under subsection 10.6). Such Agent shall be
entitled to refrain from exercising any power, discretion or authority vested in
it under this Agreement or any of the other Loan Documents unless and until it
has obtained the instructions of Requisite Lenders (or such other Lenders as may
be required to give such instructions under subsection 10.6).
D. Agents Entitled to Act as Lender. The agency hereby created
--------------------------------
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, any Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit, each Agent shall have the same rights and powers hereunder as
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121
any other Lender and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term "Lender" or
"Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include such Agent in its individual capacity. Each Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with Company or any
of its Affiliates as if it were not performing the duties specified herein, and
may accept fees and other consideration from Company and/or its Subsidiaries for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
9.3 Representations and Warranties;
No Responsibility For Appraisal of Creditworthiness.
---------------------------------------------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or, except as expressly provided elsewhere in this Agreement, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and no Agent shall have any responsibility with respect to the
accuracy of or the completeness of any information provided to Lenders.
9.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify each Agent, to the extent that such Agent shall not have
been reimbursed by Company, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against such Agent in performing its duties hereunder or under
the other Loan Documents or otherwise in its capacity as such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
- - --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
9.5 Successor Agents and Swing Line Lender.
--------------------------------------
A. Successor Agents. Any Agent may resign at any time by giving
----------------
30 days' prior written notice thereof to the other Agents, Lenders and Company,
and any Agent may be removed at any time with or without cause by an instrument
or concurrent instruments in writing delivered to Company and Administrative
Agent and signed by Requisite Lenders. Upon any such notice of resignation or
any such removal, Requisite Lenders shall have the right, upon five Business
Days' notice to Company, to appoint a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, that successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Agent and the retiring or
removed Agent shall be discharged from its duties and
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122
obligations under this Agreement. After any retiring or removed Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation or removal of
---------------------------
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Chase or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon
its acceptance of such appointment, become the successor Swing Line Lender for
all purposes hereunder. In such event (i) Company shall prepay any outstanding
Swing Line Loans made by the retiring or removed Administrative Agent in its
capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or
removed Administrative Agent and Swing Line Lender shall surrender the Swing
Line Note held by it to Company for cancellation, and (iii) Company shall issue
a new Swing Line Note to the successor Administrative Agent and Swing Line
Lender substantially in the form of Exhibit VII annexed hereto, in the principal
-----------
amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 Collateral Documents.
--------------------
Each Lender and Agent hereby further authorizes Administrative
Agent to enter into each Collateral Document as secured party on behalf of and
for the benefit of Agents and Lenders and agrees to be bound by the terms of
each Collateral Document; provided that Administrative Agent shall not enter
--------
into or consent to any amendment, modification, termination or waiver of any
provision contained in any Collateral Document without the prior consent of
Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders);
provided further, however, that, without further written consent or
- - -------- ------- -------
authorization from Requisite Lenders, Administrative Agent may execute any
documents or instruments necessary to effect the release of any asset
constituting Collateral from the Lien of the applicable Collateral Document in
the event that such asset is sold or otherwise disposed of in a transaction
effected in accordance with subsection 7.7. Anything contained in any of the
Loan Documents to the contrary notwithstanding, each Lender agrees that no
Lender shall have any right individually to realize upon any of the Collateral
under any Collateral Document (including, without limitation, through the
exercise of a right of set-off against call deposits of such Lender in which any
funds on deposit in the Collateral Account may from time to time be invested),
it being understood and agreed that all rights and remedies under the Collateral
Documents may be exercised solely by Administrative Agent for the benefit of
Lenders in accordance with the terms thereof.
SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans, Letters of Credit.
----------------------------------------------------------
A. General. Subject to subsection 10.1B, each Lender shall have
-------
the right at any time to (i) sell, assign, transfer or negotiate to any Eligible
Assignee, or (ii) sell participations to any Person in, all or any part of its
Commitments (together with its Letters of Credit or participations therein made
or arising pursuant to its Revolving Loan Commitment) or any Loan or Loans made
by it or any other interest herein or in any other Obligations owed to it;
provided
- - --------
<PAGE>
123
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided
--------
further, that no such sale, assignment or transfer described in clause (i) above
- - -------
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii); provided further,
-------- -------
that no such sale, assignment, transfer or participation of any Letter of Credit
or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan
Commitment and the Revolving Loans of the Lender effecting such sale,
assignment, transfer or participation; and provided further, that anything
-------- -------
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of Swing Line Lender may not be sold, assigned or
transferred as described in clause (i) above to any Person other than a
successor Administrative Agent and Swing Line Lender to the extent contemplated
by subsection 9.5. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein or the
other Obligations owed to such Lender.
B. Assignments.
-----------
(i) Amounts and Terms of Assignments. Each Commitment,
--------------------------------
Loan, Letter of Credit, or participation therein or other Obligation
may (a) be assigned in any amount to another Lender who is a Non-
Defaulting Lender, to an Approved Fund of a Non-Defaulting Lender, or
to an Affiliate of the assigning Lender or another Lender who, in
either such case, is a Non-Defaulting Lender, with the consent of
Administrative Agent (which consent shall not be unreasonably
withheld) and the giving of notice to Company; provided that, after
--------
giving effect to a proposed assignment to another Lender, the
assigning Lender shall have an aggregate Commitment of at least
$1,000,000 unless the proposed assignment constitutes the aggregate
amount of the Commitments, Loans, Letters of Credit, and
participations therein and other Obligations of the assigning Lender,
or (b) be assigned in an aggregate amount of not less than $1,000,000
(or such lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit, and participations therein and
other Obligations of the assigning Lender) to any other Eligible
Assignee with the consent of Administrative Agent (which consent shall
not be unreasonably withheld) and the giving of notice to Company. To
the extent of any such assignment in accordance with either clause (a)
or (b) above, the assigning Lender shall be relieved of its
obligations with respect to its Commitments, Loans, Letters of Credit,
or participations therein or other Obligations or the portion thereof
so assigned. The parties to each such assignment shall execute and
deliver to Administrative Agent, for its acceptance and recording in
the Register, an Assignment Agreement, together with a processing fee
of $3,500 payable by the assigning Lender and such certificates,
documents or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such
<PAGE>
124
Assignment Agreement may be required to deliver to Administrative
Agent pursuant to subsection 2.7B(iii)(a). Upon such execution,
delivery, acceptance and recordation, from and after the effective
date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (z) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights (other
than any rights which survive the termination of this Agreement under
subsection 10.9B) and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or
the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto;
provided that, anything contained in any of the Loan Documents to the
--------
contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall
continue to have all rights and obligations of an Issuing Lender with
respect to such Letters of Credit until the cancellation or expiration
of such Letters of Credit and the reimbursement of any amounts drawn
thereunder). The Commitments hereunder shall be modified to reflect
the Commitments of such assignee and any remaining Commitments of such
assigning Lender and, if any such assignment occurs after the issuance
of the Notes hereunder, the assigning Lender shall surrender its
applicable Notes and, upon such surrender, new Notes shall be issued
to the assignee and, if applicable, to the assigning Lender,
substantially in the form of Exhibit IV, Exhibit V , Exhibit VI or
---------- --------- ----------
Exhibit VII annexed hereto, as the case may be, with appropriate
-----------
insertions, to reflect the new Commitments and/or outstanding Term
Loans of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent: Recordation in
--------------------------------------------------
Register. Upon its receipt of an Assignment Agreement executed by an
--------
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing fee referred to in subsection
10.1B(i) and any certificates, documents or other evidence with
respect to United States federal income tax withholding matters that
such assignee may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if
such Assignment Agreement has been completed and is in substantially
the form of Exhibit XVI hereto and if Administrative Agent have
-----------
consented to the assignment evidenced thereby (to the extent such
consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided
therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof
to Company. Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in
this subsection 10.1B(ii).
<PAGE>
125
C. Participations. The holder of any participation, other than an
--------------
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
(i) effecting the extension of the final maturity of the Loan allocated to such
participation, (ii) effecting a reduction of the principal amount of or
affecting the rate of interest payable on any Loan allocated to such
participation, (iii) releasing all or substantially all of the Collateral, or
(iv) releasing all of the Guarantors from their obligations under the
Guaranties, and all amounts payable by Company hereunder (including, without
limitation, amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and
3.6) shall be determined as if such Lender had not sold such participation.
Company and each Lender hereby acknowledge and agree that, solely for purposes
of subsections 10.4 and 10.5, (a) any participation will give rise to a direct
obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the
------------------------------------
assignments and participations permitted under the foregoing provisions of this
subsection 10.1, any Lender (without having to obtain the consent of Company or
Administrative Agent) may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender and its Notes to secure obligations of
such Lender, including, without limitation, assignments and pledges to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank, and any Lender which is an investment fund
may pledge all or any portion of its Notes or Loans to its trustee or other
representatives of holders of such Notes or Loans to secure its obligations to
such trustee or other such representatives; provided that (i) no Lender shall,
as between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any such assignment and pledge and (ii) in no event
shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to
require the assigning Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
-----------
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants).
F. Limitation. No assignee, participant or other transferee or any
----------
Lender's rights shall be entitled to receive any greater payment under
subsection 2.7 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with Company's prior
written consent or at a time when the circumstances giving rise to such greater
payment did not exist.
G. Representations of Lenders. Each Lender listed on the signature
--------------------------
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (i) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of
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126
such Lender contained in Section 2(c) of such Assignment Agreement are
incorporated herein by this reference.
10.2 Expenses.
--------
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and out of pocket expenses of Administrative Agent in connection with the
preparation of the Loan Documents; (ii) all the actual and reasonable costs of
furnishing all opinions by counsel for Company (including, without limitation,
any opinions requested by Lenders as to any legal matters arising hereunder) and
of Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Agents (including allocated costs
of internal counsel) in connection with the negotiation, preparation, execution
and administration of the Loan Documents and the Loans and any consents,
amendments, waivers or other modifications hereto or thereto and any other
documents or matters requested by Company; (iv) all other actual and reasonable
costs and expenses incurred by Agents in connection with the negotiation,
preparation and execution of the Loan Documents and the transactions
contemplated hereby and thereby; and (v) after the occurrence of an Event of
Default, all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by Agents
and Lenders in enforcing any Obligations of or in collecting any payments due
from Company hereunder or under the other Loan Documents by reason of such Event
of Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection
10.2, whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Agents and Lenders,
and the officers, directors, trustees, partners, employees, agents, attorneys
and affiliates of any of Agents and Lenders (collectively called the
"Indemnitees") from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including, without limitation,
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including, without limitation,
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds of any of the Loans or the issuance of
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127
Letters of Credit hereunder or the use or intended use of any of the Letters of
Credit) (collectively called the "Indemnified Liabilities"); provided that
---------
Company shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent, and only to the extent, of any
particular liability, obligation, loss, damage, penalty, claim, cost, expense or
disbursement that arose from the gross negligence or willful misconduct of that
Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
10.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default each Lender is
hereby authorized by Company at any time or from time to time, without notice to
Company or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other Indebtedness at any time held or owing by that Lender (at any office
of that Lender wherever located) to or for the credit or the account of Company
against and on account of the obligations and liabilities of Company to that
Lender under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
each Agent and Lender a security interest in all deposits and accounts
maintained with such Agent or Lender as security for the Obligations.
10.5 Ratable Sharing.
---------------
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such
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128
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by
all Lenders in proportion to the Aggregate Amounts Due to them; provided that if
--------
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy
reorganization or insolvency proceeding of Company or otherwise, those purchases
shall be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Company to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
----------------------
A. No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, or consent to any departure by
Company or any other Loan Party therefrom, shall in any event be effective
without the written concurrence of Requisite Lenders; provided that any such
--------
amendment, modification, termination, waiver or consent which: reduces the
principal amount of any of the Loans; changes in any manner the definition of
"Requisite Lenders" (it being understood that, with the consent of the Requisite
Lenders, additional extensions of credit pursuant to this Agreement may be
included in the determination of "Requisite Lenders" on substantially the same
basis as the Tranche A Term Loan Commitments, Tranche A Term Loans, Tranche B
Term Loan Commitments, Tranche B Term Loans, Revolving Loan Commitments and
Revolving Loans are included on the Effective Date); changes in any manner any
provision of this Agreement which, by its terms, expressly requires the approval
or concurrence of all Lenders; postpones the scheduled final maturity date of
any of the Loans; postpones the date or reduces the amount of any scheduled
payment (but not prepayment) of principal of any of the Loans; postpones the
date or reduces the amount of any scheduled reduction (but not prepayment) of
the Revolving Loan Commitments; postpones the date on which any interest or any
fees are payable; decreases the interest rate borne by any of the Loans (other
than any waiver of any increase in the interest rate applicable to any of the
Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder;
increases the maximum duration of Interest Periods permitted hereunder; releases
all or substantially all of the Collateral; releases all or substantially all of
the Subsidiary Guarantors from their obligations under the Subsidiary Guaranty;
reduces the amount or postpones the due date of any amount payable in respect
of, or extends the required expiration date of, any Letter of Credit; changes
the obligations of Lenders relating to the purchase of participations in Letters
of Credit in any manner that could be adverse to any Issuing Lender; or changes
in any manner the provisions contained in subsection 8.1 or this subsection
10.6; shall be effective only if evidenced by a writing signed by or on behalf
of all Lenders to whom are owed Obligations being directly affected by such
amendment, modification, termination, waiver or consent. In addition, (i) any
amendment, modification, termination or waiver of any of the provisions
contained in Section 4 shall be effective only if evidenced by a writing signed
by or on behalf of Administrative Agent and Requisite Lenders, (ii) no
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the Lender which is the
holder
<PAGE>
129
of that Note, (iii) no amendment, modification, termination or waiver of any
provision of this Agreement which disproportionately and adversely affects the
obligation of any Loan Party to make payments (including without limitation
mandatory prepayments) to the holders of the Term Loans or the holders of the
Revolving Loans and Revolving Loan Commitments, shall be effective without the
written concurrence of the holders of more than 50% in principal amount of the
class (i.e., Tranche A Term Loans, Tranche B Term Loans or Revolving Loans and
Revolving Loan Commitments each being a "class" of Loans) of Loans so
disproportionately and adversely affected; (iv) no increase in the Commitments
of any Lender over the amount thereof then in effect shall be effective without
the written concurrence of that Lender, it being understood and agreed that in
no event shall waivers or modifications of conditions precedent, covenants,
Events of Default, Potential Events of Default or of a mandatory prepayment or a
reduction of any or all of the Commitments be deemed to constitute an increase
of the Commitment of any Lender and that an increase in the available portion of
any Commitment of any Lender shall not be deemed to constitute an increase in
the Commitment of such Lender, (v) no amendment, modification, termination or
waiver of any provision of subsection 2.1A(iv) or any other provision of this
Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans
shall be effective without the written concurrence of Swing Line Lender, (vi) no
amendment, modification, termination or waiver of any provision of this
Agreement shall change the allocation among the Tranche A Term Loans and Tranche
B Term Loans of prepayments to be made pursuant to subsection 2.4C without the
prior written consent of (1) Lenders holding more than 50% of the aggregate
outstanding principal amount of the Tranche A Term Loans and (2) Lenders holding
more than 50% of the aggregate outstanding principal amount of the Tranche B
Term Loans, (vii) no amendment, modification, termination or waiver of any
provision of this Agreement shall change the application of prepayments of
Tranche A Term Loans pursuant to subsection 2.4C without the prior written
consent of Lenders holding more than 50% of the aggregate outstanding principal
amount of the Tranche A Term Loans, (viii) no amendment, modification,
termination or waiver of any provision of this Agreement shall change the
application of prepayments of Tranche B Term Loans pursuant to subsection 2.4C
without the prior written consent of Lenders holding more than 50% of the
aggregate outstanding principal amount of the Tranche B Term Loans, (ix) no
amendment, modification termination or waiver of any provision of Section 3
relating to the rights or obligations of any or all Issuing Lenders shall be
effective without the written concurrence of Administrative Agent and each
Lender who is an Issuing Lender with respect to any Letter of Credit then
outstanding, and (x) no amendment, modification, termination or waiver of any
provision of Section 9 or of any other provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of Administrative Agent
shall be effective without the written concurrence of Administrative Agent.
Administrative Agent may, but shall have no obligation to, with the concurrence
of any Lender, execute amendments, modifications, waivers or consents on behalf
of that Lender. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Company in any case shall entitle Company to any other or further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Company, on Company.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of
<PAGE>
130
this subsection 10.6, the consent of Requisite Lenders is obtained but consent
of one or more of such other Lenders whose consent is required is not obtained,
then Company may, so long as all non-consenting Lenders are so treated, elect to
terminate such Lender as a party to this Agreement; provided that, concurrently
--------
with such termination, (i) Company shall pay that Lender all principal, interest
and fees and other amounts due to be paid to such Lender with respect to all
periods through such date of termination, (ii) another financial institution
satisfactory to Company and Administrative Agent (or if Administrative Agent is
also a Lender to be terminated, the successor Administrative Agent) shall agree,
as of such date, to become a Lender for all purposes under this Agreement
(whether by assignment or amendment) and to assume all obligations of the Lender
to be terminated as of such date, and (iii) all documents and supporting
materials necessary, in the judgment of Administrative Agent (or if
Administrative Agent is also a Lender to be terminated, the successor
Administrative Agent) to evidence the substitution of such Lender shall have
been received and approved by Administrative Agent as of such date.
10.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or would otherwise be
within the limitations of, another covenant shall not avoid the occurrence of an
Event of Default or Potential Event of Default if such action is taken or
condition exists.
10.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telecopied, telexed or sent by United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telecopy or telex, or four
Business Days after depositing it in the United States mail, registered or
certified, with postage prepaid and properly addressed; provided that notices to
--------
Administrative Agent shall not be effective until received. For the purposes
hereof, the address of each party hereto shall be as set forth under such
party's name on the signature pages hereof or (i) as to Company and
Administrative Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.
10.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of the
Loans and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7,
3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4, 10.4, 10.5 and 10.20 shall survive
<PAGE>
131
the payment of the Loans, the cancellation or expiration of the Letters of
Credit and the reimbursement of any amounts drawn or paid thereunder, and the
termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Administrative Agent or any
Lender in the exercise of any power, right or privilege hereunder or under any
other Loan Document shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 Marshalling; Payments Set Aside.
-------------------------------
Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 Severability.
------------
In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no action
taken by Lenders pursuant hereto or thereto, shall be deemed to constitute
Lenders as a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
10.14 Headings.
--------
<PAGE>
132
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.15 Applicable Law.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither
Company's rights nor obligations hereunder nor any interest therein may be
assigned or delegated by Company without the prior written consent of all
Lenders.
10.17 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III)
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
<PAGE>
133
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
10.18 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/ BORROWER RELATIONSHIP OR OTHER RELATIONSHIP THAT IS BEING ESTABLISHED.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO),
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
10.19 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
confidential by Company in accordance with such Lender's customary procedures
for handling confidential information of this nature, it being understood and
agreed by Company that in any event a Lender may make disclosures reasonably
required by any Affiliate or any bona fide assignee, transferee or participant
in connection with the contemplated assignment or transfer by such Lender of any
Loans or any participation therein or as required or requested by any
governmental agency or representative thereof or pursuant to legal process or by
the National Association of Insurance Commissioners or in connection with the
exercise of any remedy under the Loan Documents;
<PAGE>
134
provided that, unless specifically prohibited by applicable law or court order,
- - --------
each Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall any Lender be
-------- -------
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
10.20 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: AURORA FOODS INC.
By: _____________________________________
Name:
Title:
Notice Address:
456 Montgomery Street, Suite 2200
San Francisco, California 94104
Attention: M. Laurie Cummings
Facsimile: (415) 982-3023
and a copy to:
Richards & O'Neil
885 Third Avenue
New York, New York 10022
Attention: Kenneth Chin, Esq.
Facsimile: (212) 750-9022
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By: _______________________________________
Name:
Title:
Notice Address:
270 Park Avenue, 10th Floor
New York, New York 10017
Attention: Karen Sharf
Telephone: (212) 270-5659
Facsimile: (212) 270-5120
with a copy to:
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Amy Labinger
Loan Servicing Group
Telephone: (212) 552-4025
Facsimile: (212) 552-5658
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
individually and as Syndication Agent
By:_____________________________________
Name:
Title:
Notice Address:
Gleacher NatWest Inc.
660 Madison Avenue, 14th Floor
New York, New York 10021
Attention: Jim Hughes
Telephone: (212) 418-4568
Facsimile: (212) 418-4594
<PAGE>
UBS AG, STAMFORD BRANCH
individually and as Documentation Agent
By:_ ________________________________
Name:
Title:
By:__________________________________
Name:
Title:
Notice Address:
Warburg Dillon Read
677 Washington Boulevard
Stamford, Connecticut 06910
Attention: Lara Kavanagh
Telephone: (213) 719-4181
Facsimile: (213) 719-4176
<PAGE>
FLEET NATIONAL BANK
By:_________________________________
Name:
Title:
Notice Address:
Fleet National Bank
One Federal Street, MAOF0324
Boston, Massachusetts 02110
Attention: Howard J. Diamond
Telephone: (617) 346-0042
Facsimile: (617) 346-5093
With a copy to:
Fleet National Bank
1185 Avenue of the Americas
New York, New York 10036
Attention: Jed Duncan
Telephone: (212) 819-6010
Facsimile: (212) 819-6201
<PAGE>
HSBC BANK USA
By:_________________________________
Name:
Title:
Notice Address:
HSBC Bank USA
140 Broadway, 5th Floor
New York, New York 10005
Attention: Martin Brown
Telephone: (212) 658-2738
Facsimile: (212) 658-2586
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________
Name:
Title:
Notice Address:
PNC BANK
201 East Fifth Street
Cincinnati, Ohio 45202
Attention: Jeff Stein
Telephone: (513) 651-8692
Facsimile: (513) 651-8951
<PAGE>
SUNTRUST BANK, ATLANTA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
Notice Address:
SunTrust Bank, Atlanta
711 Fifth Avenue, 16th Floor
New York, New York 10022
Attention: Kelly Fox
Telephone: (212) 583-2607
Facsimile: (212) 371-9386
<PAGE>
WELLS FARGO BANK, N.A.
By:________________________________
Name:
Title:
Notice Address:
Wells Fargo Bank, N.A.
555 Montgomery Street, 17th Floor
San Francisco, California 94111
Attention: Margot Golding
Telephone: (415) 396-6036
Facsimile: (415) 975-7302
<PAGE>
NATIONAL CITY BANK
By:_________________________________
Name:
Title:
Notice Address:
National City Bank
1900 East Ninth Street, 10th Floor
Cleveland, Ohio 44114
Attention: Lisa Lisi
Telephone: (216) 575-9166
Facsimile: (216) 222-0003
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:_________________________________
Name:
Title:
Notice Address:
Harris Trust and Savings Bank
111 West Monroe Street
Floor 18 West
Chicago, Illinois 60603
Attention: Karen Knudsen
Telephone: (312) 461-4085
Facsimile: (312) 765-8095
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
Notice Address:
Credit Agricole Indosuez
101 California Street, Suite 4390
San Francisco, California 94111
Attention: Karen Kokame
Telephone: (415) 773-1281
Facsimile: (415) 986-4116
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By:_________________________________
Name:
Title:
Notice Address:
U.S. Bank National Association
First Bank Place
MPFP 0702
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Elliot Jaffee
Telephone: (612) 973-0543
Facsimile: (612) 973-0825
<PAGE>
FIRST UNION NATIONAL BANK
By:_________________________________
Name:
Title:
Notice Address:
First Union National Bank
301 South College Street, 5th Floor
Mail Code NC0737
Charlotte, North Carolina 28288-0737
Attention: Ben Howatt
Telephone: (704) 383-1357
Facsimile: (704) 374-4793
<PAGE>
SUMMIT BANK
By:_________________________________
Name:
Title:
Notice Address:
Summit Bank
750 Walnut Avenue, 3rd Floor
Cranford, New Jersey 07016
Attention: Wayne Troutman
Telephone: (908) 709-5339
Facsimile: (908) 709-6433
<PAGE>
MITSUBISHI TRUST AND BANKING
By:__________________________________
Name:
Title:
Notice Address:
Mitsubishi Trust and Banking
520 Madison Avenue, 25th Floor
New York, New York 10022
Attention: Bea Kossodo
Telephone: (212) 891-8363
Facsimile: (212) 644-6825
<PAGE>
BANQUE NATIONALE DE PARIS
By:______________________________
Name:
Title:
Notice Address:
Banque Nationale de Paris
499 Park Avenue
New York, New York 10022
Attention: Stephanie Rogers
Telephone: (212) 415-9438
Facsimile: (212) 415-9805
<PAGE>
BAYERISCHE VEREINSBANK
By:__________________________________
Name:
Title:
Notice Address:
Bayerische Vereinsbank
150 East 42nd Street, 39th Floor
New York, New York 10017
Attention: Erich Ebner
Telephone: (212) 672-5778
Facsimile: (212) 672-5516
<PAGE>
FIRSTAR BANK, N.A.
By:____________________________
Name:
Title:
Notice Address:
Firstar Bank, N.A.
425 Walnut Street, 8th Floor
Cincinnati, Ohio 45201
Attention: Mark Whitson
Telephone: (513) 632-2013
Facsimile: (513) 632-2068
<PAGE>
DEUTSCHE BANK AG
New York Branch and/or Cayman Islands
Branch
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
Notice Address:
Deutsche Bank AG New York Branch
and/or Cayman Islands Branch
31 West 52nd Street, 24th Floor
New York, New York 10019
Attention: Alexander Karow
Telephone: (212) 469-8532
Facsimile: (212) 469-8212
<PAGE>
PARIBAS
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
Notice Address:
Banque Paribas
101 California Street, Suite 3150
San Francisco, California 94111
Attention: Robert Pinkerton
Telephone: (415) 398-6811
Facsimile: (415) 398-4240
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By:__________________________________________
Name:
Title:
Notice Address:
The Travelers Insurance Company
One Tower Square, 9PB
Hartford, Connecticut 06183-2030
Attention: Teresa M. Torrey
Telephone: (860) 277-5952
Facsimile: (860) 954-5243
<PAGE>
STATE STREET BANK AND TRUST COMPANY,
as Trustee for General Motors
Employees
Global Group Pension Trust
By:
Name:
Title:
Notice Address:
State Street Bank and Trust Company
Global Investment Manager Services
Division
One Enterprise Drive W6C
North Quincy, Massachusetts 02171
Attention: Adam Antonik
Portfolio Number 7MC9
With a copy to:
Shenkman Capital Management, Inc.
461 Fifth Avenue, 23rd Floor
New York, New York 10017
Attention: Niall Rosenzweig
Telephone: (212) 867-9090
Facsimile: (212) 867-9106
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE TRUST
By:
Name:
Title:
Notice Address:
One Parkview Plaza, 5th Floor
Oakbrook Terrace
Illinois 60181
Attention: Jeffrey W. Maillet
Telephone: (630) 684-6438
Facsimile: (630) 684-6740
<PAGE>
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By:
Name:
Title:
Notice Address:
One Parkview Plaza, 5th Floor
Oakbrook Terrace
Illinois 60181
Attention: Jeffrey W. Maillet
Telephone: (630) 684-6438
Facsimile: (630) 684-6740
<PAGE>
FRANKLIN FLOATING RATE TRUST
By:
Name:
Title:
Notice Address:
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Mary Ann Chase
Telephone: (650) 525-7424
Facsimile: (650) 312-3346
<PAGE>
GENERAL RE-NEW ENGLAND ASSET MGMT.
By:
Name:
Title:
Notice Address:
76 Batterson Park Road
Farmington, Connecticut 06032
Attention: Theodore Haag
Telephone: (860) 409-3213
Facsimile: (860) 676-8712
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
By:
Name:
Title:
Notice Address:
334 Madison Avenue, P.O. Box 633
Convent Station, NJ 07961
Attention: James Dingler
Telephone: (973) 254-3206
Facsimile: (973) 254-3032
<PAGE>
CONSECO CAPITAL MANAGEMENT
By:
Name:
Title:
Notice Address:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: Eric Johnson
Telephone: (317) 817-6806
Facsimile: (317) 817-2763
<PAGE>
KZH STERLING LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
KZH CNC LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
KZH APPALOOSA LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
KZH IV LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
KZH WATERSIDE LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Facsimile: (212) 946-7776
<PAGE>
NORTH AMERICAN SENIOR FLOATING RATE FUND
By: CypressTree Investment Management
Company, Inc. as Portfolio Manager
By:
Name:
Title:
Notice Address:
125 High Street
Boston, Massachusetts 02110
Attention: Cathy McDermott
Telephone: (617) 946-0600
Facsimile: (617) 946-5681
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND
By: CypressTree Investment Management
Company, Inc. as Portfolio Manager
By:
Name:
Title:
Notice Address:
125 High Street
Boston, Massachusetts 02110
Attention: Cathy McDermott
Telephone: (617) 946-0600
Facsimile: (617) 946-5681
<PAGE>
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
Notice Address:
c/o The Chase Manhattan Bank
450 West 33/rd/ Street - 15/th/ Floor
New York, New York 10001
Attention: Virginia Conway
Telephone: 212-946-7575
Facsimile: 212-946-7776
<PAGE>
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, L.L.C.,
as Collateral Manager
By:
Name:
Title:
Notice Address:
333 S. Grand Avenue, #4250
Los Angeles, California 90071
Attention: Mike Hatley
Telephone: (213) 346-3972
Facsimile: (213) 346-3995
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
Notice Address:
201 High Ridge Road
Stamford, Connecticut 06927
Attention: David Rich
Telephone: (203) 961-2993
Facsimile: (203) 316-7978
<PAGE>
HARCH CAPITAL MANAGEMENT INC.
By:
Name:
Title:
Notice Address:
621 Nw 53rd Street, Suite 620
Boca Raton, Florida 33487
Attention: John Farrace
Telephone: (561) 995-4920
Facsimile: (561) 995-4955
<PAGE>
ALLSTATE INSURANCE COMPANY
By:
Name:
Title:
By:
Name:
Title:
Notice Address:
3075 Sanders Road, Suite G3a
Northbrook, Illinois 60062
Attention: Carrie Cazolas
Telephone: (847) 402-8383
Facsimile: (847) 402-3092
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By:
Name:
Title:
By:
Name:
Title:
Notice Address:
3075 Sanders Road, Suite G3a
Northbrook, Illinois 60062
Attention: Carrie Cazolas
Telephone: (847) 402-8383
Facsimile: (847) 402-3092
<PAGE>
NATEXIS BANQUE BFCE
By:
Name:
Title:
By:
Name:
Title:
Notice address:
645 Fifth Avenue, 20th Floor
New York, New York 10022
Attention: Frank Madden
Telephone: (212) 872-5180
Facsimile: (212) 872-5045
<PAGE>
ANNEX A
TO CREDIT AGREEMENT
PRICING GRID
RATIO OF CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA
<TABLE>
<CAPTION>
Greater than Less than Less than 5:00 Less than Less than
or Equal to 5.25 but but Greater 4.75:1 but 4.25:1 but
5:25:1 Greater than than or Greater than Greater than
------ or Equal Equal to or Equal to or Equal to
to 5:00:1 4:75:1 4.25:1 3.75:1
--------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
APPLICABLE MARGIN FOR
REVOLVING CREDIT LOANS AND
TRANCHE A TERM LOANS:
- - ---------------------
ABR LOANS 1.25% 1.00% 0.75% 0.50% 0.25%
EURODOLLAR LOANS 2.25% 2.00% 1.75% 1.50% 1.25%
APPLICABLE MARGIN FOR
TRANCHE B TERM LOANS:
- - ---------------------
ABR LOANS 1.50% 1.25% 1.00% 1.00% 1.00%
EURODOLLAR LOANS 2.50% 2.25% 2.00% 2.00% 2.00%
APPLICABLE MARGIN FOR
COMMITMENT FEE: 0.50% 0.50% 0.375% 0.375% 0.375%
- - ---------------
<CAPTION>
Less than
3.75:1
but Greater
than or Equal Less Than
to 3.25:1 3.25:1
--------- -----
<S> <C> <C>
APPLICABLE MARGIN FOR
REVOLVING CREDIT LOANS AND
TRANCHE A TERM LOANS:
- - ---------------------
ABR LOANS 0.00% 0.00%
EURODOLLAR LOANS 1.00% 0.875%
APPLICABLE MARGIN FOR
TRANCHE B TERM LOANS:
- - ---------------------
ABR LOANS 1.00% 1.00%
EURODOLLAR LOANS 2.00% 2.00%
APPLICABLE MARGIN FOR
COMMITMENT FEE: 0.30% 0.30%
- - ---------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 DEC-28-1997
<PERIOD-END> MAR-31-1999 MAR-28-1998
<CASH> 253 23,330
<SECURITIES> 0 0
<RECEIVABLES> 108,470 23,081
<ALLOWANCES> 717 234
<INVENTORY> 75,078 24,851
<CURRENT-ASSETS> 208,705 84,538
<PP&E> 174,000 47,041
<DEPRECIATION> 13,630 2,010
<TOTAL-ASSETS> 1,473,731 869,551
<CURRENT-LIABILITIES> 244,111 64,374
<BONDS> 402,196 202,377
647,343 217,335
0 0
<COMMON> 670 291
<OTHER-SE> (36,312) (63,597)
<TOTAL-LIABILITY-AND-EQUITY> 1,473,731 869,551
<SALES> 261,050 89,385
<TOTAL-REVENUES> 261,050 89,385
<CGS> 104,128 37,734
<TOTAL-COSTS> 212,693 70,654
<OTHER-EXPENSES> 20,119 65,796
<LOSS-PROVISION> 717 94
<INTEREST-EXPENSE> 14,579 12,837
<INCOME-PRETAX> 12,942 (63,316)
<INCOME-TAX> 5,112 (360)
<INCOME-CONTINUING> 7,830 (62,956)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 1,876
<CHANGES> 0 0
<NET-INCOME> 7,830 (64,832)
<EPS-PRIMARY> 0.12 (2.23)
<EPS-DILUTED> 0.12 (2.23)
</TABLE>
